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TMI Blog2023 (3) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... . Valuation of a subsidiary company is also supported by the valuation certificate issued by a Chartered Accountant. Moreover, the ld. PCIT did not find fault with the fair market value of ₹.33 per share determined by the assessee company on the basis of second method. Therefore, shares were issued at a consideration of ₹.33/- per share which is in line with the fair market value of ₹.33/- per share determined as per Explanation (a0(ii) to section 56(2)(viib) of the Act. Hence, the assessee company has not received any consideration exceeding the fair market value of its shares. Thus, the question of making any addition under section 56(2)(viib) of the Act does not arise. The ld. PCIT arrived at a fair market value of ₹.15.14/- per share as per Rule 11UA which is as per Explanation (a)(i) and the same is irrelevant since the assessee company had opted for determination on the basis of Net Assets method. In view of the above, we are of the opinion that the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. Thus, the revision order passed by the ld. PCIT under section 263 of the Act is quashed. Appeal filed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elete or amend the grounds of appeal hereinabove before or during the course of hearing of the instant appeal. 4. Facts are, in brief, that the assessee company filed its return of income for the assessment year under consideration on 28.09.2015 admitting total loss of ₹.7,92,483/-. The case was selected for limited scrutiny under CASS. Notice under section 143(2) of the Income Tax Act, 1961 [ Act in short] dated 23.03.2016 was served on the assessee. A notice under section 142(1) of the Act was issued on 08.06.2017. In response to notice, the AR of the assessee appeared and furnished the details as called for. After examining the details, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 31.10.2017 by accepting the returned loss. 4.1 Subsequently, the ld. PCIT, while exercising the powers conferred under section 263 of the Act, noted from the assessment records that the assessee company issued 86,35,077 shares of ₹.19,86,06,771/- on right issue basis at ₹.33/- per share (face value ₹.10/-) and issued at a premium of ₹.23/- per share to the following: S.No. Name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a show cause notice under section 263 of the Act to the assessee on 07.02.2020 and 22.02.2021. 4.3 In response to the notice, the assessee s AR filed detailed letter dated 11.03.2020, wherein, he has submitted that the during the course of assessment proceedings, the Assessing Officer has examined all the details in respect of fair market value of the shares issued and also the method adopted by the assessee. It was submitted before the ld. PCIT that fair market value of ₹.33/- per share was determined on the basis of net asset method, which is in accordance with sub-clause (ii) of clause (a) of Explanation to section 56(2)(viib) of the Act and justified that the issue price is not exceeding the fair market value. 4.4 It was further submitted before the ld. PCIT that the assessee company went into voluntary liquidation during the financial year 2019-20 and the existing shareholders sold the shares at a price of ₹.142.43/- per share which is higher than ₹.33/- per share and accordingly submitted that ₹.33/- per share is fair and reasonable. It was further submitted before the ld. PCIT that section 56(2)(viib) of the Act cannot be invoked in the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of the Act in connection with the share premium received. The Assessing Officer issued notice under section 142(1) of the Act dated 08.06.2017 to examine the share premium received by the assessee. The Assessing Officer specifically asked the details of shares issued and premium received through specific question No. 13(a) and (b) and the same are reproduced as under: 13. You are also requested to furnish the details for the following specific queries: (a) Details of shares issued and premium received during the F.Y.2014- 15. (b) Produce the details of the investments made during the F.Y.2014-15. The ld. Counsel for the assessee has submitted that in response to the notice under section 142(1) of the Act issued by the Assessing Officer, vide letter dated 15.06.2017, the assessee has submitted complete details including reply to specific question No. 13(a) and (b) [pages 7 to 10 of the paper book more specifically page 9]. 5.3 The ld. Counsel for the assessee has submitted that on 27.06.2017, the assessee company had furnished before the Assessing Officer, a note on non-applicability of provisions of section 56(2)(viib) of the Act in respect of share premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des, perused the materials available on record and gone through the order passed under section 263 of the Act including various details filed in the form of paper book by the assessee. In this case, the case of the assessee was selected for limited scrutiny for application of section 56(2)(viib) of the Act. During the course of assessment proceedings, the Assessing Officer issued notice under section 142(1) r.w.s. 129 of the Act dated 08.06.2017 and called for various details from the assessee company, particularly, through question No. 13(a) and (b) details of shares issued and premium received during the financial year 2014-15 and produce the details of the investments made during the financial year 2014-15, which is placed at page 5 to 6 of the paper book filed by the assessee. Vide its letter dated 15.06.2017, the assessee has furnished particulars in respect of M/s. Star Health Investments Pvt. Ltd. at pages 7 to 10 of its paper book. On 27.06.2017, again the assessee filed further details in respect of M/s. Star Health Investments Pvt. Ltd., which is placed at pages 11 to 14 of its paper book. Again the assessee company vide its letter dated 01.09.2017 filed separate docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of power under section 263 of the Act was not justified. 10. In this case, the ld. PCIT simply noted that the assessment order passed by the Assessing Officer is cryptic. The ld. PCIT ought to have been examined the entire record, particularly, notice issued under section 142(1) of the Act dated 08.06.2017, wherein, the Assessing Officer has called for various details from the assessee and specifically, all the details were filed before the Assessing Officer. Thus, we are of the opinion that the order passed by the Assessing Officer is not erroneous and therefore, revision order under section 263 of the Act is not warranted and accordingly, the order passed under section 263 of the Act is liable to be quashed. 11. So far as merits of the case is concerned, the assessee company has determined the fair market value at ₹.33/- per share on the basis of Net Assets method which is in accordance with the second method i.e., as per Explanation (a)(ii) to section 56(2)(viib) of the Act. The said value is duly substantiated by the valuation certificate issued by the Chartered Accountant, which is already filed in the form of paper book page No. 27. Further, the valuation of a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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