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2020 (2) TMI 484 - AT - Income TaxRevision u/s 263 - CIT finds fault with the action of AO while calculating the fair market value of shares applying Rule 11U and 11UA, the price of share is only ₹ 27 and therefore, there is revenue loss of ₹ 123 per share, therefore, the order of the AO is erroneous - HELD THAT:- The certificate of Chartered Accountant of assessee is found placed and the calculation sheet as to how the value of shares has been arrived at ₹ 150/- is reproduced at page (4) (supra). So, it can be seen that AO during assessment proceedings had in fact enquired about the fair market value of shares issued by the assessee at ₹ 150/- per share and assessee had submitted the aforesaid documents before the AO to substantiate the fair market value of shares to the satisfaction of AO, so he accepted the same. We do not countenance this action of the Ld. Pr. CIT for the simple reason that the view taken by the AO after enquiry on the issue is a plausible view and cannot be held to be unsustainable in law. As per sec. 56(2)(viib) of the Act, fair market value can be computed by two ways. (i) By Rule 11U and 11UA of Income Tax Rules 1962. (ii) By assessee company to the satisfaction of the AO. And as per the said provision, the value whichever is higher can be adopted. So, in this case when Rule 11U and 11UA is applied, the fair market value of shares is at ₹ 27 and the fair market value according to assessee company is at ₹ 150/-, so the higher value has been adopted, which is a plausible view. However, if the Ld. Pr. CIT has to hold the view of the AO to be erroneous as well as prejudicial to revenue he has to conduct enquiries and record a finding that assessee's calculation of fair market value of ₹ 150/- is unsustainable in law, which the Ld. Pr. CIT has not done in this case, though all facts were furnished before him. The action of AO, who has conducted enquiry on the issue and called for documents and after examination has not drawn any adverse view against the assessee, cannot be held to be erroneous as well as prejudicial to the revenue since the assessment order cannot be found to be erroneous as well as prejudicial on the fair market value of shares, the condition precedent to invoke revisional jurisdiction u/s. 263 is absent and, therefore, the usurpation of jurisdiction by Ld. Pr. CIT is bad in law and so quashed. - Decided in favour of assessee.
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