Section 56(2)(vii)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 June 2017 A Private Limited company allotted shares to one director during F.Y. 2014-15 case is under scrutiny at ITO. In that period the FMV of shares was Rs. 60/- per share. But allotment made at Rs. 10/- per share which was unintentional and the difference is a huge amount. The AO has also opened the file of Director with approval from Joint Commissioner and going to taxed it in the hands of director under section 56(2)(vii) of I.T. Act, 1961. Please suggest me is there any way to avoid the tax & penalty in the hands of director, if there is any case law please provide me.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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11 June 2017 The view of the AO is correct as per section 56(2)(vii)(c)(ii). Seems there is no reported case laws on identical issue. Since there is no mala fide intention, penalty will not sustain on appeal.

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