TRIVENI KNITS PRIVATE LIMITED,LUDHIANA V. ITO WARD 1 (3), LUDHIANA

MA 114/CHANDI/2025

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Triveni Knits Private Limited filed a Miscellaneous Application seeking rectification of an earlier Tribunal order that dismissed their appeal against the addition of Rs. 77,25,000 as share premium under Section 56(2)(viib) of the Income Tax Act, 1961. The Tribunal had previously accepted the Assessing Officer's substitution of the Discounted Cash Flow (DCF) method with the Net Asset Value (NAV) method for valuation. The assessee argued that the Tribunal ignored precedents and statutory rights under Rule 11UA to choose the DCF method. However, the Tribunal, referencing the Supreme Court's decision in Reliance Telecom Ltd, emphasized that its powers under Section 254(2) are limited to rectifying mistakes apparent from the record and do not extend to re-evaluating the merits of the case.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 829742 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-01-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Chandigarh
• Assessment Year: misc
• Appeal Filed On: 01-07-2025
• Other Referred Cases: Dada Ganpati Gaur Products Pvt. Ltd. vs. PCIT, Apna Punjab Resorts Ltd. vs. PCIT, Cinestaan Entertainment Pvt. Ltd. v. ITO, Vodafone M-Pesa Ltd. v. DCIT, CIT v. Vatika Township, Reliance Telecom Ltd v. ITAT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: RAJESH MEHRU; C.A
• Keywords: Set aside; Principle of natural justice; Valuation report

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी मनोज क ुमारअŤवाल, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM &SHRI. MANOJ KUMAR AGGARWAL, AM Misc. Application No. 114/Chd/2025 In (आयकर अपील सं./ ITA No.246 /Chd/2024 ) िनधाŊरण वषŊ / Assessment Year : 2013-14 Triveni Knits Private Limited D-264, Phase-VIII, Focal Point Ludhiana, Punjab -141010 बनाम The ITO Ward 1(3) Ludhiana ˕ायी लेखा सं./PAN NO: AAECT5125C अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Rajesh Mehru, C.A राजˢकी ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 12/01/2026 उदघोषणा की तारीख/Date of Pronouncement : 14/01/2026 आदेश/Order PER LALIET KUMAR, J.M: This Miscellaneous Application has been filed by the Assessee under section 254(2) of the Income-tax Act, 1961 seeking rectification/recall of the order passed by this Tribunal in ITA No. 246/Chd/2024 dated 09/06/2025. 2. In the Misc. Application the Ld. AR has mentioned as under: 1. The appellant had filed an appeal bearing ITA No. 246/Chd/2024 for AY 2013- 14 challenging the addition of Rs. 77,25,000/- made under Section 56(2)(viib) of the Income Tax Act, 1961, in respect of share premium received from promoters upon conversion of a partnership firm into a private limited company. 2. The Hon'ble Tribunal, through its order dated 09.06.2025, dismissed the appeal by accepting the Assessing Officer's decision to replace the Discounted Cash Flow (DCF) method chosen by the assessee with the Net Asset Value (NAV) method. 3. The appellant now seeks rectification under Section 254(2) of the Act on the following grounds, highlighting errors apparent from the record The main legal question involved is whether the valuation method once lawfully opted by the Printed from counselvise.com 2 assessee under Rule 11UA-can be disregarded or substituted by the Assessing Officer without establishing that the method or the report is flawed or contrary to the law. 4. It is further submitted that during the course of appellate proceedings, the learned counsel for the assessee had specifically cited, discussed, and narrated the decisions of this very Hon'ble Tribunal in the cases of Dada Ganpati Gaur Products Pvt. Ltd. and Apna Punjab Resorts Ltd, where the facts were strikingly similar to the present case and the Tribunal had ruled in favour of the assessee Despite this, the impugned order neither referred to nor distinguished these binding precedents, and passed an adverse ruling, thereby causing serious prejudice and giving rise to a glaring error apparent from the record A. Ignorance of Statutory Right to Choose Valuation Method (Rule 11UA(2)) 1 Rule 11UA(2) provides a clear statutory option to the assessee to adopt either the Discounted Cash Flow (DCF) method or the Net Asset Value (NAV) method for valuation of unquoted equity shares. The use of the phrase \"at the option of the assessee\" unambiguously confers this legal right. 2. However, the order under challenge completely disregards this legal mandate, by upholding the action of the Assessing Officer in substituting the assessee's chosen DCF method with the NAV method without demonstrating that the DCF report was perverse, arbitrary, or in violation of Rule 11UA 3 Significantly, this very Tribunal (Chandigarh Bench) has, in its own earlier judgments, upheld this legal right in factually identical circumstances, namely:  Dada Ganpati Gaur Products Pvt. Ltd. vs. PCIT [(2021) 214 TTJ (Chd) 908], and  Apna Punjab Resorts Ltd. vs. PCIT [(2023) 225 TTJ (Chd) 957] 4. In both these cases, the Tribunal ruled that once the assessee has exercised its statutory right to adopt the DCF method-backed by a Chartered Accountant's report the Assessing Officer cannot disregard the same merely because a different valuation result arises under the NAV method, or because projections do not materialise perfectly. 5. Inexplicably, the impugned order makes no reference whatsoever to these binding and relevant decisions of the same coordinate bench, despite the assessee having filed and referred to these precedents during the course of proceedings. This inconsistency results in unequal treatment of similarly placed assessees and undermines the principle of judicial consistency and parity. B. Retrospective Disqualification of Valuer is Invalid 1. The Tribunal rejected the valuation report on the ground that the Chartered Accountant who issued it was also the statutory auditor, thereby violating the independence criteria under Rule 11U and Section 288(2). 2. However, the disqualification provision relied upon came into force only from 01.04.2018 and cannot be applied retrospectively to AY 2013-14. Applying it retrospectively is contrary to the ruling of the Hon'ble Supreme Court in CIT v. Vatika Township (2014) 367 ITR 466 (SC). Printed from counselvise.com 3 C. Non-Consideration of Rebuttal to Remand Report 1. The Tribunal held that no rejoinder or counter-submission was filed against the AO's remand report. This is factually incorrect. The assessee had filed detailed rebuttals and clarifications during the appellate proceedings, including justifications for growth assumptions and valuation metrics used in the DCF model. 2. This omission led to a misrepresentation of facts on record, amounting to an error apparent and violative of the principle of natural justice. D. Non-Consideration of Applicable Judicial Precedents. 1. The assessee cited and filed judgments directly supporting the validity of the DCF method under Rule 11UA, including:  Dada Ganpati Gaur Products Pvt. Ltd. vs. PCIT, ITAT Chandigarh [(2021)214 TTJ 908]  Apna Punjab Resorts Ltd. vs. PCIT, ITAT Chandigarh [(2023) 225 TTJ 957]  Cinestaan Entertainment Pvt. Ltd. v. ITO (Delhi ITAT)  Vodafone M-Pesa Ltd. v. DCIT (Mumbai ITAT) 2. Despite these authorities being discussed during oral hearings and filed in the Paper Book, the impugned order does not deal with them at all. Such non- consideration of binding judicial precedents renders the order per incuriam and liable for rectification. E. Inconsistency with Coordinate Bench Rulings of Same Tribunal 1. The Chandigarh ITAT itself has, in Dada Ganpati Gaur Products Pvt. Ltd. and Apna Punjab Resorts Ltd., upheld the DCF method where share premium was questioned under Section 56(2)(viib), in circumstances identical to the appellant's case:  Newly incorporated company/conversion from firm  Shares issued to promoters  DCF method adopted by CA  Revenue substituted NAV without alleging perversity 2. Despite such factual parity, the Tribunal has taken a contrary view in the present case without distinguishing the prior judgments, or referring the matter to a larger bench. This violates the principle of judicial discipline and consistency laid down by the Hon'ble Supreme Court in Union of India v. Paras Laminates Pvt. Ltd. (1990) 186 ITR 722 (SC). PRAYER In view of the above facts and legal submissions, it is respectfully prayed that this Hon'ble Tribunal: 1. Be pleased to recall and rectify the order dated 09.06.2025 passed in ITA No. 246/Chd/2024 in view of the above-stated mistakes apparent from the record; Printed from counselvise.com 4 2. Be pleased to delete the addition of Rs. 77,25,000/- made under Section 56(2)(viib) by upholding the DCF valuation method validly adopted by the assessee; 3. Or alternatively, remand the matter back to the AO for fresh consideration of the DCF valuation in light of applicable legal principles and judicial precedents; 4. Grant such other relief as may be deemed just and fit in the interest of justice. 3. The Ld. AR had submitted that at the time of hearing the then AR was failed to point out the vital issues to the notice of the Bench and therefore the order is required to be recalled. 4. Per contra, the ld. DR relied upon the decision of the Tribunal and submitted that there was no error which call for rectification by the Bench. Further it was submitted that the contour of powers under section 254 have been explained by the Hon'ble Supreme Court in the case of Reliance Telecommunication and therefore the present application is required to be dismissed. 5. We have heard the rival contention of the parties and perused the material available on the record. We find that the decision of the Hon'ble Supreme Court in the case of Reliance Telecom Ltd reported in 133 taxmann.com 41 on 3rd December 2021 are applicable and we do not find any reason to interfere in the order passed by the Tribunal as there is no apparent error which requires for modification of the order passed by the Tribunal. For ready reference, the findings of the Hon'ble Supreme Court in the case of Reliance Telecom Ltd reads as under: “3.1 We have considered the order dated 18.11.2016 passed by the ITAT allowing the miscellaneous application in exercise of powers under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013 as well as the original order passed by the ITAT dated 06.09.2013. 3.2 Having gone through both the orders passed by the ITAT, we are of the opinion that the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is beyond the scope and ambit of the powers under Section 254(2) of the Act. While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may Printed from counselvise.com 5 amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. 4. In the present case, a detailed order was passed by the ITAT when it passed an order on 06.09.2013, by which the ITAT held in favour of the Revenue. Therefore, the said order could not have been recalled by the Appellate Tribunal in exercise of powers under Section 254(2) of the Act. If the Assessee was of the opinion that the order passed by the ITAT was erroneous, either on facts or in law, in that case, the only remedy available to the Assessee was to prefer the appeal before the High Court, which as such was already filed by the Assessee before the High Court, which the Assessee withdrew after the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013. Therefore, as such, the order passed by the ITAT recalling its earlier order dated 06.09.2013 which has been passed in exercise of powers under Section 254(2) of the Act is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under Section 254 (2) of the Act. Therefore, the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is unsustainable, which ought to have been set aside by the High Court. 5. From the impugned judgment and order passed by the High Court, it appears that the High Court has dismissed the writ petitions by observing that (i) the Revenue itself had in detail gone into merits of the case before the ITAT and the parties filed detailed submissions based on which the ITAT passed its order recalling its earlier order; (ii) the Revenue had not contended that the ITAT had become functus officio after delivering its original order and that if it had to relook/revisit the order, it must be for limited purpose as permitted by Section 254(2) of the Act; and (iii) that the merits might have been decided erroneously but ITAT had the jurisdiction and within its powers it may pass an erroneous order and that such objections had not been raised before ITAT.6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case. 7. In view of the above and for the reasons stated above, the impugned common judgment and order passed by the High Court as well as the common order passed by the ITAT dated 18.11.2016 recalling its earlier order dated Printed from counselvise.com 6 06.09.2013 deserve to be quashed and set aside and are accordingly quashed and set aside. The original orders passed by the ITAT dated 06.09.2013 passed in the respective appeals preferred by the Revenue are hereby restored.” 6. In view of the above, the M.A is devoid of any merit and accordingly we dismiss the M.A filed by the assessee. 7. In the result, M.A filed by the assessee is dismissed. Order pronounced in the open Court on 14/01/2026 Sd/- Sd/- मनोज क ुमारअŤवाल लिलत क ुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟/JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "