ZHILMIL ELECTRONICS PVT. LTD.,HARYANA vs. ITO WARD-2(5), FARIDABAD

ITA 87/DEL/2021Status: DisposedITAT Delhi18 April 2024AY 2016-1742 pages

AI SummaryAllowed

Facts

The Assessees' returns were selected for limited scrutiny to verify the sources of funds received as share premium. The Assessing Officer (AO) made additions under Section 68 for unexplained share capital and premium. The CIT(A) upheld these additions and further enhanced the income under Section 251(1) read with Section 56(2)(viib) by rejecting the assessees' valuation reports.

Held

The Tribunal ruled that the assessees had sufficiently discharged their burden under Section 68 by proving the identity, creditworthiness of investors, and genuineness of transactions. It also held that the revenue authorities erred in rejecting the share valuation reports prepared using the Discounted Cash Flow (DCF) method as per Rule 11UA, stating that the assessee has the option to choose the valuation method and the authorities cannot substitute their own valuation without proper grounds. Therefore, all additions and enhancements were deleted.

Key Issues

1. Whether the CIT(A) correctly confirmed the addition under Section 68 regarding share capital and share premium. 2. Whether the CIT(A) was justified in enhancing income under Section 251(1) read with Section 56(2)(viib) by rejecting the valuation report furnished under Rule 11UA(2) of the Income Tax Rules, 1962.

Sections Cited

Sections 68, 251(1), 56(2)(viib), 143(1), 133(6), 142(1), 271(1)(c), Rule 11UA, Rule 11UA(2)(b)

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.