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2018 (5) TMI 503 - AT - Income TaxTransfer of shares without adequate consideration - Addition made on account of excess share premium u/s. 56 - method adopted for determining the value of the shares - non following rule of consistency for the year under appeal - Held that:- AO cannot adopt a method of his choice. In the case under consideration the whole controversy has arisen because of the AO has rejected the method adopted by the assessee. Considering the ratio of Taparia Tools (2015 (3) TMI 853 - SUPREME COURT), we hold that the AO had ‘tampered’ with the provisions of the Act. Section 56 allows the assessee to adopt one of the methods of their choice. But, the AO held that the assessee should have adopted only one method for determining the value of the shares. In our opinion, it was beyond the jurisdiction of the AO to insist upon a particular system, especially the Act allows to choose one of the two methods. Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of the shares, the assessees are free to adopt any one of the methods. Therefore, in our opinion the order of the FAA does not suffer from any factual or legal infirmity. As in the earlier assessment year, the AO had, while completing scrutiny assessment, accepted the valuation of same shares at ₹ 25, 500/-. But, during the year under appeal why did he not follow the earlier year’s order is not known. As per the basic principles of taxation, the AO's are not governed by the principles of res judicata and every assessment is a fresh assessment. But, it is also equally accepted that the AO's should not deviate from the earlier years’ decisions without assigning any concrete and justifiable reasons. Tax determination cannot be left to whims and fancies of a person. Thus AO should have given some reasons for not accepting the valuation for the year under consideration whereas for the earlier year he had accepted the valuation. It is a clear violation of principle of consistency. - Decided in favour of assessee Expenditure incurred for maintaining corporate entity - Disallowance as business expenses - as per AO assessee had not carried out any business activity for the year under appeal - Held that:- While making the disallowance he forgot the basic fact that assessee is a corporate entity. For maintaining the corporate status assessee has two incur certain expenditure and same could not be disallowed in absence of earning profit in a particular year. There is no doubt that the assessee is a corporate entity. Even if it is not carrying on any business activity it has to incur some expenditure to keep up its corporate entity. Therefore expenditure incurred by it has to be allowed. See Preimus Investment And Finance Ltd [2015 (6) TMI 756 - ITAT MUMBAI] - Decided in favour of assessee
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