ITO Vs Quetzal Exim Pvt. Ltd. (ITAT Delhi)
The Income Tax Appellate Tribunal, Delhi allowed the Revenue’s appeal and restored the addition of ₹14.25 crore made under Section 56(2)(viib) of the Income Tax Act, 1961, holding that the order of the Commissioner of Income Tax (Appeals) was unjust and unfair. The assessee company had filed its return for Assessment Year 2016–17 declaring a nominal income. The case was selected for limited scrutiny to verify investments and the source and taxability of share premium received. During assessment proceedings, the Assessing Officer found that the assessee had issued shares at a substantial premium, receiving ₹14.28 crore as share premium and ₹12 lakh as share capital.
The Assessing Officer examined the valuation submitted by the assessee based on the Discounted Cash Flow (DCF) method but found it unsupported by reliable evidence. Despite issuing summons, the concerned parties failed to appear, and irregularities were noted in the valuation assumptions. Consequently, the DCF valuation was rejected, fair market value was determined in accordance with Rule 11UA(2) of the Income Tax Rules, 1962, and an addition of ₹14.25 crore was made under Section 56(2)(viib).
The Commissioner (Appeals) deleted the addition. Aggrieved, the Revenue carried the matter to the Tribunal. During appellate proceedings, none appeared on behalf of the assessee despite multiple notices, many of which were returned unserved. After examining the record, the Tribunal observed that the assessee failed to substantiate the DCF valuation and did not comply with summons during assessment. It held that the Assessing Officer had validly rejected the valuation and correctly determined the fair market value. The Tribunal concluded that the order of the Commissioner (Appeals) was neither just nor reasonable and therefore set it aside, restoring the addition. As a result, the Revenue’s appeal was allowed.
