UTILITY SUPPLY PRIVATE LIMITED,MUMBAI vs. DCIT CENTRAL CIRCLE 8(4) MUMBAI, MUMBAI

Per : Narender Kumar Choudhry, Judicial Member:

This appeal has been preferred by the Assessee against the order dated 14.06.2024, impugned herein, passed by the Ld.
Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y.
2017-18. M/s. Utility Supply Private Limited

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2. Brief facts relevant for adjudication of the instant appeal are that the Assessee has claimed that it is also engaged in share trading and investment activities and during the assessment year under consideration, has declared income at Rs. 14,090/- by filing its return of income on dated 11.10.2017, which was processed u/s 143(1) of the Act.
3. Subsequently, on dated 22.03.2018 a search and seizure action u/s 132 of the Act was conducted in the case of Aachman
Group and other related entities by the DDIT (Investigation), Unit-
6(1), Mumbai. The case of the Assessee was also covered under such search and seizure operation and consequently notice dated
06.12.2019 u/s 153A of the Act, was issued to the Assessee, in response to which the Assessee filed its return of income on dated
10.12.2019, declaring total income at Rs.”14,090/-”.
4. Thereafter, various statutory notices were issued, in response to which the Assessee from time to time, attended the proceedings and filed the requisite details, as called for. On verification of the details filed by the Assessee during the course of assessment proceedings and examining the return of income, it was observed by the Assessing Officer (AO) that the Assessee, during the assessment year under consideration, has purchased following shares:

Sl.
No.
Name of the share
Number of shares
Consideration amount
1. M/s. Navratan
Management Pvt. Ltd.
3000
Rs.3,00,000/-
2. M/s. Muktamani
Distributors Pvt. Ltd.
50,000
Rs.50,000/-
3. M/s. Mecons Pro
Comotrade Pvt. Ltd.
60,000
Rs.6,00,000/-
M/s. Utility Supply Private Limited

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4. M/s. Aachman Vanijya
Pvt. Ltd.
3,30,000
Rs.33,00,000/-
5. The AO on perusing the financials of the Assessee observed that the fair market value per share of M/s. Navratan Management
Pvt. Ltd. and M/s. Muktamani Distributors Pvt. Ltd. appears to be more than the face value, on which the shares were purchased and therefore, he asked the Assessee to furnish the valuation of the shares of such companies. The Assessee furnished the valuation report of M/s. Navratan Management Pvt. Ltd. and M/s. Muktamani
Distributors Pvt. Ltd.
5.1
On perusing the valuation reports, the AO observed that fair market value per share of M/s. Navratan Management Pvt. Ltd. and M/s. Muktamani Distributors Pvt. Ltd. was more than the purchase value per share and therefore he show caused the Assessee “as to why the provisions of section 56(2)(viia) of the Act should not be invoked for the purchase of such shares of and the differential amount {of the fair market value and purchase value} should not be added as income in the hands of the Assessee”.
6. The Assessee furnished its explanation, more or less claiming as under:
"The assessee is a company registered with the