Dada Ganpati Guar Products Pvt. Ltd. (Now Cyamopsis Biotech India Pvt. Ltd.), Sirsa V. Pr. CIT, Hissar

ITA 531/CHANDI/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4256 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-04-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 26-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C CHANDTRAKANTA
• Keywords: Revision of order; Fair market value; Valuation report; Set aside
• Section: 143(3); 142(1); 56(2); 143(1); 143(2); 13; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI R.L NEGI, JUDICIAL MEMBER ./ ITA NO. 531/CHD/2018 / ASSESSMENT YEAR : 2013-14 DADA GANPATI GUAR PRODUCTS PVT. LTD. (CHANGED NAME W.E.F. 28.11.2015 CYAMOPSIS BIOTECH INDIA PVT. LTD) 12KM STONE, HISAR ROAD, VILLAGE MORIWALA, DISTRICT SIRSA (125060) THE PR. CIT, CR BUILDING, AAYKAR BHAWAN, SECTOR 14, HUDA, HISAR ./PAN NO: AAECD1986H /APPELLANT /RESPONDENT HEARING THROUGH VIDEO CONFERENCING /ASSESSEE BY : SHRI SUDHIR SEHGAL, ADVOCATE / REVENUE BY : SMT. C. CHANDTRAKANTA, CIT $ /DATE OF HEARING : 28.07.2021 $ / DATE OF PRONOUNCEMENT : 24.09.2021 / ORDER PER R.L. NEGI, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 21.03.2018 PASSED BY PRINCIPAL COMMISSIONER OF INCO ME TAX (APPEALS), HISAR [FOR SHORT THE PR. CIT(A)] FOR THE ASSESSME NT YEAR 2013-14, WHEREBY THE LD. PR. CIT(A) HAS SET ASIDE THE ASSESS MENT ORDER PASSED BY THE AO U/S 143(3) OF THE INCOME TAX ACT, 1961 [FOR SHORT THE ACT] OF THE ACT BY EXERCISING JURISDICTION U/S 263 OF THE A CT AND DIRECTED AO TO PASS THE ASSESSMENT ORDER AFRESH. ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONS IDERATION DECLARING TOTAL INCOME OF RS. 1,10,250/- THE RETURN WAS PROCE SSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SC RUTINY AND THE AO ISSUED NOTICES U/S 143(2) AND 142(1) OF THE ACT. IN RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND FILED THE DETAILS AND DOCUMENTS CALLED FOR AND DISC USSED THE CASE FROM TIME TO TIME. IT WAS NOTICED THAT THE ASSESSEE HAD CLAIMED WAGE EXPENSES AMOUNTING TO RS. 45,676/-AND DISCOUNT EXPENSES AMOU NTING TO RS. 5,09,658/- AND SOME OF THE PAYMENTS HAD BEEN MADE I N CASH. SINCE THE ASSESSEE FAILED TO PRODUCE SOME OF THE VOUCHERS TO SUBSTANTIATE THE SAID CLAIM, AO MADE A LUMPSUM ADDITION OF RS. 50,000/- A ND DETERMINED THE INCOME OF THE ASSESSEE AT RS. 1,60,250/- 3. THEREAFTER, THE LD. PR. CIT HISAR, NOTICED THAT DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED TOTAL SHARE CAPITAL AND PREMIUM OF RS. 5.9 CRORE AND THE AO HAS NOT EXAMINED THE APPLICABILITY OF SECTION 56(2)(VII B) OF THE ACT DURING THE ASSESSMENT PROCEEDINGS. ACCORDINGLY, THE LD. PR . CIT ISSUED NOTICE DIRECTING THE ASSESSEE TO SHOW CAUSE AS TO WHY AN A PPROPRIATE ORDER U/S 263(1) OF THE ACT SHOULD NOT BE PASSED. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE SUBMITTED WRITTEN SUBMISSIONS INTER ALIA CONTENDING THAT THE AO HAS PASSED THE ASSESSMENT ORDER AFTER PROPER VER IFICATION OF ALL THE ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 3 DOCUMENTS RELATING TO SHARES ISSUED ON PREMIUM OF R S. 10/- AND RS. 20/- HOWEVER, THE LD. PR. CIT REJECTING THE SUBMISSIONS MADE BY THE ASSESSEE SET ASIDE THE ASSESSMENT ORDER HOLDING THA T THE SAID ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND DIRECTED THE AO TO PASS THE ASSESSMENT ORDER AFRESH MAKING ADDIT ION OF SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE AS DISCUSSED IN THE ORDER. 4. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER P ASSED BY THE LD. PR. CIT ON THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY WORTHY PR. COMMISSIONER OF INCO ME TAX, HISAR BEING AGAINST LAW FACTS AND PROVISIONS OF I.T . ACT. 1961 IS LIABLE TO BE SET ASIDE. 2. THAT, ON FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. PRINCIPAL C.I.T. ERRED IN HOLDING THAT ASSESSMENT ORDER IS ER RONEOUS AS THE ASSESSING OFFICER, WITHOUT EXAMINING THE APPLICATIO N OF SECT. 56(2) (VIIB), HAS ACCEPTED THE ALLOTMENT OF SHARES ON PREMIUM. THE ISSUES ACCEPTED AND DECIDED IN THE FAVOR OF THE ASS ESSEE ARE NOT NORMALLY MENTIONED IN THE ASSESSMENT ORDER BUT THES E ARE INDICATED IN THE OFFICE ORDER. 3. THAT WORTHY PR. COMMISSIONER OF INCOME TAX, HISAR E RRED IN REJECTING THE VALUATION OF SHARES @RS.33.44 PER SHA RE BY THE CHARTERED ACCOUNTANT, FOLLOWING DISCOUNTED FREE CAS H FLOW METHOD, IN HIS REPORT. THE PROJECTED FIGURES CONTAI NED IN CM.A., REGARDING WORKING CAPITAL, TERM LOAN, UNSECURED LOA NS AND EQUITY CAPITAL ADOPTED BY THE ACCOUNTANT FOR VALUATION, SE EMS TO HAVE BEEN INADVERTENTLY REJECTED/IGNORED BY LD. PR. C.L. T. THESE FIGURES WERE VERIFIABLE FROM ANNEXURE-(B) ACCOMPANIED WITH REPLY DATED 06.02.2018 SUBMITTED BEFORE HIM. 4. THAT THE COMPUTATIONS OF FAIR MARKET VALUATION BY L D. PR. COMMISSIONER OF INCOME TAX, HISAR OF RS.12.14 PER S HARE FOLLOWING RULE 11UA(2)(A), REJECTING THE VALUATION OF SHARES OPTED BY THE APPELLANT COMPUTED BY THE ACCOUNTANT AS PER RULE IIUA(2)(B), WAS WHOLLY AGAINST THE PROVISIONS OF SE CTION 56(2)(VIIB) OF I.T. ACT. 1961 AND THE RULES. THEREF ORE, THERE SEEMS TO BE NO JUSTIFICATION IN INSTRUCTING THE ASSESSING OFFICER FOR ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 4 MAKING FRESH ASSESSMENT FOLLOWING THE DIRECTIONS TO ADD THE SHARE PREMIUM IN THE EXCESS OF FAIR MARKET VALUE OF RS.1, 09,98,548/-. 5. THAT APPELLANT CRAVES LEAVE, WITH KIND PERMISSION O F HON'BLE 0INCOME TAX APPELLATE TRIBUNAL, TO AMEND, ADD OR MO DIFY THE GROUNDS OF APPEAL, TILL THE SAME IS FINALLY HEARD A ND DISPOSED OF. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE COMPANY CAME INTO EXISTENCE ON 14.03.2012. IT START ED MANUFACTURING GUAR GUM PRODUCTS IN MAY 2013. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FILED SHOWING INCOME FROM T RADING ACTIVITIES. DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONS IDERATION THE COMPANY ALLOTTED SHARES ON DIFFERENT DATES. THE ASSESSEE IN ITIALLY ALLOTTED 10000 SHARES ON FACE VALUE ON 16.03,2012. THEREAFTER, THE SHARES WERE ALLOTTED ON 27.7.2012 AND 10.10.2012. THE SHARES AS PER FOURTH ISSUE WERE ALLOTTED ON 10.11.2012 AT A PREMIUM OF RS. 10/- PER SHARE AND T HEREAFTER THE SHARES AS PER FIFTH ISSUE WERE ALLOTTED ON 15.2.2013 AT A PREMIUM OF RS. 20/- PER SHARE. THE THIRD ISSUE AT A PREMIUM OF RS. 10/- WERE ALLOT TED TO THE EXISTING SHAREHOLDERS AND THEIR FAMILY MEMBERS ONLY. THE FO URTH ISSUE AT A PREMIUM OF RS. 20/- WERE OFFERED AT THE TIME WHEN THE COMPA NY WAS IN URGENT NEED OF FINANCE AND WERE OFFERED TO EXISTING SHAREHOLDERS O NLY ON PRO-RATA BASIS. FURTHER THE SHARES WERE ALLOTTED TO THE EXISTING SH AREHOLDERS OR THEIR FAMILY MEMBERS OF THEIR CLOSE FRIENDS ONLY ON RENOUNCING T HEIR ENTITLEMENTS IN FAVOUR OF THE ALLOTTEE. THE LD. COUNSEL INVITED O UR ATTENTION TO PAGES 141 TO 144 OF THE PAPER BOOK SUBMITTED ON 13.5.2018 CONTAI NING ANNEXURE-A FORMAT OF LIST OF ALLOTTEES, PAGES NOS. 126 TO 133 OF THE SAME PAPER BOOK CONTAINING ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 5 THE RETURN OF THE PARTNERSHIP FIRM FOR GUAR MANUFAC TURING BUSINESS DECLARING AN INCOME OF RS. 1,32,58,518/- FOR THE ASSESSMENT Y EAR 2012-13 AND THE ASSESSMENT ORDER DATED 31.12.2014 TO DEMONSTRATE TH AT THE DETAILS REGARDING THE ALLOTTED SHARES AND THE RETURN OF PARTNERSHIP F IRM WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE COMPLETE EVIDENCE TO ESTABLISH CREDITWORTHINESS OF THE PERSONS WERE FURNISHED BEFORE THE AO. THE AO VERIFIED THE SAME INCLUDING T HE SHARES ISSUED ON PREMIUM OF RS. 10/- AND 20/- AND FURTHER VERIFIED T HE AUDIT REPORT FURNISHED BY THE ASSESSEE HAVING COMPLETE PARTICULARS I.E., N AME, ADDRESS, OCCUPATION OF THE PERSONS, NUMBERS OF SHARES, FACE VALUE AS PER S HARES AND THE RATIO OF SHARES ALLOTTED. THE LD. COUNSEL FURTHER SUBMITTED THAT SO FAR AS THE APPLICABILITY OF SECTION 56(2) (VII)(B) APPLICABLE W.E.F. 1.4.2013 IS CONCERNED, THE AO HAS MADE COMPLETE VERIFICATION REGARDING INV ESTMENT IN BUILDINGS, VEHICLES, COMPUTERS, GENERATOR SET, LAB EQUIPMENTS AND MACHINERY SHOWN IN THE BALANCE SHEET. PLACING RELIANCE ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD.203 ITR 108 (BOM.) THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE SIMPLY BECAUSE THE AO HAS N OT MADE DISCUSSION ON EACH AND EVERY POINT. THE LD. COUNSEL FURTHER SUBMI TTED THAT SINCE THE AO HAD PASSED THE ASSESSMENT ORDER AFTER CONDUCTING EN QUIRY AND DUE VERIFICATION OF FACTS, THE IMPUGNED ORDER PASSED BY THE LD. PR. CIT IS BAD IN LAW, THEREFORE LIABLE TO BE SET ASIDE. 6. AS REGARDS VALUATION OF SHARES, THE LD. COUNSEL SUBMITTED THAT THE VALUATION REPORT DULY PREPARED IN ACCORDANCE WITH T HE PROVISIONS OF LAW WAS ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 6 SUBMITTED BEFORE THE LD. PR. CIT IN COMPLIANCE TO H IS DIRECTION VIDE ORDER SHEET DATED 02.02.2018, COPY OF WHICH IS AVAILABLE AT PAGE 164 TO 174 OF THE ACT. THE LD. COUNSEL FURTHER CONTENDED THAT VALUATI ON THE ASSESSEE HAS PREPARED THE VALUATION REPORT FOLLOWING DISCOUNTED FREE CASH FLOW (DCF) METHOD ON THE BASIS OF PROJECTED FIGURES CONTAINED IN CERTIFIED MANAGEMENT ACCOUNT (CMA), REGARDING WORKING CAPITAL, TERM LOAN , UNSECURED LOANS AND EQUITY CAPITAL ETC. PLACING RELIANCE ON THE JUDGMEN T OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. CINESTAAN ENTERTAINMENT (P) LTD. 199 DTR 345 (DELHI) AND JUDGMENT OF THE HON'BLE MUMBAI HIGH COU RT COURT IN THE CASE OF VODAFONE M-PESA LIMITED VS. PR. CIT IN WRIT PETITION NO 654 OF 2018 DATED 01.03.2018 SUBMITTED THAT THE HON'BLE DE LHI HIGH COURT HAS UPHELD THE FINDINGS OF THE TRIBUNAL AND DELETED TH E ADDITION MADE U/S 56(2)(VIIB) HOLDING THAT TRIBUNAL HAS FOLLOWED THE DICTA OF THE HON'BLE SUPREME COURT IN MATTER RELATING TO THE COMMERCIAL PRUDENCE OF AN ASSESSEE RELATING TO VALUATION OF AN ASSET. SIMILARLY, THE H ON'BLE MUMBAI HIGH COURT HAS HELD THAT AO HAS JURISDICTION TO SCRUTINIZE VAL UATION REPORT AND DETERMINE FRESH VALUATION, HOWEVER IT IS NOT OPEN TO HIM TO C HANGE THE METHOD OF VALUATION WHICH HAD BEEN ADOPTED BY THE ASSESSEE. I N THIS CASE SINCE THERE WAS NO DEFECT IN THE VALUATION REPORT THE LD. PR. C IT HAS WRONGLY REJECTED THE DCF METHOD ADOPTED BY THE ASSESSEE HOLDING THAT THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES IS REQUIRED TO BE DONE AS PE R METHOD PRESCRIBED IN THE RULE 11UA(2)(A) AND DIRECTED THE AO TO MAKE ADDITIO N OF RS.1,09,98,548/- COMPUTED BY HIM. THE LD. COUNSEL FURTHER RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KARMIC LABS PVT. LTD. VS. ITO ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 7 ITA NO 3955/MUM/2018 , ORDER OF THE CUTTACK BENCH OF THE TRIBUNAL IN THE CASE OF ALISHAN PALACE RESORTS PROVISION. LTD VS. ITO, ITA NO 114/CTK/2019 , ORDER OF THE BANGALORE BENCH OF THE TRIBUNAL IN T HE CASE OF INNOVITI PAYMENT SOLUTIONS (P) LTD. VS. ITO 102 TAX MANN.COM 59 (BANGALORE TRIB.), ORDER OF THE JAIPUR BENCH OF THE TRIBUNAL I N THE CASE OF RAMESHWARAM STRONG GLASS (P) LTD. VS. ITO 96 TAXMANN.COM542/JP/-TRIB. AND ACIT VS. SAFE DECORE (P) LTD. 90 TAXMANN.COM 161JP TRIB , ORDER OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. OZONELAND AGRO PVT. LTD. 53 CCH 427 MUM -TRIB , AND THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF CINESTAAN ENTERTAINMENT (P) LTD. VS. ITO 105 TAXMAN N.COM 300 DEL TRIB TO SUBSTANTIATE THE CONTENTION OF THE ASSESSEE. ON THE BASIS OF THE SUBMISSIONS AND THE CASES REFERRED ABOVE, THE LD. COUNSEL SUBMI TTED THAT SINCE THE ACTION OF THE LD. PR. CIT IS NOT IN ACCORDANCE WITH THE RA TIO LAID DOWN BY THE HON'BLE HIGH COURTS AND ORDERS OF THE TRIBUNAL DISC USSED ABOVE, THE SAME IS LIABLE TO BE SET ASIDE. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRE SENTATIVE SUPPORTING THE ORDER PASSED BY THE LD. PR. CIT SUBMITTED THAT PERU SAL OF THE COPY OF QUESTIONNAIRE DATED 03.11.2014 ISSUED BY THE AO, CO PY OF REPLY DATED 26.10.2015, COPY OF REPLY DATED 04.12.2015 COPY OF NOTE SHEETS ATTACHED WITH THE WRITTEN SUBMISSIONS REVEAL THAT THE AO HAS NOT EXAMINED THE APPLICABILITY OF SECTION 56(2) (VIIB) OF THE ACT. THE LD. DR FURT HER SUBMITTED AS PER CLAUSE (A) OF EXPLANATION 2 TO SECTION 263 OF THE ACT, THE LD. PR. CIT CAN REVISE THE ASSESSMENT ORDER, IF IN HIS OPINION THE SAME HAS BE EN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MA DE. FURTHER, THE VALUATION ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 8 REPORT WAS SUBMITTED BEFORE THE LD. PR. CIT AND FRO M THE DATE OF REPORT IT IS CLEAR THAT THE REPORT WAS CONSIDERED FOR THE FIRST TIME IN FEB. 2018. THE LD. DR FURTHER CONTENDED THAT THE LD. PR. CIT HAS RIGHT LY POINTED OUT THAT FIGURES OF WORKING CAPITAL, TERM LOAN, UNSECURED LOAN AND E QUITY CAPITAL ARE NOT AS PER THE AUDITED BALANCE SHEET FOR THE FINANCIAL YEA R 2012-13. THE LD. DR PLACING RELIANCE ON THE DECISION OF THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF AGRO PORTFOLIO (P) LTD VS. ITO [2018] 94 TAXMANN.COM 112 (DELHI-TRIB.) SUBMITTED THAT IN THE PRESENT CAS E SINCE THE FAIR MARKET VALUE OF SHARES HAS BEEN DETERMINED ON THE BASIS OF DIRECT CASH FLOW (DCF) METHOD WITHOUT VERIFYING THE CORRECTNESS OF DATA SU PPLIED BY THE ASSESSEE, THE LD. PR. CIT HAS RIGHTLY SET ASIDE THE ASSESSMENT OR DER BY EXERCISING REVISIONAL POWER U/S 263 OF THE ACT. THE LD. DR ACC ORDINGLY CONTENDED THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD . PR. CIT TO INTERFERE WITH. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PA RTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES. THE LD. PR. CIT HAS SET ASIDE THE ASSESSMENT ORDER BASICALLY ON THE GROUND THAT THE AO HAS PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE A CT, WITHOUT MAKING ANY ENQUIRY OR VERIFICATION ON THE ISSUE OF SHARE PREMI UM RECEIVED AND APPLICABILITY OF SECTION 56(2)(VIIIB) OF THE ACT. T HE CONTENTION OF THE LD. COUNSEL IS THAT SINCE THE AO HAS PASSED THE ASSESSM ENT ORDER AFTER MAKING PROPER ENQUIRY INCLUDING APPLICABILITY OF SECTION 5 6(2)(VIIIB) OF THE ACT, THE LD. PR. CIT HAS WRONGLY EXERCISED THE JURISDICTION U/S 263 OF THE ACT. AS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FILED POINT WISE REPLY TO THE NOTICE ISSUED U/S ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 9 142(1) AND 143(2) OF THE ACT, COPY OF WHICH IS AVAI LABLE AT PAGES 179 TO 182 OF THE PAPER BOOK. FURTHER, THE ASSESSEE SUBMITTED REPLY TO THE AO IN RESPONSE TO QUERIES RAISED AFTER SUBMISSION OF REPL Y TO THE NOTICES AFORESAID. THE COPY OF THE SAID REPLY IS ALSO AVAILABLE AT PAG ES 183 AND 184 OF THE PAPER BOOK. MOREOVER, THE LD. PR. CIT IN HIS ORDER HAS OB SERVED THAT THE AO HAS EXAMINED THE ASPECT OF IDENTITY, GENUINENESS AND CR EDITWORTHINESS OF THE SHARE APPLICANTS BUT HAS NOT EXAMINED THE ISSUE OF APPLICABILITY OF SECTION 56(2) (VIIB) OF THE ACT IN RESPECT OF SHARE PREMIUM RECEIVED. FROM THE OBSERVATIONS OF THE LD. PR. CIT, IT CAN BE INFERRED THAT THE AO HAS EXAMINED THE GENUINENESS OF THE TRANSACTION AND DID NOT FIND ANY INFIRMITY WITH REGARD TO THE IDENTITY AND CREDITWORTHINESS OF THE SHARE A PPLICANTS AND THE GENUINENESS OF THE TRANSACTION. UNDER THESE CIRCUMS TANCES THE LD. PR. CIT HAS WRONGLY ASSUMED THAT THE AO HAS NOT EXAMINED TH E APPLICABILITY OF SECTION 56(2)(VIIB) OF THE ACT. AS PER THE RATIO LA ID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. M/S CYBER PARK DEVELOPMENT, ITA NO 115 OF 2020 , MERE INADEQUACY OF AN ENQUIRY OR INSUFFICIENCY OF MATERIAL ON RECORD CANNOT BE A GROUND TO INVOKE POWERS UNDER SECTION 263 OF THE ACT. IN OUR CONSIDERED OPINION THIS IS NOT A CASE OF NO ENQUIRY. AS POINTED OUT BY THE LD. COUNSEL, DURING THE ASSESSMENT PROCEEDIN GS THE ASSESSEE PRODUCED THE COMPLETE DETAIL CALLED FOR BY THE AO EXCEPT THE VALUATION REPORT, WHICH WAS PRODUCED BEFORE THE LD. PR. CIT IN COMPLIANCE T O HIS DIRECTIONS GIVEN DURING THE APPELLATE PROCEEDINGS. IN OUR CONSIDERED VIEW, THE AO HAS PASSED THE ASSESSMENT ORDER AFTER EXAMINING AND VERIFYING THE DOCUMENTS AND THE DETAILS FURNISHED BY THE ASSESSEE. SO FAR AS THE AP PLICABILITY OF NEWLY INSERTED ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 10 EXPLANATION 2(A)TO SECTION 263 OF THE ACT IS CONCER NED, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF NARAYAN TATU RANE VS. ITO MUMBAI, 70 TAXMANN.COM 227 (MUMBAI-TRIB.) HAS HELD THAT THE SAID EXPLANATION D OES NOT AUTHORIZE OR GIVE UNFETTERED POWERS TO THE COMMISSI ONER TO REVISE EACH AND EVERY ORDER PASSED BY THE AO IF IN HIS OPINION SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. IN THE PRESENT CASE SINCE THE AO HAS PASSED THE ASSESSMENT ORDER A FTER DUE APPLICATION OF MIND AND AFTER ACCEPTING THE EXPLANATION GIVEN BY T HE ASSESSEE THE SAME CANNOT BE TERMED AS ERRONEOUS. THEREFORE, IN OUR CO NSIDERED VIEW THE OBSERVATION OF THE LD. PR. CIA THAT AO HAS PASSED T HE ORDER WITHOUT MAKING PROPER ENQUIRIES IS NOT FACTUALLY CORRECT, HENCE NO T SUSTAINABLE. 9. THE SECOND LIMB OF THE ARGUMENT OF THE LD. COUN SEL IS THAT THE LD. PR. CIT HAS WRONGLY REJECTED THE VALUATION OF SHARES @ RS. 33.44 AS ASKED BY THE LD. PR. CIT, DURING THE COURSE OF PROCEEDINGS U /S 263 OF THE ACT, ASSESSEE FILED VALUATION REPORT OF FAIR MARKET VALUE OF UNQU OTED EQUITY SHARES DETERMINED AS PER DCF METHOD PROVIDED UNDER SECTION 56(2)(VIIB) R/W RULE 11UA(2)(B) OF THE INCOME TAX RULES. THE CONTENTION OF THE LD. DR IS THAT THE VALUATION HAS BEEN DONE ON THE BASIS OF MATERIA L SUPPLIED BY THE ASSESSEE WITHOUT VERIFYING THE GENUINENESS OF THE DATA SUPPL IED. THE LD. COUNSEL HAS REBUTTED THE SAID CONTENTION ON THE GROUND THE FACT S AND FIGURES WERE VERIFIABLE FROM ANNEXURE (B) ATTACHED WITH REPLY DA TED 06.02.2018 SUBMITTED BEFORE THE LD. PR. CIT. AS POINTED OUT BY THE LD. C OUNSEL, THE HON'BLE MUMBAI HIGH COURT HAS HELD IN THE CASE OF VODAFONE M-PESA LIMITED VS. PR. CIT (SUPRA), DCF METHOD CANNOT BE IGNORED AT ALL AND TH E AO CANNOT CHANGE ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 11 THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE. TH E HON'BLE HIGH COURT OF DELHI IN THE CASE OF CINESTAAN ENTERTAINMENT (P) LTD. VS. ITO (SUPRA) HAS UPHELD THE FINDINGS OF THE TRIBUNAL HOLDING THAT TH E REVENUE IS UNABLE TO DEMONSTRATE THAT THE METHODOLOGY ADOPTED BY THE ASS ESSEE IS NOT CORRECT AS THE AO HAD SIMPLY REJECTED THE VALUATION OF THE ASS ESSEE ON THE GROUND THAT PERFORMANCE DID NOT MATCH PROJECTIONS AND IT HAS FA ILED TO PROVIDE FAIR VALUER OF THE SHARES. IN THE SAID CASE THE TRIBUNAL HAS D ELETED THE ADDITION HOLDING THAT UNDER SECTION 56(2)(VIIB) READ WITH RULE 11UA ASSESSEE HAS AN OPTION TO DO VALUATION OF SHARES AND DETERMINE FAIR MARKET VA LUE EITHER FOLLOWING DCF OR NET ASSET VALUE (NAV) METHOD AND THE AO HAS NO J URISDICTION TO SUBSTITUTE HIS OWN VALUE IN PLACE OF VALUE SO DETER MINED. THE JAIPUR BENCH OF THE ITAT HAS HELD IN THE CASE OF RAMESHWARAM STRONG GLASS(P) LTD. VS. ITO 96 TAXMANN.COM 542 THAT SINCE THE ASSESSEE HAS PREPARED THE VALUATION REPORT AS PER THE GUIDELINES OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA FOLLOWING DCF METHOD CONSIDERING PLANT CAPACITY, IN DUSTRY AND MARKET CONDITIONS, SANCTIONING OF LOAN BY BANK, THERE IS N O JUSTIFICATION OF REJECTING THE VALUATION REPORT. THE DELHI BENCH OF THE ITAT H AS HELD IN THE CASE OF CINESTAAN ENTERTAINMENT(P) LTD. VS. ITO 106 TAXMANN.COM 300 (DELHI-TRIB.) THAT THE ASSESSEE HAS AN OPTION TO VALUATE THE SHAR ES AND DETERMINE FAIR MARKET VALUE EITHER FOLLOWING DCF METHOD OR NAV MET HOD. SO, THE EVIDENCE ON RECORD DO NOT SUGGEST THAT THE VALUATION REPORT SUBMITTED BY THE ASSESSEE HAD BEEN PREPARED WITHOUT VERIFICATION OF THE DATA SUPPLIED BY THE ASSESSEE. HENCE, WE DO NOT FIND ANY MERIT IN THE CONTENTION O F THE LD. DR THAT THE LD. PR. CIT HAS RIGHTLY REJECTED THE VALUATION REPORT S UBMITTED BY THE ASSESSEE. ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 12 WE THEREFORE, DO NOT FIND ANY COGENT AND CONVINCING REASON FOR REJECTING THE VALUATION REPORT PREPARED AS PER THE PROVISIONS OF LAW AND THE GUIDELINES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. HENCE, IN OUR CONSIDERED VIEW LD. PR. CIT HAS WRONGLY REJECTED TH E METHOD OF VALUATION OF SHARES ADOPTED BY THE ASSESSEE FOR DETERMINING THE FAIR MARKET VALUE. 10. IN VIEW OF THE DISCUSSIONS IN THE FOREGOING PA RAS, WE HOLD THAT THE LD. PR. CIT HAS FAILED TO SHOW THE TWIN CONDITIONS FOR EXERCISING JURISDICTION U/S 263 OF THE ACT THAT THE ORDER PASSED BY THE AO IS E RRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE, THE AO HAS PASSED THE ASSESSMENT ORDER AFTER CONDUCTING PROPER VERIFICATI ON OF THE DETAILS FURNISHED AND CONSIDERING THE EXPLANATION GIVEN BY THE ASSESS EE, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE IMPUGNED ORDER PASSED BY THE LD. PR. CIT IS BEYOND THE SCOPE OF SECTION 263 OF THE ACT, THER EFORE BAD IN LAW. HENCE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ON'BLE HIGH COURTS IN THE CASES DISCUSSED ABOVE AND THE DECISIONS OF THE VARI OUS BENCHES OF THE TRIBUNAL DISCUSSED ABOVE, WE ALLOW THE APPEAL OF TH E ASSESSEE AND SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. PR. CIT. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED ON 24 TH SEPT. 2021. SD/- SD/- ( N.K. SAINI) (R.L.NEGI) / VICE PRESIDENT / JUDICIAL MEMBER DATED : 24.09. 2021 .. ITA NO. 531-CHD-201 8- M/S DAD A GANPATI GUAR PRODUCTS PVT. LTD, HISAR 13 +,-, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. . / CIT 4. . ( )/ THE CIT(A) 5. , 1 , $1 , 3 / DR, ITAT, CHANDIGARH 6. / GUARD FILE / BY ORDER, / ASSISTANT REGISTRAR