AO CANNOT CHANGE SHARE VALUATION METHOD OPTED BY ASSESSEE IN RETURN
IBS Fintech India Pvt. Ltd Vs ITO (ITAT Bangalore)
The issue under consideration is whether AO in invoking section 56(2)(viib) of the Act and taxing the share premium under the said provisions?
ITAT states that As per the judgment of Hon’ble Bombay High Court the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a final determination from an independent valuer to confront the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. Respectfully following this judgment of Hon’ble Bombay High Court,ITAT set aside the order of CIT (A) and restore the matter to AO for a fresh decision in the light of this judgment of Hon’ble Bombay High Court. The AO should scrutinize the valuation report and he should determine a fresh valuation either by himself or by calling a final determination from an independent valuer and confront the same to the assessee. Further as per report of research committee of (ICAI) as reproduced above, most critical input of DCF model is the Cash Flow Projections. Hence, the assessee should be asked to establish that such projections by the assessee based on which, the valuation report is prepared by the Chartered accountant is estimated with reasonable certainty by showing that this is a reliable estimate achievable with reasonable certainty on the basis of facts available on the date of valuation and actual result of future cannot be a basis of saying that the estimates of the management are not reasonable and reliable.”
Hence, ITAT set aside the order of CIT(A) on this issue and restore the matter back to the file of AO for a fresh decision.
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