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TMI Blog2021 (11) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... res was prepared. But in the case before us we find that the assessee has not filed the project report based on which the valuation of shares was determined by the qualified chartered accountant. However, the same has been filed before us with the prayer to restore the issue to the file of the AO for fresh adjudication. To our mind, it is necessary for the authorities below to consider the impugned project report for determining the market value of the shares so that the amount of premium could be justified. We also note that the alternate contention raised by the assessee for determining the fair value of shares on the basis of the method as provided under clause (a)(ii) of explanation (a) to section 56(2)(viib) of the Act subject to the satisfaction of the AO, is a legal contention - we admit the same and restore the issue to the file of the AO for making the denovo assessment - Ground of appeal of the assessee is allowed for the statistical purposes. - ITA No.169/AHD/2018 - - - Dated:- 25-10-2021 - Shri Waseem Ahmed, Accountant Member And Ms Madhumita Roy, Judicial Member For the Assessee : Ms Asthamaniar, A.R For the Revenue : Shri R.R.Makwana, Sr..D.R ORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 24.5 lakh and ₹ 4.1 lakh respectively for year ending March 2014, 2015 and 2016. Accordingly the AO vide notice dated 05th December 2016 show cause the assessee to explain the sources of change in working capital at the end of March 2017 for ₹ 2,36,15,000/-. 4.2 The assessee in response vide letter dated 15th December 2016 submitted that it valued the share as per clause (b) of sub rule (2) of rule 11UA of the Income Tax Rule which recognize the valuation method based on DCF and submitted certificate from chartered account also to this effect. The assessee contended that they are not in a position to comment on any of the items of certificate issued by a professional as the same was made after considering several factors. Accordingly, it was prayed if any question with respect to valuation, may be asked from CA himself. 4.3 The assessee alternatively also contended that the provision of section 56(2)(viib) was brought in the Act with the specific objective as a measure to prevent generation and circulation of unaccounted money. However in its case all the shares were issued to the family members of group i.e. Parekh family and all of them are regularly asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase in working capital without the- corresponding, increase in liability either long term or short term, in fact, in the case under consideration, the assessee company presented a fabricated and a masked picture under the permitted valuation rule but providing a hypothetical figure, which was erroneously certified by the Chartered Accountant. Accordingly, in view of the provisions of sec. 56(2)(viib) of the income-tax act, 1961 and the entire amount of share premium received by the assesses company during the year of ₹ 1,85,22,460/- is hereby added to the total income of the assessee company as income from other sources 5. Aggrieved assessee preferred an appeal to the learned CIT (A). 6. The assessee before the learned CIT (A) submitted that its book value of share in beginning of the year as per the method prescribed under rule 11UA (2)(a) stood at ₹ 99/- per share. Subsequently it issued new shares during the year at ₹ 128 based on valuation certificate from the accountant as prescribed under Rule 11UA(2)(b). The chartered accountant based on audited balance sheet and in consultation with management with regard to future perspective and plan valued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the group concern, and therefore, there is no intention of circulation of unaccounted money which is envisaged in the memorandum explaining the Financial Bill, 2012 at the time of insertion of new section i.e. 56(2j(vII)(b). Appellant has further submitted that it has obtained CA certificate as provided in Rule llUA(2}(b), according to which share premium comes to Rs.l 17.28 per share. Appellant has also submitted that, even as per book value, the value of each share is ₹ 99/-. The appellant's argument that provision of section 56(2) (viib) is not applicable as subscriber of shores were members of promoter family is not tenable as section 56[2)(viib) clearly states that where a company not being a company in which the public are substantially interested receives in any previous year from any person being a resident, any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such share as exceeds the fair market value of the share, is chargeable under the head 'income from other sources'. The above provision does not distinguish whether person subscribing share is a family member or outsider. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that the project report which was used by the chartered accountant in the valuation of shares was not furnished before the authorities below. Accordingly, the learned AR before us filed such project report and requested to restore the issue to the file of the AO for fresh adjudication in accordance with the provisions of law after considering such project report. 8.2 The learned AR, without prejudice to the above, also made one alternate contention by submitting that the fair market value of shares can be also be decided by any other method subject to the satisfaction of the AO as provided under clause (a)(ii) of explanation to section 56(2)(viib) of the Act. Accordingly, the learned AR before us pleaded that the matter can be set aside to the AO with the liberty to the assessee to satisfy the AO under clause (a)(ii) of explanation to section 56(2)(viib) of the Act by filing the necessary documents. 9. On the contrary, the learned DR raised no objection if the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law. 10. We have heard the rival contentions of both the parties and perused the materials available on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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