CANPAC TRENDS PVT. LTD.,BAVLA vs. THE ACIT, CIRCLE-1(1)(2), AHMEDABAD

The assessee filed its return of income for the assessment year 2017-18 on 31/10/2017, declaring a total income of Rs.9,73,53,840/-, after claiming a deduction of Rs.5,60,500/- The return was processed under Section 143(1) of the Act. The case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS). During the course of the assessment proceedings, the assessee responded to some notices through e-submissions on the e-filing portal. However, the responses were incomplete and failed to address all issues raised by the AO. The AO focused on two major issues during the assessment: (i) Disallowance under Section 36(1)(va): • The AO observed that the assessee had delayed depositing employees’ contributions to PF/ESI amounting to Rs.1,41,730/-, beyond the due dates prescribed under the respective Acts. • Although the contributions were deposited before the due date for filing the return under Section 139(1), the AO disallowed the claim, citing the provisions of Section 2(24)(x) read with Section 36(1)(va). (ii) Addition under Section 56(2)(viib): • The assessee issued 7,85,000 shares at a face value of Rs.10/-, charging premiums ranging from Rs.127/- to Rs.275/- per share. • The fair market value (FMV) of the shares, as determined under Rule 11UA, was Rs.145/-, based on a valuation certificate issued by an independent Chartered Accountant. • The AO noted that shares were issued at a premium exceeding FMV to certain shareholders, resulting in taxable income under Section 56(2)(viib).

The assessee filed an appeal before the CIT(A) challenging the additions made by the AO. The CIT(A) dismissed the appeal on the basis of material available on record and upheld the additions made by the AO as the assessee did not make any submission.

Aggrieved by the order of CIT(A), the assessee filed an appeal before us with following grounds of appeal:

The application of Section 56 is against the spirit of the law; 3. The AO has erred in appreciating the submissions made and the shareholding pattern of the company since 2011.” Asst. Year : 2017-18

Despite multiple notices and hearings, spanning 30 opportunities, neither the appellant nor any authorized representative appeared before the Tribunal. Furthermore, no written submissions, including the statement of facts or supporting documents, have been filed by the appellant on record.

From the grounds of appeal, it is noted that the appeal pertains to a solitary issue of Addition under Section 56(2)(viib) on account of share premium exceeding the fair market value (FMV), amounting to Rs. 1,18,00,000/-.

1. We observe that the provisions of Section 56(2)(viib) apply to closely held companies issuing shares at a premium exceeding FMV, irrespective of whether the shares are issued to existing shareholders or the promoter group. The relationship between the company and the shareholders is irrelevant for determining the applicability of the provision. The legislative intent of Section 56(2)(viib), as explained in the Memorandum to the Finance Bill, 2012, is to tax excessive share premiums to curb potential abuse. The provision is applicable even in cases where the transactions are genuine or between related parties. The AO has adequately analysed the shareholding pattern, and the submissions made during assessment proceedings. The finding that shares were issued at a premium exceeding FMV is based on the certificate of independent Chartered Accountant.

2. The assessee has failed to provide any new submissions or evidence to challenge these findings during appellate or proceedings before us. It is evident from the repeated non-appearance of the appellant and the lack of submissions that the appellant is not interested in pursuing the appeal. As Canpac Trends Pvt.Ltd. vs. ACIT Asst. Year : 2017-18

In the result, the appeal of the assessee is dismissed.

अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय #ितिनिध , अिधकरण