M/S I BRANDS BEVERAGES PRIVATE LIMITED,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(1)(1), BANGALORE

The appeal filed by the assessee is directed against the order dated 21.03.2019 passed by Ld CIT(A)-3, Bengaluru and it relates to the assessment year 2015-16. All the grounds urged by the assessee relate to the addition of Rs.16.20 crores made by the AO u/s 56(2)(viib) of the Income-tax Act,1961 ['the Act' for short].

The facts relating to the above said issue are stated in brief. The assessee company is engaged in the business of manufacture and sale of beverages. During the year under consideration, the M/s. I Brands Beverages Pvt. Ltd., Bangalore

The assessee furnished a valuation report dated 22.01.2015 issued by a Chartered Accountant. The AO noticed that the valuation has been done under “Discounted Cash Flow” method. The AO noticed that the value of per share, as per projections was Rs.37.49 per share and it was mistakenly arrived at Rs.374.95. Accordingly, the AO assessed the difference amount of Rs.16.20 crores as income of the assessee u/s 56(2)(viib) of the Act.

Before Ld CIT(A), the assessee furnished a “Corrigendum” issued by the Chartered Accountant in respect of Valuation report earlier furnished by him. The assessee furnished the same as an additional evidence. The assessee submitted that there was an error in the Schedule attached to the original valuation report. The assessee submitted that the Corrigendum issued by the valuer has to be read together along with the original report and the same would show that the fair market value of share was arrived at by the valuer at Rs.374.95.

We heard the parties and perused the record. We notice that the additional evidence furnished by the assessee before the AO is in the nature of Corrigendum issued by the Valuer, who was constrained to issue the same as there was an error in the original valuation report. The corrigendum issued same shall form part of original valuation report. In our view, the same should not be treated as additional evidence, as observed by Ld CIT(A). Hence, in our view, there is no reason to reject the corrigendum. Accordingly, we admit the corrigendum furnished by the assessee before the Ld CIT(A), since the same has been issued to correct the error in arriving at the fair market value of shares issued by the assessee. Accordingly, the original report and corrigendum shall constitute full report and the same has to be examined by the AO. Accordingly, we set aside the order passed by Ld CIT(A) and restore the same for examination of the AO with the direction to take into account full report.