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Judgment
PER S. RIFAUR RAHMAN, AM :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 25.08.2025 for the Assessment Year 2016-17 raising following grounds of appeal :-
“1.The Assessment order dated 12th December, 2018 passed by Ld. Income Tax Officer (ITO), Ward-2, Hissar [hereinafter referred to as "Ld. Assessing Officer" or "Ld. A.O."] u/s 143(3) of the Income Tax Act [hereinafter referred to as "the Act"] and upheld by the Commissioner of Income Tax (Appeals) -National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "Ld. CIT(A), NFAC"] vide Order dated 25th August, 2025 is bad at law & on facts hence, the same is void ab initio and liable to be quashed.
2.That on facts and in law, the Ld. AO has grossly erred in framing the assessment u/s 143(3) of the Act, on the basis of invalid notice as issued u/s 143(2) of the Act.
3.That on the facts and in law, the Ld. CIT (A) erred in upholding Appellant total income at Rs.1,05,21,210/- as against the returned / declared income of (-) Rs.6,50,788/-.
4.That on the facts and in circumstances of the case, Ld. CIT (A), NFAC has erred in upholding the Impugned addition to the tune of Rs.1,11,72,000/- u/s 56(2) (viib) of the Act made by the Ld. Assessing Officer being the amount of securities premium received @ Rs.490/- per share on issue of 22,800 equity shares during the year.
5.That on the facts and in the law, the Ld. CIT(A) has erred in confirming the Impugned Addition u/s 56(2)(viib) solely on the allegation that Rs.50,00,000/-Securities Premium considered in the valuation of equity share as per Rule 11UA is not a genuine Securities Premium being underline item in "Reserves & Surplus" in Appellant Balance Sheet.
6.The order of the Ld. CIT(A) inter alia suffers from below mentioned factual errors:
(A)Para no 2 of the appellate order:
"In the above appeal, as per the Form 35 of the appeal, the appellant has raised the following main grounds of Appeal"
These grounds of appeal have not been raised by the Appellant in the Form no 35.
(B)Para no 5 of the appellate order:
"assessment order dated 12.12.2018 passed under section 143(3) read with section 147 of the Income-tax Act, 1961 for the assessment year 2016-17."
The assessment completed u/s 143(3) and assessment is not reassessment proceedings u/s 147 as mentioned.
(C)Para no 5.1.1. to 5.1.3 of the appellate order:
"The first ground raised by the assessee challenges the validity of the reassessment proceedings initiated under section 147 of the Act":
This ground of appeal not raised by the Appellant.
(D)Para no 5.2 of the appellate order:
'The assessee has also raised a ground to the effect that no proper and meaningful opportunity of being heard was granted by the AO and that the assessment was made in violation of principles of natural justice."
This ground of appeal not raised by the Appellant.
(E)Para no 5.3.4 of the appellate order:
“It is also relevant to note that the assessee has failed to substantiate the identity, creditworthiness, and genuineness of the share applicants in a convincing manner. Merely filing PANs, ITRs, or bank statements does not discharge the onus under section 68.”
This subject matter neither arisen from the Ld. AO order nor the mater raised by CIT(A) in the appellate proceedings.
7.That on the facts and in circumstances of the case, the Ld. CIT(A), NFAC has erred in upholding the levying the interest u/s 234B, 234C and 234D of the Act of Rs.10,78,539/-, Rs.3,744/- and Rs.5,992/- respectively.
8.All the above grounds are independent and without prejudice to others.”
Brief facts of the case are, assessee filed its return of income for the Assessment Year 2016-17 on 12.09.2016 declaring total income at Rs.nil, the same was processed under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’). The case was selected for limited scrutiny through CASS as large share premium received during the year, to verify applicability of section 56(2)(viib) of the Act. Accordingly, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response, ld. AR of the assessee, attended and submitted relevant information as called for.
During assessment proceedings, the AO observed that assessee has received share premium of Rs.1,11,72,000/- in excess of fair market value. Assessee issued 22,800 shares during the year under consideration of Rs.500 per share comprising Rs.10 face value and Rs.490 premium. To justify the issue price of the shares, assessee furnished a valuation of shares based on the net asset value under Rule 11UA of the Income-tax Rules, 1962 (for short ‘the Rules’) claiming that fair market value per issue was Rs.505.30. However, the AO rejected the above valuation of shares submitted by the assessee with the observation that the assessee has artificially inflated the value of shares by including a reserve of Rs.50 lakhs which was not booked by allocating share allotment. As per the records, assessee claimed to have received Rs.50 lakhs as partly paid share capital in FY 2011-12, that is Rs.2.5 lakhs against face value and Rs.47.5 lakhs as share premium, but the abovesaid shares were never allotted and were forfeited in FY 2012-13. The AO observed that it was implausible for any investor to forfeit Rs.50 lakhs for failure to pay Rs.2.5 lakhs of balance capital leading to the inference that the transaction was a colourable device to create fictitious reserves. Accordingly, the AO concluded that the inflated reserve formed dominant component in the valuation of shares in the year under consideration and the unsecured share premium collected was treated as unexplained and liable to be taxed u/s 56(2)(viib) of the Act.
Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions. After considering the detailed submissions, ld. CIT (A) sustained the additions made by the AO and dismissed the appeal filed by the assessee.
Aggrieved with the above order, assessee is in appeal before us.
At the time of hearing, ld. AR of the assessee brought to our notice relevant facts on record and at the same time, ld. AR submitted that the AO doubted reserves contained in the Balance Sheet of Rs.50 lakhs which was forfeited. He submitted that the basis of disallowance of entire premium based on the above reserves contained in the Balance Sheet. In this regard, he submitted that in the AY 2012-13, assessee has declared abovesaid amount under Vivad Se Vishwas Scheme and in pursuant to the same, Pr.CIT has certified the full and final payment of Rs.15,47,020/- as taxes as determined payable in Form No.3. The same was considered by the ld. CIT (A) while passing the assessment order for AY 2012-13 vide order dated 29.08.2022.
After considering the above submissions, when enquired with the ld. AR, we came to understand that this information was never submitted before the AO during assessment proceedings. This being the critical and crucial information which was not submitted before the AO and with the consent of ld. DR, we are inclined to remit this issue back to the file of AO to verify the same and complete the proceedings as per law, after providing an opportunity of being heard to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.