CONFIDENT DISTRIBUTORS PRIVATE LIMITED,KOLKATA V. DCIT CENTRAL CIRCLE-I, FARIDABAD

ITA 3297/DEL/2024

AI Insights

The case involves M/s Confident Distributors Pvt Ltd, which appealed against the order of the Commissioner of Income Tax (Appeals)-3 Gurgaon, which had dismissed their appeal against the assessment order passed under section 153A of the Income Tax Act, 1961. The assessment was contested on several grounds including the lack of jurisdiction, absence of incriminating material, and procedural improprieties among others. The Tribunal focused primarily on the procedural aspect concerning the approval under section 153D, which was found to be granted in a mechanical manner without due application of mind, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474946 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: Gurvinder Singh Duggal Versus ACIT, Central Circle- 06, Delhi, MYSORE FINLEASE PRIVATE LIMITED NEW DELHI AND OTHERS VERSUS AC CENTRAL CIRCLE-13 NEW DELHI, PR. COMMISSIONER OF INCOME TAX-15 VERSUS SHIV KUMAR NAYYAR, THE PR. COMMISSIONER OF INCOME TAX AND ANOTHER VERSUS SAPNA GUPTA, DCIT, CENTRAL CIRCLE -II VERSUS ZYNC GLOBAL PVT. LTD., NOIDA, M/S AKSHATA REALTORS PVT. LTD. VERSUS ACIT, CENTRAL CIRCLE-2, RAIPUR, M/S GOYAL ENERGY & STEEL PVT. LTD. VERSUS ACIT, CENTRAL-2, Municipal Council Neemuch vs Mahadeo Real Estate, West Bengal Central School Service Commission vs. Abdul Halim
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: VED JAIN
• Keywords: Set aside; Principle of natural justice; Search and seizure; Liquidation
• Section: 142(1); 143(2); 132; 153A; 139(1); 68; 22; 153C

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI BEFORE SH. M. BALAGANESH, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITA No.3297/Del/2024 Assessment Year: 2013-14 M/s Confident Distributors Pvt Ltd, 6-1, Durgapur Colony, Kolkata, West Bengal, India -700053 PAN No. AADCC4751C Vs DCIT CC-1, Faridabad (APPELLANT) (RESPONDENT) Appellant by Sh. Ved Jain, Advocate Sh. Ayush Garg, CA Respondent by Sh. Surender Pal, CIT DR Date of hearing: 11/02/2025 Date of Pronouncement: 07/03/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-3 Gurgaon [hereinafter referred to as “CIT(A)”] vide order dated17.05.2024 pertaining to A.Y. 2017-18 pertaining to arises out of the assessment order dated 25.01.2018 under section 153Aof the Income Tax Act 1961 [hereinafter referred as ‘the Act’]. 2 2. The assessee has raised following grounds of appeal: 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, learned CIT (A) has erred, both on facts and in law, in rejecting the contention of the assessee that the assessment order passed under section 153A of the Act is without jurisdiction, void ab initio, illegal and deserved to be quashed. 3. On the facts and circumstances of the case, learned CIT (A) has erred, both on facts and in law, in rejecting the contention of the assessee that the assessment proceedings initiated and consequently assessment order passed under section 153A of the Act by the learned AO is bad and liable to be quashed in the absence of any warrant of authorization for search under section 132 of the Act executed in the name of the assessee. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the additions made by the AO under Section 153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, confirming the action 3 of the AO despite the fact that the order passed by the AO without obtaining valid prior approval under section 153D of the Income Tax Act. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the settled position of the law that where the assessment of the assessee has been made on the basis of any material found during the course of search of other person, then assessment of the assessee shall be completed by following the procedure prescribed under section 153C of the Act and not under section 153A of the Act and therefore, the impugned assessment order passed by the AO under section 153A of the Act is invalid and liable to be quashed. 7. (i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 31,60,00,000/- made by the AO on account of amount received from liquidation of investments and returns of loans received by the assessee. (ii) That the above addition has been confirmed rejecting the contention of the assessee that the above amount of Rs. 31,60,00,000/- was arising out of share capital and share premium of Rs. 32, 17,07,000/- on which taxes have been settled under Direct Tax Vivad Se Vishwas Act, 2020 in AY 2009-10. 4 (iii) That the abovesaid action of the CIT(A) in confirming the action of the AO will lead to double taxation of the same amount, which is against the principles of taxation. 8. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite that the same has been made merely by relying on the statements recorded at the back of the assessee, without giving assessee an opportunity to cross examine the same. 9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition made by the AO in drawing adverse inference, by misinterpreting the statement recorded during the course of search on oath. 10. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite that the same has been made on the basis of material collected at the back of the assessee without giving assessee an opportunity to rebut the same. 11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition/disallowances despite the fact that the AO has not concluded the independent enquiry conducted under section 133(6)/131 of the Income Tax Act to the logical end. 5 12. Without prejudice to the above, learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the value of the assets to the extent of Rs. 31,60,00,000/-which has been liquidated and reduced to NIL as no longer receivable would be a business loss to the assessee and eligible to be set-off against the addition made under section 68 of the Act. 13. The appellant craves leave to add, amend or alter any of the grounds of appeal. 3. The brief facts of the case are that the assessee company has filed its return of income for A.Y. 2013-14 u/s 139(1) of the Act on 29-09-2013 declaring income at Rs 7,880/-. Subsequently a search and seizure operations were conducted on 29-12-2015 at the residential as well as office premises of Mapsko Group. A notice u/s 153A of the Act on 15-10-2016 issued to the assessee to file the return of income for A.Y. 2013- 14. In the response of the notice the assessee company filed his reply on 21-09-2017 requesting to treat the return of income filed u/s 139(1) of the Act. The Assessing officer issued notice u/s 143(2) and u/s 142(1) of the Act. The A.O has completed the assessment by making the addition of Rs.31,60,00,000/-. 6 4. Aggrieved the order of the A.O. the assessee has filed the appeal before the Ld. CITA), who vide his order dated 17-05- 2024 dismissed the appeal against which the assessee is in appeal before the tribunal. 5. The approval granted by the JCIT Gurgaon is reproduced as under: 7 6.Ground No5: This ground goes to the root of the matter so first taken up for the purpose of adjudication. The ld counsel for the assessee has stated that the assessment order was passed without the valid approval u/s 153D of the Act. He also stated that in the search cases assessment should be made with the prior approval of the superior authority. No separate prior approval for the separate A.Y. for the seven yearswas obtained by the A.O. He further submitted that in this case only single approval was granted for the seven assessment years by the superior authority without application of mind. The approval was granted mechanical manner without due application of mind by the Ld. JCIT by letter No. JCIT(CR)/ GGN/2017-18-951 dated 22-12-2017. Reliance has placed on the following judgments: Hon’ble ITAT Delhi in the case of Gurvinder Singh Duggal Versus ACIT, Central Circle- 06, Delhi 2024 (6) TMI 336, held that :- \"20. In view of the aforesaid observations and respectfully following the judicial precedent relied upto hereinabove, we have no hesitation in holding that the approval u/s 153D of the Act has been granted b the Id. JCIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval 8 proceedings by a high ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decisions of the Hon'ble Orissa High Court Hon'ble Allahabad High Court and Hon'ble Jurisdictional High Court (Delhi High Court) referred to supra Hence, we find lot of force in the arguments advanced by the Ld. AR in support of the additional ground raised for all assessment years under consideration before us. Accordingly, the Additional Grounds raised by the assessee for all the assessment years under consideration are hereby allowed.\" ITAT DELHI in the case of MYSORE FINLEASE PRIVATE LIMITED NEW DELHI AND OTHERS VERSUS AC CENTRAL CIRCLE-13 NEW DELHI 2024 (1) TMI 793 held that 15. In view of the aforesaid observations and respectfully following the judicial precedents relied up hereinabove, we have no hesitation in holding that the approval u/s 153D of the Act has been granted the Id. JCIT in the instant case before us in a mechanical manner without due application of mind, there making the approval proceedings by a high ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decisions of the Hon'ble Orissa High Co 9 Hon'ble Allahabad High Court and Hon'ble Jurisdictional High Court (Delhi High Court) referred to sum Hence, we find lot of force in the arguments advanced by the Ld. AR in support of the additional ground raised for all assessment years under consideration before us for all the assessees. Accordingly, Additional Grounds raised by all the assessees for all the assessment years under consideration are her allowed.\" Further reliance is placed on the following judicial pronouncements: -DELHI HIGH COURT in the case of PR. COMMISSIONER OF INCOME TAX-15 VERSUS SHIV KUMAR NAYYAR, 2024 (6) TMI 29, Dated: - 15-5-2024 THE PR. COMMISSIONER OF INCOME TAX AND ANOTHER VERSUS SAPNA GUPTA (2022 (12) TMI 887] [12.12.2022)- ALLAHABAD HIGH COURT M.G. METALLOY P. LTD. VERSUS DCIT, CENTRAL CIRCLE, NOIDA. AND (VICE-VERSA), 2024 (9) 728-ITAT DELHI, Dated: 2-9-2024 10 DCIT, CENTRAL CIRCLE -II VERSUS ZYNC GLOBAL PVT. LTD., NOIDA, 2024 (2) TMI 690 - ITAT DELHI, Dated: - 22-1-2024 M/S AKSHATA REALTORS PVT. LTD. VERSUS ACIT, CENTRAL CIRCLE-2, RAIPUR, [2023 (4) TMI 97] dated 27.03.2023-ITAT RAIPUR M/S GOYAL ENERGY & STEEL PVT. LTD. VERSUS ACIT, CENTRAL-2, [2023 (4) TMI 379] dated ITAT RAIPUR 7. The Ld DR has supported the order of the below authorities and submitted that the assessment order was passed after taking the prior approval. He also submitted that the order of the Ld. JCIT /Addl CIT u/s 153D is an administrative order so the principals of “the application of mind” and “the speaking order” are not as strict or high as they are in the case of quasi- judicial or judicial order. The written submissions submitted by ld. DR are as under: In the above case, it is humbly submitted that in addition to the oral arguments submitted by the undersigned, the following legal issues/legal submissions, relevant te section 153D approval and two vital Judgments of the Hon. Supreme Court, on the legality and legal requirements of the Administrative 11 Orders of government or executive authorities, may kindly be considered:- 1. The word/phrase - \"written approval\" is not mentioned in the section 153D of the Income tax Act, 1961. The only phrase used is \"the prior approval\". Therefore, the contents of the written order of the JCIT/AddI. CIT are legally not required to be examined or considered, for meeting the legal or factual requirements of the approval under section 153D. 2. The order by the Addl. CIT/JCIT under section 153D is an Administrative Order, by the higher authority i.e. JCIT/AddI. CIT to the lower authority, i.e. AO. Such an order is not a quasi- judicial or judicial order. Therefore, the legal requirements and benchmarks regarding the principles of \"the application of mind\" and \"the speaking order are not as strict or high, as they are in the case of quasi-judicial or judicial order. 3. In respect of the legal requirements and the benchmarks regarding the administrative orders, the Hon. Supreme Court has given many comprehensive judgements, which are enclosed and the relevant portions/parts are quoted as under:- (i) Decision of Hon'ble Supreme Court in the case of Municipal Council Neemuch vs Mahadeo Real Estate, dated 17 September, 2019, AIR 2019 SC 4517, 2019 (10) SCC 738. 12 “……………….14. In the present case, the learned Judges of the Division Bench have arrived at a finding that such a sanction was, in fact, granted. We will examine the correctness of the said finding of fact at a subsequent stage. However, before doing that, we propose to examine the scope of the powers of the High Court of judicial review of an administrative action. Though, there are a catena of judgments of this Court on the said issue, the law laid down by this Court in the case of Tata Cellular Vs. Union of India reported in (1994) 6 SCC 651 lays down the basic principles which still hold the field. Paragraph 77 of the said judgment reads thus: \"77. The duty of the court is to confine itself to the question of legality. Its concerned should be :- 1. Whether a decision-making authority exceeded its powers? 2. Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of 13 that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:- (i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind, (1991) 1 AC 696, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, 'consider whether something has gone wrong of a nature and degree which requires its intervention\", 15. It could thus be seen that the scope of judicial review of an administrative action is very limited. Unless the Court comes to a conclusion, that the decision maker has not understood the law correctly that regulates his decision-making power or when it is found that the decision of the decision maker is vitiated by 14 irrationality and that too on the principle of \"Wednesbury Unreasonableness\" or unless it is found that there has been a procedural impropriety in the decision-making process, it would not be permissible for the High Court to interfere in the decision making process. It is also equally well settled, that it is not permissible for the Court to examine the validity of the decision but this Court can examine only the correctness of the decision- making process. 16. This Court recently in the case of West Bengal Central School Service Commission vs. Abdul Halim reported in 2019 SCC On Line SC 902 had again an occasion to consider the scope of interference under Article 226 in an administrative action. 31. In exercise of its power of judicial review, the Court is to see whether the decision impugned is vitiated by an apparent error of law. The test to determine whether a decision is vitiated by error apparent on the face of the record is whether the error is self-evident on the face of the record or whether the error requires examination or argument to establish it. If an error has to be established by a process of reasoning, on points where there may reasonably be two opinions, it cannot be said to be an error on the has been adopted, the decision would not be open to interference by the writ Court, it is only an obvious face of the record, as held by this Court in misinterpretation of a relevant statutory provision, or ignorance or disregard thereof, or a decision founded the provision of a Satyanarayan v. 15 Mallikarjuna reported in AIR 1960 SC 137. If statutory rule is reasonably capable of two on reasons which are clearly wrong in law, which can be corrected by the writ Court by issuance of writ of or more constructions and one construction if Certiorari 32. The sweep of power under Article 226 may be wide enough to quash unreasonable orders. a decision is so arbitrary and capricious that no reasonable person could have ever arrived at it, the same is liable to be struck down by a writ Court. If the decision cannot rationally be supported by the materials on record, the same may be regarded as perverse. Municipal Council Neemuch vs Mahadeo Real Estate on 17 September, 2019IndianKanoon -http://indiankanoon.org/doc/83894917/6 the authorities does not 33. However, the power of the Court to examine the reasonableness of an order of enable the Court to look into the sufficiency of the grounds in support of a decision to examine the merits of the decision, sitting as if in appeal over the decision. The test is not what the Court considers reasonable or lead unreasonable which has led to manifest injustice. The writ Court does not interfere, because a decision is not perfect. 17. It could thus be seen that an interference by the High Court would be warranted only when the decision impugned is vitiated by an apparent error of law, ie, when the error is apparent on the face of the record and is self evident. The High Court would be empowered to exercise the powers when it finds that the decision impugned is so arbitrary and capricious that 16 no reasonable person would have ever arrived at. It has been reiterated that the test is not what the court consi ders reasonable person could have taken. Not only this but such injustice. a decision must have led to manifest 25. In the present case, we find that the Commissioner had acted rightly as a custodian of the public property by pointing out the anomalies in the proposal of the Municipal Council to the State Government and the State Government has also responded in the right perspective by authorizing the Commissioner to take an appropriate decision. We are of the considered view that, both, the Commissioner as well as the State Government, have acted in the larger public interest. We are unable to appreciate as to how the High Court, in the present matter, could have come to a conclusion that it was empowered to exercise the power of judicial review to prevent arbitrariness or favoritism on the part of the State authorities, as has been observed by it in paragraph 13. We are also unable to appreciate the finding of the High Court in para 17 wherein it has observed that the impugned decision of the authorities are found not to be in the public interest. We ask the question to us, as to whether directing re-tendering by inviting fresh tenders after giving wide publicity at the National level so as to obtain the best price for the public property, would be in the public interest or as to whether awarding contract to a bidder in the tender process where it is found that there was no adequate publicity and also a possibility of there being a cartel of bidders, would be in the public interest. We are the considered view that 17 the decision of the Commissioner which is set aside by the High Court is undoubtedly in larger public commissioner would ensure that the Municipal Council earns a higher revenue by enlarging the scope of the competition. By no stretch of imagination, the decision of the State Government or the Commissioner could be termed as illegal, improper, unreasonable or irrational, Which parameters only could have permitted the High Court to interfere. Interference by the High Court when none of such parameters exist, in our view, was totally improper. On the contrary, we find that it is the High Court, which has failed to take into consideration relevant material. 26. In the result, the impugned Orders are not sustainable in law. The appeals are, accordingly, allowed and the impugned orders dated 31.08.2017 and 05.07.2018 are quashed and set aside. The petition of respondent No. 1 stands dismissed. (ii) Decision of Hon'ble Supreme Court in the case of West Bengal Central School Service... vs Abdul Halim dated 24 July, 2019, AIR 2019 SC 4504, AIRONLINE 2019 SC 2188 AIR 2020 SC (CIV) 82. .......31. The sweep of power under Article 226 may be wide enough to quash unreasonable orders. If a decision is so arbitrary and capricious that no reasonable person could have ever arrived at it, the same is liable to be struck down by a writ 18 Court. If the decision cannot rationally be supported by the materials on record the same may be regarded as perverse. 32. However, the power of the Court to examine the reasonableness of an order of the authorities does not enable the Court to look into the sufficiency of the grounds in support of a decision to examine the merits of the decision, sitting as if in appeal over the decision. The test is not what the Court considers reasonable or unreasonable but a decision which the Court thinks that no reasonable person could have taken, which has led to manifest injustice. The writ Court does not interfere, because a decision is not perfect. 33. In entertaining and allowing the writ petition, the High Court has lost sight of the limits of its extraordinary power of judicial review and has in fact sat in appeal over the decision of the respondent No. 2 Submitted for kind consideration of the Hon'ble Bench. (Surender Pal) Pr. Commissioner of Income-tax (DR)-2, B-Bench, ITAT, New Delhi 8. The above sited decisions by Ld. DR do not help the revenue because the facts and circumstances of the instant case are different from the sited case. 19 9.We have heard the parties and gone through the material available on record. 10. In the instant case search & seizure operation were conducted on 29-12-2015 and search case the assessment u/s 153A of the Act should be made with the prior approval of the JCIT. The provision of section 153D of the Act is reproduced as under: “No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of ] [ Inserted by Act 18 of 2005, Section 47 (w.r.e.f. 1.6.2003).] [sub-section (1) of section 153-A] [ Substituted by Act 18 of 2008, Section 39, for \" section 153-A\" (w.r.e.f. 1.6.2007).]Substituted by Act 18 of 2008, Section 39, for \" section 153-A\" (w.r.e.f. 1.6.2007).[or the assessment year referred to in clause (b) of sub-section (1) of section 153-B, except with the prior approval of the Joint Commissioner. ] [ Inserted by Act 22 of 2007, Section 50 (w.e.f. 1.6.2007).] 11. We observed that the assessment order was framed by the AO u/s 153A(1)(b) of the Act with the prior approval of the Joint commissioner. The joint commissioner of Income Tax has granted the single approval for the seven years A.Y. i.e 2010-11 20 to 2016-17 by the letter no F. No. JCIT(CR)/GGN/2017-18/951 in a mechanical manner without due application of mind.In view of above observation and respectfully following the judicial precedent, we have no hesitation in holding that the approval u/s 153D of the Act, granted by Learned JCITin the instant case was mechanical manner and without due application of mind. We declared the assessment as bad in law. Accordingly, the ground raised by the assessee is allowed. 12. We have decided the legal issue raised by assessee in the favour of the assessee so all grounds are not adjudicated at this stage and kept them open. 13. In the result the appeal of the assessee is allowed. Order pronounced in the open court on 07.03.2024. Sd/- Sd/- (M. BALAGANESH) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER NEHA, Sr. PS Dated:07.03.2025 "