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2021 (3) TMI 459 - AT - Income TaxAddition u/s 68 or 56- Bogus share premium and share capital - assessee could not substantiate with evidence to his satisfaction regarding the credit worthiness of the share applicants and the genuineness of the transaction is doubtful - CIT(A) deleted the addition made u/s. 68 on the ground that such share capital was not received by the assessee during the year, but, was received in F.Y. 2013-14 relevant to assessment year 2014-15 and the assessee has only allotted the shares during the year however, confirmed the addition made by the AO u/s. 56(2)(viib) - HELD THAT:- As assessee has valued its shares at ₹ 82.07 as per the valuation certificate issued by the chartered accountant. Although the said valuation report was submitted before the AO to justify that the shares issued by the assessee was at fair market value, it was computed in accordance with Rule 11UA(a) of IT Rules, 1962, however, I find, the AO rejected the same holding that the assessee is not having any worth of receiving any share premium. He has ignored the various assets shown by the assessee in the balance sheet such as cash and cash equivalent of ₹ 6,18,035/-, -short-term loans and advances of ₹ 2,38,07,381/- and other current assets of ₹ 1,16,534/-. The AO did not apply the formula provided in Rule 11UA and did not make any attempt to compute the value of shares of the assessee in accordance with Rule 11UA of IT Rules, 1962 which has been upheld by the ld. CIT(A). When the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. See A.K. ROY VERSUS STATE OF PUNJAB [1986 (9) TMI 412 - SUPREME COURT] Thus as assessee has issued the shares at fair market value computed in accordance with Rule 11UA(a) of the IT Rules 1962 and no fault has been found in the method applied by the assessee and the lower authorities have made the addition u/s. 56(2)(viib) purely on presumptions and surmises. Therefore such action of the lower authorities being not in accordance with law is unsustainable - set aside the order of the CIT(A) and direct the AO to delete the addition - Decided in favour of assessee.
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