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Facts
The assessee company issued equity shares at a premium, receiving Rs. 1,26,40,000/-. The Assessing Officer, calculating the Fair Market Value under Rule 11UA, determined that the premium received in excess of FMV was taxable under Section 56(2)(viib) and made an addition. The CIT(A) confirmed this addition without independently examining the assessee's contentions or providing a speaking order.
Held
The ITAT found that the CIT(A)'s order was a non-speaking order, lacking independent findings and discussion of the assessee's arguments and valuation reports, violating principles of natural justice. Therefore, the ITAT set aside the CIT(A)'s order and remanded the matter back for fresh adjudication, directing the CIT(A) to provide a reasonable opportunity of hearing and pass a speaking order addressing all issues.
Key Issues
Whether the CIT(A)'s order, which lacked independent findings and failed to address the assessee's contentions regarding the addition under Section 56(2)(viib), was sustainable in law.
Sections Cited
56(2)(viib)
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Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI MAKARAND V. MAHADEOKAR
This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) [CIT(A)], dated 15.10.2024, confirming the addition of Rs. 1,26,40,000/- made under Section 56(2)(viib) of the Income Tax Act, 1961 [the Act] for the Assessment Year 2014-15.
2 Facts of the Case
The assessee had issued 5,16,000 equity shares at a premium of Rs. 24 per share and had received a total share premium of Rs. 1,26,40,000/-. The Assessing Officer (AO), while computing the Fair Market Value (FMV) under Rule 11UA of the Income Tax Rules, 1962, determined the FMV at Rs. 9.32 per share and held that the premium received in excess of FMV was taxable as income from other sources under Section 56(2)(viib).
The CIT(A), in its order dated 15.10.2024, confirmed the addition without independently examining the assessee’s contentions and merely relied on the findings of the AO.
Aggrieved by the order of CIT)A) the assessee filed the present appeal before us with following grounds of appeal-
1. That on facts, and in law, the learned NEAC has grievously erred in not providing sufficient and reasonable opportunity of hearing and in deciding the appeal by a non speaking order.
2. That on facts and in law, the learned NEAC has grievously erred in confirming the addition of Rs. 1, 26, 40,000/- made u/s 56(2) (viib) of the Act.
3. That on facts, evidence on record, and in law, the learned NEAC ought to have accepted the valuation done by appellant's C.A. and ought to have held that the provisions of section 56(2) (viib) of the Act are not applicable and the entire addition ought to have been deleted, as prayed for.
4. The appellant craves leave to add, alter, amend any ground of appeal.
During the course of hearing before is Learned Authorized Representative (AR) of the Assessee submitted that The CIT(A) has not passed a speaking order and has merely relied on the order of the AO without conducting an independent examination of the facts. The AR further submitted that the valuation report submitted by the assessee’s Chartered Accountant (CA) was disregarded without any specific reasoning and the principles of natural justice were violated, as no proper opportunity was granted, and the order lacks reasoning.
Learned Departmental Representative (DR) conceded that the order of CIT(A) does not contain independent findings and that the matter may be remanded for fresh consideration.
We have considered the submissions of both parties and perused the records. It is evident from the impugned order that CIT(A) has not applied independent reasoning and has merely affirmed the order of the AO. The order lacks discussion on the assessee’s arguments, valuation reports, and other evidences placed on record.
7.1 As per settled legal principles, an appellate authority is required to examine the merits of the case and pass a speaking order by dealing with all arguments raised by the appellant. The absence of independent findings renders the order unsustainable.
7.2 It is also settled principle of law that a non-speaking order, which fails to examine the submissions of the appellant, is liable to be set aside.
7.3 In view of the above, we find that the CIT(A) has failed to discharge its appellate duty of providing independent findings and passing a reasoned order. We, therefore, set aside the impugned order and restore the matter back to the file of CIT(A) for fresh adjudication. The CIT(A) is directed to Examine all contentions of the assessee in detail, including the valuation reports submitted and Pass a speaking order by addressing all issues raised by the appellant. The CIT(A) shall Provide a reasonable opportunity of hearing to the assessee before deciding the appeal.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the Open Court on 21st February,2025 at Ahmedabad.