AO Cannot Reject The Prescribed Method Of Valuation, ITAT Deletes Addition Under Section 50CA

BACKGROUND

• The Assessee¹ is an individual, engaged in business of trading of shares.
• The Assessee transferred 801 shares in Cash Grail (P) Ltd (‘CGPL') to Vun Internet Partners in April 2021 at a sale consideration of INR 54,960 per share determined in accordance with Net Asset Value (‘NAV') method prescribed under Rule 11UA of the Income-tax Rules, 1962 (‘the Rules').
• Thereafter, in February 2022 the Assessee sold 595 shares of CGPL at INR 7,29,938/- per share to M/s Nepean Investments Trust–II based on the valuation determined using Discounted Free Cash Flow (‘DFCF') method prescribed under Rule 11UA.
• Rejecting the Assessee's claim, Assessing Officer (‘AO') contented that:
  1. AO noted the huge gap between the value of shares deriving from two different valuation methods, rejected the valuation of shares and substituted the sale consideration on sale of 801 shares with INR 7,12,664 per shares as against INR 54,960 per share.