O R D E R

PER S. RIFAUR RAHMAN, AM :

1. This appeal is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 18.08.2025 for the Assessment Year 2018-19.

2. Brief facts of the case are, assessee filed its original return of income declaring total loss of Rs.1,46,02,003/- on 15.10.2018. Subsequently, the return was revised on 01.03.2019 at a total loss of Rs.1,46,02,003/-. The case was selected for scrutiny through CASS under limited scrutiny in order to verify the share premium. Accordingly, notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee through ITBA Portal. Accordingly, assessee filed relevant information as called for.

3. The assessee is engaged in the business of IOT products and solutions, which forms the backbone of the all smart solutions. The AO observed that assessee has issued share capital on 25.07.2017, 23.10.2017 and 31.03.2018 and based on the valuation, assessee has issued share capital with the share premium of Rs.993/- on 25.07.2017, share premium of Rs.734.05 on 23.10.2017 and share premium of Rs.888.80 on 31.03.2018. Since the assessee has adopted the same data to determine the different share premium to issue shares in three tranches during the same year. In response, assessee has submitted various details in support of the valuation of shares. Further, the AO observed that even though assessee has adopted projections from AY 2017-18 to 2020-21 whereas the actual figures are that assessee has incurred huge losses during this period. Accordingly, assessee was asked to explain as to why the above value of shares should not be added u/s 56(2)(viib)of the Act. In response to the above notices, assessee has submitted a detailed submissions and also submitted that one of the shareholders is Kamal Puri who is a non-resident and the provisions of section 56(2)(viib) are not applicable. The AO took note of the same and proceeded to make the addition towards collection of share premium to the extent of resident only. The proportionate amount to the extent of share issue to the resident to Rs.70,36,523/- was considered. The AO has adopted the other method of valuation of equity shares as specified under Rule 11UA of Income-tax Rules, 1962 (for short ‘the Rules’) on the basis of net worth based valuation. Based on that, he has determined the value per share and accordingly he disallowed the difference between values determined by him and share premium amount collected from the resident Indian.

4. Aggrieved with the above order, assessee preferred an appeal before NFAC, Delhi and filed detailed submissions. After considering the detailed submissions, ld. CIT (A) observed that on perusal of the three valuation reports submitted by the assessee certified by the certified valuer adopting DCF method, the above reports clearly state that fair valuation of the equity shares is pursuant to Regulation 5(1) of foreign exchange management. He has reproduced scope and purpose of the report at page 16 of the appellate order. He further observed that although the valuation of the equity shares has been done on the basis of DCF method certified by the Chartered Accountant, the report does not certify that valuation is for the purpose of compliance of Rule 11UA of the Rules instead of the valuations have been done solely in pursuance of FEMA Regulations for the purpose of proposed issuance of equity shares to non-resident Indian and/or are foreign corporate body. As per section 56(2)(viib), where a company, not being a company in which public are substantially interested, receives, in any previous year, from any person being resident, any consideration received for issue of shares as exceeds the fair market value of such shares, the correct consideration received for such shares as exceeds the fair market value of the shares. There