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2022 (12) TMI 1314 - AT - Income TaxAddition u/s 68 on account of alleged unexplained share premium and share capital - HELD THAT:- By respectfully following the ratio laid down in the case of PCIT Vs. Rohtak [2019 (10) TMI 931 - SC ORDER] and considering the facts and circumstances of the case, we find no merit in the argument of the Ld. DR to hold that the assessee has failed to establish the ingredients of Section 68 of the Act. Hon'ble Supreme Court in the case of CIT Vs. Lovely Export Pvt. Ltd. [2008 (1) TMI 575 - SC ORDER] observed that even if the share capital money is received by the assessee from alleged bogus share holders, whose names are given to the A.O. The Department is free to proceed to reopen their individual assessment in accordance with law. But cannot regarded undisclosed income of the assessee Company. The present case, the assessee has substantially provided materials to prove the genuineness of the share holders apart from giving the Pan Card, name and ROC details. Therefore, we delete the addition made u/s 68 of the Act. Accordingly, the Ground No. 2 of the Assessee is allowed. Addition u/s 56(2) (viib) on protective basis - valuation arrived by the assessee either DCF Method or NAV Method - assessee has received a premium on issue of shares to various parties - According to the Ld. A.O, the value of the shares issued to the parties are very high in comparison to fair market value of such shares - contention of the Ld. AR that the valuation of the shares has been done as per DCF Method which is prescribed under Rule 11 UA to Income Tax Rules (2)(b) which has been and also certified by the Assessee’s qualified Charted Accountant - HELD THAT:- Valuation Method adopted by the assessee is one of the Methods accepted under law which cannot be disturbed by the Revenue authorities without bringing any contrary material on record to sow that the method adopted by the assessee is incorrect. CIT (A) has rejected the valuation report of the assessee, by relying on decision of Agro Portfolio Pvt. Ltd. [2018 (5) TMI 1088 - ITAT DELHI] The decision made in Agro Portfolio Pvt. Ltd. (supra) has been considered in the case of Cinestan Entertainment (P). Ltd. [2019 (6) TMI 1367 - ITAT DELHI], wherein it is held that the Assessing Officer cannot examined or substitute its own value in place of valuation arrived by the assessee either DCF Method or NAV Method, the commercial expediency has to be seen from the point view of businessman. Further held that if law provides the assessee to get the valuation done from a prescribed expert as per the prescribed method, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law. A.O and CIT(A) has committed an error in rejected the valuation done by the assessee from prescribed expert as per the prescribed method. Enhancement of income - AR submitted that the Ld.CIT(A) enhanced the income without giving a mandatory notice required u/s 250(1) of the Income Tax Act, thus violations of principals of natural justice - HELD THAT:- In our opinion, when the CIT(A) deem it fit to enhance the assessed income, shall give mandatory notice u/s 250(1) of the Act. In the present case, admittedly no such notice issued to the assessee before enhancing the assessed income. Therefore, the action of the Ld.CIT(A) in enhancing the income of the assessee is found to be erroneous. Therefore, Ground No. 4 & 5 of the assessee requires to be allowed. Disallowance of business expenditure - assessee has not carried on business in the year under consideration - HELD THAT:- The contention of the Ld. AR that the assessee has already set up his business and the same was in operation, the expenditure claimed u/s 37 of the Act. Further submitted that, to claim the business expenditure, the assessee has to be set up the business and it is not mandatory that there should be actual income generated from the business. In our opinion, once the business of the assessee is set up and the expenditure incurred thereafter deserves to be allowed as business expenditure u/s 30 to 38 of the Act. There is no requirement of generation of income from such business activities. The business activity is a continuous process and it cannot be said that as soon as setting up of the business, the income will be generated and should yield income in all years. Being so, we find merit in the argument of the Ld. AR. Therefore, we inclined to allow the Ground of the assessee.
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