CANPAC TRENDS PVT. LTD.,BAVLA V. THE ACIT, CIRCLE-1(1)(2), AHMEDABAD

ITA 271/AHD/2021

AI Insights

The case involves Canpac Trends Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, concerning the assessment year 2017-18. The primary issues in the appeal were the disallowance of employee contributions to PF/ESI and the addition under Section 56(2)(viib) due to the issuance of shares at a premium exceeding the FMV. The Tribunal dismissed the appeal, noting the absence of the appellant's representation and failure to provide substantial grounds or evidence to overturn the initial findings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472269 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY LAL
• Keywords: Fair market value
• Section: 143(3); 143(1); 56

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “डी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD \u0015ी टी.आर. से\u0019\u001aल क ुमार, \u0011ाियक सद\u001c एवं \u0015ी मकरंद वसंत महादेवकर, लेखा सद\u001c क े सम\"। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.271/Ahd/2021 िनधा \u000fरण वष\u000f /Assessment Year :2017-18 Canpac Trends Pvt.Ltd. Plot No.338, Chiyada Village : Chiyada B/h. Jerala GIDC Ahmedabad – 382 220 बनाम/ v/s. The ACIT Circle-1(1)(2) Ahmedabad \u0013थायी लेखा सं./PAN: AABCV 9858 M (अपीलाथ%/ Appellant) (&' यथ%/ Respondent) Assessee by : -None- Revenue by : Dr. Sanjay Lal, CIT-DR सुनवाई की तारीख/Date of Hearing : 16/01/2025 घोषणा की तारीख /Date of Pronouncement: 20/01/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre - NFAC, Delhi [hereinafter referred to as “CIT(A)”], dated 25/08/2021, arising out of the assessment order passed by the Assistant Commissioner of Income Tax, Circle 1(1)(2), Ahmedabad [hereinafter referred to as “AO”], under Section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the assessment year 2017-18. ITA No.271/Ahd/2021 Canpac Trends Pvt.Ltd. vs. ACIT Asst. Year : 2017-18 2 Facts of the Case: 2. The assessee filed its return of income for the assessment year 2017-18 on 31/10/2017, declaring a total income of Rs.9,73,53,840/-, after claiming a deduction of Rs.5,60,500/- The return was processed under Section 143(1) of the Act. The case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS). During the course of the assessment proceedings, the assessee responded to some notices through e-submissions on the e-filing portal. However, the responses were incomplete and failed to address all issues raised by the AO. The AO focused on two major issues during the assessment: (i) Disallowance under Section 36(1)(va): • The AO observed that the assessee had delayed depositing employees’ contributions to PF/ESI amounting to Rs.1,41,730/-, beyond the due dates prescribed under the respective Acts. • Although the contributions were deposited before the due date for filing the return under Section 139(1), the AO disallowed the claim, citing the provisions of Section 2(24)(x) read with Section 36(1)(va). (ii) Addition under Section 56(2)(viib): • The assessee issued 7,85,000 shares at a face value of Rs.10/-, charging premiums ranging from Rs.127/- to Rs.275/- per share. • The fair market value (FMV) of the shares, as determined under Rule 11UA, was Rs.145/-, based on a valuation certificate issued by an independent Chartered Accountant. • The AO noted that shares were issued at a premium exceeding FMV to certain shareholders, resulting in taxable income under Section 56(2)(viib). The AO calculated the taxable excess premium as follows: ITA No.271/Ahd/2021 Canpac Trends Pvt.Ltd. vs. ACIT Asst. Year : 2017-18 3 Name of Shareholder Date of Allotment No. of Shares Issue Price (Rs.) Excess Amount per Share (Rs.) Addition (Rs.) Bhagchandani Group 30/07/2016 28,500 275 130 37,05,000 Todi Group 30/07/2016 56,500 175 30 16,95,000 Bhagchandani Group 20/10/2016 15,000 273 128 19,20,000 Todi Group 30/03/2017 5,65,000 127 Nil Nil Bhagchandani Group 30/03/2017 35,000 273 128 44,88,000 Total Addition under Section 56(2)(viib) amounted to Rs. 1,18,00,000/- (Actual total of the amounts come to Rs.1,18,08,000/-). 3. The assessee filed an appeal before the CIT(A) challenging the additions made by the AO. The CIT(A) dismissed the appeal on the basis of material available on record and upheld the additions made by the AO as the assessee did not make any submission. 4. Aggrieved by the order of CIT(A), the assessee filed an appeal before us with following grounds of appeal: “1. Impugned transactions are between the promoter group and existing shareholders.; 2. The application of Section 56 is against the spirit of the law; 3. The AO has erred in appreciating the submissions made and the shareholding pattern of the company since 2011.” ITA No.271/Ahd/2021 Canpac Trends Pvt.Ltd. vs. ACIT Asst. Year : 2017-18 4 5. Despite multiple notices and hearings, spanning 30 opportunities, neither the appellant nor any authorized representative appeared before the Tribunal. Furthermore, no written submissions, including the statement of facts or supporting documents, have been filed by the appellant on record. 4. From the grounds of appeal, it is noted that the appeal pertains to a solitary issue of Addition under Section 56(2)(viib) on account of share premium exceeding the fair market value (FMV), amounting to Rs. 1,18,00,000/-. 4.1. We observe that the provisions of Section 56(2)(viib) apply to closely held companies issuing shares at a premium exceeding FMV, irrespective of whether the shares are issued to existing shareholders or the promoter group. The relationship between the company and the shareholders is irrelevant for determining the applicability of the provision. The legislative intent of Section 56(2)(viib), as explained in the Memorandum to the Finance Bill, 2012, is to tax excessive share premiums to curb potential abuse. The provision is applicable even in cases where the transactions are genuine or between related parties. The AO has adequately analysed the shareholding pattern, and the submissions made during assessment proceedings. The finding that shares were issued at a premium exceeding FMV is based on the certificate of independent Chartered Accountant. 4.2. The assessee has failed to provide any new submissions or evidence to challenge these findings during appellate or proceedings before us. It is evident from the repeated non-appearance of the appellant and the lack of submissions that the appellant is not interested in pursuing the appeal. As ITA No.271/Ahd/2021 Canpac Trends Pvt.Ltd. vs. ACIT Asst. Year : 2017-18 5 held in many judicial precedents, merely filing an appeal is insufficient; it must be effectively prosecuted. 5. In the result, the appeal of the assessee is dismissed. Order pronounced in the Open Court on 20th January, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 20/01/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय #ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 17.1.2025 2. Date on which the typed draft is placed before the Dictating Member. : 17.1.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 20.1.25 7. Date on which the file goes to the Bench Clerk. : 20.1.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "