TaxTMI 
TaxTMI 
2022 (12) TMI 107
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.... CIT(A) erred both on facts and in law in upholding the action of the AO in making an addition of Rs,5,56,24,843/- under section 56(2)(vii b) of the Income Tax Act 1961 ("the Act"). 2. That the Ld. CIT(A) in confirming the addition made by the AO failed to take into consideration the detailed written submissions filed during the course of the hearing to supplement the oral submissions. 3. That the Ld. CIT (A) failed to appreciate that having given by statute the option to an assessee to choose the method of valuation, the revenue could not reject on a flimsy ground the report given by a Chartered Accountant who was an "expert" on the question of valuation. 4. That the Ld. CIT (A) erred in relying on judgment's....
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....l on record and gave our thoughtful consideration. 8. During the relevant assessment year, the assessee had issued 5307/- equity shares of face value of Rs. 10/- each as a share premium of Rs. 11,296/- per equity share. The share premium was determined on the basis of discounted free cash flow Method (DCF) as per report of the chartered accountant which was prepared as per Section 56 (2) (viib) read with Rule 11UA (2) of the Rules. The Ld. A.O was of the opinion that the assessee cannot be considered as start up, the share valuation report relied upon by the assessee is not acceptable since the projections and actual are not in conformity and the valuation report does not meant requirements of Indian Evidence Act, does not pertain to the....
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....e through the valuation report and opined that the report falls foul of Section 45 of the Indian evidence Act. In our considered view the Ld. AO and the CIT (A) have committed an error in not following the principal of consistency. 12. The Coordinate Bench of the Tribunal in ITA No. 5982/Del/2018, held that the evaluation report which is prepared by the professional such as chartered accounts or mercantile banks for which their respective professional bodies have laid down specific disclosure requirements those disclosure requirements are binding on them. Merely because the valuation report contains certain caveats and disclosures those factors are not sway the mind of the A.O or commissioner of Appeal and therefore remitted the matter t....
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....e premium of Rs. 1 990 per share. In the valuation report submitted by the assessee the valuation of Rs. 2 035.53 per share was received by adopting discounted cash flow method in accordance with rule 11 UA of the income tax rules 1962. The rational disclosed by the assessee for such a valuation was that assessee company got an opportunity to invest in a coal mine in the USA. For this it entered into an agreement with the promoters of the coal mine and a new company was formed by the name and style of M/s Stryton Minerals & Resources LLC in USA as a special purpose vehicle. Therefore according to the assessee huge profit was expected to be received in that CD company and therefore on the projected cash flow method the valuation of share was....
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....d and further it may happen that the projected cash flow shown by the assessee at the time of the valuation did not materialize in subsequent year due to different business reasons such as delay in the project. The assessee has shown that there is a delay in the project and subsequently the LLC company has started earning the sum. If that be the case that if there is a variation in the discounted cash flow shown by the assessee with actual result in subsequent years, then the basic fallacy will arise that discounted future cash flow should be equal to the actual cash flow of the assessee. According to us it will result in absurdity. However it can also not be subscribed to the view that if there are wide variations in subsequent years with ....
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.... appellate orders or submission of the assessee about the cash flow generated by the coal mine business of the LLC. In any case unless the ground no 1 of the appeal of the assessee is decided, ground no 2 cannot be adjudicated as outcome of ground no 1 will decide whether the ground no 2 of the appeal is required to be adjudicated or not. In view of this, we set aside the whole issue of tax ability under section 56 (2) (viib) of the act back to the file of the assessee for the reason that that original addition made by the learned assessing officer under section 68 of the act is also set aside to the file of the learned assessing officer and further the lower authorities have failed to objectively evaluate the valuation report submitted by ....