M/S NAMDEV FINVEST PVT. LTD.,JAIPUR vs. ACIT, CIRCLE-1, JAIPUR, JAIPUR

ITA 1255/JPR/2026Status: DisposedITAT Jaipur13 October 2026AY 2022-2311 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A) was not justified in upholding the AO's order. The Tribunal found merit in the assessee's contention that the valuation report of the merchant banker based on the DCF method was wrongly rejected by the AO, who then adopted the NAV method. The Tribunal reiterated that as per Rule 11UA of the Income Tax Rules, 1962, the option to choose between the DCF or NAV method rests with the assessee. It is judicially settled that the AO cannot reject the assessee's chosen method unless grave errors are pointed out. The Tribunal noted that the AO's basis for rejecting the DCF valuation was that the assessee showed unreasonable future projections while incurring losses. However, the Tribunal found that the AO's conclusion was merely a passing remark based on figures in the report, without any inquiry or investigation into the justification for the projections provided by the merchant valuer. This was deemed insufficient to reject the expert valuation. Therefore, the addition of Rs. 18,57,73,482/- made under Section 56(2)(viib) was directed to be deleted.

What were the facts?

The assessee, M/s Namdev Finvest Pvt. Ltd., filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 05.03.2026, which confirmed an addition of Rs. 18,57,73,482/- under Section 56(2)(viib) of the Income Tax Act, 1961. The addition pertained to the issuance of equity shares and Compulsorily Convertible Preference Shares (CCPS) at a premium. The assessee had issued 3,60,000 equity shares at Rs. 50/- per share and 71,42,852 CCPS at Rs. 70/- per share. The assessee obtained valuation reports from a merchant banker using both the Discounted Cash Flow (DCF) method, which valued shares at Rs. 70/-, and the Net Asset Value (NAV) method, which valued shares at Rs. 44.28/-. The Assessing Officer (AO) adopted the NAV value of Rs. 44.28/- and made the addition.

What were the issues?

1. Whether the Ld. CIT(A) erred in law and on facts by confirming the addition of Rs. 18,57,73,482/- under Section 56(2)(viib) of the Income Tax Act, 1961, by adopting the Net Asset Value (NAV) method for determining the fair market value (FMV) of shares, when the assessee had provided a valuation report based on the Discounted Cash Flow (DCF) method showing a higher FMV of Rs. 70/- per share. Assessee's contentions: The assessee argued that Rule 11UA of the Income Tax Rules, 1962, gives the assessee the option to choose between the DCF method or the NAV method for valuation. Since the assessee opted for the DCF method and obtained a report from a SEBI-registered merchant banker, the AO was not justified in discarding this valuation and adopting the NAV method. The assessee relied on judicial pronouncements holding that the AO cannot discard the DCF method without sound reasoning and rational basis, and that the option lies with the assessee. The assessee cited ITAT Jaipur Benches in ITO Vs. M/s Universal Polysack (India) Pvt. Ltd. Revenue's contentions: The Revenue, through the Ld. DR, relied on the orders of the authorities below, contending that the AO rightly rejected the DCF value due to unreasonable assumptions made by the assessee.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, “B” BENCH, JAIPUR

Hearing: 07.10.2026Pronounced: 13.10.2026

Per Annapurna Gupta, AM:- The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi(hereinafter referred to as “Ld. CIT(A)”), dated 05.03.2026 under P a g e | 2 M/s Namdev Finvest Pvt. Ltd. Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2.

The grounds raised by the assessee read as under:-

1.

The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs. 18,57,73,482/- u/s 56(2)(viib) of IT Act, 1961 by considering the fair market value of shares issued by the assessee at Rs.44.28 per share adopting Net Asset Value method

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 56(2)(viib)

All 746 judgments and leading authorities on Section 56(2)(viib) →

Recent GST High Court judgments

Search GST case law →