DCF share valuation and protective assessment cannot be displaced or sustained without reasoned rejection and genuine doubt.

A share premium valuation supported by a prescribed DCF report cannot be rejected and replaced with another fair market value unless the report is first found defective on reasoned grounds; the addition under section 56(2)(vii)(b) was deleted. Protective addition under section 68 is confined to genuine uncertainty about the correct person taxable on the income, and cannot be used for the same income already assessed on another basis in the assessee's hands; that addition was also deleted.

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Issues: (i) Whether the addition made by rejecting the assessee's share valuation under the Discounted Cash Flow method and applying a different fair market value was sustainable. (ii) Whether the protective addition made under section 68 in the assessee's hands was sustainable.

Issue (i): Whether the addition made by rejecting the assessee's share valuation under the Discounted Cash Flow method and applying a different fair market value was sustainable.

Analysis: The assessee supported the share premium by a valuation report prepared under the prescribed DCF method. No specific defect or violation in that valuation exercise was found by the lower authorities before substituting their own fair market value. A valuation adopted under the prescribed method cannot be discarded and replaced summarily without first recording a reasoned rejection of the assessee's report.

Conclusion: The addition under section 56(2)(vii)(b) was unsustainable and was deleted, in favour of the assessee.

Issue (ii): Whether the protective addition made under section 68 in the assessee's hands was sustainable.

Analysis: Protective assessment is permissible only where there is uncertainty as to the person in whose hands an income is taxable. It is not a device to make the same addition protectively in the very hands of the assessee in respect of the same income already brought to tax on another basis. On that principle, the protective addition could not survive.

Conclusion: The addition under section 68 on a protective basis was deleted, in favour of the assessee.

Final Conclusion: The assessee succeeded on both disputed additions, and the assessment additions made on the twin bases were set aside.

Ratio Decidendi: A valuation report prepared under the prescribed method cannot be disregarded and substituted by a different fair market value without a specific and reasoned rejection of that report, and protective assessment is confined to cases of genuine doubt about the correct person chargeable to tax.

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