ORDER

PER MANISH AGARWAL, AM :

The present appeal is filed by Revenue against the order dated 26.03.2019 by Ld. Commissioner of Income Tax (A)-3, New Delhi [“Ld. CIT(A)”] in Appeal No.3/10187/2017-18 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 18.12.2017 passed u/s 143(3) of the Act pertaining to Assessment Year 2015-16.

Brief facts of the case are that assessee has filed return of income on 26.09.2015, declaring NIL income. The case was selected for limited scrutiny for the reason large share premium receipt. Notice u/s 142(1) of the Act alongwith questionnaires were issued from time to time. The assessee has issued shares at a premium of INR 990/- per share having face value of INR 10/- per share. The assessee filed certificate from Chartered Accountant who had valued the share at INR 1007/- per share followed DCF method. The AO observed that assessee has failed to file documentary evidences in support of the basis of projected data supply to the valuer for valuation of shares and thus, invoked the provisions of section 56(2)(viib) of the Act. Thereafter, AO has treated the entire share premium as income of the assessee u/s 56(2)(viib) of the Act and made the addition thereof.

Against the said order, the assessee preferred an appeal before Ld. CIT(A) who vide order dated 26.03.2019 deleted the addition made by AO.

Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before the Tribunal by taking Grounds of appeal as per appeal Memo.

The solitary Ground of appeal of the Revenue is regarding deletion of addition of INR 4,36,59,000/- made u/s 56(2)(viib) of the Act.

Ld. Sr. DR for the Revenue vehemently supported the order of the AO and submits that assessee has failed to provide details based on which the projections were made by the valuer under DCF method for computing the value of the shares issued by the assessee. Ld. Sr. DR further submits that since the AO has doubted the methodology adopted for computing the prices of the shares as per DCF method therefore, Ld. CIT(A) is not correct in deleting the additions by holding that the AO cannot tinkered into the method adopted by the assessee. Ld. Sr. DR submits that the AO has not doubted the method whether DCF method should be applied or NAV method should be applied. Rather the AO has asked the assessee to provide the basis and details for projection of the data under DCF method therefore, she prayed for restoration of the additions made by AO.

On the other hand, Ld. AR for the assessee submits that assessee has followed DCF method for valuation of preferential shares issued during the year. It is further submitted that the assessee has issued preferential shares therefore, provision of section 56(2)(viib) of the Act are not applicable which are applicable for the issue of equity shares. Ld. AR submits that assessee has filed valuation report obtained from Chartered Accountant before the lower authorities which is available in the Paper Book. He further drew our attention to the feasibility report which is filed before the AO available at pages 52 to 326 of PB, based on which valuer has made the valuation of the shares issued by the assessee. Ld.AR submits that merely for the reason that the valuer in the Valuation Report observed that this Report is based on the information provided by the assessee, it was rejected by the AO. Ld.AR submits that it is upon the assessee to choose any of the methods provided under Rule 11UA of the Income Tax Rules, 1962 (“the Rules”) for computing the fair market value of the shares which cannot be discarded by AO. Once the assessee has exercised its option of choosing one of the method, AO cannot change such method. He, therefore, submits that Ld. CIT(A) has rightly deleted the additions made which order deserves to be uphold. He prayed accordingly.

Heard the contentions of both the parties and perused the material available on