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of <h1>Share valuation dispute under fair market value rules: revenue appeal allowed restoring addition for excess share premium.</h1> Dispute concerned taxation of share allotment where share premium exceeded fair market value as determined under the income-tax valuation rules; AO ... Addition u/s 56(2) - share allotment in excess of fair market value as determined under Rule 11UA(2) of the Income Tax Rules, 1962 - HELD THAT:- The assessee company received shares premium of Rs. 14,28,00,000/- and share capital of Rs. 12,00,000/-. Copies of agreement were filed by the assessee. AO summoned the parties but they failed to appear. On basis of irregularities found, DCF method submitted by the Department, assessee remained unsubstantiated and was rejected. Fair market value of the shares was assessed and addition of Rs. 14,26,48,000/- was made. Therefore, order of CIT(A) being not just, fair, reasonable and legal is set aside. Accordingly, ground of appeal is accepted. Appeal filed by the Department of Revenue is allowed. Issues: Whether the Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 14,25,48,000/- made by the Assessing Officer under Section 56(2) of the Income-tax Act, 1961 on account of share allotment in excess of fair market value as determined under Rule 11UA(2) of the Income-tax Rules, 1962.Analysis: The Tribunal examined the record including that the assessee received share capital and share premium, filed agreements, but parties summoned by the Assessing Officer failed to appear. The Assessing Officer rejected the DCF valuation submitted by the Department as having irregularities in the assessee's submissions and determined the fair market value of shares, making the addition under Section 56(2). The CIT(A) had deleted that addition but the Tribunal found the deletion unsupportable on the record and noted that the assessee did not substantiate the premium received or cooperate with proceedings.Conclusion: The deletion of the addition by the CIT(A) is set aside and the Assessing Officer's addition under Section 56(2) is restored; decision is against the assessee and in favour of the Revenue.
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