DCIT, Corp Cir-1(1), Chennai V. Avigana Housing Pvt LTd, Chennai

ITA 521/CHNY/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9782 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G. CHANDRABABU
• Keywords: Fair market value; Corroborative evidences; Valuation report; Set aside
• Section: 56; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , . , % BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.521/CHNY/2019 ( / ASSESSMENT YEAR: 2015-16) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(1) CHENNAI-600 034. VS M/S. AVIGNA HOUSING PVT. LTD. PLOT NO.1822, 1 ST BLOCK, 13 TH MAIN ROAD, ANNA NAGAR WEST. CHENNAI-600 040. PAN: AAKCA 6239J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. G.CHANDRABABU, SR.AR /RESPONDENT BY : MR.M.KARUNAKARAN, ADVOCATE /DATE OF HEARING : 02.12.2020 /DATE OF PRONOUNCEMENT : 31.12.2020 / O R D E R PER G. MANJUNATHA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LEARNED CIT(APPEALS)-4, CHENNAI DATED 28.12.2018 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A) ERRED IN GIVING RELIEF TO THE ASSE SSEE ACCEPTING DISCOUNT CASH FLOW METHOD (DCF) VALUATION DONE BY THE ASSESEE RATHER THAN VALUATION DONE BY T HE ASSESSING OFFICER(AO) UNDER RULE 11UA OF THE INCOME TAX RULES, FOR CALCULATION OF FAIR MARKET VALUE OF SHARES (FMVI& DELETING THE ADDITION OF DIFFERENCE IN FMV & ACTUAL PRICE AT WHICH THE SHARES ARE ISSUED UNDER S ECTION 56{2)(VIIB) OF THE ACT. 2 ITA NO.521/CHNY/2019 3. THE LD,CIT(A) ERRED IN GIVING RELIEF TO THE ASSE SSEE BY HOLDING THAT THE AO WAS NOT JUSTIFIED IN TAKING THE BOOK VALUE OF SHARES OF THE IMMOVABLE PROPERTY FOR VALUA TION AND SHOULD HAVE TAKEN THE HIGHER DCF METHOD ADOPTED VALUE 0F THE ALLOTTED SHARES AS RETURNED BY THE ASS ESSEE SINCE IT WAS THE HIGHER VALUATION OF THE TWO METHOD S EXPRESSLY PRESCRIBED BY THE ACT/RULES WHEN THIS FIN DING OF THE ID.CLT(A) IS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 56(2(VIIB) & RULE 11 UA, AS NOWHERE IN THES E PROVISIONS IS IT MENTIONED THAT HIGHER VALUATION OF TWO METHODS SHOULD BE ADOPTED FOR THE PURPOSE OF ARRIVI NG AT THE FMV 4. THE LDCIT(A) ERRED IN GIVING RELIEF TO THE ASSES SEE WITHOUT TAKING INTO CONSIDERATION THE RATIO LAID DO WN IN THE DECISION OF THE HONBE ITAT., DELHI IN THE CASE OF M/S STRYTON EXIM INDIA PVT LTD VS ITO IN ITA NO. 5982/DEL/2018(AY 2014-15), WHEREIN IT HAS BEEN HELD THAT OBJECTIVE EVALUATION OF THE VALUATION REPORT S UBMITTED BY THE ASSESSEE DESERVES TO BE CARRIED OUT 5. FOR THESE REASONS, IT IS PRAYED THAT THE ORDE R OF THE LEARNED CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF SELLING DTCP APPROVED PLOTS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16 O N 05.10.2015 DECLARING TOTAL INCOME OF RS.37,92,300/-. DURING TH E PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2015-16, THE ASSESSEE HAS ISSUED 835 EQUITY SHARES @ ` 1,05,708/- PER SHARE WITH FACE VALUE OF ` 100 PER SHARE TO MR. N.AMRUTESH REDDY. THE SAID ALL OTMENT HAS BEEN MADE ON THE BASIS OF VALUATION REPORT OBTAI NED FROM ACCOUNTANT UNDER RULE 11UA, AS PER WHICH ACCOUNTAN T HAS ARRIVED 3 ITA NO.521/CHNY/2019 AT THE VALUE OF EQUITY SHARES AS ON THE DATE OF IS SUE ON THE BASIS OF DISCOUNTED CASH FLOW (DCF) METHOD. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, HOW EVER, DID NOT ACCEPT THE VALUE OF SHARES ARRIVED AT BY THE ASSESS EE AND ACCORDING TO HIM, BOOK VALUE OF SHARES AS PER RULE 11UA IS A T ` 61,200/- AND AS AGAINST THIS ASSESSEE HAS ISSUED SHARES AT A P REMIUM OF ` 1,05,708/- AND THUS, CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY SHARES ISSUED AT HUGE PREMIUM CANNOT BE TREATED AS INCOME FROM OTHER SOURCES UNDER THE PROVISIONS OF SECTION 56(2 )(VIIB) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITTED THA T IT HAS ARRIVED AT VALUE OF SHARES AS PER PRESCRIBED METHOD UNDER RULE 11UA, WHERE IT WAS SPECIFICALLY PROVIDED FOR VALUATION OF S HARES EITHER ON NET ASSET VALUE METHOD OR DCF METHOD, AS PER THE C HOICE OF THE ASSESSEE AND ONCE ASSESSEE HAS CHOSEN A PARTICU LAR METHOD FOR VALUATION OF SHARES , THEN ASSESSING OFFICER HAS N O ROLE TO ADOPT A DIFFERENT METHOD. THE ASSESSING OFFICER WAS NOT CO NVINCED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE AND ACCORDING TO HIM, DCF METHOD AS PROVIDED UNDER RULE 11UA IS NOT APPROPRIA TE FOR THE ASSESSEE IN THE GIVEN FACTS AND CIRCUMSTANCES OF TH E CASE, BECAUSE THIS METHOD CAN BE USED BY COMPANY WHICH ARE IN TOT AL CONTROL OF 4 ITA NO.521/CHNY/2019 BUSINESS BEING IN A POSITION TO PROJECT THE INCOME ARISING THEREFROM. HE FURTHER WAS OF THE OPINION THAT AS PER DCF METHO D PROJECTION SHOULD BE REALISTIC AND WHICH IS BASED ON PERFORMAN CE OF THE ASSESSEE INCLUDING ASSET BASE AND INTANGIBLE ASSET S OWNED. IN THE PRESENT CASE, ON A PERUSAL OF VALUATION REPORT SUB MITTED BY THE ASSESSEE, ACCOUNTANT HAS RELIED UPON THE PROJECTIO NS AND FINANCIALS GIVEN BY THE ASSESSEE TO ARRIVE AT VALUE OF SHARE S BY DISCOUNTING NET EARNINGS OF FUTURE FINANCIAL YEARS IN CURREN T VALUE. HOWEVER, ON PERUSAL OF THE ACTUAL FINANCIALS OF THE ASSESSEE FO R THE RELEVANT PERIOD, THERE IS A HUGE DIFFERENCE IN ACTUAL EARNI NGS AND PROJECTIONS CONSIDERED FOR VALUATION OF SHARES AND HENCE, VALU E ARRIVED AT BY THE ASSESSEE ADOPTING DCF METHOD IS NOT GIVING COR RECT PRICE OF SHARES AS ON THE DATE OF ISSUE AND ACCORDINGLY, R EJECTED THE DCF METHOD FOLLOWED BY THE ASSESSEE AND ARRIVED AT F AIR MARKET VALUE OF SHARES ON NET ASSET VALUE METHOD AT ` 61,200/- . ACCORDINGLY, EXCESS PREMIUM CHARGED OVER AND ABOVE FAIR MARKET V ALUE HAS BEEN TREATED AS INCOME UNDER SECTION 56(2)(VIIB) OF THE ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A). BEF ORE THE LEARNED CIT(A), THE ASSESSEE HAS REITERATED ITS ARGUMENTS MADE BEFORE 5 ITA NO.521/CHNY/2019 THE ASSESSING OFFICER TO JUSTIFY ISSUE OF SHARES A T PREMIUM OF ` 1,05,708/-. THE ASSESSEE FURTHER SUBMITTED THAT THE COMPANY OWNS HUGE INVENTORY OF IMMOVABLE PROPERTY AND MARK ET VALUE OF SAID ASSET AS ON VALUATION DATE ITSELF WORKS OUT T O ` 1,03,018/- PER SHARE AND HENCE, ARRIVING AT VALUE OF SHARES AT ` 61,200/- ON NET ASSET VALUE METHOD BY TAKING BOOK VALUE OF ASSETS IS CONTRARY TO PRESCRIBED METHOD FOR VALUATION OF SHARES. THE A SSESSEE FURTHER SUBMITTED THAT AS PER PROVISIONS OF SECTION 56(2)( VIIB) READ WITH RULE 11UA, IT IS FOR THE ASSESSEE TO CHOOSE ANY ON E METHOD PROVIDED UNDER THE ACT FOR VALUE OF SHARES AND THE ASSESSING OFFICER DOES NOT HAVE ANY ROLE, EXCEPT TO EXAMINE T HE METHOD SELECTED BY THE ASSESSEE TO ARRIVE AT VALUE OF SHAR ES. IN THIS CASE, THE ASSESSING OFFICER HAS ALTOGETHER ADOPTED A DIFF ERENT METHOD TO DETERMINE VALUE OF SHARES AS ON THE DATE OF ISSUE I GNORING THE FACT THAT THE STATUTE DOES NOT PERMIT SUCH POWERS TO A SSESSING OFFICER. 5. THE LEARNED CIT(A), AFTER CONSIDERING THE RELE VANT SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF ITAT., MUMBAI BENCHES IN THE CASE OF DCIT VS.OZONE LAND AGRO P.LTD., HELD THAT AS PER PROVISIONS OF SECTION 56 (2)(VIIB), MORE PARTICULARLY, EXPLANATION THERETO READ WITH RULE 11 UA, THE ASSESSING 6 ITA NO.521/CHNY/2019 OFFICER HAS NO POWER/ CHANCE/OPTION TO CHOOSE HIS O WN METHOD TO ARRIVE AT VALUE OF SHARES, WHEREAS THE ASSESSEE HAS SUCH CHOICE OF OPTION TO CHOOSE NAV/DCF METHOD AND ONCE THE ASSESS EE HAS SELECTED A PARTICULAR METHOD, THEN THE ASSESSING OF FICER HAS NO POWER TO REJECT THE METHOD CHOSEN BY THE ASSESSEE . THE LEARNED CIT(A) FURTHER OBSERVED THAT THE OBSERVATIONS OF TH E ASSESSING OFFICER THAT DCF METHOD IS NOT CORRECT METHOD UND ER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE IS MISPLACED, BECAUSE WHEN THE STATUTE ITSELF PERMITS THE ASSESSEE TO CHOOSE A PARTICULAR METHOD FOR VALUATION OF SHARES AND SUCH METHOD IS BASED ON APPROVED SHARE VALUATION METHOD I.E. DCF METHOD, T HE ASSESSING OFFICER CANNOT SIMPLY BRUSH ASIDE THE METHOD ADO PTED BY THE ASSESSE, BECAUSE THE VALUE OF SHARES AS PER THE MET HOD SELECTED BY THE ASSESSEE IS MORE THAN THE BOOK VALUE OF SHAR ES AS PER NET ASSET VALUE METHOD. THE LEARNED CIT(A) HAS DISCUSS ED THE ISSUE IN LIGHT OF THE DECISION OF DCIT VS.OZONELAND AGRO P.L TD., AND COME TO THE CONCLUSION THAT AS PER AMENDMENT TO RULE 11U A BY THE FINANCE ACT, 2017 W.E.F. 01.04.2018 FOR THE PURPOSE OF SECTION 56(2)(VIIB) OF THE ACT, IT IS VERY CLEAR THAT VALUE OF IMMOVABLE PROPERTY HAVE TO BE VALUED AT VALUE ADOPTED BY OR A SSESSED BY ANY AUTHORITY OF THE GOVERNMENT FOR THE PURPOSE OF PAY MENT OF STAMP 7 ITA NO.521/CHNY/2019 DUTY. IN THIS CASE, THE ASSESSING OFFICER HAS ADOPT ED VALUE OF IMMOVABLE PROPERTY AT BOOK VALUE UNDER NET ASSET VA LUE METHOD AND HENCE, THE ASSESSING OFFICER HAS GROSSLY ERRED IN NOT CONSIDERING METHOD SELECTED BY THE ASSESSEE FOR VAL UATION OF SHARES. THEREFORE, HE OPINED THAT THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN TAKING BOOK VALUE OF SHARES OF THE IMM OVABLE PROPERTY FOR VALUATION AS AGAINST DCF METHOD FOLLOWED BY THE ASS ESSEE WHICH IS ONE OF THE METHOD PRESCRIBED UNDER RULE 11UA AND AP PROVED BY THE ACCOUNTANT AS MANDATED UNDER LAW. ACCORDINGLY, DEL ETED THE ADDITIONS MADE TOWARDS EXCESS PREMIUM ON ISSUE OF S HARES UNDER SECTION 56(2)(VIIB) OF THE ACT. 6. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICE R TOWARDS EXCESS PREMIUM ON ISSUE OF SHARES UNDER SECTION 5 6(2)(VIIB) OF THE ACT BY ACCEPTING DISCOUNTED CASH FLOW METHOD SELECT ED BY THE ASSESSEE FOR VALUATION OF SHARES, AS AGAINST VALUE ADOPTED BY THE ASSESSING OFFICER UNDER NET ASSET VALUE METHOD AS P ER RULE 11UA.THE LEARNED DR FURTHER SUBMITTED THAT THE LEA RNED CIT(A) HAS ERRED IN HOLDING THAT ASSESSING OFFICER WAS NOT JUS TIFIED IN TAKING BOOK VALUE OF SHARES OF IMMOVABLE PROPERTY AND SHO ULD HAVE TAKEN 8 ITA NO.521/CHNY/2019 THE HIGHER VALUE OF DCF METHOD ADOPTED BY THE ASSES SEE IN CONTRAVENTION OF PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT AND RULE 11UA, AS NOWHERE IN THESE PROVISIONS, IT IS MENTION ED THAT HIGHER VALUATION OF THE TWO METHODS TO BE ADOPTED FOR THE PURPOSE OF ARRIVING AT FAIR MARKET VALUE. THE LEARNED CIT(A) E RRED IN NOT CONSIDERING THE RATIO LAID DOWN IN THE DECISION BY THE ITAT., DELHI BENCHES IN THE CASE OF M/S STRYTON EXIM INDIA PVT L TD VS ITO IN ITA NO. 5982/DEL/2018, WHEREIN IT HAS BEEN HELD THAT OBJECTIVE EVALUATION OF VALUATION REPORT SUBMITTED BY THE ASSESSEE DESERVES TO BE CARRIED OUT. 7. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THA T THE LEARNED CIT(A) HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT TH AT ASSESSING OFFICER HAS ADOPTED NET ASSET VALUE METHOD CONTRARY TO THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT READ W ITH RULE 11UA(2), WHILE ALLOWING RELIEF TO THE ASSESSEE TOWARDS ADDIT ION MADE ON ACCOUNT OF EXCESS PREMIUM CHARGED ON ISSUE OF SHARE S AND SUCH FINDING OF THE LEARNED CIT(A) IS IN ACCORDANCE WITH LAW. THEREFORE, THERE IS NO MERIT IN THE ARGUMENTS TAKEN BY THE LEA RNED DR THAT THE FINDINGS RECORDED BY THE LEARNED CIT(A) ARE CONTRAR Y TO THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT READ W ITH RULE 11UA. THE 9 ITA NO.521/CHNY/2019 LEARNED AR FURTHER SUBMITTED THAT IT IS WELL SETTLE D PRINCIPLE OF LAW THAT PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT R EAD WITH RULE 11UA, GAVE OPTION TO THE ASSESSEE TO CHOOSE A PARTICULAR METHOD FOR VALUATION OF SHARES AND ONCE A METHOD IS SELECTED B Y THE ASSESSE, THEN THE ASSESSING OFFICER HAS NO ROLE TO ADOPT DI FFERENT METHOD FOR VALUATION OF SHARES. IF AT ALL THE ASSESSING OFFICE R IS NOT SATISFIED WITH THE VALUE ARRIVED AT BY THE ASSESSE, HE CAN VERIFY THE METHOD SELECTED FOR VALUATION OF SHARES AND RELEVANT DOCUM ENTS SUPPORTING SUCH VALUATION, BUT AT NO TIME, HE CAN REJECT THE M ETHOD SELECTED BY THE ASSESSEE AND CHOOSE DIFFERENT METHOD FOR VALUAT ION OF SHARES. THE AR FURTHER SUBMITTED THAT IN THIS CASE, THE ASS ESSEE HAS FOLLOWED DCF METHOD WHICH IS SUPPORTED BY VALUATION REPORT OF ACCOUNTANT, WHERE VALUE OF SHARES HAS BEEN ARRIVED AT ON THE BASIS OF FUTURE PROJECTIONS OF THE COMPANY, WHICH MAY NOT BE EQUAL TO THE ACTUAL REVENUE EARNED FOR THE RELEVANT ASSESSMENT Y EAR, BUT WHAT IS RELEVANT FOR DCF METHOD IS DISCOUNTED CASH FLOW OF FUTURE FINANCIAL YEARS AND SUCH CASH FLOW IS ESTIMATED ON REALISTIC METHOD. IN THIS CASE, THE ASSESSEE HAS ARRIVED AT DISCOUNTED CASH F LOW ON THE BASIS OF FUTURE EARNING CAPACITY OF THE COMPANY AND VALUE OF SHARES ARRIVED AT ON THE BASIS OF SUCH METHOD IS ALMOST EQ UAL TO BOOK VALUE OF SHARES ARRIVED AT AS PER RULE 11UA, AND THEREFOR E, VALUE ARRIVED 10 ITA NO.521/CHNY/2019 AT BY ASSESSING OFFICER AT ` 61,200/- ON BOOK VALUE OF ASSETS IS CONTRARY TO RULE 11UA OF I.T. RULES, 1962. THE LEAR NED CIT(A), AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY DELETED ADDI TIONS MADE BY THE ASSESSING OFFICER AND HIS ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS ISSUED SHARES AT PREMIUM AN D SUCH SHARES HAS BEEN ISSUED ON THE BASIS OF VALUATION RE PORT AS ON THE DATE OF ISSUE OF SHARES BY FOLLOWING DISCOUNTED CAS H FLOW METHOD AS PRESCRIBED UNDER RULE 11UA OF INCOME TAX RULES, 196 2. THE ASSESSEE HAS ARRIVED AT VALUE OF SHARES AT ` 1,10,069/- PER SHARE. ACCORDING TO THE ASSESSE, VALUE ARRIVED AT BY DCF M ETHOD IS CORRECT VALUE OF SHARES AS ON THE DATE OF ISSUE, BECAUSE E VEN IF IT IS CONSIDERED ON NET ASSET VALUE METHOD, THE VALUE FOR EQUITY SHARES WORKS OUT TO ` 1,00,380/-, IF STOCK IN TRADE HELD BY THE ASSESSEE IS VALUED AT MARKET VALUE OR VALUE AS PER STAMP DUTY PURPOSES. THEREFORE, IT IS INCORRECT ON THE PART OF THE ASSES SING OFFICER TO COME TO THE CONCLUSION THAT VALUE ARRIVED AT BY THE ASSE SSEE UNDER DCF METHOD IS NOT SHOWING CORRECT VALUE OF SHARES AS ON THE DATE OF ISSUE OF SHARES. THE PROVISIONS OF SECTION 56(2)(VI IB) OF THE ACT, 11 ITA NO.521/CHNY/2019 DEALS WITH ISSUE OF SHARES SET OF PREMIUM. AS PER S AID PROVISIONS, IF A COMPANY ISSUES SHARE SET OF PREMIUM AND FAIR MAR KET VALUE OF SHARES AS ON THE DATE OF ISSUE IS LESS THAN THE ISS UE PRICE, THEN DIFFERENCE MAY BE TREATED AS INCOME TO BE TAXED UND ER SECTION 56(2)(VIIB) OF THE ACT. AS PER EXPLANATION PROVIDED TO SECTION 56(2)(VIIB) OF THE ACT, FAIR MARKET VALUE OF SHARES HAS BEEN DEFINED, AS PER WHICH VALUE OF SHARES SHALL BE VALUED AS MAY BE DETERMINED IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED OR AS MAY BE SUBSTANTIATED BY THE COMPANY TO THE SATISFACTION OF THE ASSESSING OFFICER, BASED ON THE VALUE ON THE DATE OF ISSUE OF SHARES OF ITS ASSETS, INCLUDING INTANGIBLE ASSETS BEING GOOD WILL , KNOWHOW ETC. WHICHEVER IS HIGHER. SIMILARLY, RULE 11UA PRESCRIB ED METHOD FOR VALUATION OF SHARES OF LISTED AND NON-LISTED COMPAN IES. AS PER RULE 11UA, UNQUOTED EQUITY SHARES CAN BE VALUED ON NET A SSET VALUE METHOD OR AS PER DISCOUNTED FREE CASH FLOW METHOD D ETERMINED BY THE ACCOUNTANT OR MERCHANT BANKER. AS PER THE SAID PROVISIONS, ONCE ASSESSEE CHOOSES A PARTICULAR METHOD, ASSESSIN G OFFICER HAS ROLE TO CHANGE METHOD SELECTED BY THE ASSESSE, BUT HE CAN VERY WELL VERIFY THE METHOD SELECTED BY THE ASSESSEE WITH REL EVANT SUPPORTING DOCUMENTS. IN THIS CASE, ASSESSEE HAS SELECTED DCF METHOD AS PRESCRIBED UNDER RULE 11UA FOR VALUATION OF SHARES AND SUCH 12 ITA NO.521/CHNY/2019 VALUATION HAS BEEN ARRIVED AT ON THE BASIS OF FUTUR E EARNING CAPACITY OF THE COMPANY AS PER WHICH, VALUE OF SHARES HAS BE EN WORKED OUT AT ` 1,10,069/- PER SHARE. THE ASSESSEE JUSTIFIES VALUE OF SHARES ARRIVED AT BY DCF METHOD ON THE BASIS OF ASSETS OWN ED BY THE COMPANY INCLUDING STOCK IN TRADE BEING IMMOVABLE PR OPERTY AND VALUE OF SUCH ASSET AS ON THE DATE OF VALUATION WOR KS OUT TO ` 1,00,380/- PER SHARE. ACCORDINGLY, THE ASSESSEE HAS TAKEN AVERAGE OF TWO AND HAS WORKED OUT ` 1,05,194/- PER SHARE WHICH IS ALMOST EQUAL TO VALUE ARRIVED AT UNDER DCF METHOD. THE ASS ESSING OFFICER HAS REJECTED DFC METHOD SELECTED BY THE ASSESSEE AN D ADOPTED NET ASSET VALUE METHOD AND FOR THIS PURPOSE, HE HAS TAKEN BOOK VALUE OF ASSET AS ON THE DATE OF VALUE OF SHARES A ND WORKED OUT TO ` 61,200/- PER EQUITY SHARES. ACCORDING TO THE ASSES SING OFFICER, THE METHOD SELECTED BY THE ASSESSEE IS NOT A CORREC T METHOD IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, BECAUSE DCF METHOD IS SUITABLE ONLY IF COMPANIES WHICH ARE IN TOTAL CONTR OL THE BUSINESS BEING IN A POSITION TO PROJECT INCOME ON THE BASIS OF ASSET AND INTANGIBLES. SINCE, THE ASSESSEE IS NOT CARRYING AN Y INTANGIBLES, HE WAS OF THE OPINION THAT DCF METHOD FOLLOWED BY THE ASSESSEE DOES NOT GIVE CORRECT VALUE OF SHARES. 13 ITA NO.521/CHNY/2019 9. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO T HE ARGUMENTS ON BOTH SIDES, IN LIGHT OF FACTS BROUGHT OUT BY THE AUTHORITIES INCLUDING VALUATION REPORT SUBMITTED BY THE ASSESSEE UNDER DC F METHOD. DCF METHOD IS ONE OF THE TRUSTED METHODS FOR VALUAT ION OF SHARES AND SAID METHOD IS PRESCRIBED UNDER RULE 11UA OF IN COME TAX RULES, 1962. THEREFORE, THE ASSESSING OFFICER CANNO T BRUSH ASIDE DCF METHOD FOR SIMPLE REASON THAT ASSESSEE DOES NOT CARRY ANY INTANGIBLES IN ITS BUSINESS. FURTHER, ONCE ASSESSE E CHOOSES A PARTICULAR METHOD AND SAID METHOD IS APPROVED METHO D FOR VALUATION OF SHARES, THEN ASSESSING OFFICER CANNOT CHANGE THE METHOD ADOPTED BY THE ASSESSEE FOR VALUING MARKET VALUE OF SHARES FOR DISCOUNTED CASH FLOW METHOD TO NET ASSET VALUE METH OD, BECAUSE THE STATUE DOES NOT PERMIT THE ASSESSING OFFICER TO CHOOSE A METHOD OTHER THAN THE METHOD SELECTED BY THE ASSESSEE. IF AT ALL THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE VALUE ARRIVED AT BY THE ASSESSEE, THEN HE CAN VERY WELL EXAMINE VALUATION O F SHARES AND IN CASE ANY DIFFERENCE IN VALUE OF SHARES, HE CAN REWO RK THE SHARE PRICE FOR THE PURPOSE OF VALUATION, BUT AT NO TIME, HE CAN ADOPT DIFFERENT METHOD FROM THE METHOD ADOPTED BY THE ASS ESSEE FOR VALUATION OF SHARES. IN THIS CASE, ON PERUSAL OF FA CTS, WE FIND THAT ASSESSEE HAS ADOPTED DCF METHOD, WHICH IS ONE OF TH E PRESCRIBED 14 ITA NO.521/CHNY/2019 METHOD UNDER RULE 11UA . NO DOUBT, THERE MAY BE A D IFFERENCE IN PROJECTIONS CONSIDERED BY THE ASSESSEE FOR VALUATIO N OF SHARES WHEN COMPARED TO ACTUAL FINANCIAL FOR RELEVANT FINANCIAL YEAR, BUT THAT ITSELF IS NOT A GROUND FOR REJECTION OF DCF METHOD, BECAUS E PRIMARILY DCF METHOD FOLLOWS PROJECTED FINANCIAL OF THE COMPANY F OR FUTURE YEARS WHICH MAY NOT BE EQUAL TO ACTUAL FINANCIAL OF THE C OMPANY FOR THE RELEVANT FINANCIAL YEARS. BUT WHAT IS RELEVANT TO S EE IS WHETHER THE PROJECTION WORKED OUT BY THE ASSESSEE IS BASED ON S OME DEGREE OF ESTIMATION OR NOT. IN THIS CASE, THE ASSESSING OFF ICER HAS NOT POINTED OUT ANY DISCREPANCY OR INCONSISTENCY IN THE PROJECTIONS ADOPTED BY THE ASSESSEE FOR DISCOUNTED CASH FLOW ME THOD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ASSES SING OFFICER HAS ERRED IN REJECTION OF DCF METHOD AND ADOPTING NET A SSET VALUE METHOD FOR THE PURPOSE OF VALUATION OF SHARES. THIS VIEW IS FORTIFIED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE MPESA LTD., VS. PCIT, (2018) (256 TAXMAN 2 40), WHERE THE HONBLE COURT HELD THAT ASSESSING OFFICER CANNO T CHANGE THE METHOD ADOPTED BY THE ASSESSEE FOR VALUING MARKET VALUE OF SHARES FROM DCF TO NET ASSET VALUE METHOD. THE ITAT., MUMB AI BENCHES IN THE CASE OF KARMIC LABS PVT. LTD. VS. ITO IN IT A NO.3955/MUM/2018 HAS TAKEN SIMILAR VIEW AND HELD TH AT ASSESSING 15 ITA NO.521/CHNY/2019 OFFICER HAS NO POWER TO CHANGE THE METHOD ADOPTED B Y THE ASSESSEE FROM ONE METHOD TO ANOTHER METHOD PROVIDED UNDER RULE 11UA. 10. IN THIS VIEW OF THE MATTER AND CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE CONSIDERE D VIEW THAT FAIR MARKET VALUE OF SHARES CONSIDERED BY THE ASSESSEE U NDER DCF METHOD IS ONE OF THE ACCEPTED METHOD OF VALUATION O F SHARES UNDER RULE 11UA AND SUCH VALUE OF SHARES IS SUPPORTED BY NECESSARY SUPPORTING EVIDENCES INCLUDING VALUATION REPORT AS ON THE DATE OF ISSUE OF SHARES. THE VALUE ADOPTED BY THE ASSESSIN G OFFICER UNDER NET ASSET VALUE METHOD EVEN THOUGH A PRESCRIBED MET HOD DOES NOT GIVE CORRECT VALUE OF SHARES IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, BECAUSE AMENDED PROVISIONS OF RULE 11UA B Y THE FINANCE ACT, 2017 W.E.F 01.04.2018 HAS PERMITTED VA LUATION OF IMMOVABLE PROPERTY AS PER GUIDANCE VALUE FOR THE PU RPOSE OF VALUATION OF SHARES. IN THIS CASE, IF STOCK IN TRAD E HELD BY THE ASSESSEE IN THE FORM OF IMMOVABLE PROPERTY HAS BEEN VALUED AS PER GUIDANCE VALUE, THEN VALUE OF ONE EQUITY SHARE WOR KS OUT TO ` 1,00,380/-, WHICH IS ALMOST EQUAL OR NEARER TO VALU E ARRIVED AT BY THE ASSESSEE UNDER DCF METHOD. THEREFORE, VALUE OF SHAR ES ARRIVED AT 16 ITA NO.521/CHNY/2019 BY ASSESSING OFFICER UNDER NET ASSET VALUE METHOD C ANNOT BE ACCEPTED. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A), AFTER CONSIDERING THE RELEVANT FACTS HAS RI GHTLY DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS EX CESS PREMIUM CHARGED ON ISSUE OF SHARES U/S.56(2)(VIIB) OF THE A CT. HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LEARNED CIT( A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER, 2020 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 31 ST DECEMBER, 2020 DS *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /G