IN THE INCOME TAX APPELLATE TRIBUNAL Camp Bench at Jalandhar Before Shri. N.K. Saini, Vice President and Shri. Ravish Sood, Judicial Member ITA No. 666/Asr/2017 (Assessment Year: 2013-14)

The Asstt. Commissioner of M/s Enterprises Business Solutions Income Tax, Circle-2, Pvt. Ltd., 49, Green Park, Jalandhar Vs.

Jalandhar PAN – AACCE6427C (Appellant) (Respondent)

Revenue by : Sh. Lalit Mohan Jindal, DR Assessee by: Sh. Y.K. Sud, CA Date of Hearing: 16.01.2019 Date of Pronouncement: 11.03.2019 O R D E R Per Ravish Sood, JM The present appeal filed by the revenue is directed against the order passed by the CIT(Appeals)-2, Jalandhar, dated 18.07.2017, which in turn arises from the assessment order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short ‘IT Act’), dated 18.03.2016 for A.Y. 2013-14. The revenue assailing the order of the CIT(A) has raised before us the following grounds of appeal:-

1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 2,80,00,000/- made by the AO under section 53(2)(viib)(a)(i) of the Income Tax Act, 1961.

2. The Ld. CIT(A) has erred in ignoring the AO’s finding that the assessee failed to produce supporting evidence to substantiate the method of valuation adopted by him.

3. The Ld. CIT(A) has erred in ignoring the fact that the AO had specifically asked the assessee to file supporting evidence with regard to “Discounted cash flow” method adopted to value shares, vide order sheet entry dated 17.03.16, which is a specific show cause in this respect, to which the assessee file no explanation.

4. The Ld. CIT(A) has erred in accepting the “Discounted cash flow” method for valuation of share, without any empirical basis to support the same.

5. It is prayed that the order of the Ld. CIT(A) be set-aside and that of the Assessing Officer restored.

6. That the appellants request for leave to add or amend or alter the grounds of appeal before the appeal is heard and disposed off.

2. Briefly stated, the assessee company had filed its return of income declaring loss of Rs. 1,25,63,385/- on 30.09.2013. The return of income filed by the assessee was processed under section 143(1) of the IT Act. Subsequently, the case was selected for scrutiny assessment under section 143(2).

3. During the course of assessment proceedings it was observed by the A.O that a perusal of the ‘balance sheet’ of the assessee company revealed that it had received share premium of Rs. 2,80,00,000/- during the year under consideration. The A.O observed that the assessee despite having been afforded sufficient opportunities could not furnish any explanation to support the method of valuation of shares adopted by it. Accordingly, the AO not being satisfied with the computation of the “Fair Market Value” (for short ‘FMV’) of the shares as shown by the assessee company, rejected the same in view of sub- clause (ii) of the clause (a) of Explanation to clause (viib) of sub-section (2) of Section 56 of the IT Act. As no separate balance sheet on the date of issue of shares was made available by the assessee, therefore, the A.O due to lack of information calculated the FMV of the shares, as under:-

	CLOSING (31.03.2013) (Without considering New Issue)	OPENING (01.04.2012
Capital	2100000.00	100000.00
R&S	19648303.00	(76359.00
Total	21748303.00	23,641.00
Less New Capital	(2000000.00)
Sec. Premium	(28000000.00)
	(-)(8251697.00
No. of Shares (Existing)	10000	10000

Value per share Rs. Nil Rs.2.36 As observed hereinabove, the value of the shares of the assessee company was worked out by the A.O as per Rule 11UA r.w.s. 56(2)(viib) as on 01.04.2012 and 31.03.2013 at Rs. 2.36 and Nil, respectively, which was even less than the face value of the shares i.e. Rs. 10/-. On the basis of his aforesaid observations the A.O concluded that the full share premium of Rs. 2,80,00,000/- received by the assessee company was taxable in its hands.

4. Aggrieved

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