Income Tax Appellate Tribunal - Delhi
Assistant Commissioner Of Income Tax, ... vs Cmc Textile Private Limited, ... on 10 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH, 'E': NEW DELHI
BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER
AND
SHRI AMITABH SHUKLA, ACCOUNTNAT MEMBER
ITA No.3569/DEL/2025
[Assessment Year: 2017-18]
ACIT, Circle-2(1)(1), CMC Textile Private Limited,
Room No.201-202, 2nd Floor, Village & Post, Harchana,
Near Purani Hapur Chungi, Vs Bulandshahr, Uttar Pradesh-245408
Kamla Nehru Nagar, Ghaziabad,
Uttar Pradesh-201002
PAN-AACCC2032P
Appellant Respondent
Assessee by Dr. Rakesh Gupta, Adv. & Shri
Saksham Agarwal, CA
Revenue by Ms. Ankush Kalra, Sr. DR
Date of Hearing 22.01.2026
Date of Pronouncement 22.01.2026
ORDER
PER AMITABH SHUKLA, AM,
This appeal filed by the Revenue is against order dated 28.03.2025 of National Faceless Appeal Centre/learned Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as 'ld. CIT(A)] arising out of assessment order dated 26.12.2019 passed under section 143(3) of the Income Tax Act, 1961 pertaining to Assessment Year 2017-18. The word 'Act' herein this order would mean Income Tax Act, 1961.
ITA No.3569/Del/2025
2. The Revenue has raised following grounds of appeal:-
"1. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 5,02,07,160/- made by the AO, by stating that Respondent-Assessee being a start-up company adopted DCF method to value its shares. However, assessee company is not a startup company. Further, the provisions of startup is applicable from the A.Y. 2019-20.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 5,02,07,160/- made by the AO, without considering the fact that the assumed long term sustainable growth rate has been taken by the assessee company at 5% per year after 2016 against the current year net profit rate of only 0.50%."
3. The only issue seminal to the appeal of the Revenue is regarding the action of the ld. CIT(A) in deleting the addition of Rs. 5,02,07,160/- made by Ld. A.O. u/s 56(2)(viib) on the ground that out of total share premium introduced by the appellant-assessee amounting to Rs.9,09,55,000/- (1,81,910 shares @ Rs. 500/- per share), the fair market value as determined under Rule 11UA(2)(a) was Rs. 4,07,47,840/- only (1,81,910 shares @ Rs. 224/- per share). The Ld. A.O. held the view that the excessive premium of Rs. 5,02,07,160/- (9,09,55,000(-) 4,07,47,840) (1,81,910 shares @ Rs. 276/- per share) was thus the income of the appellant company under section 56(2)(viib) being consideration in excess of the face value of such shares.
3. We have heard rival submission in the light of material available on records. The ld. Counsel for the assessee submitted that the assessee is a company in which public are not substantially interested. The appellant company is engaged in the business of manufacturing textured and twisted yarn Page 2 of 5 ITA No.3569/Del/2025 from POY manufacturing of cloth on warp knitting machine. During the year under appeal, the appellant company allotted 1,81,910 equity shares of Rs. 10/- each at premium @ 500/- per share and thus, the aggregate amount of premium was to the tune of Rs. 9,09,55,000/-. Assessee-company determined its fair market value at Rs. 510/- per share (inclusive of premium of Rs. 500/-per share) based upon the valuation method as prescribed under Income tax Rule 11UA(2)(b) i.e. Discounted Cash Flow Method as certified by the Chartered Accountant certifying the fair market value of the premium at Rs. 500/- per share aggregating premium of Rs. 9,09,55,000/- (1,81,900x500). The ld. Counsel submitted that the consequent disagreement of the ld. AO with the DCF method adopted by the assessee by finding some untenable objections and substituting with Net Asset Value Method in terms of Rule 11UA(2)(a) was impermissible in law. The ld. Counsel argued that the relief accorded by the ld. CIT(A) is based upon correct understanding and appreciation of the facts of the case as well as judicial precedents governing the matter. The ld. Counsel for the assessee reiterated the argument taken before the ld. First Appellate Authority placing reliance upon the material placed before him.
4. Per Contra, the ld. DR placed reliance upon the order of the ld. Assessing Officer.
6. We have noted the conclusions drawn by ld. CIT(A) in para-7 of his order on pages-20-25. We have noted that the conclusions are based upon extensive analysis of the facts of the case and governing judicial precedents. We Page 3 of 5 ITA No.3569/Del/2025 find force in his arguments that the law does not provides any authority to the ld. AO to substitute his valuation method over that adopted by the taxpayer. We also find favour with his conclusion that the DCM method adopted by the assessee company was the correct method which was based upon a scientific valuation of shares made by the accountant valuer. Accordingly, we do not find any necessity to interfere with the order of the ld. CIT(A) and the same is therefore sustained. The grounds of appeal raised by the Revenue are therefore dismissed.
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 22nd January, 2026.
Sd/- Sd/-
[SATBEER SINGH GODARA] [AMITABH SHUKLA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 10.03.2026
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Copy forwarded to:
1. Appellant
2. Respondent
3. PCIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi,
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