Bhagya Laxmi Food Products Pvt.Ltd., Himatnagar V. ITO SK Ward-1, Himatnagar

ITA 202/AHD/2018

AI Insights

The case involves Bhagya Laxmi Food Products P. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad, concerning the assessment year 2014-15. The primary issue was the addition of Rs.83,25,900 to the company's income, representing the excess premium received on shares issued at a high premium of Rs.100.90 per share. The Assessing Officer (AO) had ignored the valuations provided by the assessee and added the entire share premium to the income. The CIT(A) accepted a lower valuation of Rs.95.18 per share but upheld part of the addition. The Tribunal, after reviewing the CIT(A)'s decision, upheld the addition, agreeing that the valuations presented by the assessee were not substantiated adequately.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133516 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 23-01-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.202/Ahd/2018 Assessment Year :2014-15 Bhagya Laxmi Food Products P.Ltd. Plot No.30-31, GIDC Ganeshpura Modasa, Himatnagar PAN : AAEC 4058 E Vs. ITO, SK Ward-1 Himatnagar. Assesseeby : None Revenue by : Shri Rakesh Jha, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 2 8 / 1 2 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 1 1 / 0 1 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals)-2, Ahmedabad (in short referred to as CIT(A)), dated 24.11.2017 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2014-15. 2. None appeared on behalf of the assessee. We have seen from the record that the appeal was instituted by the assessee on 24.1.2018, and since then as many as 26 times the matter has been listed for hearing and except on one occasion the assessee has remained unrepresented throughout despite services of notices through RPAD post and even being informed telephonically of the ITA No.202/Ahd/2018 2 hearing in the appeal. It is clear from the record that the assessee is no longer interested in pursuing its appeal. It was therefore decided to go ahead with the adjudication of the appeal ex parte qua the assessee on the basisof material available before us. 3. The grounds raised by the assessee are as under: “ 1. The assessee has made the Share Valuation as per Rule 11U and 11UA r.w.s. 56(2)(viib) of Income Tax Act, 1961 which was not considered by Learned A.O. while passing the Assessment Order which leads to an addition amount of Rs.83,25,900/-. The Valuation of Shares done as per Provisions of Section 56(2)(viib) of Income Tax Act 1961. 2. Subsequently in CIT Appeal the honourable Commissioner Appeal reduced the addition to the extent of Rs.12,98,550/-. Accordingly, Appeal effect is give by the AO and revised demand issued by the learned AO. GROUNDS OF APPEAL 1. The learned assessing officer has erred in law. 2. That on the facts and in the circumstances of the case and in the law, the AO has erred in assessing the income of the appellant at Rs.83,47,940/-, instead of Rs.22,037/- returned. As such aggregate estimated additions of Rs.83,25,900/- may please be deleted. 3. The learned assessing officer erred in making an addition on account of Share valuation of the assessee. Assessee has valued the Shares as per Rule 11U and 11UA but learned A.O. had not considered it. The assessing officer has not interpreted the section properly and has not taken the share Valuation presented by assessee and hence an addition of Rs. 83,25,900/- stands bad in law and kindly be deleted. 4. The Learned assessing officer and CIT Appeal totally ignored the methods of valuation of unquoted shares of closely held company which is described under Rule 11U and 11UA r.w.s. 56(2)(viib) of Income Tax Act, 1961 and totally ignored the valuation certificate provided by Chartered Accountant on Discounted Cash Flow Method which was justifying the valuation of shares for further allotment or shares to shareholders. 5. The learned assessing officer must interpret the law liberally in view of fact and materiality based on various judgments. The appellant craves leave to add, alter or amend all the above grounds of appeal at or during the course of hearing.” ITA No.202/Ahd/2018 3 4. The issue in the present appeal, as is evident from grounds raised by the assessee, relates to addition made to the income of the assessee under section 56(2)(viib) of the Act on account ofexcess premium of Rs.83,25,900/- allegedly received by the assessee, made on the ground that the assessee company did not have financial worth or capacity to issue shares at premium of Rs.100.90 per shares. 5. The facts of the case are that the assessee had issued 82,510 shares during the impugned year of face value of Rs.10/- each at a premium of Rs.100.90 per share. When asked to justify the premium at which shares were issued, the assessee submitted that as per provisions of section 56(2)(viib) of the Act the shares were valued as per Rule 11UA at Rs.122/- per share which valuation wasmade on the basis of book value ,with the indexed value of land shown in the balance sheet. The assessee submitted another valuation on the basis ofvaluation done by the Chartered Accountant as per Rule 11UA of the Rules following discounted cash flow method at the rate of Rs.1137.27 per share. Yetanother valuation was submitted by the assessee as per book value at Rs.95.18 per share. The AO ignored all the valuations and added the entire share premium of Rs.83,25,900/-holding that the assessee-company did not have any worth or capacity to issue shares at a high premium of Rs.100.90 per share. The ld.CIT(A) however accepted the valuation of shares at Rs.95.18 and rejected other valuations submitted by the assessee on the basis of discounted cash flow method at Rs.1137.27 per share and on the basis of book value being the value of land after indexation at Rs.122.64 per share, finding serious anomalies in the same. Accordingly he held premium of Rs.85.18( Rs.95.18 – Rs.10 )per share to be justified . The addition made pertaining to the ITA No.202/Ahd/2018 4 balance premium was therefore upheld and which amounted to Rs.12,98,550/- Aggrieved bythis order of the ld.CIT(A) the assessee has come up in appeal before us. 6. We have gone through order of the ld.CIT(A). His finding in rejecting valuation of shares submitted by the assessee at Rs.1137.27 per share as per the valuation done by the CA and valuation at Rs.122.64 per share on the basis of book value has been dealt with in para 2.6 and 2.7 of his order. Further, theld.CIT(A) has considered the valuation done by the assessee on the basis of book value of shares at Rs.95.18 per share at para 2.7 of his order accepting the valuation. The relevant finding of the ld.CIT(A) at para 2.5 to 2.7 of the order in this regard is as under: ITA No.202/Ahd/2018 5 7. We have gone through the findings of the ld.CIT(A). We find that the ld.CIT(A) has passed a well reasoned order, and there is no need to interfere in the same. The ld.CIT(A) has given valid reason for rejecting both the valuations of the shares at Rs.1137.27 per share and at Rs.122.64 per share, pointing out that valuation at ITA No.202/Ahd/2018 6 Rs.1137.22 per share, done on the basis of discounted cash flow method ,was based on projected profits of the assessee for the subsequent year which projections did not have any solid basis. There is nothing before us to counter this finding of the ld.CIT(A). Therefore, his order rejecting the valuation of shares at Rs.1137.27 per share is found to be in order, and upheld. 8. With regard to the rejection of valuation of shares at Rs.122.64 per share, the ld.CIT(A) found that though the valuation was done on the basis of book value, the land was valued after indexation ,which he noted was not as per the prescribed method. There is nothing before us to controvert this finding of the ld.CIT(A). Therefore, even rejection of the valuation done by the assessee at Rs.122.64 per share calls for no interference. 9. In view of the above, we do not find any merit= in the grounds raised by the assessee against order of the ld.CIT(A) upholding the addition made under section 56(2)(viib) of the Act to the extent of Rs.12,98,550/-. Thus, all the grounds raised by the assessee are dismissed. 10. In the result, appeal of the assessee is dismissed. Order pronounced in the Court on 11 th January, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 11/01/2023 vk*