ITO WARD 8(1) KOLKATA, KOLKATA vs. PDK ESTATES PVT. LTD., KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 08.10.2024 for the AY 2018-19.

At the outset, we observe from the appeal folder that there is 2. a delay of 101 days in filing the appeal by the department in support of which a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from various authorities, which took quite a long time and accordingly, the delay may be condoned. The ld. AR, on the other hand, did

3.1. The facts in brief are that the case of the assessee was selected for limited scrutiny for examination of investments/ advance loans and share premium. The assessee filed the return of income on 18.09.2018, declaring nil income. The ld. AO during the course of assessment proceedings, noted that the assessee has issued fresh share during the year and accordingly, assessee was issued notices u/s 143(2) and 142(1) of the Act to furnish the details, with respect to the increase in share capital/ introduction of share premium. During the year, the assessee issued 2 lacs equity shares of face value ₹10 each to PDK Impex Limited at a premium of ₹375/- per share based on the valuation report by the Chartered Accountant Shri Sashi Agarwal. However, the ld. AO rejected the same on the ground that the assessee has not provided any sound analysis and computation of valuation of share premium. Accordingly, the ld. AO computed the value of premium at NAV method as per Rule 11UA(2) at ₹207.73. The ld. AO noted that the assessee has issued shares at an excess price of 168/- per share and accordingly, computed the excess share premium received by the assessee at ₹3,36,00,000/-. A show cause notice was issued and after

3.2. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by observing and holding as under:-

“11. I have perused the said documents and it is seen that it contains the detailed working and supporting calculation on the basis of which the Valuer (Chartered Accountant) has arrived at the FMV of Rs.385.41 per share. The said detailed working sheet also contains calculation of the foreign subsidiary company viz. Nepal Distilleries Private Limited, Nepal which is duly supported by valuation report of the Nepal valuer. 12. On perusal of the valuation report along with the detailed working sheet, and on examination of the same, I find no cogent reason to doubt the said calculation of the FMV of the shares of Assessee at Rs. 385.41 per share. During the assessment proceedings, the Assessee was never confronted with the doubts of the AO about the Valuation Report and/or inadequacy of supporting, and thus there was no occasion before the Assessee to comprehend that the AO was not satisfied with the Valuation Report submitted before him and/or calculation of the FMV of the shares of Assessee determined at Rs.385.41 per share. 13. In addition to the lacuna that the calculation of the figure of Rs. 385.41 was not clear, the AO has pointed out the following issues in support of his rejecting the valuation reached in the Valuation Report: i. It is not clear as to which immovable properties were considered for valuation. Whether properties of companies in which the assessee has made investments, is also included in the same. ii. Whether Rule 11UA has been followed iii. Whether all the data has been provided by the Directors to the valuer CA and the CA has not been able to verify the said data independently iv. The method used for valuation given that the company has high investment in sister concerns and the EPS is negative. v. AO has drawn support from the judgement of the Hon’ble ITAT, Bangalore bench in the case of TUV Rheinland NIFE Academy Pvt. Ltd. vs. ITO and Hon’ble ITAT A bench, New Delhi in the case of Agro Portfolio Pvt. Ltd. vs ITO (94Taxmann.com112) 14. At the outset it is seen that the lacunas pointed out are more in the nature of suspicion/conjectures, bearing out of lack of opportunity to peruse

4.1. The facts in brief are that the case of the assessee was selected for examination of advance/ advance loans and share

4.2. The ld. CIT (A) in the appellate proceedings allowed this issue by directing the ld. AO to delete the addition that the same is in the scope of limited scrutiny.

4.3. After hearing the rival contentions and perusing the materials available on record including the assessment order, we note that the case of the assessee was selected for limited scrutiny and disallowances of expenses was not within the ambit of limited scrutiny. The ld. AO has not converted the scrutiny into complete scrutiny after recording his satisfaction and after obtaining prior approval of the competent authority. Therefore, in our opinion, the addition made by the ld. AO is beyond his jurisdiction and cannot be sustained. The ld. CIT (A) rightly deleted the addition by observing that the disallowance of expenses was outside the ambit of jurisdiction of the ld. AO as it was only a limited scrutiny. The case of the assessee is squarely covered by the decision of Hon'ble Jurisdictional High Court in case of Principal Commissioner of Income-tax vs. Weilburger Coatings (India) (P.) Ltd. [2023] 155 taxmann.com 580 (Calcutta)/[2024] 296 Taxman 205 (Calcutta)/[2024] 463 ITR 89 (Calcutta)[11-10-2023], wherein the Hon'ble Court has held as under:-

Order pronounced on 13.07.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 13.07.2026 Sudip Sarkar, Sr.PS

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata