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TMI Blog2022 (12) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... this year and new equity shares have been issued in this year. There is constructive payment and the money is constructively received by the assessee in this year and the provisions of Sec.56(2)(viib) are very much applicable and the assessee would be obligated to justify the valuation of the shares. AR has also submitted that the right to choose a particular method of valuation has been vested with the assessee and DCF method of valuation is one of the prescribed methods. The said argument could be accepted only if the assessee discharges the onus of furnishing an acceptable valuation report. The valuation report is not mere empty formality rather the same should be based on valid assumptions and supported by empirical data which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share subscription money of Rs.70,00,000 was received in the appellant bank account during the year 2011-2 vide share subscription agreement dated 23.02.2012 and the share valuation was also fixed in the said share subscription agreement. The learned Commissioner of Income-Tax (Appeals) failed to appreciate that the conversion of Compulsorily Convertible Preference Shares (CCPS) in to equity shares during the Asst. Year 2015-16 was a mere process completed as per the agreement already entered into. The learned CIT (Appeals) has filed to appreciate the equity shares issued by virtue of conversion of CCPS into equity shares is not covered by Section 56 (2) (viib). 2. The learned Commissioner of Income-Tax (Appeals) 15 further erred in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange in political and economic climate the performance have taken a big beating and accordingly the actual. 5. The Learned CIT Appeals has erred in not appreciating that the assessing officer has no power to change the method of valuation adopted by the Appellate but at the maximum could have referred the matter to a valuation officer u/s 142A for determining the Fair Market Value of the shares. The statute having given the discretion to the assessee to adopt a particular method of valuation, the assessing officer has no power to change the method of valuation. Accordingly the Assessee has adopted DCF method of valuation while valuing the shares. The learned CIT (Appeal) has failed to appreciate that the Assessing officer has no juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share. Accordingly. Ld. AO invoked the provisions of Sec.56(2)(viib) and directed assessee to justify the valuation of shares. 4.2 The assessee submitted that the premium was fixed before-hand in investor agreement dated 23.02.2012. The assessee also filed valuation report of a Chartered Accountant valuing the shares at Rs.1540/- per share adopting Discounted Cash Flow (DCF) method. In support, the assessee filed net cash flow statement and discounted cash flow. However, the details of net cash flow and basis for arriving at the same was not available in the valuation report. Contrary to projections, the assessee suffered losses in Financial Years 2013-14 as well as in FY 2014-15 and therefore, the projection were held to be purely base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport was not reliable. Finally, the additions were confirmed as under: - 4.3.10 In view of the above remarks and the decisions relied on, I am of the considered opinion that the receipt of share premium of Rs.65,62,500/- by allotting shares with face value of Rs.100 at Rs.1,600 with the share premium of Rs.1,500 is not based on actual valuation and therefore, the genuineness of the same is suspicious. It is inferred from the projection of financials as per the valuation report submitted by the appellant and the actual financial figures declared in the income tax return enclosed as annexure to this appeal order reveals that there is substantial difference between projection and the actual which leads to the conclusion that the shares we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not justified and it did not contain empirical data which should be the basis for projected future financials. The relevant economic factors and basis for making assumptions were not discussed in the valuation report. It could thus be seen that both the authorities have questioned the valuation made by valuer. In our considered opinion, it was the onus of the assessee to justify the valuation by furnishing an acceptable valuation report which is duly corroborated by relevant material. This onus, in our opinion, has remained undischarged by the assessee. 7. The Ld. AR has submitted that the shares have been converted pursuant to investor agreement dated 23.02.2012 and at that point of time, the provisions of Sec.56(2)(viib) were not in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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