M/s Sahsralingeshwara Power Pvt Ltd , Bangalore V. Income Tax Officer Ward-6(1)(1), Bangalore

ITA 922/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4077 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH BATTINI
• Assessee Lawyers: S RAMASUBRAMANIAM
• Keywords: Opportunity of being heard; Additional evidence; Fair market value; Valuation report
• Section: 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 922 /BANG/201 8 ASSESSMENT YEAR : 20 13 - 14 M/S. SAHSRALINGESHWARA POWER PVT. LTD., NO. 37, RMJ MANDOTH TOWER, 7 TH CROSS, VASANTHNAGAR, BANGALORE 560 052. PAN: AAKCS6624B VS. THE INCOME TAX OFFICER, WARD 6 (1) (1), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI S. RAMASUBRAMANIAM, CA RE VENUE BY : SHRI SURESH BATTINI, CIT (DR) DATE OF HEARING : 25 . 10 .2018 DATE OF PRONOUNCEMENT : 26 . 10 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A)-6, BANGALORE DATED 17.01.2018FOR ASSESS MENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IN SO FAR IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) OUGHT TO HAVE HELD THAT THE RULE 11UA(2)(D) OF INCOME TAX RU LES, 1962 PRESCRIBING THE VALUATION OF UNQUOTED EQUITY SHARES AS PER DCF METHOD IS APPLICABLE TO AY 2013-14. 3. WITHOUT PREJUDICE TO GROUND NO.2 ABOVE, THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE VALUATION OF UNQUOTED EQUITY SHARES SHOULD BE DETERMINED DULY IN ACCORDANCE WITH RULE 11UA AS IT STOOD BEFORE THE AMENDMENT MADE BY NOTIFICATION W.E.F. 29.11.2012 AND THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE RULE 11UA IS NOT MANDATORY. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) OUGHT TO HAVE HELD THAT THE ASSESSING OFFICER HAS NO JURISDI CTION TO GO BEYOND THE VALUATION REPORT ISSUED BY CHARTERED ACCOUNTANT . ITA NO.922/BANG/2018 PAGE 2 OF 4 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE DCF METHOD ADO PTED BY THE APPELLANT FOR VALUATION OF SHARES IS IRRATIONAL AND DOES NOT HAVE RELEVANCE TO THE FACTUAL FINANCIAL RESULTS OF THE A SSESSEE COMPANY. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE VALUATION REPO RT CANNOT BE RELIED UPON BECAUSE THE CHARTERED ACCOUNTANT DID NOT AUTHE NTICATE THE PROJECTIONS IGNORING THE FACT THAT THE PROJECT COUL D NOT TAKE OFF DUE TO FACTORS BEYOND THE CONTROL OF THE APPELLANT. 7. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT SECTION 56(2) (VII B) IS APPLICABLE EVEN THOUGH THE SHARES HAVE BEEN ALLOTTED ONLY TO THE PA RENT COMPANY. 8. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT SECTION 56(2)(VIIB ) IS APPLICABLE TO THE FACTS OF THE CASE EVEN THOUGH AS PER THE CIRCULAR A .P (DIR SERIES) CIRCULAR NO.49 DATED 04.05.2010 ISSUED BY RESERVE B ANK OF INDIA, THE APPELLANT IS BOUND TO VALUE THE SHARES UNDER DCF ME THOD. 9. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) OUGHT TO HAVE DISPOSED OF THE GROUNDS NO. 2,3,7 AND 8 RAISED BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER, THE APPELLANT CRAVES THE LEAVE OF THE HON'BLE INCOME TA X APPELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR MODIFY OTHERWISE ALL OR ANY OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TI ME OF HEARING THIS APPEAL. 3. THE LD. AR OF ASSESSEE HAS SOUGHT LEAVE OF THE B ENCH FOR FILING SOME ADDITIONAL EVIDENCES. BUT HE ALSO SUBMITTED THAT T HE MATTER HAS TO GO BACK TO THE FILE OF THE AO FOR FRESH DECISION. IN THIS REGARD, HE SUBMITTED THAT IN GROUND NO. 3 RAISED BEFORE CIT(A), IT WAS CONTENDED THAT THE AO HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE VALUATION O F UNQUOTED EQUITY SHARES SHOULD BE DETERMINED DULY IN ACCORDANCE WITH RULE 1 1UA AS IT STOOD BEFORE THE AMENDMENT MADE BY NOTIFICATION W.E.F. 29.11.201 2. HE SUBMITTED THAT THE ORDER OF CIT(A) DOES NOT CONTAIN DECISION ON TH IS GROUND NO. 3 RAISED BY ASSESSEE BEFORE CIT(A). HE SUBMITTED THAT THE MATT ER MAY BE RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION BECAUSE A S PER THE ASSESSMENT ORDER ALSO, THIS ISSUE WAS DECIDED BY THE AO IN A C RYPTIC MANNER WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO MAKE SUBM ISSIONS IN THIS REGARD ITA NO.922/BANG/2018 PAGE 3 OF 4 AS TO HOW THE AMENDED RULE 11UA OF IT RULES ARE APP LICABLE IN THE PRESENT CASE. 4. AS AGAINST THIS, LD. DR OF REVENUE SUBMITTED THA T EVEN IF THE MATTER IS RESTORED BACK, THE SAME SHOULD BE RESTORED BACK TO CIT(A) AND NOT TO THE FILE OF AO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT AS PER PARA 7 OF THE ASSESSMENT ORDER, THE AO SAYS THAT ON THE DATE OF ALLOTMENT OF SHARES, DCF METHOD WAS NOT AN ACCEPTED METHOD FOR CALCULATI NG FMV OF SHARES AS PER RULE 11UA OF IT RULES. IN PARA 5 OF THE ASSESS MENT ORDER, IT IS NOTED BY THE AO THAT HE ASKED THE ASSESSEE TO SUBSTANTIATE T HE SHARE PREMIUM COLLECTED BY THE ASSESSEE AND AS PER THE REPLY DATE D 15.03.2016, SUBMITTED BY THE ASSESSEE BEFORE THE AO, THE ASSESSEE HAS FUR NISHED THE COPY OF CERTIFICATE ISSUED BY A CHARTERED ACCOUNTANT DATED 03.09.2012. IN THE SAME PARA OF THE ASSESSMENT ORDER, THIS IS ALSO NOTED BY THE AO THAT THE VALUATION ADOPTED BY THE ASSESSEE IS AS PER THE DCF METHOD. THERE IS NO MENTION IN THE ASSESSMENT ORDER THAT ANY QUERY WAS MADE BY THE AO TO THE ASSESSEE ASKING THE ASSESSEE TO EXPLAIN AS TO HOW THE DCF ME THOD AS PER AMENDED RULE 11UA IS NOT APPLICABLE IN THE PRESENT CASE BEI NG ASSESSMENT YEAR 2013-14 IN VIEW OF THE AMENDMENT IN RULE 11UA W.E.F . 29.11.2012. BEFORE CIT(A) ALSO, GROUND TO THIS EFFECT WAS RAISED BY AS SESSEE WHICH WAS NOT DECIDED BY CIT(A). HENCE, WE ARE OF THE CONSIDERED OPINION THAT THE ENTIRE MATTER HAS TO GO BACK TO THE FILE OF AO FOR FRESH D ECISION. REGARDING THIS REQUEST OF THE LD. DR OF REVENUE THAT THE MATTER SH OULD NOT BE RESTORED BACK TO AO BUT IT SHOULD BE RESTORED BACK TO CIT(A), WE WOULD LIKE TO OBSERVE THAT THE AO HAS NOT GRANTED AN OPPORTUNITY TO THE ASSESS EE BY ASKING THE ASSESSEE SPECIFICALLY AS TO HOW THE DCF METHOD IS N OT APPLICABLE IN THE PRESENT CASE ALTHOUGH RULE 11UA OF IT RULES WAS AME NDED W.E.F. 29.11.2012 AND THE ALLOTMENT OF SHARES WAS ON 11.09 .2012. THEREFORE, IN OUR CONSIDERED OPINION, IT SHOULD GO BACK TO THE AO IN THE INTEREST OF JUSTICE. ACCORDINGLY, WE RESTORE BACK THE MATTER TO THE FILE OF AO FOR FRESH DECISION WITH THE DIRECTION THAT HE SHOULD PASS A SPEAKING A ND REASONED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE AND WHATEVER BE THE OBJECTION OR QUERY OF THE AO, THE S AME SHOULD BE ITA NO.922/BANG/2018 PAGE 4 OF 4 CONFRONTED TO THE ASSESSEE BEFORE TAKING FINAL DECI SION. IN VIEW OF THIS, NO ADJUDICATION IS CALLED FOR REGARDING THE MERIT OF T HE CASE AT THE PRESENT STAGE AND REGARDING ADDITIONAL EVIDENCES, WE HOLD THAT TH E SAME MAY BE SUBMITTED TO THE AO AND HE SHOULD CONSIDER THE SAME . 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH OCTOBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.