Vaaan Infra Private Limited, Haryana V. Pr,CIT Delhi-7, Delhi

ITA 1102/DEL/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 9048 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 05-11-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 18-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S. MOHIT CHOUDHARY
• Keywords: Revision of order; Principle of natural justice; Fair market value; Difference of opinion; Assessment record; Change of opinion; Set aside
• Section: 263; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE, DR. B.R.R. KUMAR, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No.1102/Del/2022 (ASSESSMENT YEAR 2015-16) Vaaan Infra Private Limited Villa-8, Block-II Charmwood Village Suraj Kund Road Faridabad Haryana-121 009 PAN-AADCV 5910G Vs. Principal Commissioner of Income Tax Delhi-7 (Appellant) (Respondent) Appellant by S/Sh. Mohit Choudhary, Harish Choudhary, Ms. Neetu Jain, CAs & Ms. Miti ka Choudhary, Adv. Respondent by Ms. Sapna Bhatia, CIT-DR Date of Hearing 06/11/2023 Date of Pronouncement 24/01/2024 ORDER PER YOGESH KUMAR U.S., JM: This appeal if filed by the assessee against the order of Learned Principal Commissioner of Income Tax, Delhi-7 [“Ld. PCIT”, for short], dated 30/03/2021 for Assessment Year 2015-16. 2. The Grounds taken in this appeal are as under: “1. The grounds mentioned herein below are without prejudice to each other. 1. That the order passed by the Principal Commissioner of Income-Tax, Delhi-7 (hereinafter referred to as Hon'ble PCIT") under section 263 of the 2. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT Income tax Act, 1961 ('the Act') to the extent prejudicial to the Appellant, is perverse, erroneous on facts and bad in law. 2. That the direction to AO for proposed addition of Rs. 1,52,91,038/- towards valuation of shares made by the Hon'ble PCIT is incorrect, without proper evaluation of all documentary evidences available on record, arbitrary, illegal, against the principles of natural justice and is liable to be deleted. 3. That no proper opportunity of being heard given to the Appellant by Hon'ble PCIT, Delhi-7 wherein the Appellant filed the last submission on 18.06.2020 before Hon'ble PCIT, Delhi-9, however the order passed by Hon'ble PCIT, Delhi-7 on 30.03.2021. 4. Mere change of opinion without satisfying twin conditions can't give rise to revision under section 263 of the Act. 4.1 That the order passed under section 263 of the Act by the Hon'ble PCIT is illegal and arbitrary. 4.2 That on the facts and circumstances of the case, the Appellant has produced all the relevant material and offered explanation to which the earlier AO had taken a particular view with which the Hon'ble PCIT did not agree, cannot form the basis for an action under section 263 of the Act. Hence, there is mere change of opinion, assessment is void ab initio. 4.3 That the twin condition (i)That the order passed by Learned AO is erroneous, and (ii)That it is prejudicial to the interest of the revenue must be satisfied before exercising the power under section 263 of the Act. 4.4 That the Hon'ble PCIT is erred in opined that the order passed by the Learned Assessing Officer (Ld. AO) without making inquiries or verification which should have been made ignoring the fact that various submissions (dated 10.08.2017, 31.08,2017, 27.09.2017, 11.10.2017, 17.11.2017, and 11.12.2017) related to share allotment on premium, KYC, sources of funds, creditworthiness etc. were submitted by the Appellant at the time of Assessment Proceedings before the AO and it must be recorded in the note sheet of the Ld. AO. Reliance made on CIT vs. International Travel House (2010) 194 Taxmann 324 (Delhi) 5. The pre-requisite of Section 56(2)(viib) of the Act not fulfilled 5.1 On the facts and circumstances of the case & in law, the HON'BLE PCIT erred in applying the provisions of section 56(2)(viib) of the Act without providing an opportunity to the Appellant to substantiate its claim 3. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT regarding the Fair Market Value (FMV) of the share as per Explanation to Section 56(25)(viib) of the Act. 5. 2 On the facts and circumstances of the case & in law, the Hon'ble PCIT grossly erred in applying the provisions of section 56(2)(vib) of the Act without appreciating the basic intention of the legislature while introducing Section 56(2)(viib) of the Act. 5.3 On the facts and circumstances of the case & in law, the Hon'ble PCIT grossly erred in not appreciating that the requisite conditions as per the provisions of section 56(2)(viib) have not been satisfied in the case of the Appellant 5.4 Notwithstanding the above, on the facts and circumstances of the case & in law, the Hon'ble PCIT grossly erred in not appreciating that the FMV of equity share is also higher as per Discounted Cash Flow (DCF) method as compared to the FMV as per Net Asset Value (NAV) as adopted by Hon'ble PCIT as per Rule 11UA of the Income Tax Rules 6. Mandatory procedures/ principles under the provisions of the Act not followed. That the HON'BLE PCIT erred in the facts and circumstances of the case, in not obtaining a separate valuation certificate for calculating FMV of the share to disregard the valuation certificate issued by a Chartered Accountant. The Hon'ble PCIT/ Ld. AO was not competent to do so himself wherein the fair market valuation of share including flat (Property) and mutual funds was required to be done by an expert (District Valuation Officer-DVD) under section 142A of the Act. 7. Right to add, alter, withdraw and amend any ground That the appellant craves leave to add, alter, amend, revise, modify, substitute or delete any or all grounds of appeal and/or prayer made.” 3. Brief facts of the case are that, the assessee filed return declaring income of Rs. 1,89,54,110/-. Assessment was completed u/s 143(3) of the Income Tax Act, 1961, (‘Act’ for short) on 18/12/2017 at an assessed income of Rs. 1,93,58,260/- by making disallowance u/s 36(1)(va) of the Act on account of late payment of ESI/PF. The 4. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT assessment records for the Assessment Year 2015-16 were called for examination by Ld. PCIT wherein following facts are taken note of :- • The case was selected under scrutiny. One of the reasons for section of scrutiny in “Large share premium received during the year (Verify the applicability of Sec. 56(2)(viib)”. • During the year, the assessee company has issued 1,91,665/- shares at Rs. 120/- (including premium of Rs. 110/-). On perusal of the records maintained, in the case mentioned above, it is seen that the assessee company has not given any valuation, how it has arrived at Fair Market Value of shares. • Therefore, the valuation of shares has not been scrutinized for the purposes of Section 56(2)(viib) during the Assessment proceedings. 4. After examining the assessment records, it is observed by the PCIT that the assessment records reflect complete lack of enquiry on the issue of ‘fair market value of the shares issued during the year’, as the order revolves only around the transaction of EPF/ESI Contribution and the assessment order is cryptic and non- speaking. The order u/s 263 of the Act came to be passed on 30/03/2021, wherein the Ld. PCIT cancelled the assessment order passed u/s 143(3) of the Act dated 18/12/2017 and directed to make fresh assessment as per the provisions of the Act. Aggrieved by the order of the Ld. PCIT dated 30/03/2021, the present Appeal has been preferred by the assessee on the Grounds mentioned above. 5. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT 5. The Ld. Counsel for the assessee submitted that the order of the PCIT passed u/s 263 of the Act to extent prejudicial to the appellant, is perverse, erroneous and bad in law and the same has been passed without proper evolution of documentary evidence available on record and the same is illegal and against to principle of natural justice. Further submitted that the Ld. PCIT has not provided proper opportunity to the assessee. The Ld. Counsel has taken us through the documents produced along with the paper book and sought for allowing the Appeal. 6. Per contra, the Ld. Departmental Representative vehemently submitted that though the case of the assessee was initially selected for limited scrutiny to verify the ‘large share premium received during the year’, the A.O. has not examined the said issue, the A.O. has only concentrated on the issue of late payment of ESI/EPF. Thus submitted that, the assessment order was without making enquiries and the same is erroneous, therefore, the Ld. PCIT has rightly exercised the jurisdiction u/s 263 of the Act which requires no interference at the hands of the Tribunal and sought for dismissal of the appeal. 7. We have heard both the parties and perused the material available on record. The case of the assessee was originally selected for scrutiny for the reason ‘large share premium received during the year (Verify the applicability of Section 56(2)(viib)) of the Act’. During the year, the assessee issued 1,91,665/- shares at Rs. 120/- (including premium of Rs. 110/-). A notice u/s 142(1) of the Act dated 18/01/2017 was issued to the assessee wherein specifically asked the questionnaires on ‘the large share premium received during the year’ and asked the Assessee to produce valuation of fair market value of the shares on the auditor’s letter head. Further one more notice has been issued to the Assessee on 04/07/2017. The Assessee filed reply on 31/08/2017 6. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT and also produced the documents relating to the share capital money and to support of creditworthiness of the share applicant from Mr. Aman Kishore, the assessee produced various documents including ledger account of share application of Aman Kishore Bank statement of Aman Kishore, ITR Acknowledgement along with computation of Mr. Aman Kishore for last three years ending the Assessment Year 2015-16. The reply of the Assessee dated 31/08/2017 is reproduced as under:- “Large Share premium received during the year" - further documents relating to Share applicant/ his creditworthiness : As already stated earlier, the company had raised a sum of Rs.2,29,99,800/- as equity share capital, by way of allotment of 1,91,665 equity shares of face value Rs. 10/- each, in March 2015 at a premium of Rs.110/- per equity share (based on NAV ruling on date of allotment). Complete details of share allottee, who is an existing shareholder and director of the company, may be noted as under Name and address of Share Applicant No of Equity Shares Isused Fv of Equity Shares (Rs. 10/each) Share Premium (Rs. 110/-) Total Amount Receivable(R s.) Aman Kishore Add: Villa 7, Block II, Charmwood Vilalge, Suraj Kund Road, Faridabad- 121009 PAN AOQPK6153E 1,91,665 19,16,650 2,10,83,150 2,29,99,800 1,91,665 19,16,650 2,10,83,150 2,29,99,800 Copies of share allotment related paeprs as filed with the Registrar of Companies, along with relevant challans already submitted in earlier hearing). Further documents as relating to raising of share capital money and in support of creditworthiness of the share applicant Mr Aman Kishore enclosed as Annexure-2 as under: 7. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT i. Ledger a/c of "Share Application - Aman Kishore" as standing in books of account of the assessee company for FY 2014-15; ii. Copy of relevant extracts of the Bank statement of Mr Aman Kishore from which share capital moneys inducted into M/s Vaaan Infra Pvt Ltd during the year' iii.Copies of ITR ack alongwith Tax Computation of Mr Aman Kishore for last 3 AYs ended AY 2015-16. After making the detailed enquiry the Ld. A.O. made no additions in so far as the issue of Large Share Premium is concerned. 8. The Ld. PCIT observed that the valuation as per Rule 11UA (2) of the Rules has to be based upon the latest preceding balance sheet of the entry which has to be is approved at Annual General Meeting (AGM) of the Company and observed that ‘the Assessee submitted the balance sheets as on 31/03/2015 and also the balance sheet audited during March 2014. Thus, balance sheet as on 31/03/2015 could not have been an audited balance sheet as on 31/03/2015 and also cannot be approved by the AGM as on the date. Further held that the only audited balance sheet available in March 2015 was as on 31/03/2014 as such the two dates of transactions of share allotment are 02/03/2015 and 31/03/2015 respectively, the values calculated on the basis of audited balance sheet as on 31/03/2014 will be applicable for such transaction and the balance sheet produced by the Assessee as on 02/03/2015 which is not approved at Annual General Body Meeting which cannot be considered for the purpose of valuation made under Rule 11UA of the Rules, accordingly cancelled the Assessment Order. 9. For the purpose of determination of fair value, the Assessee produced Valuation Report prepared under Rule 11UA of Income Tax Rule 1962. The said valuation has been prepared by the Chartered Accountant based on the books of account, financial 8. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT statements and other records of the Company drawn up to 26/02/2015. The Assessee produced audited balance sheet before the A.O. as on 31/03/2015 and furnished balance sheet as on 02/03/2015, but the audited balance sheet has been disbelieved by the Ld. PCIT on the ground that the balance sheet as on 02/03/2015 has not been approved by the Annual General Meeting the same cannot be considered for the purpose of Rule 11UA of the Rules. The said observation of the Ld. PCIT is not supported by any of the provisions of law. On the contrary, the Rule 11UA of the Rules does not mentions the pre-condition of approval of the balance sheet by the Annual General Meeting. Therefore, the above finding of the Ld. PCIT is found to be perverse. Considering the fact that the assessee has already produced all the details in respect of the issue of ‘large share premium received during the year under consideration’ at the time of original assessment proceedings itself which has been already dealt by the A.O. and decided in favour of the Assessee and further considering the fact that since the order of the A.O. is not being erroneous, in our considered view, the Ld. CIT(A) has committed error in exercising the power conferred u/s 263 of the Act, accordingly, we allow the Grounds of Appeal of the Assessee and set aside the order passed u/s 263 of the Act. 10. In the result, Appeal filed by the assessee is allowed. Order Pronounced in the Open Court on 24 th January, 2024. Sd/- Sd/- (DR. B.R.R. KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24/01/2024 Pk/R. N, Sr . ps 9. ITA No.1102/Del/2022 Vaaan Infra Private Limited vs. PCIT Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI