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TMI Blog2020 (12) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... l and without jurisdiction . Assessing Officer is duty bound to follow the instructions issued by the CBDT. Therefore, the CBDT circulars not followed by the ld. AO are not acceptable for making the addition which are in violation of that circular. In the present case only the additions of unsecured loan from the Directors and their relatives were not covered in the limited scrutiny aspect. Addition accordingly as well as loan are deserved to be deleted on this ground itself. Addition u/s 68 - Loan was taken from the Director of the company and same were supported by the confirmation, Income Tax Return and details of the source of funds available with the Director evidenced from the pass book. Assessing Officer without making any enquiry disbelieved the submission made by the assessee. In view of this, it is apparent that even on the merits assessee has clearly established the identity, creditworthiness and genuineness of the loans. Assessee in this case has discharged the basic onus cast up on it by producing the confirmation, Income Tax Returns, bank statements, details of source of funds in case of each of the depositors. The ld AO should have thrown back onus on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following grounds of appeal:- 1. On the facts and circumstances of the case the order passed by the Ld. CIT(A) is bad both in eyes of law and on facts. 2. On the facts on circumstances of the case the Ld. CIT(A) erred in law and on facts in upholding the action of Ld. AO in framing the assessment which is contrary to Instruction No. 5/2016 dated 14.07.2016 i.e. the case of the assessee was selected for Limited Scrutiny and later on converted to Full Scrutiny without according an opportunity to the assessee and therefore in violation of principle of natural justice. 3. On the facts on circumstances of the case the Ld. CIT(A) erred in law and on facts in upholding the action of Ld. AO in framing the assessment which is contrary to Instruction No. 20/2015 dated 29.12.2015 i.e. assessee was asked to furnish the information s which were out of the purview of limited scrutiny guidelines. 4. On the facts and circumstances of the case the Ld. CIT(A) erred in law and on facts in upholding the action of Ld. AO in making additions on account of security premium received on fresh issue of shares u/s. 56(2)(vii-b) of the Act. 5. On the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a company engaged in the business of manufacturing of Gluco products. Till 31st of March, 2014 the manufacturing operations of the company have not yet started. For the year assessee filed its return of income on 30th September, 2014 declaring loss of ₹ 6,59,442/-. The case of the assessee was selected for limited scrutiny under CASS for verification of large share premium received during the year under consideration. However, subsequently the ld. Assessing Officer sought approval for converting the case into complete scrutiny since some other issues have also been noticed during the assessment proceedings. The ld. AO has stated in para No. 1 that, therefore, approval from ld. Pr. Commissioner of Income Tax has been sought for complete scrutiny communicated vides order dated 21st December, 2016. On next day, i.e. on 22/12/2016 he passed assessment order u/s 143 (3) of the act by making the following additions:- (i) Addition on account of share premium of ₹ 34,05,000/-; (ii) Addition on account of un-secured loan from Shri Nitin Bansal of ₹ 14,51,000/-; (iii) Loan from Ms. Alpna Saxena ₹ 8,40,000/-; (iv) Loans from Shri Himanshu Mit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 of appellate order at page no 23 is it stated by the ld AO that :- On 9/1/2016, request letter to PR CIT GZB through proper channel for approval of complete scrutiny sent along with draft assessment order. Admittedly approval was granted on 21/12/2016 and assessment order was passed on 22/12/2016. Instruction No. 5/2016 dated 14th July, 2016 clearly states that in para No. 4 only on conversion of case to complete scrutiny, the AO may examine the issues besides the issues involved in limited scrutiny. The AO is also required to intimate the taxpayer regarding conducting the complete scrutiny in his case. In para No. 5 it was further clarified that once a case has been converted into complete scrutiny, the Assessing Officer can deal with any issue emerging from the scrutiny proceedings. In the present case the notice is shown to us at page Nos. 1, 2 3 of the paper book that the ld. AO on 5.07.2016 asked assessee to appear and therein in para No. 9 asked for the borrowings and its details despite the issue not being in limited scrutiny. Further in para No. 4 of instruction dated 29th of December, 2015 it has been specifically stated that where the AO proposed to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted on this ground itself. 6. Even otherwise on merits of addition, first addition of ₹ 14,51,000/-, the loan was taken from the Director of the company and same were supported by the confirmation, Income Tax Return and details of the source of funds available with the Director evidenced from the pass book. Further with respect to unsecured loan from Ms. Alpna Saxena of ₹ 8,40,000/- the assessee submitted copy of confirmation, bank statement and the return of income. The sources of the fund were also explained as income from house property, tuition income and fixed deposit closure proceeds for depositing the same. In case of loan of ₹ 42,00,000/- from Mr. Himanshu Mittal who is also one of the Director and was running a proprietary concern in the name of Ganesh Trading Company and the funds were transferred from the current account of that proprietary concern to the appellant. Assessee submitted the audited accounts of proprietary concern and Income Tax return of the firms over and above the proprietary concern from which funds were received. The copies of the bank account of those firms were also submitted. With respect to unsecured loan of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 14.46. Assessee has determined the price as per certificate of CA applying discounted cash flow [DCF] method determining price at ₹ 55/- per share, justifying premium of ₹ 45/- per share. Ld AO considered book value of the shares at ₹ 14.64 per share only. Therefore, assessee has charged excess premium of ₹ 40.54 on 84,000 shares, the amount of ₹ 34,05,360/- was added to the income. Before the CIT (Appeals) assessee submitted the valuation report certified by a Chartered Accountant under Rule 11UA of the Act showing the fair market value of the share on the basis of discounted cash flow method was ₹ 55/- per share. It was to justify the share premium of ₹ 45/- per share. The ld. CIT (Appeals) did not consider the above valuation report and confirmed the action of the ld. Assessing Officer. On careful examination of Rule 11UA of the Income tax Rules, 1962, the assessee can value the shares for determining its fair market value of unquoted equity share either at the book value of the assets as per the prescribed formula or as per the discounted free cash flow method. The assessee has justified the valuation of shares by adopting disco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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