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Facts
The assessee company sold shares for a total consideration of Rs. 16,00,00,000/-, which were purchased at a face value of Rs. 10 per share but shown as Rs. 100 for tax purposes. The Assessing Officer (AO) treated the difference as premium income under section 56(2)(viib) of the Income Tax Act, adding Rs. 14,40,00,000/- to the assessee's income.
Held
The Tribunal observed that the impugned order by the CIT(A) was passed ex-parte without providing adequate opportunity of hearing to the assessee. The CIT(A) dismissed the appeal without discussing the merits of the case. The Tribunal found the order perverse as it lacked reasons for dismissal and proper service of notices was not established.
Key Issues
Whether the CIT(A) erred in dismissing the appeal ex-parte without proper opportunity of hearing and whether the addition made by the AO on account of share premium was justified.
Sections Cited
56(2)(viib), 250, 143(2), 142(1), 14A, 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI. BR BASKARAN & SHRI. RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 10.06.2024 of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the
The facts in brief as culled out from the proceedings before the Ld. Lower Authorities are that the assessee filed the return of income on 31.10.2018 declaring total income of Rs. 1,86,56,340/-. The case was selected for scrutiny and notice u/s. 143(2) of the Act was issued on 10.08.2018 and subsequently, notices u/s. 142(1) of the Act along with questionnaire were also issued to the assessee from time to time. The assessee did not file any response before the Ld. AO and the show cause notice was issued as extracted in page no. 2 of the assessment order.
During the year under consideration, the assessee company had sold 16,00,000 shares for total consideration of Rs. 16,00,00,000/-. The same were purchased by Kamlesh Manohar Kanungo. The shares were issued more than the face value. The assessee has failed to explain on what basis the share value has fixed. The assessee in response to the show cause notice, has filed a share certificate stating that it had sold shares at face value of Rs. 100 per share. But on perusal of the certificate, it is clearly indicated that face value of share is at Rs. 10 only. It is noticed that with a view to avoid the provisions of Section 56(2)(viib) of the Act, the assessee Page | 2 Mane Finance Private Limited, Mumbai; A.Y.2017-18 company might have changed the value of shares at the time of acquisition because the premium issue came into force from A.Y. 2013-14.
It is therefore concluded by Ld. AO that with a view to avoid the tax liability on share premium, the assessee company has shown value of Rs. 100 instead of Rs. 10 as face value and remaining amount as premium amount. Hence, the remaining amount of Rs. 90 per share is treated as premium and accordingly, the fair market value is worked out by invoking the provisions of section 56(2)(viib) of the Act. The value worked out as per the above calculation and arrived at Rs. 14,40,00,000/- is added to the income of the assessee.
Aggrieved by the impugned order, the appeal was filed before the Ld. CIT(A) who by impugned order has dismissed the appeal purportedly on merit, but on perusal of the impugned order it is evident that nothing on merit has been discussed by the Ld. CIT(A).
Aggrieved by the impugned order, the assessee is in appeal before us and has raised various grounds:-
That on facts and circumstances of the case the ld. C.I.T. (Appeals), NFAC, Delhi has erred in dismissing the appeal of assessee company ex-parte without appreciating that adjournment letters giving valid reasons in response to earlier hearing notices issued during the Page | 3 Mane Finance Private Limited, Mumbai; A.Y.2017-18 subsisting period of COVID-2019 Pandemic were duly furnished and last hearing notice dated 13/05/2024 issued in the appeal was neither received in electronic mail nor same was reflecting timely on Income Tax Portal of assessee company.
2. That on facts and circumstances of the case and in law the ld. A.O. has erred in making, addition of the never received share premium u/s 56(2)(viib) at Rs.14,40,00,000/-, by adopting the face value of each share at Rs.10/- as against the actual face value of Rs.100/- per share for shares issued during the year on the basis of printing error in old invalidated share certificate inadvertently furnished on record and typo error in note no. 3(b)of balance sheet ignoring other vital documents. In view of the same addition made being wrong on facts and bad in law may be deleted.
3. That the ld. A.O. has erred in making the addition of share expenses of Rs.16,92,412/-, not incurred and not claimed during the year, on erroneous understanding of applicable provisions and procedures governing the filing and payments of fees in respect of increase and issue of share capital and in fact the said expenses were incurred in A.Y. 2018-19 and were also disallowed in the ITR filed for that assessment year. In view of the same alleged addition made being wrong on facts and bad in law may be deleted.
4. That the ld. A.O. on erroneous understanding of fact has erred in disallowing the legitimate business expense of Rs.1,50,000/- being court fee paid for filing suit in the court of law against the debtor Jasani Realty for recovery of amount financed to the said debtor in earlier year on repayment default being committed by the said party. In view of the same said expense incurred being wholly and exclusively for the business purpose of the assessee Company hence admissible deduction therefore alleged disallowance being wrong on facts and bad in law may kindly be deleted.
5. That the ld. A.O. has erred in making the disallowance u/s 14A r.w. rule 8D at Rs.13,94,877/- though agreeing that when there is no exempt income no disallowance under the said provisions can be made but falsely stating the reason that nature of rent income of Rs.91,04,400/- is not known, though he himself has assessed the said rent income as income from house property as was duly disclosed in ITR filed. In view of the same alleged disallowance made being Mane Finance Private Limited, Mumbai; A.Y.2017-18 wrong on facts and bad in law may be deleted as appellant has not earned any dividend income.
6. That the appellant craves the leave to amend, alter, substitute and or to raise new or additional grounds of appeal at the time of hearing.”
We have heard the Ld. AR on behalf of the assessee and Ld. DR on behalf of the revenue. The Ld. AR at the very outset submitted that the impugned order has been passed ex-parte without affording opportunity to the assessee. It is argued that the assessee could not file the response because of covid pandemic prevailing at that time and the notices were again issued on 03.12.2021 and 13.05.2024. It is further argued that the assessee has never received the said notices and deciding the appeal on merit is not legally sustainable and the assessee be given an opportunity by restoring the case to the file of the Ld. CIT(A).
The Ld. DR has relied upon the judgment of the Ld. CIT(A). We have carefully examined the impugned order and considered the submissions made on behalf of the parties. On perusal of the impugned order, it is noticed that nothing has been discussed and no reason has been assigned for dismissal of the appeal except observing that the assessee is not aggrieved with the impugned order and not keen on pursuing this appeal.
3.4 “Considering the above, it is clear that the Appellant is not aggrieved with the impugned order and not keen on pursuing this appeal. Hence, I compel to proceed to decide the appeal based on the records available in my office and on merit of the case. Considering the records and merits of the case I have left with no option but to dismiss this appeal.”
We have noticed that the impugned order is perverse on two accounts, (1) the opportunity of hearing as is mandated by Section 250 sub section 2(a) of the Act has not been given to the appellant. It is simply mentioned in the order that the notices of appeal were issued on 03.12.2021 (covid period) and 13.05.2024 but nothing is mentioned or no material placed on record if the said notices were served upon the appellant. (2) no reason has been assigned for dismissal of the appeal on merit.
For the above reasons, the impugned order is not legally sustainable in the eyes of law and accordingly set aside. The matter is restored to the file of the Ld. CIT(A) for deciding afresh after affording reasonable opportunity of hearing to the appellant/assessee. The assessee is directed to present his case before the Ld. CIT(A) before the Ld. CIT(A) within the 60 days of this order.
Order pronounced in the open court on 05.09.2024