Brawny Nivesh Pvt. Ltd. Vs ACIT (ITAT Delhi)
56(2)(viia) Valuation Can’t Be Mechanical; Sundry Debtors Can’t Be Added on Presumptions: ITAT Delhi Grants Major Relief
Delhi ITAT partly allowed the Assessee’s appeal, granting substantial relief on additions made u/s 56(2)(viia) and on account of alleged fictitious sundry debtors.
On the issue of addition u/s 56(2)(viia) relating to purchase of unquoted shares of Gain E-Commerce Pvt. Ltd. and Kanti Commercial Pvt. Ltd., the Tribunal noted that the Assessee had furnished valuation reports as per Rule 11UA after excluding assets shown in the balance sheet which allegedly had no realisable value. Neither the AO nor the CIT(A) examined or verified this critical claim, and the valuation was rejected without proper enquiry. Holding that such an approach violates principles of natural justice, the ITAT set aside the orders on this issue and restored the matter to the AO for de-novo adjudication, directing proper verification of the valuation methodology and exclusions claimed by the Assessee.
On the addition of ₹98.56 lakh towards sundry debtors, comprising balances of AY 2014-15 and AY 2015-16, the Tribunal granted outright relief. The ITAT observed that the AO had proceeded on broad assumptions that the business was non-genuine, without bringing any corroborative material on record. It was also noted that the trade receivables as on 31-03-2015 were nil, and similar additions on identical facts had already been deleted by a Coordinate Bench in Fabulous Nivesh Pvt. Ltd. The Tribunal held that once business transactions are alleged to be bogus, additions cannot be made selectively on sundry debtors without taxing alleged beneficiaries. Accordingly, the entire addition of ₹98.56 lakh was deleted.
On the limited scrutiny objection, the Tribunal held that the addition u/s 56(2)(viia) was within the scope of the reasons for selection (large investment in unlisted equities) and therefore rejected this legal ground; however, the issue became academic so far as sundry debtor addition was concerned.
Overall, the appeal was partly allowed, reaffirming that deeming provisions and valuation rules cannot be applied mechanically, and additions cannot rest on suspicion, presumptions or unverified assumptions.
FULL TEXT OF THE ORDER OF ITAT DELHI
