PARAKH MANAGEMENT SYSTEM PRIVATE LIMITED,AHMEDABAD V. THE ITO, WARD-3(1)(1), AHMEDABAD

ITA 1411/AHD/2025

AI Insights

The case involves Parakh Management System P.Ltd., which appealed against the order of the CIT(A) confirming an addition of Rs.66,08,000 under section 56(2)(viib) of the Income Tax Act, 1961, related to the premium on shares issued. The assessee argued that the CIT(A) passed an ex-parte order without considering their detailed submissions and documents. The Tribunal noted that the CIT(A) had proceeded ex-parte and did not address the submissions made by the assessee, leading to a violation of natural justice. The Tribunal decided to set aside the CIT(A)'s order and remand the case for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786833 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 08-07-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESHWAR P. MEENA
• Assessee Lawyers: PARIMALSINH B. PARMAR
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Corroborative evidences; Fair market value; Period of limitation; Principle of natural justice; Valuation report
• Section: 143(3); 142(1)

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘D’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.1411/Ahd/2025 Asstt.Year : 2014-15 Parakh Management System P.Ltd. 504/C, Sahjanand Shopping Centre Shahibaug Road Ahmedabad. PAN : AADCP 3748 E ITO, Ward-3(1)(1) Vejalpur Ahmedabad. (Applicant) (Responent) Assessee by : Shri Parimalsinh B. Parmar, AR Revenue by : Shri Rameshwar P. Meena, Sr.DR सुनवाई क तारीख/Date of Hearing : 17/11/2025 घोषणा क तारीख /Date of Pronouncement: 19 /11/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER: This appeal by the assessee arises out of the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, New Delhi [hereinafter referred to as “CIT(A)”] , dated 21.11.2022 for the assessment year 2014–15. The appeal is directed against the order of the learned CIT(A) passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. The assessee challenges the additions and disallowances sustained by the learned CIT(A) arising from the assessment order dated 08.11.2016 passed under section 143(3) of the Act by the Income Tax Officer, Printed from counselvise.com ITA No.1411/Ahd/2025 2 Ward 3(1)(2), Ahmedabad [hereinafter referred to as “Assessing Officer or AO”]. 2. Condonation of Delay: 2.1 The Registry noted a delay of 889 days in filing appeal before us. The appeal of the assessee is accompanied by a petition for condonation of delay supported by a duly sworn affidavit. The affidavit filed by the assessee explains the sequence of dates and circumstances that resulted in the delay. It is affirmed that there was no deliberate or intentional lapse on the part of the assessee in not presenting the appeal within the limitation prescribed by the Act. The deponent has stated that the assessee had acted diligently and had taken steps for preparation of the appeal papers well within time. However, due to administrative and procedural difficulties encountered in the process of coordinating the digital filing and ensuring the compatibility and correctness of all attachments required in the e-filing module, the uploading of the appeal was completed only on 10.03.2023. In support of the claim the learned Authorised Representative (AR) submitted that the assessee had prepared and filed the appeal in time, the statutory fee had been deposited through challan dated 01.03.2023, and the e-filing of the appeal was completed on 10.03.2023, which is evidenced by the acknowledgement bearing No. 1678444034 placed on record. The AR further pointed out that Form No. 36 along with all required enclosures were already e-filed and the delay occurred only in the process of completing the e-filing procedure i.e. filing the form physically with the office of ITAT. The learned AR further submitted that the challan clearly demonstrates that the statutory fee was paid on 01.03.2023 and, therefore, the assessee had made a bona fide Printed from counselvise.com ITA No.1411/Ahd/2025 3 attempt to file the appeal within the period of limitation. The AR emphasised that the assessee had neither gained any advantage nor sought to delay the appellate proceedings. The delay was purely technical in nature and was occasioned because the assessee was under genuine belief that the appeal is filed. 2.2 We have considered the submissions of the learned AR, the contents of the affidavit filed by the assessee, and the supporting documents placed on record. The challan dated 01.03.2023 evidences timely payment of appeal fees. The e-filing acknowledgement dated 10.03.2023 confirms that the assessee had completed the online filing of appeal shortly thereafter. The delay does not appear to be deliberate or contumacious. The reasons explained in the affidavit are reasonable, supported by contemporaneous documentation, and deserve acceptance. In our view, the assessee has satisfactorily demonstrated that the delay was caused due to bona fide and unavoidable circumstances. 2.3 In the light of the above facts and respectfully applying the principles laid down by the Hon’ble Supreme Court in matters of condonation of delay, we hold that sufficient cause has been made out. The delay in filing the appeal is accordingly condoned. The appeal is admitted for adjudication on merits. 3. Facts of the Case: 3.1 The assessee a company engaged in consultancy services and trading. For the assessment year 2014–15, it filed its return of income electronically on 21.09.2014 declaring a total income of Rs.1,47,034/- . The case was selected for scrutiny under CASS and statutory notices under sections 143(2) and 142(1) were issued. During assessment, Printed from counselvise.com ITA No.1411/Ahd/2025 4 while examining the financial statements of the assessee, the Assessing Officer noticed that the assessee had increased its Security Premium Reserve by Rs.74,34,000/- during the relevant previous year. Observing that the increase was on account of allotment of shares at a premium, the Assessing Officer required the assessee to furnish complete details of share capital and share premium transactions. The assessee was asked to file the ledger accounts and confirmations of all persons and entities to whom shares had been allotted, their names, addresses and PAN, the working of the face value and premium charged per share, justification for the premium, valuation report and supporting evidences, and reconciliation of the receipts as reflected in the profit and loss account. 3.2 In response, the assessee submitted that no new share application money had been received during the year, and that the allotment had been made out of “Application Money Pending for Allotment” received in earlier years. It was contended that the premium was computed in accordance with Rule 11U and Rule 11UA read with section 56(2)(viib) and that no fresh valuation was required as no money was received during the relevant year. 3.3 The Assessing Officer rejected this explanation, observing that although the share application money may have been received in earlier years, the transfer of Rs. 74,34,000/- to the Security Premium Reserve had taken place during the previous year relevant to the year under appeal and therefore the valuation of shares and taxability of the premium had to be examined in this year. Since the assessee did not furnish an acceptable valuation report or supporting workings, the Assessing Officer proceeded to compute the fair market value of the shares in terms of Rule 11UA(2)(a). By applying the net asset value Printed from counselvise.com ITA No.1411/Ahd/2025 5 method, the Assessing Officer determined the fair market value at Rs.20/- per share as against the issue price of Rs.100/- per share and accordingly proposed addition under section 56(2)(viib). 3.4 In reply, the assessee produced a valuation report issued by M/s Salawat & Associates, Chartered Accountants, adopting the discounted cash flow method and valuing the shares at Rs.100.69 per share based on projected financial statements. Upon examination, the Assessing Officer found the projections of turnover and profits to be unrealistic, disproportionate and inconsistent with actual performance in subsequent years. The Assessing Officer recorded that the projections indicated an abnormally steep increase in receipts vis- a-vis a relatively modest rise in expenditure, resulting in inflated profitability. It was thus held that the valuation did not present a true picture of fair market value. 3.5 The assessee, in its final reply, reiterated that the valuation report was correct and declined to furnish any further explanation. The Assessing Officer held that the assessee had failed to justify the premium charged or to rebut the findings recorded in the show-cause notice. The fair market value was finally adopted at Rs.20/- per share and the excess premium of Rs.80/- per share on 82,600 shares, aggregating to Rs.66,08,000/-, was brought to tax under section 56(2)(viib). The assessment was completed determining the total income at Rs.67,55,034/- along with consequential interest under sections 234A, 234B, 234C. 3.6 The assessee preferred an appeal before the learned CIT(A). Despite issuance of notices through the faceless mechanism, the assessee did not file any substantive submission except a formal request for adjournment. As there was no compliance to the appellate Printed from counselvise.com ITA No.1411/Ahd/2025 6 notices, the learned CIT(A) proceeded ex parte on the basis of material available on records and confirmed the addition under section 56(2)(viib) by reiterating the reasoning of the Assessing Officer and holding that the assessee had failed to furnish any material either during the assessment or appellate proceedings to substantiate its claim. 3.7 The assessee is now in further appeal before us raising following grounds of appeal: 1. The Ld. CIT(A) has erred, both in law and on facts, in passing an ex-parte order which grossly violates principles of natural justice. 2. The Ld. CIT(A) has erred, both in law and on facts, in confirming addition of Rs.66,08,000/- made under section 56(2)(viib) of the Act read with Rule 11UA(2)(a) of the Rules. 3. Both, AO & CIT(A), have erred in passing the impugned orders without properly appreciating facts of the case, submissions of the assessee and documentary evidences available on record in the correct perspective. Such an act in in gross violation of principles of natural justice and hence, the impugned order deserve to be quashed. 4. The Ld. CIT(A) has erred in law and on facts of the case in confirming levy of interest under section 234A/B/C/D of the Act. 5. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 4. During the hearing the Authorised Representative (AR) submitted that the CIT(A) passed an ex parte order without evaluating voluminous submissions and documents filed during the appellate proceedings. The AR pointed out that the assessee had repeatedly filed detailed submissions before the CIT(A), evidenced by acknowledgments placed on record. The learned Departmental Representative fairly submitted that, considering the facts and circumstances and the nature of the Printed from counselvise.com ITA No.1411/Ahd/2025 7 explanation supported by documents, he does not have any serious objection if the delay is condoned and the matter is restored to the file of the CIT(A) for adjudication afresh. 5. We have carefully considered the rival submissions, the material placed on record, and the entire sequence of events that led to the passing of the impugned ex parte order by the learned CIT(A). The primary grievance of the assessee is that the learned CIT(A), has disposed of the appeal without affording reasonable and effective opportunity of being heard, and without considering the detailed submissions and evidences stated to have been filed during the appellate proceedings. 5.1 From the records and the compilation placed before us, it is evident that the assessee had filed multiple submissions before the learned CIT(A) and had placed on record extensive factual and legal material relating to the valuation of shares, justification for premium, accounting treatment of share application funds received in earlier years, and the valuation report issued by M/s Salawat & Associates based on the discounted cash flow methodology. The acknowledgements of such submissions have been produced before us. The impugned appellate order, however, proceeds entirely on an ex parte basis, stating that no meaningful compliance was made by the assessee before the appellate authority. The order does not advert to, analyse, or even record the existence of the written submissions claimed to have been filed by the assessee. 5.2 In our considered view, an appellate order under section 250 of the Act must reflect conscious application of mind to the grounds raised, the submissions advanced, and the material produced before the appellate authority. The mandatory procedural safeguards Printed from counselvise.com ITA No.1411/Ahd/2025 8 embedded in section 250 require the first appellate authority to provide adequate opportunity to the assessee and to dispose of the appeal by a speaking and reasoned order. The Hon’ble Courts have consistently held that an ex parte order passed without considering the submissions and evidences available on record, and without dealing with the contentions raised, violates basic principles of natural justice. 5.3 We also note that during the course of hearing before us, the learned DR fairly submitted that, considering the facts and circumstances and the record demonstrating filing of written submissions, he does not object to the matter being remanded to the file of the learned CIT(A) for fresh adjudication. 5.4 Having regard to the foregoing factual matrix, and particularly keeping in view the absence of examination of the assessee’s contentions and evidences by the learned CIT(A), we are of the considered opinion that the ends of justice would be met if the impugned order is set aside and the matter is restored to the file of the learned CIT(A) for a fresh decision. 5.5 We clarify that we have not expressed any opinion on the merits of the additions made under section 56(2)(viib) of the Act or any other connected issue, as the same would require proper appreciation of facts and submissions by the first appellate authority. Accordingly, the impugned order passed by the learned CIT(A) is set aside. The matter is restored to his file with a direction to adjudicate the appeal afresh in accordance with law after granting due and adequate opportunity of being heard and after taking into consideration all submissions and evidences already filed or that may Printed from counselvise.com ITA No.1411/Ahd/2025 9 be filed during the fresh proceedings. The assessee is also directed to extend full cooperation and to ensure timely compliance in the interest of expeditious disposal. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 19th November, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 19/11/2025 Printed from counselvise.com "