ITO, New Delhi V. M/s. April Cottage Farms Pvt. Ltd., Delhi

ITA 3300/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0954 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 25-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALKA GAUTAM
• Assessee Lawyers: V RAJ KUMAR
• Keywords: Bogus Share capital; Valuation report
• Section: 2(14); 56(2); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 3300/DEL/2017: ASSTT. YEAR: 2013-14 INCOME TAX OFFICER, WARD-3(1), NEW DELHI-110001 VS M/S APRIL COTTAGE FARMS PVT. LTD., 283, SONALIKA HOUSE, AGCR ENCLAVE, LAXMI NAGAR, DELHI-110092 (APPELLANT T (RESPONDENT) PAN NO. AA KCA3443Q ASSESSEE BY : SH. K. SAMPATH, ADV. & SH. V. RAJ KUMAR, ADV. REVENUE BY : MS. ALKA GAUTAM, SR. DR DATE OF HEAR ING: 2 8 . 06 .20 21 DATE OF PRONOUNCEMENT: 07 .0 7 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF LD. CIT (A)-I, NEW DELHI DATED 22.03.2 017. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. THE LD. CIT (A) ERRED IN DELETING ADDITION OF RS.4,08,06,000/- MADE U/S 68 OF THE INCOME TAX ACT, 1961 BEING NON-GENUINE/UNEXPLAINED SHARE CAPITAL/SHARE PREMIUM. 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 05.03.2 012 AND RECEIVED SHARE PREMIUM OF RS.90 PER SHARE FROM RELATED PERSONS TOTALING TO AN AMOUNT OF RS.4,08,60,000/-. THE NOTICES U/S 133(6) ISSUED BY THE ASSESSING OFFICER HAVE BEE N RESPONDED TO BY THE SHARE APPLICANTS. ITA NO. 3300/DEL/2017 APRIL COTTAGE FARMS PVT. LTD. 2 4. THE ASSESSING OFFICER HELD THAT THE ASSESSEE COM PANY FAILED TO SUBMIT VALUATION REPORT UNDER RULE 11UA A ND DID NOT JUSTIFY THE SHARE PREMIUM RECEIVED IN VIEW OF THE P ROVISIONS OF SECTION 56(2) R.W.S. 2(14) OF THE INCOME TAX ACT, 1 961. THE AO DETERMINED THE BOOK VALUE AS (A-L)PV PE AS PER THE FORMULA UNDER RULE 11UA ON NAV BASIS. THE AO FURTHE R HELD THAT THE AMENDMENT TO RULE 11UA IS APPLICABLE FROM THE D ATE OF NOTIFICATION I.E. 29.11.2012, HENCE THE ASSESSEE CA NNOT HAVE THE BENEFIT OF VALUATION BASED ON DISCOUNTED CASH F LOW (DCF) METHOD. 5. THE LD. CIT (A) DELETED THE ADDITION ON THE GROU NDS THAT ONCE RULE 11UA HAS BEEN NOTIFIED BY THE CBDT, THE R ULE WOULD BE APPLICABLE FOR THE ENTIRE ASSESSMENT YEAR AND NO T FOR THE TRANSACTIONS DONE AFTER 29.11.2012. 6. BEFORE US, IT WAS SUBMITTED THAT THE AMOUNTS HAV E BEEN RECEIVED AS LOANS INITIALLY WHICH WERE SUBSEQUENTLY CONVERTED INTO SHARE CAPITAL VIDE BOARD RESOLUTION DATED 06.0 3.2013. THE AMOUNTS HAVE UTILIZED FOR PURCHASE OF LAND AND IF T HE COST OF THE LAND IS TAKEN INTO CONSIDERATION, THE SHARE PREMIUM WOULD STANDS SUBSTANTIATED. IT WAS ARGUED THAT EVEN OTHER WISE AS ON 06.03.2013, THE DATE ON WHICH THE SHARE CAPITAL HAS BEEN RECEIVED IN THE BOOKS OF THE COMPANY, THE VALUATION UNDER RULE 11UA AS PER THE DCF METHOD IS ACCEPTABLE VALUATION METHOD FOR THE PURPOSE OF CLAUSE (VIIB) OF SECTION 56(2). THE VALUATION REPORT SUBMITTED TO THE LD. CIT (A) AS ADDITIONAL E VIDENCE HAS BEEN ACCEPTED BY THE REVENUE AND NO INCONSISTENCIES IN THE VALUATION REPORT HAS BEEN BROUGHT OUT BY THE REVENU E. ITA NO. 3300/DEL/2017 APRIL COTTAGE FARMS PVT. LTD. 3 7. SINCE, THE SOURCE OF THE AMOUNTS RECEIVED HAS NO T BEEN THE ISSUE BEFORE US, SINCE THE VALUATION REPORT AS PER THE DCF METHOD IS AN ACCEPTABLE METHOD PRESCRIBED UNDER RUL E 11UA IN RELATION TO SECTION 56(2)(VIIB) AND SINCE THE VALUA TION REPORT HAS BEEN FOUND TO BE IN ORDER BY THE REVENUE AUTHOR ITIES, WE HEREBY DECLINE TO INTERFERE WITH THE ORDER OF THE L D. CIT (A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/07/2021. SD/- SD/- (AMIT SHUKLA) (D R. B. R. R. KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATED: 07/07/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR