VAAAN INFRA PRIVATE LIMITED,HARYANA vs. PR,CIT DELHI-7, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE, DR. B.R.R. KUMAR, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No.1102/Del/2022 (ASSESSMENT YEAR 2015-16)

Vaaan Infra Private Limited Principal Commissioner of Villa-8, Block-II Income Tax Charmwood Village Vs. Delhi-7 Suraj Kund Road Faridabad Haryana-121 009

PAN-AADCV 5910G (Appellant) (Respondent)

Appellant by S/Sh. Mohit Choudhary, Harish Choudhary, Ms. Neetu Jain, CAs & Ms. Miti ka Choudhary, Adv. Respondent by Ms. Sapna Bhatia, CIT-DR

Date of Hearing 06/11/2023 Date of Pronouncement 24/01/2024

ORDER PER YOGESH KUMAR U.S., JM:

This appeal if filed by the assessee against the order of Learned

Principal Commissioner of Income Tax, Delhi-7 [“Ld. PCIT”, for short], dated

30/03/2021 for Assessment Year 2015-16.

Income tax Act, 1961 ('the Act') to the extent prejudicial to the Appellant, is perverse, erroneous on facts and bad in law. 2. That the direction to AO for proposed addition of Rs. 1,52,91,038/- towards valuation of shares made by the Hon'ble PCIT is incorrect, without proper evaluation of all documentary evidences available on record, arbitrary, illegal, against the principles of natural justice and is liable to be deleted. 3. That no proper opportunity of being heard given to the Appellant by Hon'ble PCIT, Delhi-7 wherein the Appellant filed the last submission on 18.06.2020 before Hon'ble PCIT, Delhi-9, however the order passed by Hon'ble PCIT, Delhi-7 on 30.03.2021. 4. Mere change of opinion without satisfying twin conditions can't give rise to revision under section 263 of the Act. 4.1 That the order passed under section 263 of the Act by the Hon'ble PCIT is illegal and arbitrary. 4.2 That on the facts and circumstances of the case, the Appellant has produced all the relevant material and offered explanation to which the earlier AO had taken a particular view with which the Hon'ble PCIT did not agree, cannot form the basis for an action under section 263 of the Act. Hence, there is mere change of opinion, assessment is void ab initio. 4.3 That the twin condition (i)That the order passed by Learned AO is erroneous, and (ii)That it is prejudicial to the interest of the revenue must be satisfied before exercising the power under section 263 of the Act. 4.4 That the Hon'ble PCIT is erred in opined that the order passed by the Learned Assessing Officer (Ld. AO) without making inquiries or verification which should have been made ignoring the fact that various submissions (dated 10.08.2017, 31.08,2017, 27.09.2017, 11.10.2017, 17.11.2017, and 11.12.2017) related to share allotment on premium, KYC, sources of funds, creditworthiness etc. were submitted by the Appellant at the time of Assessment Proceedings before the AO and it must be recorded in the note sheet of the Ld. AO. Reliance made on CIT vs. International Travel House (2010) 194 Taxmann 324 (Delhi) 5. The pre-requisite of Section 56(2)(viib) of the Act not fulfilled 5.1 On the facts and circumstances of the case & in law, the HON'BLE PCIT erred in applying the provisions of section 56(2)(viib) of the Act without providing an opportunity to the Appellant to substantiate its claim

regarding the Fair Market Value (FMV) of the share as per Explanation to Section 56(25)(viib) of the Act. 5. 2 On the facts and circumstances of the case & in law, the Hon'ble PCIT grossly erred in applying the provisions of section 56(2)(vib) of the Act without appreciating the basic intention of the legislature while introducing Section 56(2)(viib) of the Act. 5.3 On the facts and circumstances of the case & in law, the Hon'ble PCIT grossly erred in not appreciating that the requisite conditions as per the provisions of section 56(2)(viib) have not been satisfied in the case of the Appellant 5.4 Notwithstanding the above, on the facts and circumstances of the case & in law, the Hon'ble PCIT grossly erred in not appreciating that the FMV of equity share is also higher as per Discounted Cash Flow (DCF) method as compared to the FMV as per Net Asset Value (NAV) as adopted by Hon'ble PCIT as per Rule 11UA of the Income Tax Rules 6. Mandatory procedures/ principles under the provisions of the Act not followed. That the HON'BLE PCIT erred in the facts and circumstances of the case, in not obtaining a separate valuation certificate for calculating FMV of the share to disregard the valuation certificate issued by a Chartered Accountant. The Hon'ble PCIT/ Ld. AO was not competent to do so himself wherein the fair market valuation of share including flat (Property) and mutual funds was required to be done by an expert (District Valuation Officer-DVD) under section 142A of the Act. 7. Right to add, alter, withdraw and amend any ground That the appellant craves leave to add, alter, amend, revise, modify, substitute or delete any or all grounds of appeal and/or prayer made.”

1,89,54,110/-. Assessment was completed u/s 143(3) of the Income Tax Act, 1961,

(‘Act’ for short) on 18/12/2017 at an assessed income of Rs. 1,93,58,260/- by making

disallowance u/s 36(1)(va) of the Act on account of late payment of ESI/PF. The

assessment records for the Assessment Year 2015-16 were called for examination by Ld. PCIT wherein following facts are taken note of :-

• The case was selected under scrutiny. One of the reasons for section of

scrutiny in “Large share premium received during the year (Verify the

applicability of Sec. 56(2)(viib)”. • During the year, the assessee company has issued 1,91,665/- shares at

Rs. 120/- (including premium of Rs. 110/-). On perusal of the records

maintained, in the case mentioned above, it is seen that the assessee

company has not given any valuation, how it has arrived at Fair Market

Value of shares. • Therefore, the valuation of shares has not been scrutinized for the

purposes of Section 56(2)(viib) during the Assessment proceedings.

u/s 263 of the Act to extent prejudicial to the appellant, is perverse, erroneous and

bad in law and the same has been passed without proper evolution of documentary

evidence available on record and the same is illegal and against to principle of natural

justice. Further submitted that the Ld. PCIT has not provided proper opportunity to

the assessee. The Ld. Counsel has taken us through the documents produced along

with the paper book and sought for allowing the Appeal.

though the case of the assessee was initially selected for limited scrutiny to verify the

‘large share premium received during the year’, the A.O. has not examined the said

issue, the A.O. has only concentrated on the issue of late payment of ESI/EPF. Thus

submitted that, the assessment order was without making enquiries and the same is

erroneous, therefore, the Ld. PCIT has rightly exercised the jurisdiction u/s 263 of the

Act which requires no interference at the hands of the Tribunal and sought for

dismissal of the appeal.

The case of the assessee was originally selected for scrutiny for the reason ‘large share

premium received during the year (Verify the applicability of Section 56(2)(viib)) of the

Act’. During the year, the assessee issued 1,91,665/- shares at Rs. 120/- (including

premium of Rs. 110/-). A notice u/s 142(1) of the Act dated 18/01/2017 was issued

to the assessee wherein specifically asked the questionnaires on ‘the large share

premium received during the year’ and asked the Assessee to produce valuation of fair

market value of the shares on the auditor’s letter head. Further one more notice has

been issued to the Assessee on 04/07/2017. The Assessee filed reply on 31/08/2017

and also produced the documents relating to the share capital money and to support

of creditworthiness of the share applicant from Mr. Aman Kishore, the assessee

produced various documents including ledger account of share application of Aman

Kishore Bank statement of Aman Kishore, ITR Acknowledgement along with

computation of Mr. Aman Kishore for last three years ending the Assessment Year

2015-16. The reply of the Assessee dated 31/08/2017 is reproduced as under:-

“Large Share premium received during the year" - further documents relating to Share applicant/ his creditworthiness : As already stated earlier, the company had raised a sum of Rs.2,29,99,800/- as equity share capital, by way of allotment of 1,91,665 equity shares of face value Rs. 10/- each, in March 2015 at a premium of Rs.110/- per equity share (based on NAV ruling on date of allotment). Complete details of share allottee, who is an existing shareholder and director of the company, may be noted as under

Name and No of Fv of Share Total address of Share Equity Equity Premium Amount Applicant Shares Shares (Rs. (Rs. 110/-) Receivable(R Isused 10/each) s.) Aman Kishore 1,91,665 19,16,650 2,10,83,150 2,29,99,800 Add: Villa 7, Block II, Charmwood Vilalge, Suraj Kund Road, Faridabad- 121009 PAN AOQPK6153E 1,91,665 19,16,650 2,10,83,150 2,29,99,800

Copies of share allotment related paeprs as filed with the Registrar of Companies, along with relevant challans already submitted in earlier hearing). Further documents as relating to raising of share capital money and in support of creditworthiness of the share applicant Mr Aman Kishore enclosed as Annexure-2 as under:

i. Ledger a/c of "Share Application - Aman Kishore" as standing in books of account of the assessee company for FY 2014-15; ii. Copy of relevant extracts of the Bank statement of Mr Aman Kishore from which share capital moneys inducted into M/s Vaaan Infra Pvt Ltd during the year' iii.Copies of ITR ack alongwith Tax Computation of Mr Aman Kishore for last 3 AYs ended AY 2015-16. After making the detailed enquiry the Ld. A.O. made no additions in so far as the

issue of Large Share Premium is concerned.

to be based upon the latest preceding balance sheet of the entry which has to be is

approved at Annual General Meeting (AGM) of the Company and observed that ‘the

Assessee submitted the balance sheets as on 31/03/2015 and also the balance sheet

audited during March 2014. Thus, balance sheet as on 31/03/2015 could not have

been an audited balance sheet as on 31/03/2015 and also cannot be approved by the

AGM as on the date. Further held that the only audited balance sheet available in

March 2015 was as on 31/03/2014 as such the two dates of transactions of share

allotment are 02/03/2015 and 31/03/2015 respectively, the values calculated on the

basis of audited balance sheet as on 31/03/2014 will be applicable for such

transaction and the balance sheet produced by the Assessee as on 02/03/2015 which

is not approved at Annual General Body Meeting which cannot be considered for the

purpose of valuation made under Rule 11UA of the Rules, accordingly cancelled the

Assessment Order.

Report prepared under Rule 11UA of Income Tax Rule 1962. The said valuation has

been prepared by the Chartered Accountant based on the books of account, financial

statements and other records of the Company drawn up to 26/02/2015. The

Assessee produced audited balance sheet before the A.O. as on 31/03/2015 and

furnished balance sheet as on 02/03/2015, but the audited balance sheet has been

disbelieved by the Ld. PCIT on the ground that the balance sheet as on 02/03/2015

has not been approved by the Annual General Meeting the same cannot be considered

for the purpose of Rule 11UA of the Rules. The said observation of the Ld. PCIT is not

supported by any of the provisions of law. On the contrary, the Rule 11UA of the

Rules does not mentions the pre-condition of approval of the balance sheet by the

Annual General Meeting. Therefore, the above finding of the Ld. PCIT is found to be

perverse. Considering the fact that the assessee has already produced all the details

in respect of the issue of ‘large share premium received during the year under

consideration’ at the time of original assessment proceedings itself which has been

already dealt by the A.O. and decided in favour of the Assessee and further

considering the fact that since the order of the A.O. is not being erroneous, in our

considered view, the Ld. CIT(A) has committed error in exercising the power conferred

u/s 263 of the Act, accordingly, we allow the Grounds of Appeal of the Assessee and

set aside the order passed u/s 263 of the Act.

Order Pronounced in the Open Court on 24th January, 2024.

Sd/- Sd/-

(DR. B.R.R. KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24/01/2024 Pk/R.N, Sr.ps