Yogesh Kumar U.S. ORDER
Anil Chaturvedi, Member (A)
1. This appeal filed by the Revenue is directed against the order dated 19.09.2019 of the Commissioner of Income Tax (Appeals)-3, New Delhi relating to Assessment Year 2016-17.
2. Brief facts of the case as culled out from the material on record are as under:-
3. Assessee is a company stated to be engaged in the business of software development. Assessee electronically filed its return of income for A.Y. 2016-17 on 17.10.2016 declaring total income at Rs. 1,69,85,280/-. The case of the assessee was selected for scrutiny and, thereafter, assessment was framed u/s. 143(3) of the Act vide order dated 20.12.2018 and the total income was determined at Rs. 24,26,59,340/-.
4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 19.09.2019 in Appeal No. 3/10224/2018-19 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal before the Tribunal and has raised the following grounds:
"1. On the facts and circumstances of the case Ld. CIT(A) erred in deleting the addition of Rs. 21,57,85,188/- on account of share premium valuation.
2. On the facts and circumstances of the case Ld. CIT(A) erred in deleting the addition of Rs. 1,36,000/- being expense for valuation certification u/s. 37(1) of the Act.
3. The appellant craves leave to add, amend or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
5. Ground No. 1 is with respect to the deleting the addition of Rs. 21,57,85,188/- on account of share premium valuation.
6. During the course of assessment proceedings and on perusing the Balance Sheet, AO noticed that during the year under consideration, assessee had issued 2,01,402 shares having face value at Rs. 1/- each at a premium of Rs. 1240.29/- per share and had thus issued shares at Rs. 1241.29/- per share and the total share capital including premium collected by the assessee was Rs. 24,99,98,288/-. The assessee was asked to furnish the justification of fund received in the form of share premium. Assessee inter alia submitted that during the year under consideration, assessee has raised PE funding from M/s. Forum Synergies India Trust, a Private Equity Fund incorporated in India. Assessee also submitted the copy of the valuation report, registration certificate of the investor with SEBI, share allotment form, Private Placement Offer Letter to support its contention. The submissions of the assessee was not found acceptable to AO. AO on perusing the valuation report furnished by the assessee, noted that the Chartered Accountant (CA) has used Discounted Cash Flow Method (DCFM) to arrive at the value of each share. He noted that the assumptions taken by the CA for the purpose of valuation of shares was not based on any reliable facts and the figures taken at the time of valuation did not match with the actual figures and, that there was a huge difference between projected figures and actual figures considered for working out the value of shares. He, therefore, concluded that the assumptions taken for the purpose of valuation was not realistic and did not match with the actual financial condition of the assessee. He, thereafter, by following the method of calculation of valuation of shares as prescribed under Rule 11UA of the Income-tax Rule, 1962, worked out the fair market value of each share at Rs. 169.88/- per share and thus considered the difference of share premium Rs. 1070.41 per share (Rs. 1241.29 - Rs. 169.88) multiplied by the number of shares issued as income from other sources taxable u/s. 56(2)(viib) of the Act and thus made the addition of Rs. 21,57,85,188/-.
7. Aggrieved by the order of AO, assessee carried the matter before CIT(A). Before CIT(A), assessee inter alia co........