SHANTA BLANKETS PVT. LTD.,HARYANA vs. ITO WARD-2(3) , FARIDABAD

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ITA 84/DEL/2021Status: DisposedITAT Delhi18 April 2024AY 2016-17Bench: DR. B.R.R. KUMAR, ACCOUNTΑΝΤ ΜΕΜBER, SHRI YOGESH KUMAR U.S. (Judicial Member)42 pages

AI SummaryAllowed

Facts

The assessees' returns were selected for limited scrutiny regarding share premium. The Assessing Officer (AO) made additions under Section 68 of the Income Tax Act, doubting the identity, creditworthiness, and genuineness of investors, despite most investors confirming their investments. The CIT(A) upheld these additions and further enhanced income under Section 251(1) read with Section 56(2)(viib) of the Act, rejecting the assessees' valuation reports submitted as per Rule 11UA(2)(b) of the Income Tax Rules.

Held

The Tribunal ruled that the assessees had successfully discharged their burden of proving the identity, creditworthiness, and genuineness of the share subscribers by providing all necessary documents. It was held that the valuation reports, prepared as per Rule 11UA(2) using the Discounted Cash Flow (DCF) method, could not be arbitrarily rejected by the lower authorities who are not recognized as valuation experts. Therefore, the additions made under Section 68 and enhancements under Section 56(2)(viib) were deemed based on conjectures, lacked legal basis, and were consequently deleted.

Key Issues

1. Whether the CIT(A) was correct in confirming the addition made u/s 68 of the Income Tax Act on account of share capital and share premium received by the assessee company. 2. Whether the CIT(A) was correct in enhancing the income of the assessee u/s 251(1) read with Section 56(2)(viib) of the Act, ignoring the valuation report furnished as per Rule 11UA(2) of the IT Rules, 1962.

Sections Cited

Section 68 of the Income Tax Act, Section 251(1) of the Income Tax Act, Section 56(2)(viib) of the Income Tax Act, Rule 11UA(2)(b) of the Income Tax Rules, 1962, Section 143(1) of the Income Tax Act, Section 133(6) of the Income Tax Act, Section 142(1) of the Income Tax Act, Section 271(1)(c) of the Income Tax Act

AI-generated summary — verify with the full judgment below

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

Before: DR. B.R.R. KUMAR & SHRI YOGESH KUMAR U.S.

Hearing: 15/03/2024Pronounced: 18/04/2024

PER YOGESH KUMAR U.S., JM:

The above captioned appeals are filed by the different Assessees against the orders passed by the Learned Commissioner of Income Tax (Appeals), Faridabad [“Ld. CIT(A)”, for short],dated 19/03/2020, 23/03/2020, 13/03/2020, 17/03/2020 and 23/03/2020 respectively pertaining to Assessment Year 2016-17.

The common grounds of Appeal taken by the Assessees in all the captioned appeals except variance of figures are as under:- , 87, 88, 89 & 99Del/2021 M/s Shanta Blankets and Ors.

CONCISE GROUNDS OF APPEAL

“1. That the Ld. CIT (A) has erred in law as well as on facts in confirming addition of Rs. 67,20,000/- u/s 68 of the Act and enhancing the income by Rs. 28,80,000/- u/s 251(1) of the Acton account of alleged unexplained share premium and share capital despite furnishing all the documentary evidence for establishing identity, creditworthiness of the investors and the genuineness of the transaction.

2. That the Ld. CIT (A) has erred in law as well as on facts in enhancing the income of appellant u/s 251(1) by a sum of Rs. 60,54,400/-under the head income from other sources by applying section 56(2)(viib) of the Acton protective basis and rejecting the valuation report furnished under Rule 11UA(2)(b) of Income Tax Rules, 1962 i.e., Discounted Cash Flow Method.

3. That the Ld. CIT(A) has grossly erred in law as well as on facts in sustaining addition u/s 68 of the Act and enhancing the income of appellant on protective basis u/s 56(2)(viib) r.w.r 11UA of IT rules without appreciating the fact that the case was selected for limited scrutiny for the reason that "Large share premium received during the year (verify applicability of sec 56(2)(viib)" which restrict the scope of assessing authorities to scrutinize the limited aspect.