PAYSWIFF TECHNOLOGIES PRIVATE LIMITED,HYDERABAD vs. DCIT, CIRCLE-5(1), HYDERABAD

ITA 131/HYD/2026Status: DisposedITAT Hyderabad30 September 2026AY 2021-2218 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal admitted additional evidence in the form of two valuation reports from an independent valuer submitted by the assessee. It held that while the DCF method is permissible and the choice of method lies with the assessee, the method must be justified with relevant details, including supporting evidence for future cash flows and an independent valuation report. The Tribunal noted that the assessee had not filed any valuation report before the AO and the CIT(A) had not considered the report submitted to them. Since the additional evidence (valuation reports) was crucial for determining the FMV, the Tribunal admitted it and remanded the issue back to the AO. The AO was directed to reconsider the addition under Section 56(2)(viib) in light of the admitted valuation reports and to examine supporting details for operational cash flow/income for subsequent years. The Tribunal set aside the CIT(A)'s order.

What were the facts?

The assessee, Payswiff Technologies Private Limited, engaged in software services, filed its return for AY 2021-22 showing a loss. The Assessing Officer (AO) noted the issuance of equity shares at a premium. The assessee provided details of share issuance and stated that the fair market value (FMV) was determined using the Discounted Cash Flow (DCF) method as per Rule 11UA(2) of the Income-tax Rules. The AO rejected the DCF valuation due to low operational cash flows and revenue, opting for the Net Asset Value (NAV) method. This resulted in an addition of INR 15,69,22,893/- under Section 56(2)(viib). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's addition, finding the DCF projections unsubstantiated and the subsequent operational performance negative.

What were the issues?

1. Whether the CIT(A) erred in upholding the addition made by the AO on account of the difference in the determination of the Fair Market Value (FMV) of shares, by not appropriately applying Section 56(2)(viib) read with Rule 11UA? Assessee's Contentions: - The AO and CIT(A) erred in not appropriately applying Section 56(2)(viib) read with Rule 11UA. - The CIT(A) misread the AO's order and failed to pass a speaking order. - The AO/CIT(A) failed to appreciate the appellant's background and industry, and the basis of the DCF method, rejecting it solely due to low operational cash flows/revenues. - The AO/CIT(A) erred in not applying the principle that the choice of valuation method lies with the assessee, and the AO cannot impose his own choice. - The DCF method cannot be rejected solely because actual performance does not match projections. Revenue's Contentions: - The revenue did not explicitly record arguments in the provided text, but their position was upheld by the AO and CIT(A) in rejecting the assessee's valuation and making the addition.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib),Section 115JB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “A” Bench, Hyderabad

For Respondent: DR Seema Meena

PER MANJUNATHA G., A.M :

This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 28.11.2025, pertaining to the assessment year 2021-22. 2. The grounds raised by the

The order continues below.

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