Stryton Exim India Pvt Ltd Vs ITO (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal arose from additions made under Section 68 and Section 56(2)(viib) of the Income-tax Act for AY 2014-15. The assessee, a private limited company, had issued shares worth ₹20 crore to seven companies and charged share premium of ₹19.90 crore. The Assessing Officer (AO) treated the share capital as unexplained cash credits under Section 68 and, on a protective basis, made an addition of ₹19.90 crore under Section 56(2)(viib). The assessee challenged both additions.
Before the Tribunal, the assessee argued that it had discharged its burden under Section 68 by furnishing extensive documentary evidence, including board resolutions, income tax returns, audited financial statements, PAN details, bank statements, confirmations, MCA records, share allotment documents, and details of the source of funds. It contended that the non-production of directors of the investor companies could not by itself justify an addition under Section 68 and stated that it was willing to produce the directors before the AO for examination. The assessee also argued that adequate opportunity had not been provided because the final show-cause notice was issued shortly before completion of the assessment.
The assessee further disputed the addition under Section 56(2)(viib), submitting that the share premium was supported by a valuation report prepared by a Chartered Accountant using the Discounted Cash Flow (DCF) method prescribed under Rule 11UA. According to the assessee, the premium was justified because it had identified an opportunity to invest in a coal mining project in the United States through a special purpose vehicle, obtained Reserve Bank of India approval for overseas direct investment, and relied on projected future cash flows for valuation. It also argued that the caveats and disclaimers contained in the valuation report were standard professional disclosures and could not be treated as grounds for rejecting the valuation.
