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Facts
The assessee sold shares of PCI Pest Control Private Limited to a non-resident buyer for Rs. 20,00,06,909. The Assessing Officer made an addition of Rs. 16,02,68,952 on account of unexplained share premium under Section 68/69 of the Income Tax Act. The assessee contended that this amount was offered as 'Sales Consideration' for capital gains, leading to double taxation.
Held
The Tribunal held that the assessee was prevented by sufficient cause from producing documents before the lower authorities. The lower authorities had dismissed the appeal for failure to discharge the onus of proving identity, creditworthiness, and genuineness of the share premium transaction without adequate documentary evidence.
Key Issues
Whether the addition of share premium under Section 68/69 was justified, and whether the assessee was denied a proper opportunity to present evidence.
Sections Cited
68, 69, 143(2), 133(6), 234B, 234C, 234D, 270A, 271AAC(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B ” MUMBAI
Before: SHRI OM PRAKASH KANT (ACCOUNT MEMBER) & MS. KAVITHA RAJAGOPAL
This appeal by the assessee is directed against order dated 22nd October, 2025 passed by the Ld. Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre, Delhi [in short, “the Ld. CIT(A)] for assessment year 2017-18 raising following grounds:
1. erred in assessing the Total Income of the Appellant at Rs. 16,07,69,040/ assessing the Total Income of the Appellant at Rs. 16,07,69,040/ assessing the Total Income of the Appellant at Rs. 16,07,69,040/- as against the returned income of Rs.4,01,94,310/ as against the returned income of Rs.4,01,94,310/- by incorrectly invoking by incorrectly invoking the provisions of section 68/Section 69 of the Income Tax Act; the provisions of section 68/Section 69 of the Income Tax Act; Opportunity of being heard Opportunity of being heard 2. Ld. NFAC has erred i 2. Ld. NFAC has erred in passing ex-parte order without granting opportunity parte order without granting opportunity of being heard to the Appellant by rejecting the Appellant's short adjournment of being heard to the Appellant by rejecting the Appellant's short adjournment of being heard to the Appellant by rejecting the Appellant's short adjournment request and not appreciating the reasonable cause for the adjournment request and not appreciating the reasonable cause for the adjournment request and not appreciating the reasonable cause for the adjournment provided by the Appellant; provided by the Appellant; Ld. AO has exceeded his j ceeded his jurisdiction 3. erred in exceeding jurisdiction by passing the final assessment order after 3. erred in exceeding jurisdiction by passing the final assessment order after 3. erred in exceeding jurisdiction by passing the final assessment order after making an addition of Rs. 16,02,68,952/ making an addition of Rs. 16,02,68,952/- under section 68/Section 69 of the under section 68/Section 69 of the Income Tax Act which was the beyond the scope of Limited Scrutiny Income Tax Act which was the beyond the scope of Limited Scrutiny Income Tax Act which was the beyond the scope of Limited Scrutiny assessment under sectio assessment under section 143(2) of the Income Tax Act which was on account n 143(2) of the Income Tax Act which was on account of CASS reason "Large deduction/exemption claimed; of CASS reason "Large deduction/exemption claimed; Addition of Rs. 16,02,68,952 on accoun Addition of Rs. 16,02,68,952 on account on unexplained share t on unexplained share premium: 4. erred in making addition of Rs. 16,02,68,952 under Section 68/Section 69 4. erred in making addition of Rs. 16,02,68,952 under Section 68/Section 69 4. erred in making addition of Rs. 16,02,68,952 under Section 68/Section 69 of the Act on account of unexplained share premium without appreciating the Act on account of unexplained share premium without appreciating the Act on account of unexplained share premium without appreciating the fact that the Appellant had offered the amount to tax as "Sales Consideration" fact that the Appellant had offered the amount to tax as "Sales Consideration" fact that the Appellant had offered the amount to tax as "Sales Consideration" while computing the capital gains during the year under consideration, while computing the capital gains during the year under consideration, while computing the capital gains during the year under consideration, thereby leading to the double taxati thereby leading to the double taxation of the same income; 5. erred in solely relying on the valuation report issued to the buyer i.e. 5. erred in solely relying on the valuation report issued to the buyer i.e. 5. erred in solely relying on the valuation report issued to the buyer i.e. Rentokil Initial Asia Pacific Management Pte Ltd ('Rentokil Singapore') to Rentokil Initial Asia Pacific Management Pte Ltd ('Rentokil Singapore') to Rentokil Initial Asia Pacific Management Pte Ltd ('Rentokil Singapore') to ascertain the minimum price of share of PCI Pest Control Private Limited under ascertain the minimum price of share of PCI Pest Control Private Limited under ascertain the minimum price of share of PCI Pest Control Private Limited under FEMA regulations without appreciating the fact that sale price of shares of PCI MA regulations without appreciating the fact that sale price of shares of PCI MA regulations without appreciating the fact that sale price of shares of PCI Pest Control Private Limited has been commercially negotiated between the Pest Control Private Limited has been commercially negotiated between the Pest Control Private Limited has been commercially negotiated between the Appellant and Rentokil Singapore; failed to obtain confirmation from the buyer Appellant and Rentokil Singapore; failed to obtain confirmation from the buyer Appellant and Rentokil Singapore; failed to obtain confirmation from the buyer under Section 133(6) of t under Section 133(6) of the Income-tax Act, 1961, as specifically requested by tax Act, 1961, as specifically requested by the Appellant, despite the Appellant having furnished all relevant details of the Appellant, despite the Appellant having furnished all relevant details of the Appellant, despite the Appellant having furnished all relevant details of the buyer; Erroneous levy of interest Erroneous levy of interest under section 234B of the Act: 7. erred in levying interest under section 234B of INR 7. erred in levying interest under section 234B of INR 3,75,54,429; Erroneous levy of interes Erroneous levy of interest under section 234C of the Act 8. erred in levying interest under section 234C of INR 68,972; 8. erred in levying interest under section 234C of INR 68,972; Erroneous levy of interes Erroneous levy of interest under section 234D of the Act 9. erred in levying interest under section 234D of INR 61,387; 9. erred in levying interest under section 234D of INR 61,387; Initiation of penalty proceedings under Section 27 Initiation of penalty proceedings under Section 270 and Section 0 and Section 271AAC of the Act 10. erred in initiating penalty proceeding under section 270A and 271AAC(1) 10. erred in initiating penalty proceeding under section 270A and 271AAC(1) 10. erred in initiating penalty proceeding under section 270A and 271AAC(1) of the Act.”
Before us, the Ld. Counsel for the assessee addressing the the Ld. Counsel for the assessee addressing the the Ld. Counsel for the assessee addressing the ground no.2 of the appeal submitted that the Ld. CIT(A) rejected ground no.2 of the appeal submitted that the Ld. CIT(A) rejected ground no.2 of the appeal submitted that the Ld. CIT(A) rejected the request of short adjournment of the assessee for providing the request of short adjournment of the assessee for providing the request of short adjournment of the assessee for providing opportunity of being heard and passed the order ex g heard and passed the order ex g heard and passed the order ex-parte. The Ld. Counsel for th Ld. Counsel for the assessee also filed an application for e assessee also filed an application for admitting additional evidence under Rule 29 of the Income Tax admitting additional evidence under Rule 29 of the Income Tax admitting additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) R (Appellate Tribunal) Rules, 1963.
We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant material on record. The Ld. CIT(A) dismissed the relevant material on record. The Ld. CIT(A) dismissed the relevant material on record. The Ld. CIT(A) dismissed the appeal of the assessee mainly for the reason that the assessee appeal of the assessee mainly for the reason that the assessee appeal of the assessee mainly for the reason that the assessee has failed to file documentary ev has failed to file documentary evidence in support of onus u/s 68 idence in support of onus u/s 68 of the Income Tax Act, 1961 (in short, “the Act”) of the Income Tax Act, 1961 (in short, “the Act”) for establishing for establishing identity, creditworthiness and genuineness of the trans identity, creditworthiness and genuineness of the trans identity, creditworthiness and genuineness of the transaction of share premium. The relevant finding of the Ld. CIT(A) is share premium. The relevant finding of the Ld. CIT(A) is share premium. The relevant finding of the Ld. CIT(A) is reproduced as under : reproduced as under :
“Decision: I have carefully considered the grounds of appeal and submission I have carefully considered the grounds of appeal and submission I have carefully considered the grounds of appeal and submission made by the appellant as above, the facts of the case as well as gone through the made by the appellant as above, the facts of the case as well as gone through the made by the appellant as above, the facts of the case as well as gone through the observation and findings of the AO 's assessment order vide dated 28 on and findings of the AO 's assessment order vide dated 28 on and findings of the AO 's assessment order vide dated 28-12-2019. It is observed from the assessment order that the AO based on detailed analysis It is observed from the assessment order that the AO based on detailed analysis It is observed from the assessment order that the AO based on detailed analysis and documentary evidences has held, since the appellant being failed to discharge and documentary evidences has held, since the appellant being failed to discharge and documentary evidences has held, since the appellant being failed to discharge the onus to prove identity, Creditworthiness of c ty, Creditworthiness of co. & genuineness of transaction o. & genuineness of transaction of share premium with supporting documentary e share premium with supporting documentary evidence, the share premium of @ vidence, the share premium of @ Rs.31,749/- per share which is over and above the fair value of @Rs.7872/ per share which is over and above the fair value of @Rs.7872/ per share which is over and above the fair value of @Rs.7872/-per share which includes the share premium also share which includes the share premium also on @ Rs. 100/-, each fully paid up, , each fully paid up, as determined by the M/s Deloite Haskin & sells in his valuation report being as determined by the M/s Deloite Haskin & sells in his valuation report being as determined by the M/s Deloite Haskin & sells in his valuation report being unreasonable and unexplained And accordingly the AO has added the total share unreasonable and unexplained And accordingly the AO has added the total share unreasonable and unexplained And accordingly the AO has added the total share premium of Rs. 16,02,68,952/ premium of Rs. 16,02,68,952/-(share premium @ Rs.31749 pershare (share premium @ Rs.31749 pershare /5048 number of shares.) as unexplained and accordingly reduce the Long Term Capital number of shares.) as unexplained and accordingly reduce the Long Term Capital number of shares.) as unexplained and accordingly reduce the Long Term Capital gain. It is observed from the assessment order that neither the AR nor the appellant It is observed from the assessment order that neither the AR nor the appellant It is observed from the assessment order that neither the AR nor the appellant counld justifiably establish how the Deloitee Haskins & sells could have prepared counld justifiably establish how the Deloitee Haskins & sells could have prepared counld justifiably establish how the Deloitee Haskins & sells could have prepared valuation report of share of company M/s PCI Pest control Pvt.Ltd. & value luation report of share of company M/s PCI Pest control Pvt.Ltd. & value luation report of share of company M/s PCI Pest control Pvt.Ltd. & value determined at Rs.7872/ determined at Rs.7872/- per share of Rs.100/-each fully paid up & not for each fully paid up & not for Rs.39621/- per share on which rate assessee has shown sold his shares to per share on which rate assessee has shown sold his shares to per share on which rate assessee has shown sold his shares to Rentokil Initial Asia Pacific Manag Initial Asia Pacific Management Pvt. Ltd. Singapore in as much as no financial ement Pvt. Ltd. Singapore in as much as no financial statement Annual Repot, Balance sheet, P & L a/c of M/s PCI Pest control Pvt.Ltd. statement Annual Repot, Balance sheet, P & L a/c of M/s PCI Pest control Pvt.Ltd. statement Annual Repot, Balance sheet, P & L a/c of M/s PCI Pest control Pvt.Ltd. submitted before the AO to examine the worth of this company in course of submitted before the AO to examine the worth of this company in course of submitted before the AO to examine the worth of this company in course of scrutiny assessment.
It is observed despite av It is observed despite availing ample/ multiple opportunity in assessment stage ailing ample/ multiple opportunity in assessment stage neither the appellant nor its authorized representative could have discharged its neither the appellant nor its authorized representative could have discharged its neither the appellant nor its authorized representative could have discharged its onus by providing any acceptable satisfactory evidence before the AO in course of onus by providing any acceptable satisfactory evidence before the AO in course of onus by providing any acceptable satisfactory evidence before the AO in course of scrutiny assessment so as to establis scrutiny assessment so as to establish identity, Creditworthiness of co. & h identity, Creditworthiness of co. & genuineness of transaction of share premium with persons advancing substantial genuineness of transaction of share premium with persons advancing substantial genuineness of transaction of share premium with persons advancing substantial amount to the appellant. amount to the appellant. In view of above, I do not find any infirmity in the order of the AO and resultantly, In view of above, I do not find any infirmity in the order of the AO and resultantly, In view of above, I do not find any infirmity in the order of the AO and resultantly, I have no hesitation in hol I have no hesitation in holding that the impugned order of the AO dated 28 ding that the impugned order of the AO dated 28-12- 2019 is based on apropos consideration of facts and law and hence the same 2019 is based on apropos consideration of facts and law and hence the same 2019 is based on apropos consideration of facts and law and hence the same does not warrant interference. Therefore I am of opinion that AO's decision of does not warrant interference. Therefore I am of opinion that AO's decision of does not warrant interference. Therefore I am of opinion that AO's decision of determining total income after addition of 16,02,68 determining total income after addition of 16,02,68,952/- with respect to with respect to unexplained cash credit invoking section 68, is justified and in accordance with unexplained cash credit invoking section 68, is justified and in accordance with unexplained cash credit invoking section 68, is justified and in accordance with law. Accordingly addition made by the AO in assessment order of Rs. law. Accordingly addition made by the AO in assessment order of Rs. law. Accordingly addition made by the AO in assessment order of Rs. 16,02,68,952/- under unexplained credit stand confirmed and the grounds under unexplained credit stand confirmed and the grounds under unexplained credit stand confirmed and the grounds relating to this issue are dismissed. this issue are dismissed. In the result, the appeal of the appellant is dismissed. In the result, the appeal of the appellant is dismissed.”
We find that the issue in dispute on merit in the appeal We find that the issue in dispute on merit in the appeal We find that the issue in dispute on merit in the appeal pertains to alleged excess premium received on sale of shares pertains to alleged excess premium received on sale of shares pertains to alleged excess premium received on sale of shares which has been charged to tax u/s 68 of the Act. which has been charged to tax u/s 68 of the Act. During the year During the year under consideration, the assessee had made a sale of 5048 under consideration, the assessee had made a sale of 5048 under consideration, the assessee had made a sale of 5048 shares of PCI Pest Control Private Limited Pest Control Private Limited to M/s Rentokil Initial to M/s Rentokil Initial Asia Pacific Management PTE Ltd., Asia Pacific Management PTE Ltd., a non-resident entity based in resident entity based in Singapore for a total consideration of Rs.20,00,06 Singapore for a total consideration of Rs.20,00,06,909/ ,909/-. During the course of the scrutiny proceeding, the Assessing Officer asked the course of the scrutiny proceeding, the Assessing Officer asked the course of the scrutiny proceeding, the Assessing Officer asked the assessee to justify the identity and creditworthiness of the the assessee to justify the identity and creditworthiness of the the assessee to justify the identity and creditworthiness of the transaction. But the assessee requested for issuance of notice transaction. But the assessee requested for issuance of notice transaction. But the assessee requested for issuance of notice u/s 133(6) of the Act. The request of the asse u/s 133(6) of the Act. The request of the assessee was, however, ssee was, however, not accepted and the Assessing Officer proceeded to make the not accepted and the Assessing Officer proceeded to make the not accepted and the Assessing Officer proceeded to make the addition u/s 68 of the Act. Being aggrieved, the assessee filed addition u/s 68 of the Act. Being aggrieved, the assessee filed addition u/s 68 of the Act. Being aggrieved, the assessee filed appeal before the Ld. CIT(A). It is contended by the assessee that appeal before the Ld. CIT(A). It is contended by the assessee that appeal before the Ld. CIT(A). It is contended by the assessee that during the first appeal proceeding, the asses during the first appeal proceeding, the assessee had filed see had filed adjournment letters before the Ld. CIT(A) seeking time for adjournment letters before the Ld. CIT(A) seeking time for adjournment letters before the Ld. CIT(A) seeking time for submitting documents as time was required to collate submitting documents as time was required to collate submitting documents as time was required to collate those documents from various sources including non documents from various sources including non-resident buyer. resident buyer. This exercise was time consuming as the documents were This exercise was time consuming as the documents were This exercise was time consuming as the documents were pertaining to financial of non ng to financial of non-resident entities which required co resident entities which required co- ordination with them. However, the Ld. CIT(A) did not offer ordination with them. However, the Ld. CIT(A) did not offer ordination with them. However, the Ld. CIT(A) did not offer another opportunity to the assessee of being heard and decided another opportunity to the assessee of being heard and decided another opportunity to the assessee of being heard and decided the matter ex parte. The Ld. Counsel submitted that as a result the matter ex parte. The Ld. Counsel submitted that as a result the matter ex parte. The Ld. Counsel submitted that as a result those crucial documentary evidence could not be submitted by ial documentary evidence could not be submitted by ial documentary evidence could not be submitted by the assessee at the lower level. the assessee at the lower level. The list of additional evidence filed The list of additional evidence filed by the assessee before us is reproduced as under: by the assessee before us is reproduced as under:
Having considered the submission of the assessee, we are of Having considered the submission of the assessee, we are of Having considered the submission of the assessee, we are of the opinion that the assessee was prevented by way of sufficient the opinion that the assessee was prevented by way of sufficient the opinion that the assessee was prevented by way of sufficient cause in producing the the documents before the lower authorities. documents before the lower authorities.
Accordingly, we set aside the order of the lower authorities and Accordingly, we set aside the order of the lower authorities and Accordingly, we set aside the order of the lower authorities and restore the matter back to the file of the Assessing Officer for tore the matter back to the file of the Assessing Officer for tore the matter back to the file of the Assessing Officer for adjudication of the issue in dispute in accordance with law in the adjudication of the issue in dispute in accordance with law in the adjudication of the issue in dispute in accordance with law in the light of documents filed by the assessee in support of the identity, light of documents filed by the assessee in support of the identity, light of documents filed by the assessee in support of the identity, creditworthiness and genuineness of the transaction. creditworthiness and genuineness of the transaction. creditworthiness and genuineness of the transaction.
The ground no.2 of the appeal of the assessee is allowed. e ground no.2 of the appeal of the assessee is allowed. e ground no.2 of the appeal of the assessee is allowed. The other grounds on merit are accordingly rendered academic. The other grounds on merit are accordingly rendered academic. The other grounds on merit are accordingly rendered academic.
In the result, appeal of the assessee is allowed for statistical In the result, appeal of the assessee is allowed for statistical In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on ounced in the open Court on 13/0 /03/2026.