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TMI Blog2024 (8) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 56(viib). In the given case the AO has adopted the value as at 31.03.2011 which in our view is not correct. At the same time we notice that the assessee has not submitted the relevant document to substantiate the basis of valuation and also the proper statement of accounts as at the valuation date to enable to the AO examine whether share premium is not excessive or unsubstantiated. In the light of these facts and that lower authorities have not examined the facts correctly for the reason that the assessee did not produce the required documentary evidences in support of the claim, we deem it just and proper to remit the issue back to the AO for a de novo examination. The assessee is directed to produce all the relevant documents to substantiate the valuation of land and building and the valuation of shares at Rs. 250/- per share. AO is directed to examine the facts of the case based on the documentary evidences that may be submitted by the assessee and decide in accordance with law. Appeal of assessee is allowed for statistical purposes. - SHRI NARENDER KUMAR CHOUDHRY, JM MS PADMAVATHY S, AM For the Appellant : Shri Bhavin Gala, CA For the Respondet : Shri Mahita Nair, Sr. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- under section 56(2)(viib) of the Act being the difference between the value as computed by the assessee and the value based on book value as per the financials as at 31.03.2011. The relevant observations of the AO in this regard are extracted below: 6. In this regard it has to noted that as per rule 11UA, the valuation date means the date on which the property or consideration as the case may be is received by the assessee. In the present case as per details submitted the consideration is received in October 2011.. Hence, the last Audited balance sheet available is on 31.03.2011. Accordingly, the fair market value as per 11UA has to be worked out based on audited Balance sheet as on 31.03.2011. 7. Further the assessee company claims that it has revalued the land and building including furniture at Rs. 33,58,00,000/- as against the value of Rs. 18,43,55,072/-. The basis for this revaluation is the draft valuation report of CB Richard Elis supported by the Valuation (Equity Shares) report of Sri S.G. Mehta, Chartered Accountant, wherein the value of land and building including furniture was taken at Rs. 33,58,00,000/-. Neither the Valuer nor the assessee has submitted any basis fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more valuation report of Mr. James Aroklaswamy, CA which is dated 31.10.2011 wherein he has stated that: Since the company has recently commenced its operations for its hotel property in Mumbai, the valuation of the shares cannot be determined by Discounted Cash Flow method and hence the Net Asset Value method has been used for determination of the Fair Market Value of each share of the company, Recommended Valuation: Based on the Net Asset Value method, I hereby certify that the Fair Market Value of each of the equity share of face value Rs. 10/- is Rs. 250/- per share as on 31 March 2011, details of the workings are given hereunder. Valuation of the Land and Building is taken as per the valuation report issued by B Richard Ellis South Asia Pvt. Ltd and is attached herewith. The valuation has been reduced by 8%, since the date of valuation was mid-year, while we are taking the value as at the end of the last financial year i.e. 31.3.2011. Average valuation has been taken based on the Direct Comparison Method approach and Depreciated Replacement Cost Method. The Valuation report is dated 31.10.2011. When the report is dated 31.10.2011, how can the CA value the shares as on 31.3.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -15. 3. Aggrieved the assessee appeal before the CIT(A). The assessee submitted before the CIT(A) that the AO has adopted the book value as on 31.03.2011 whereas the assessee has adopted the revalued figure of land and buildings as on 31.10.2011 and therefore, the addition made by the AO is not sustainable. The CIT(A) after considering the submissions of the assessee held that In the instant case, while the assessee has adopted the revalued figure of land and building including furniture as on 31.10.2011, the AO has adopted the book-value as on 31.03.2011. It is observed that the assessee has enhanced the value of the land and building including furniture from Rs. 18,43,55,072/- as on 31.03.2011 to Rs. 33,58,00,000/- as on 31.10.2011 as a result of which the value of the share has increased from Rs. 138.5/- to Rs 250/- Further, it is to be noted that the revaluation was carned out on the basis a draft valuation report of CB Richards Elis. It remains rather unsubstantiated as to how the value of land and building could increase by 82% in a matter of just seven months. The assessee's contention of working out the value of shares on the basis of revalued numbers cannot be acceded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the timing of revaluation creates serious doubt, which has not been dispelled by the assessee There is no doubt that Rule 11UA prescribes adoption of book value of the assets as on the date of valuation. But that does not mean that the assessen resorts to revaluation of assets so as to artificially increase the book-value of the assets in order to arrive at a pre-determined value of the share. Provisions of section 56(2)(vib) are anti-tax evasion provisions enacted to avoid introduction of unaccounted or inflated sums without proper explanation of the legitimate source of funds being infused in the garb of share contributions, especially in respect of privately held unquoted shares. They must be interpreted strictly and no scope must be left available for artificially manipulating the value of the shares and assets. In the background of the above detailed discussion and facts and circumstances of the case, the AO's action is to be upheld. The assessee's grounds of appeal are therefore dismissed 4. Aggrieved the assessee is in appeal before the Tribunal. The ld. AR reiterated the submissions made before the lower authority. The ld. AR submitted that the main reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the audited balance-sheet as of 31.03.2012 should be adopted as per Rule 11UA. However, during the course of hearing before us the assessee did not bring on record any further material to substantiate the basis on which the valuation of land and building has been revised from Rs. 18,43,55,072/- as on 31.03.2011 to Rs. 33,58,00,000/- which has been major contributor for arriving at the share premium of Rs. 240/- per share. As per the provisions of Rule 11UA in the case of unquoted shares the Fair Market Value (FMV) shall be determined based on the book value of assets and liabilities as on the valuation date for the purpose of making addition under section 56(viib). In the given case the AO has adopted the value as at 31.03.2011 which in our view is not correct. At the same time we notice that the assessee has not submitted the relevant document to substantiate the basis of valuation and also the proper statement of accounts as at the valuation date to enable to the AO examine whether share premium is not excessive or unsubstantiated. In the light of these facts and that lower authorities have not examined the facts correctly for the reason that the assessee did not produce the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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