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2021 (5) TMI 99 - AT - Income TaxAddition u/s 56(2)(vii)(b) - valuation of shares - surplus amount received by the assessee on account of premium - HELD THAT:- As decided in M/S LALITHAA JEWELLERY MART PVT. LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE – 1 (4) , CHENNAI. [2019 (8) TMI 400 - ITAT CHENNAI] AO has not taken into consideration the second limb in explanation to Section 56(2)(viib) of the Act. The second limb provides that when valuation was made by the company, if the Assessing Officer is not satisfied about the valuation, he has to call for material from the assessee how the valuation was made by the assessee-company. Satisfaction of the Assessing Officer as referred in explanation to Section 56(2)(viib) of the Act would be judicial satisfaction of the Assessing Officer. Judicial satisfaction means the Assessing Officer has to take into consideration the well established method of valuation of shares including the assets as explained in Explanation 2 to Section 56(2)(viib) of the Act. It cannot be arbitrary. The Assessing Officer has to take note of the judicial and established principles in arriving at his satisfaction. In this case, the Assessing Officer has not found any specific fault in rejecting or not satisfying with the valuation made by the assessee. When the Assessing Officer has not found any defect or error in the valuation of shares by the assessee company, it may not be necessary to apply the method of valuation prescribed under Rule 11UA of the I.T. Rules. Therefore, this Tribunal is unable to uphold the valuation made by the Assessing Officer under Rule 11UA of the Income-tax Rules, 1962. Thus we delete the addition made by the AO u/s 56(2)(vii)(b) - Decided in favour of assessee.
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