CITILAND COMMERCIAL CREDITS LTD.,NEW DELHI V. DCIT CIRCLE-4(2), NEW DELHI

CO 94/DEL/2023

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle-4(2), New Delhi as the appellant and M/s. Citiland Commercial Credits Ltd. as the respondent. The dispute arose from an assessment order dated 05.03.2016 by the Assistant Commissioner of Income Tax, Circle-6(1), New Delhi, which added Rs.6,29,86,012 to the assessee's income for the assessment year 2013-14. This addition was contested and initially overturned by the CIT(A) in 2020, leading to the Revenue's appeal to the ITAT. The primary legal issues revolved around the validity of the notices issued under sections 143(2) and 143(3) of the Income Tax Act, 1961, and the substantive issue of whether the assessee had indeed earned additional, undisclosed income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708338 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-07-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2013-2014
• Other Referred Cases: DCIT VS Mastech Technologies P Ltd, Abhishek Jain Vs ITO, SA Developers Pvt. Ltd. - Appeal No. 75/2015-16-AY2013-14
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: S ARUN KISHORE; SURAJ SUMAN
• Keywords: Additional evidence; Search and seizure
• Section: 143(3); 142(1); 132

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 346/DEL/2021 Assessment Year: 2013-14 Deputy Commissioner of Income Tax, Circle- 4(2), New Delhi Vs. M/s. Citiland Commercial Credits Ltd., 38 DDA Commercial Complex, Kailash Colony Extension, Zamrudpur, New Delhi PIN: 1100 48 PAN No. AAACC0251A (Appellant) (Respondent) C. O. No. 94/DEL/2023 ( In ITA No. 346/DEL/2021) Assessment Year: 2013-14 M/s. Citiland Commercial Credits Ltd., 38 DDA Commercial Complex, Kailash Colony Extension, Zamrudpur, New Delhi PIN: 1100 48 PAN No. AAACC0251A Vs. Deputy Commissioner of Income Tax, Circle- 4(2), New Delhi (Appellant) (Respondent) Department by: Shri Om Prakash, Sr. DR Assessee by: S/Shri Arun Kishore & Suraj Suman, CAs Date of Hearing: 03.06.2025 Date of pronouncement: 16.07.2025 ITA No.346/Del/2021 & CO No. 94/Del/2023 2 O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal filed by Revenue and Cross Objection by assessee are against order dated 24.07.2020 of Learned Commissioner of Income-Tax (Appeals)-2, New Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of order dated 05.03.2016 of the Assistant Commissioner of Income Tax, Circle-6(1), New Delhi (hereinafter referred as “Ld. AO\") under Section 143(3) of the Act for assessment year 2013-14. 2. Brief facts of case are that assessee company filed its return on 30.09.2013 declaring an income of Rs.5,11,66,664/-. Notice under Section 143(2) of the Act dated 02.09.2014 was served on assessee company selecting the case for scrutiny. Notices under Section 142(1) of the Act along with questionnaire dated 17.08.2015 and 30.11.2015 were served upon assessee. Shri Rakesh Seth, General Manager (Taxation) AR appeared and filed necessary details and documents. Assessee, a non-banking finance company declared “Revenue from Operations” of Rs.7,37,62,179/- consisting of dividend income of Rs.2,19,21,134/- and interest income of Rs.5,18,41,046/- and profit before tax of Rs.7,28,37,799/- in the profit and loss account. The information was received from ACIT, Central Circle-8, New Delhi vide letters dated 27.02.2015 regarding fact of seizure of three agreements to Sell from J-10/5, M.G. Road, ITA No.346/Del/2021 & CO No. 94/Del/2023 3 Gurgaon during the course of search and seizure operations under Section 132 of the Act in the case of group consisting of Vatika Limited, Shahi Exports, Span India, Dhingra Group, Harman Singh Dhingra, Orrisa Group and S.A.S. Group on 16.01.2023. In all the ‘Agreement to Sell’ the buyer was the assessee company. On completion of proceedings, Ld. AO vide order dated 05.03.2016, made addition of Rs.6,29,86,012/-. 3. Against order dated 05.03.2016 of the Ld. AO, appellant/assessee preferred appeal before Ld. CIT(A) which was allowed, vide order dated 24.07.2020. 4. Being aggrieved, appellant/revenue preferred present appeal and assessee filed cross-objection. The grounds raised by the Department of Revenue are as under: “1. In view of the facts and circumstances of the case, whether the Ld. CIT(A) erred in facts and in law in allowing the appeal of the assessee ignoring the fact that the assessee had concealed its income by separating loan agreement from ‘Agreement to Sell’ and earned additional interest described as “loss of profit/cost” in the ‘Agreement to Sell’. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.” 5. The grounds raised by the Assessee in CO No.94/Del/2023 are as under: “1. That on the facts of the case and in law, the appeal filed by DCIT Circle 4 (2) on 30.03.2021 against the CIT (A) order dated ITA No.346/Del/2021 & CO No. 94/Del/2023 4 22.10.2020 is a time barred appeal which is to be dismissed since not filed within stipulated period of 60 days from the date of receipt of the Appellate order. 2. That on the facts of the case and in law CIT (A) - 2 order as well as the order of ACIT Circle-6(1) u/s 143 (3) are both illegal, since based on erroneous foundation. No valid notice u/s 143 (2) was issued by the Jurisdictional AO. Notice u/s 143 (2) issued by a Non-Jurisdictional ITO Ward 3 (3), makes the assessment invalid and all consequent orders including order of CIT (A) -2 is also an illegal order. 3. i. That as per the CBDT directions in respect of jurisdiction for assessment of incomes in Delhi Ward ITO can make an assessment of incomes up to Rs. 30 Lacs and beyond Rs. 30 Lacs, it is to be assessed by the Circle Assistant Commissioner of Income Tax. ii. That the illegal assessment made without valid jurisdiction and confirmed by CIT (A)-2 be annulled. 4. The appellant craves leave for reserving the right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.” 6. Learned Authorized Representative for the Revenue submitted that Ld. CIT(A) erred in ignoring the fact that assessee had concealed the income and from Agreement to sell and earned additional interest described as loss of profit/cost in agreement to sell. Whenever there are two segments of the proceedings one is the initiation of proceedings by one AO/ territorial jurisdictional Assessing Office as per the prima-facie at that point of time, following the due process of law. And the second is the completion of the assessment by the other AO, ward/circle in continuation of the said proceedings. The actions of both the AOs are very much within the meaning of section 129 ITA No.346/Del/2021 & CO No. 94/Del/2023 5 of the IT Act which says that \"Whenever in respect of any proceedings under this Act an income Tax authority ceases to exercise jurisdiction and is succeeded by any another who has and exercises jurisdiction, the income tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor”. 6.1. The above argument is supported by Hon'ble SC in the case of DCIT VS Mastech Technologies P Ltd dated. 3.11.2022 in Civil Appeal No.8077 of 2022. The intention of the assessee may be apparently mala fide in not responding to the statutory notices within time with an intent to avoid the timely transfer of the case to his jurisdictional AO and in not raising any objection to the jurisdiction of the AO who had initiated the proceedings. Provision of Sub Section [3][b] of Section 124 of the Income Tax Act, 1961 clearly says that \"No person shall be entitled to call in question the jurisdiction of an Assessing Officer- after the expiry of a specified time period.” 6.2 Section 292BB is also supporting our view where the assessee did appear in the proceedings but did not raise any such objection before the completion of the assessment. 6.3 Further, reliance is taken on the decision of the Hon'ble Delhi High Court in the case of Abhishek Jain Vs ITO dated 1.6.2018. 7. The Learned Authorised Representative for the respondent/assessee submitted that; ITA No.346/Del/2021 & CO No. 94/Del/2023 6 1. There is no error in the order of the Ld. CIT(A) in deleting the addition of Rs. 6,29,86,012/- towards alleged earning of additional interest in terms of Agreement to Sell: 1.1 Same issue has been favorably decided in the appellant own case for AY 2014-15 by CIT(A) 31 in appeal no. 246/18-19/10639/16-17 vide order dated 26.07.2019 and addition of Rs. 1,29,77,950/- is deleted. The issue is discussed under para 4.1 on internal Pg. No. 31&32 of appeal order (Pg. 38&39 of PB-II). Please refer Pg. No. 8 to 41, PB-II for CIT Order. The said deletion of similar additional interest of Rs. 1,29,77,950/- has been accepted by the IT department. There is no appeal against the order of CIT(A) for AY 2014-15. 1.2 CIT(A)-31 in the order for AY 2014-15 in the appellant's own case under para 4.1 at internal Pg. 32 has also relied upon the decision of CIT(A)-24 in order dated 20.11.2016 in the case of SA Developers Pvt. Ltd. - Appeal No. 75/2015-16-AY2013-14 wherein similar addition on account of additional interest on loans granted to same borrower M/s Oris Infrastructure Pvt. Ltd. was deleted. The above decision is also accepted by the IT department. No appeal is filed against the said order of CIT(A). 1.3 Ld. CIT (A) -2 while dealing with the instant case has discussed the issue under para 5&6 of the appellate order on page 6 to 8 and has accepted the contentions of the appellant that: a) No additional interest was received or accrued to the appellant. b) No corroborative evidence of having earned / received additional interest is brought on record by the AO. c) Affidavit furnished by the borrower Oris Infrastructure Pvt. Ltd. is also categorical in the rate of interest paid. The affidavit was accepted after a remand report from Ld. AO seeking dismissal of additional evidence. d) CIT(A) has also relied upon the decision of coordinate office of CIT(A)-31 in the case of the appellant for AY 2014-15 in appeal no. 246/18-19/10639/2016-17 dated 26.07.2019 ITA No.346/Del/2021 & CO No. 94/Del/2023 7 8. Learned Authorised Representative for the respondent/assessee submitted that cross-objection no.1 is not pressed and ground nos. 2 & 3 raise legal issues namely: 1. Assessment made u/s 143(3) by ACIT Circle - 6(1) on the basis of notice issued by a non-jurisdictional AO Ward - 3(3); 1.1 ITR declaring an income of Rs. 5,11,66,664/- filed on 30.09.2013- (page 29-31, PB-I); Notice u/s 143(2) dated 02.09.2014 is issued by ITO Company Ward- 3(3), who had no jurisdiction to assess an income of Rs. 5,11,66,664/-, since as per the jurisdiction fixed by CBDT, Ward ITO could assess income up to Rs. 30 Lakhs only (PB-1, Pg. No. 227 to 234 of PB-I). 1.2 The assessment made u/s 143(3) vide order dated 08.03.2016 by ACIT Circle - 6(1) is an illegal order since based on notice u/s 143(2) issued by a non-jurisdictional AO. The jurisdictional AO Circle - 6(1) did not issue any notice u/s 143(2) before making assessment on 08.03.2016. 1.3 In support of our submissions, we rely upon copies of case laws attached at Pg. No. 42 to 87 of Case Law Paper Book and Case Laws referred under Sr. No. (i) to (vi) at Sr. No. B(6) of Case Law Paper Book. 9. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. AO in order dated 05.03.2016 in para 3.15 has stated as under: “3.15 Therefore, an amount of Rs. 5,48,79,565/- is hereby added to the income of the assessee for additional interest earned by it on secured loans given as computed above. In the details given by the assessee vide its letter dated 8.10.2015, from which the above additions for income on account of additional interest has been computed, shows income from interest of Rs. 4,22,78,929/-. The assessee has also furnished details of interest earned on unsecured loans which provides detail of interest ITA No.346/Del/2021 & CO No. 94/Del/2023 8 income to the tune of Rs. 30,76,958/-. The total of these two sums comes to Rs. 4,53,55,887/-. However, the amount of interest declared in the profit and loss account is Rs. 5,18,41,045/-. Thus, the assessee has under- reported its interest income in the details filed during scrutiny proceedings by Rs. 64,85,158/- (Rs. 5,18,41,045 Rs. 4,53,55,887). As the assessee has failed to provide the relevant information and discharge its onus, it is presumed that the assessee also earned additional interest on the loans relating to this interest income also which is estimated to be Rs. 81,06,447/- (64,85,158/ 16 X 20), assuming the rate of interest to be 16% p.a. and the rate of additional interest to be 20% р.а., and ordered to be added to the income of the assessee. Thus, a total amount of Rs. 6,29,86,012/- is hereby added to the income of the assessee for undisclosed interest income, including the amount of Rs. 5,48,79,565/- on secured loans whose details were furnished by the assessee and Rs. 81,06,447/- for loans whose details were not furnished.” 11. Ld. CIT(A) in order dated 24.07.2020 in paras no.6.1 to 6.3 has observed as under: “6.1 The issue is whether the appellant was in receipt of any additional interest, which has been termed as loss of profit or cost. Moreover, any such receipt is also contingent on the happening of another event i.e. rescinding of the contract. Admittedly, the AO has not brought on record any evidence which will go on to prove either of the two events. No evidence or documents have been brought on record by the AO to buttress his presumptions in this respect. It is an admitted fact that such a practice is followed by entities engaged in this line of business. This provides them with security with respect to amount advanced. It is generally in the nature of a collateral. 6.2 The affidavit furnished by the M/s Orris Infrastructure Pvt. Ltd. which was forwarded to the AO, is also categorical in the rate of interest paid. The AO at the stage of remand proceedings could have also undertaken necessary exercise to collect evidence in support of facts brought out during the course of assessment proceedings. No such exercise was carried out. Only the legality of its admittance is the subject matter of AO's report. Dismissal of the contentions raised by AO at the appellate stage in a cryptic manner, does not aid the addition made by the AO. In the absence of the same, the affidavit of the party has to be treated as a confirmation and non-rebuttal by the AO, makes its acceptance, a legal requirement. ITA No.346/Del/2021 & CO No. 94/Del/2023 9 6.3 The Ld. CIT(A) in the case of the appellant (for the AY 2014-15) vide Appeal No. 246/18-19/10639/16-17 dated 26.07.2019, has held that no addition can be made on notional income, without having been received or accrued. The decision was rendered on identical facts. There is no reason to differ from the said findings. 11. From perusal of above findings of Ld. AO and Ld. CIT(A), it is evident that assessee was in receipt of additional interest which has been termed as loss of profit or cost. The affidavit of M/s. Oris Infrastructure Pvt. Ltd. (Oris) is categorical regarding payment of interest. In case of assessee for assessment year 2014-15, it was held in order dated 26.07.2019 that no addition can be made on notional income without having been received or accrued. Therefore, findings of Ld. CIT(A) are just fair, reasonable and legal. The ground of appeal no.1 being de void of merit is dismissed. 12. In view of findings on ground of appeal no.1 of Revenue, grounds of appeal nos. 2 and 3 of cross-objection being academic in nature and are left open. Ground of appeal no.1 of assessee’s appeal is dismissed as not pressed. 13. In the result, the appeal of Revenue and Cross-Objection by assessee are dismissed. Order pronounced in the open court on 16 July, 2025. Sd/- Sd/- (S RIFAUR RAHMAN) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 16 /07/2025 Mohan Lal ITA No.346/Del/2021 & CO No. 94/Del/2023 10 Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "