ITO WARD - 20(3), NEW DELHI vs. QUETZAL EXIM PVT LTD, NEW DELHI

PDF · subscribers
ITA 717/DEL/2020Status: DisposedITAT Delhi27 January 2026AY 2016-174 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A) erred in deleting the addition. The assessee company received share premium of Rs.14,28,00,000/- and share capital of Rs.12,00,000/-. While copies of agreements were filed, the parties summoned by the Assessing Officer failed to appear. Based on irregularities found and the Discounted Cash Flow (DCF) method submitted by the Department, the assessee's position remained unsubstantiated and was rejected. The fair market value of the shares was assessed, leading to the addition. Consequently, the order of the Ld. CIT(A) was deemed not just, fair, reasonable, and legal. The ground of appeal by the Department was accepted. The operative direction was to set aside the CIT(A)'s order and allow the Department's appeal.

What were the facts?

The Department of Revenue appealed an order dated 08.11.2019 by the Commissioner of Income Tax (Appeals)-7, Delhi, which had allowed the assessee's appeal against an assessment order dated 28.12.2018 passed by the Income Tax Officer, Ward 20(3), New Delhi. The assessment was for AY 2016-17. The assessee company initially declared a total income of Rs.90,780/-. The case was selected for limited scrutiny regarding investments and funds received as share premium. The Assessing Officer made an addition of Rs.14,25,48,000/- under Section 56(viib) of the Income Tax Act, 1961, assessing the total income at Rs.14,26,38,780/-. The assessee's appeal to the CIT(A) resulted in the deletion of this addition.

What were the issues?

1. Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.14,25,48,000/- under Section 56(2) of the Income Tax Act, 1961, on account of share allotment in excess of fair market value as determined under Rule 11UA(2) of the Income Tax Rules, 1962. Assessee's contentions: None recorded as the assessee did not appear. Revenue's contentions: The Ld. CIT(A) erred in deleting the addition of Rs.14,25,48,000/- under Section 56(2) of the Income Tax Act, 1961. The Assessing Officer had made the addition for valid reasons.

Which sections of the Income-tax Act were involved?

Section 56(viib),Section 56(2),Section 143(3),Section 143(2),Section 142(1),Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI

Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR

For Appellant: Ms. Monika Singh, CIT-DR
For Respondent: Ms. Monika Singh, CIT-DR
Hearing: 20.01.2026Pronounced: 20.01.2026

PER VIMAL KUMAR, JUDICIAL MEMBER:

1.

The appeal filed by the Department of Revenue is against order dated 08.11.2019 of Learned Commissioner of Income Tax (Appeals)-7, Delhi (hereinafter referred to as “Ld. CIT(A)") under Section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) arising out of assessment order dated 28.12.2018 of the Learned Assessing Officer/Income Tax Officer, Ward 20(3), New Delhi ((hereinafter referred to as "Ld. AO") under Section 143 (3) of the Act for AY 2016-17.

2.

Brief facts of the case are that assessee company filed its return of income on 17.10.2016 declaring total income of Rs.90,780/-. The case was selected for under limited scrutiny through CASS for verification of investment and also for verification of funds received in the form of share premium are from disclosed sources and have correctly been offered for tax. Notice under Section 143(2) of the Act was issued electronically on 05.07.2017. Notice under Section 142(1) of the Act were issued. Assessee filed electronically responses to the notices. On completion of proceedings, Ld. AO vide order dated 28.12.2018, assessed income of Rs.14,26,38,780/- and made addition of Rs.14,25,48,000/- under Section 56(viib) of the Act.

3.

Against order dated 28.12.2018 of Ld. AO, the assessee filed appeal before Ld. CIT(A) which was allowed vide order dated 08.11.2019.

4.

Being aggrieved, the Appellant/Department of Revenue, preferred present appeal with following grounds: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s 56(2) of the Income Tax Act, 1961 of Rs.14,25,48,000/- on account of share allotment in excess of fair market value as determined under Rule 11UA(2) of the Income Tax Rules, 1962.”

5. Learned Departmental Representative submitted that Ld. CIT(A) erred in deleting addition of Rs.14,25,48,000/- under Section under Section 56(2) of the Income Tax Act, 1961 of Rs.14,25,48,000/- on account of share allotment in excess of fair market value as determined under Rule 11UA(2) of the Income Tax Rules, 1962. Ld. AO for valid reasons had made the addition.

6.

None appeared on behalf of assessee on 14.07.2022, 06.10.2022, 13.12.2022, 06.03.2023 , 18.07.2023, 03.10.2023, 14.12.2023, 07.03.2024, 20.05.2024, 20.09.2024 and 24.12.2024. Notices sent to the assessee were returned unserved.

7.

From examination of record in light of aforesaid rival contentions, it is crystal clear that the assessee company received shares premium of Rs.14,28,00,000/- and share capital of Rs.12,00,000/-. Copies of agreement were filed by the assessee. Ld. AO summoned the parties but they failed to appear. On basis of irregularities found, DCF method submitted by the Department, assessee remained unsubstantiated and was rejected. Fair market value of the shares was assessed and addition of Rs.14,26,48,000/- was made. Therefore, order of Ld. CIT(A) being not just, fair, reasonable and legal is set aside. Accordingly, ground of appeal

is accepted.

More judgments on Section 56(2)

All 166 judgments and leading authorities on Section 56(2) →

Recent GST High Court judgments

Search GST case law →