TaxTMI 
TaxTMI 
2022 (11) TMI 577
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....x Act, 1961 (hereinafter referred to as 'the Act') relating to the Assessment Year (A.Y) 2013-14. 2. The brief facts of the case is that the assessee is a company engaged in the business of trading of SS Scrap, Rod, Plates etc; which is used for manufacturing SS Pipe, tubes, vessels, industrial equipment and machinery utensils. The assessee imports raw materials from various dealers from Gulf countries and also locally by Tender option from various suppliers. The promoters and directors of the company are having vast experience and knowledge in this line of business since 1986. For further extension of the business, the assessee company installed a new plant for the production of MS Alloys and SS Alloys with a production capacity of 100 ....
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....e the ld. CIT(A). Before the Ld. CIT(A), the assessee filed additional evidence of Valuation Report prepared by Shri Kanhaiyalal Salawat. During the assessment proceedings, the Authorized Representative has submitted is more Valuation Report to the Assessing Officer but not the Valuation Report prepared by Shri Kanhaiyalal Salawat. The Ld. CIT(A) called for a remand report from the Assessing Officer. Though A.O. stoutly objected admission of additional documents, the Ld. CIT(A) held that the assessee was prevented by reasonable cause to furnish the Valuation Report to the A.O. However the Valuation Report is a basic document required to decide the issue. Therefore the same was entertained as additional document. Further the Assessing Office....
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....refore, the Assessing Officer is undoubtedly entitled to scrutinize the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to fee the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee.---" The AO though observed that the assessee raised loans from the above associate concerns and has converted them into shares application/premium money. However, it has not shown how it will affect the correctness of the valuation claimed. It is not the case of the AO that the shares were allotted to the outsiders non-related persons but the existing amount....
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....ation behind rejecting the declared valuation of the shares and in the impugned addition made by the AO but partly sustained by the CIT(A), which is hereby deleted. 5.9 In view of the aforesaid facts it has to be held that appellant has issued the shares at the Fair Market Value determined by Chartered Accountant following the DCF method as prescribed in Rule 11UA of the Rules. No infirmity on the merits of the report has been found by the AO as well as by the undersigned. Therefore, it has to be held that the shares have been issued at the premium according to the fair market value. Hence, the additions made u/s.56(2)(viib) of the Act amounting to Rs.4,70,25,000/- made by the AO are not sustainable and accordingly deleted. Ground ....
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....the same can be taxed u/s. 56(2)(viib). 5.1. Ld. Senior Counsel also submitted that as per sub-clause (i) of clause (a) of Explanation to Section 56(2)(viib) of the Act, "Fair Market Value" mean (a) as may be determined in accordance with the prescribed method; or (b) as may be substantiated by company to the satisfaction of A.O.; whichever is higher. 5.2. Rule 11UA provides for "Determination of Fair Market Value". As per Rule 11UA(2), FMV of unquoted equity shares for the purposes of Section 56(2)(viib) shall be the value of unquoted shares as determined under Clause (a) namely as per prescribed formula or Clause (b) as per Discounted Free Cash Flow method, at the option of the assessee. Thus DFCF method is a presc....
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....Mr. Mohanty is correct in his submission that a part of demand arising out of the assessment order dated 21st December, 2017 would on adoption of DCF Method will be sustained in part, the same is without working out the figures. This was an exercise which ought to have been done by the Assessing Officer and that has not been done by him. Infact, he has completely disregarded the DCF Method for arriving at the fair market value. Therefore, the demand in the facts need to be stayed. 6. Heard rival contentions and perused the materials available on record including the Paper Book filed by the assessee. The Promoters and Directors of the Company having their rich experience for long time in steel business and also to install a new plan....