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Income Tax Appellate Tribunal, D BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI MAKARAND V. MAHADEOKAR
ORDER \nPER MAKARAND V. MAHADEOKAR, AM:\nThis appeal is filed by the assessee against the order of the\nCommissioner of Income Tax (Appeals), National Faceless Appeal Centre -\nNFAC, Delhi (hereinafter referred to as “CIT(A)"], dated 25/08/2021,\narising out of the assessment order passed by the Assistant Commissioner of\nIncome Tax, Circle 1(1)(2), Ahmedabad [hereinafter referred to as “AO"],\nunder Section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as\n\"the Act\"], for the assessment year 2017-18.\nITA No.271/Ahd/2021\nCanpac Trends Pvt.Ltd. vs. ACIT\nAsst. Year: 2017-18\n2\nFacts of the Case:\n2. The assessee filed its return of income for the assessment year 2017-18 on\n31/10/2017, declaring a total income of Rs.9,73,53,840/-, after claiming a\ndeduction of Rs.5,60,500/-. The return was processed under Section 143(1) of\nthe Act. The case was selected for scrutiny under the Computer-Assisted\nScrutiny Selection (CASS). During the course of the assessment proceedings,\nthe assessee responded to some notices through e-submissions on the e-filing\nportal. However, the responses were incomplete and failed to address all\nissues raised by the AO. The AO focused on two major issues during the\nassessment:\n(i) Disallowance under Section 36(1)(va):\n• The AO observed that the assessee had delayed depositing employees'\ncontributions to PF/ESI amounting to Rs.1,41,730/-, beyond the due\ndates prescribed under the respective Acts.\n• Although the contributions were deposited before the due date for\nfiling the return under Section 139(1), the AO disallowed the claim,\nciting the provisions of Section 2(24)(x) read with Section 36(1)(va).\n(ii) Addition under Section 56(2)(viib):\n• The assessee issued 7,85,000 shares at a face value of Rs.10/-, charging\npremiums ranging from Rs.127/- to Rs.275/- per share.\n• The fair market value (FMV) of the shares, as determined under Rule\n11UA, was Rs.145/-, based on a valuation certificate issued by an\nindependent Chartered Accountant.\n• The AO noted that shares were issued at a premium exceeding FMV to\ncertain shareholders, resulting in taxable income under Section\n56(2)(viib).\nThe AO calculated the taxable excess premium as follows:\nName of\nShareholder\nDate of\nAllotment\nNo. of\nShares\nIssue\nPrice\n(Rs.)\nExcess\nAmount per\nShare (Rs.)\nAddition\n(Rs.)\nBhagchandani\nGroup\nTodi Group\nBhagchandani\nGroup\nTodi Group\nBhagchandani\nGroup\n30/07/2016\n30/07/2016\n20/10/2016\n30/03/2017\n30/03/2017\n28,500\n56,500\n15,000\n5,65,000\n35,000\n275\n175\n273\n127\n273\n130\n30\n128\nNil\n128\n37,05,000\n16,95,000\n19,20,000\nNil\n44,88,000\nITA No.271/Ahd/2021\nCanpac Trends Pvt.Ltd. vs. ACIT\nAsst. Year: 2017-18\n3\nTotal Addition under Section 56(2)(viib) amounted to Rs.1,18,00,000/-\n(Actual total of the amounts come to Rs.1,18,08,000/-).\n3. The assessee filed an appeal before the CIT(A) challenging the\nadditions made by the AO. The CIT(A) dismissed the appeal on the basis of\nmaterial available on record and upheld the additions made by the AO as the\nassessee did not make any submission.\n4. Aggrieved by the order of CIT(A), the assessee filed an appeal before\nus with following grounds of appeal:\n\
1. Impugned transactions are between the promoter group and existing\nshareholders.;\n2. The application of Section 56 is against the spirit of the law;\n3. The AO has erred in appreciating the submissions made and the\nshareholding pattern of the company since 2011.\"\nITA No.271/Ahd/2021\nCanpac Trends Pvt.Ltd. vs. ACIT\nAsst. Year: 2017-18\n4\n5. Despite multiple notices and hearings, spanning 30 opportunities,\nneither the appellant nor any authorized representative appeared before the\nTribunal. Furthermore, no written submissions, including the statement of\nfacts or supporting documents, have been filed by the appellant on record.\n4. From the grounds of appeal, it is noted that the appeal pertains to a\nsolitary issue of Addition under Section 56(2)(viib) on account of share\npremium exceeding the fair market value (FMV), amounting to Rs.\n1,18,00,000/-.\n4.
We observe that the provisions of Section 56(2)(viib) apply to closely\nheld companies issuing shares at a premium exceeding FMV, irrespective of\nwhether the shares are issued to existing shareholders or the promoter group.\nThe relationship between the company and the shareholders is irrelevant for\ndetermining the applicability of the provision. The legislative intent of\nSection 56(2)(viib), as explained in the Memorandum to the Finance Bill, 2012,\nis to tax excessive share premiums to curb potential abuse. The provision is\napplicable even in cases where the transactions are genuine or between\nrelated parties. The AO has adequately analysed the shareholding pattern,\nand the submissions made during assessment proceedings. The finding that\nshares were issued at a premium exceeding FMV is based on the certificate of\nindependent Chartered Accountant.\n4.
The assessee has failed to provide any new submissions or evidence to\nchallenge these findings during appellate or proceedings before us. It is\nevident from the repeated non-appearance of the appellant and the lack of\nsubmissions that the appellant is not interested in pursuing the appeal. As\nheld in many judicial precedents, merely filing an appeal is insufficient; it\nmust be effectively prosecuted.\n5. In the result, the appeal of the assessee is dismissed.\nOrder pronounced in the Open Court on 20th January, 2025 at Ahmedabad.\nSd/-\n(T.R. SENTHIL KUMAR)\nJUDICIAL MEMBER\nSd/-\n(MAKARAND V. MAHADEOKAR)\nACCOUNTANT MEMBER\nअहमदाबाद/Ahmedabad, दिनांक/Dated 20/01/2025\nटी.सी. नायर, व.नि. स. / T.C. NAIR, Sr. PS\nआदेश की प्रतिलिपि अग्रेषित/