TMI Blog2023 (6) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... see on this ground is allowed. Additions u/s 68 - Low profit ratio - HELD THAT:- With regard to Rs. 9,00,000/- received on 04.09.2014 by the assessee during the year which has been confirmed by the ld. CIT(A) u/s 68, we find that the assessee has discharged his onus before the revenue authorities. AO and the ld. CIT(A) rejected the explanation of the assessee solely based on the limited issue of low profit - There were no enquiries made nor any evidence to reject the documents/evidences filed by the assessee. Hence, we hold that no addition u/s 68 is called for in this case. - ITA No. 6176/Del/2019 And ITA No. 6177/Del/2019 - - - Dated:- 27-6-2023 - Sh. Saktijit Dey, Judicial Member And Dr. B. R. R. Kumar, Accountant Member Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been determined @ Rs. 40/- per share. The assessee has submitted the valuation report and argued that no mistake in the valuation report has been found by the revenue. It was argued that the revenue cannot change the method of valuation and also cannot reject the valuation done without bringing on record any cogent reasoning. Arguments of the ld. DR in support of the issue of Section 56(2)(viib): 9. It was argued that no corroborative details have been furnished to substantiate the cash flow of Rs. 90,00,000/- from the equity. The assessee has no business worth and no tangible business activity was carried out by the assessee since incorporation. Further, there were no fixed asset or any intangible asset in position of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be chargeable to income- tax under the head Income from other sources , namely : (i) dividends; (ia) income referred to in sub-clause (viii) of clause (24) of section 2; ib) (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received (i) by a venture capital undertaking from a venture capital company or a venture capital f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (viib) of subsection (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely: (a) the fair market value of unquoted equity shares =(A-L)x (PV)/(PE) where, A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance- sheet as asset including the un-amortised amount of deferred expenditure which does not represent the value of any asset; L = book value of liabilities shown in the balance-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said rule also provides that the method to be adopted is left to the choice of the assessee. 24. Thus, the option to choose the method to be adopted to determine the FMV of unquoted shares is not with the AO but with the assessee. In the instant case the assessee opted for the DCF method. 25. Whether the AO erred in rejecting the DCF method because the Valuer failed to furnish the documents called for by him? 26. The AO has rejected the DCF method by observing that the Valuer did not have proper understanding of the methodology and intricacies of the DCF method and that the Valuation report is just of 4 pages. The AO required the Valuer to appear before him along with his working papers which he failed to carry on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. The provisions of Rule 11UA shows that the legislature has not made any distinction as going concern or otherwise in valuation of unquoted equity shares. The Rules give option to choose between the two methods and the only criteria to choose is the option to be exercised by the assessee. In the absence of any such prescription under the law, one cannot read into the statute anything without showing that the Legislature intended it. Hence, the AO has erred in not accepting DCF as the most appropriate and scientific method for valuing shares of the appellant. Issue no. 5: 30. Whether AO can reject the DCF method when this method has been duly prescribed under the Law itself? 31. The DCF method is one of the duly prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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