The Income Tax Appellate Tribunal ( ITAT ), Kolkata Bench recently deleted the addition of Share Premium as calculation of Fair Market Value ( FMV ) of equity shares based on book value by the Assessing Officer was carried out without due consideration of the valuation report furnished by the assessee.
The appellant assessee challenged the addition of Rs. 46,52,400/- to the assessee’s income, attributed to share premium, as upheld by the Ld. CIT(A).
Shri Dilip Chatterjee appeared for the appellant and Shri B. K. Singh, JCIT, represented the respondent-department.
The case unfolded after the assessee filed their income tax return, which was subsequently scrutinized under CASS. The assessing officer ( AO ) raised concerns regarding the substantial share premium recorded in the assessee’s balance sheet.
A detailed inquiry ensued, with the assessee providing extensive documentation, including a tax audit report, audited accounts, and a list of shareholders.
The AO had concluded that the fair market value of the unquoted shares had not been determined in accordance with the prescribed methods under Section 56(2)( viib ) of the Income Tax Act. This led to a discrepancy in the valuation of shares, resulting in the addition of Rs. 46,52,400/- to the assessee’s income.
The appellate tribunal noted that the valuation report obtained from a registered valuer meticulously considered both movable and immovable properties, a crucial aspect overlooked by the lower authorities.
The reliance solely on the book value for valuation by the Assessing Officer ( AO ) was deemed erroneous, given the diverse assets owned by the assessee.
The Tribunal emphasized the importance of recognizing valuations conducted by qualified professionals and critiqued the AO’s failure to engage a valuation expert.
Sonjoy Sarma ( Judicial Member ) and Rajesh Kumar ( Accountant Member ) ruled in favor of the assessee, directing the AO to annul the addition of Rs. 46,52,400/- to their income.
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