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Income Tax Appellate Tribunal, KOLKATA ‘A(SMC
Before: Shri P.M. Jagtap, Vice-
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-17, Kolkata dated 05.09.2019 and the solitary issue involved therein relates to the addition of Rs.14,65,094/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 56(2)(viib) of the Income Tax Act, 1961.
The assessee in the present case is a Company, which filed its return of income for the year under consideration on 24.09.2015 declaring total income of Rs.3,28,094/-. During the year under consideration, the assessee-company had allotted 75,833 equity shares of the face value of Rs.10/- each to M/s. Amita Agarwal Beneficiary Trust for
ITA No. 2463/KOL/2019 Assessment Year: 2015-2016 M/s. Amita Properties Pvt. Limited
Rs.200/- each including a premium of Rs.190/- per share. During the assessment proceedings, a valuation report certified by a Chartered Accountant was furnished by the assessee as per Rule 11UA of the Income Tax Rules, 1962 showing the fair market value of its shares at Rs.180.68 per share. The Assessing Officer, therefore, required the assessee to explain the difference of Rs.19.32 in the value of shares and also asked the assessee to show-cause as to why the difference in value of shares allotted to M/s. Amita Agarwal Beneficiary Trust should not be added to its total income under section 56(2)(viib) of the Act. The assessee, however, failed to comply with this requirement and accordingly the difference of Rs.14,65,094/- (75,833 shares multiplied by Rs.19.32) was added by the Assessing Officer to the total income of the assessee under section 56(2)(viib) of the Act in the assessment completed under section 143(3) vide his order dated 07.08.2017.
Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and the following submission, inter alia, was filed by the assessee in writing to support and substantiate the price of Rs.200/- per share charged by it to M/s. Amita Agarwal Beneficiary Trust:- “Under these facts, it is submitted that the underlying asset in the appellant company is an office space aqt ECP Space Business Park, Block-4B, Unit No. ESNT 4B 0804, Plot No. 11F/10, Action Area-II, New Town, Rajarhat, Kolkata which is a commercial property having super built area of 5890 sq.ft. and six nos. of car parking space. The said commercial space was allotted to the company during FY 2010-11 at a total consideration of Rs.3,04,54,363/- and payments were made during FYs 2010-11 to 2012-13. Apart from the said space, the appellant was also having other assets like cash and bank balance. The appellant had got its said property valued by a registered valuer M/s. Ideal Consultancy Services, who had vide their report dated 15.03.2015 determined the FMV of the impugned property at Rs.324.96 lacs and the guideline value of this commercial space as per Govt. Valuation at Rs.381.23 lacs. On the above premise, the appellant had determined the issue price of shares as per clause (a)(ii) of Explanation to s. 56(2)(viib) of the Act by
ITA No. 2463/KOL/2019 Assessment Year: 2015-2016 M/s. Amita Properties Pvt. Limited
substituting asset value determined by the registered valuer and the FMV per share came to Rs.200.10 as per calculation below:-
Total value of assets as on 31.03.2014 Investment in Rs.3,24,96,000 property(Book Value Rs.3,04,54,363) Cash & cash Rs. 21,412 equivalents Other current Rs. 50,000 assets: Rent receivable Rs.3,25,67,412 Less: Total value of liabilities as on 31.03.2014
Total liabilities 3,05,30,775 Less: Shareholder 1,88,24,389 Rs.1,17,06,386 fund Rs.2,08,61,026 Paid up value of Rs.10/- equity share Total amount of Rs.10,42,500/- paid up equity share FMV of Unquoted Rs.200.10 Equity Shares
The appellant thus adopted FMV of the equity shares allotted to Amita Agarwal Beneficiary Trust on the basis of higher of valuation as per Rule 11UA and intrinsic value of underlying assets held by the company as per clause (a)(ii) of Explanation to sec. 56(2)(viib) of the Act, which was in this case was Rs.200.10 per share”.
In the light of the above submission, a request was made on behalf of the assessee to the ld. CIT(Appeals) to admit the valuation report of asset as new evidence and delete the addition made by the Assessing Officer under section 56(2)(viib) of the Act as fair market value of shares arrived on the basis of the said report at Rs.200.10 was higher than the fair market value arrived under Rule 11UA of the Income Tax Rules, 1962.
Not satisfied with the submission of the assessee, the ld. CIT(Appeals) confirmed the addition made by the Assessing Officer under
ITA No. 2463/KOL/2019 Assessment Year: 2015-2016 M/s. Amita Properties Pvt. Limited
section 56(2)(viib) of the Act for the following reason given in paragraph no. 4 of his impugned order:- “I have considered the submissions made by the appellant. As there is no merit in the submission of the appellant and based on the facts and findings narrated by the ld. AO in the assessment order, the appeal of the appellant is hereby dismissed. The AO is justified in disallowance u/s 56(2)(viib) of Rs.14,65,094/- and therefore, the addition made by the ld. AO in this regard is hereby confirmed”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. The main grievance of the assesee as highlighted by the ld. Counsel for the assessee at the time of hearing before the Tribunal is that the additional evidence filed by the assessee in the form of valuation report of asset as well as the case made out by the assessee on the basis of the same was not at all considered by the ld. CIT(Appeals) and without giving any finding or recording observation thereon, he decided the issue against the assessee by passing a cryptic order.
The ld. D.R. has not disputed this position, which is clearly evident from the impugned order of the ld. CIT(Appeals). He, however, has contended that there being no explanation offered by the assessee in support of the difference of valuation during the course of assessment proceedings before the Assessing Officer and the valuation report of asset having been filed by the assessee for the first time before the ld. CIT(Appeals) to explain the said difference, the matter may be sent back to the Assessing Officer for giving him an opportunity to examine/verify the explanation of the assessee in the light of the said valuation report. I find merit in the contention of the ld. D.R. and since the ld. Counsel for the assessee has also not raised any objection for sending the matter back
ITA No. 2463/KOL/2019 Assessment Year: 2015-2016 M/s. Amita Properties Pvt. Limited
to the Assessing Officer for proper verification/examination, I set aside the impugned order passed by the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer for deciding the same afresh after examining/verifying the explanation of the assessee regarding the difference in valuation of shares in the light of the valuation report of asset filed by the assessee for the first time before the ld. CIT(Appeals).
In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on June 01, 2020.
Sd/- (P.M. Jagtap) Vice-President) Kolkata, the 1st day of June, 2020
Copies to : (1) M/s. Amita Properties Pvt. Limited, 6, Alipore Park Road, Alipore, Kolkata-700027
(2) Income Tax Officer, Ward-11(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) Commissioner of Income Tax (Appeals)-17, Kolkata; (4) Commissioner of Income Tax- , Kolkata (5) The Departmental Representative (6) Guard File By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.