DCIT CENTRAL CIRCLE-1, NOIDA V. RB DIVERSIFIED PVT. LTD., NEW DELHI

ITA 1641/DEL/2023

AI Insights

The case involves multiple appeals by the revenue and the assessee concerning the assessment years 2015-16, 2017-18, and 2018-19. The primary issues revolved around the disallowance of depreciation on solar plants, the valuation method of shares, and procedural lapses in the assessment process under section 153C of the Income Tax Act. The tribunal examined the validity of the depreciation claims on solar plants, the appropriateness of the DCF method for share valuation over the NAV method, and the adherence to procedural requirements in the assessment process, including the issuance of notices and the application of mind in approvals under section 153D.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848307 (ITAT-NEW DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Delhi
• Assessment Year: 2015-2016
• Appeal Filed On: 26-05-2023
• Other Referred Cases: Agro Portfolio Pvt. Ltd. vs. ITO, PCIT vs. Siddharth Gupta, PCIT vs. Subodh Aggarwal, PCIT vs. Sapna Gupta, PCIT vs. Anuj Bansal, Tish Consultants Pvt. Ltd. vs. DCIT, Ninecube Technologies Pvt. Ltd., Autope Payment Solution (P) Ltd., Ipsaa Holding Pvt. Ltd., SA Builders vs. CIT, CIT vs. Panipat Woollen and General Mills Company Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: THEM. SIMILARLY
• Keywords: Opportunity of being heard; Unexplained expenditure; Depreciation; Sale consideration of property below Jantri Value; Fair market value; Principle of natural justice; TDS; Search and seizure; Valuation report; Earning of tax free income; Competent authority; Rule 8D; Opportunity of cross examination; Bogus
• Section: 144; 143(3); 271(1)(c); 32; 153A; 56(2); 69C; 14A; 50C; 2(14); 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘C’: NEW DELHI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCONTANT MEMBER ITA No.1641 & 1642/Del/2023 Assessment Year 2015-16 & 2017-18 DCIT Central Circle-1 Noida Vs. RB Diversified Pvt. Ltd. 403, Prabhat Kiran 17, Patel Nagar, Central Delhi-110008 PAN No.AADCR3205J Appellant Respondent ITA No.1524/Del/2023 Assessment Year 2018-19 RB Diversified Pvt. Ltd. 403, Prabhat Kiran 17, Patel Nagar, Central Delhi-110008 PAN No.AADCR3205J Vs. DCIT Central Circle-1 Noida Appellant Respondent Appellant Smt. Kranti, CIT DR Respondent Sh. Rajiv Khandelwal, CA Sh. Gagan R. Khandelwal, Advocate Sh. Jaind Kumar Jaiswal, Advocate Date of Hearing 27.01.2026 Date of Pronouncement 25.03.2026 Printed from counselvise.com Page | 2 ORDER PER C.N. PRASAD, JM, These appeals are filed by the revenue for the A.Y. 2015- 16 and 2017-18 and by the assessee for the A.Y. 2018-19. 2 First we take up the appeal of the revenue for the A.Y.2015-16 and the grounds of appeal of revenue are as under :- 1. On facts and circumstances of the case Ld. CIT(A)- IV, Kanpur has erred in deleting the addition of Rs. 4,29,71,458/-on account of disallowance of claim of depreciation, without appreciating the fact that the assessee had produced only one bill dated 31.03.2015 showing units generated 2123 whereas a solar plant of 1000 kwp produces 4000-6000 units per day. Thus the units generated of 2123 are quite low and can be shown in meter during test/trial runs only. 2. On facts and circumstances of the case Ld. CIT(A)- IV, Kanpur has erred in allowing the appeal of the assessee ignoring the fact that the assessee in its form 3CD mentions only business to be of trading of wheat and other commodities and not solar plant. It must also be noted that there is a difference between ready to use and put to use as per IT Act. As per section 32 of IT Act 1961, there should be commercial exploitation of the asset. However, it is not the case of the assessee. Hence the depreciation claimed by the assessee was rightly disallowed. 3. That the appellant craves leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 3. Brief facts of the case are that the assessee company filed its return of income on 11.02.2016 declaring income of Rs.7,45,28,871/-. The case was selected for scrutiny Printed from counselvise.com Page | 3 assessment under CASS and in the course of assessment proceedings the AO noticed that the assessee had claimed depreciation on solar plant which was used for less than 180 days. The AO required the assessee to justify the date of put to use of the solar plants by providing necessary details. The assessee furnished various details including copies of invoices for purchase of solar power Energy System certificate from chartered engineering certifying the generation of power from the solar plants, sale of such power by the assessee etc. However, the AO denied depreciation on solar plants to the assessee and made addition of Rs.4,29,71,548/- holding that the solar plants of 1000 KWP and 350 KWP have not been put to use during the year observing as under :- 3.5 For claiming depreciation u/s 32 of the Income-tax Act, 1961 (Act) is that asset must have been put to use during the year if it had not been put to use during the year, no depreciation is allowed during the year 3.6 As per Assessee Company, two solar plants having capacity of 350kwp, and 1000kwp has been put to use during the year and on which depreciation is claimed 40% being half of 80% as put to use for less than 180 days. 3.7 As stated above, the assessee company was asked to justify that whether these solar plants were put to use on or before 31/03/2015 or not. Solar plant capacity 1000kwp The said plant cannot be said to be put to use on or before 31/03/15 considering the following facts. 1. Assessee produced one invoice 002 dated 31/03/2015 showing units generated 2123 and billed Rs. 13,906/- according to assessee which it received on 07/04/2015. In this regard it may be noted that a solar plant of 1kwp installed at roof tops of residential Printed from counselvise.com Page | 4 house produces approx. 4-6 units during a day. Now being this a proper solar plant of 1000kwp, even if technology believes to be same that of residential solar plants, a single day production should have been 4000-6000 units. In such a type of solar plant, it is quite normal that 2123 units have been shown in meter during test/trail runs only. 2. The assessee has produced only one invoice dated 31/03/2015 in support of claim and nothing else been submitted. 3. Assessee is saying that Chartered Engineer Certificate are being attached but It is not so. 4. The details of legal & professional fees does not include any fees paid/payable to Chartered Engineer, which shows probability of getting certificate at later date with back dating 5. Further, it is saying to attach copy of permission letters from govt, authority. Said letters being attached but first of all they are in other language i.e. Marathi. Further, these permission letters were in respect of some other plants and not in respect of this plant as evidenced from capacity mentioned in them. Lastly, out of said letters, some belong to September 2015 and not in relation to FY 2014-15. 6. Even, ITR & Form 3CD, mentions only business to be of Trading of wheat & other commodities and not Solar Plant. 7. It must be noted that there is difference between situation of ready to use versus put to use. It is well established by various courts that in case of situation ready to use, depreciation is not allowed as the same is not equal to situation put to use. What section 32 warrants is actual usage of the asset during the year for the purpose of business or profession or in other words actual commercial exploitation of the coasts, which in the case here is not so Solar plant capacity 350kwp The said plant cannot be said to be put to use on or before 31/03/15 considering the above facts only with following immaterial differences: Printed from counselvise.com Page | 5 1. Assessee produced one invoice 001 dated 31/03/2015 showing units generated 4460 and billed Rs 31.236/- according to assessee which it received on 21/08/2015 2. The assessee has produced only one invoice dated 31/03/2015 in support of claim and further Chartered Engineer Certificate dated 31/03/2015 only which certifies commissioning on the basis of meter readings and invoice raised only and no other fact was considered 3.8 Considering all these facts, it can be concluded that solar plants of 1000kwp and 350 kwp have not been put to use during the year and hence depreciation amounting to Rs. 4,29,71,548/- for both solar plants is being disallowed. Onus to file correct and accurate particulars of income always lies on the assessee. In the current case, the assessee filed inaccurate particulars of income. Hence, I am satisfied to initiate penalty u/s 271(1)(c) are initiated separately for filing inaccurate particular. (Addition of Rs. 4,29,71,548/-) 4. On appeal the Ld. CIT(A) deleted the disallowance of depreciation considering the evidences furnished by the assessee and the averments in the assessment order made by the AO. 5. Before us the Ld. DR strongly placed reliance on the order of the AO in denying depreciation on the Solar plants. The Ld. DR submitted that the Chartered Engineer issued a certificate on 31.03.2015 and on the very same day the production is said to have been started which is very much unlikely. 6. On the other hand the Ld. Counsel for the assessee strongly supported the orders of the Ld. CIT(A). The Ld. Counsel Printed from counselvise.com Page | 6 for the assessee further submitted that as a matter of fact M/s. TATA Communications had confirmed that the assessee had raised invoices for supply of power upto March, 2025 and payment was also released to the assessee by them. Similarly confirmation was placed at page-134 of the paper book. The Ld. Counsel for the assessee referring to page -219 of the paper book which are bank statements submitted that the assessee received payments for sale of power. The Ld. Counsel for the assessee strongly placed reliance on the orders of the Ld. CIT(A). 7. Heard rival submissions and perused the orders of the authorities below. On perusal of the assessment order we observed that the depreciation on power plants was denied by the AO on the ground that the assessee did not put to use the Solar Power Plants to use during the assessment year under consideration. 8. The Ld. CIT(A) after considering the evidences on record and the averments of the AO concluded that the solar power plants have been put to use by the assessee, deleted the disallowance of depreciation by observing as under :- 5.3 in the assessment order Ld. AO states that the appellant has added Rs. 10,74,28,871/- in the block of plant and machinery, which is illegible for 80% depreciation and has claimed to have put to use the same for less than 180 days and thus claimed depreciation of Rs 4,29,71,548/- [40% of Rs. 10,74,28,871/-]. In the matter of solar plant of capacity 1000 KWP, Ld. AO states that the said plant cannot be said to be put to use on or before 31/03/15 since the appellant produced one invoice 002 dated 31/03/2015 showing 2123 units generated by the plant and billed for Rs 13,906/-. This amount was received on 07/04/2015. Ld. AO states that a solar Printed from counselvise.com Page | 7 plant of one KWP installed at roof-top of residential house produces approx. 4-6 units during a day, therefore this plant being a solar plant of 1000KWP, even if technology is same as that of residential solar plant, a single day production should have been around 4000-6000 units. Therefore Ld. AO concludes that in such type of solar plant as is erected by the appellant, it is quite normal that 2123 units have been shown in meter during test/trail runs only.. 5.4 Ld. AO states that in the assessment proceedings, the assessee has produced only one invoice dated 31/03/2015 in support of claim and nothing else been submitted. He states that the appellant has claimed that Chartered Engineer Certificate is being attached with the submissions, but the same has not been found attached Ld. AO further states that the details of legal & professional fees do not include any fees paid/payable to Chartered Engineer, which shows probability of getting certificate at later date with back dating He states that the copy of permission letters of Govt. authorities are in other language i,e. Marathi and also the permission letters were in respect of some other plants and not in respect of the plant under consideration, as is evident from capacity mentioned in these letters, Ld. AO further states that some of these letters belong to September 2015 and not in relation to FY 2014-15. 5.5 Ld. AO observes that in the 3CD report and ITRs, the nature of business of the appellant is mentioned as \"Trading of wheat & other commodities' and not 'Solar Plant. He observes that there is difference in situation of 'ready to use' versus 'put to use' and that it is well established by various court decisions that in case of situation 'ready to use', depreciation is not allowed as the same is not equal to actual situation of 'put to use. Ld. AO states that section 32 warrants actual usage of the asset during the year for the purpose of business or profession or in other words actual commercial exploitation of the asset, which in the case here, is not so. Printed from counselvise.com Page | 8 5.6 In the matter of claim of depreciation on Solar plant of capacity 350 KWP, Ld. AO observes that the said plant cannot be said to be 'put to use on or before 31/03/15 since the appellant produced one invoice 001 dated 31/03/2015 showing units generated 4460 and billed Rs. 31,236/- and according to the appellant, this amount was received on 21/08/2015. He observes that the appellant has produced only one invoice dated 31/03/2015 in support of claim and further Chartered Engineer Certificate dated 31/03/2015 only which certifies commissioning on the basis of meter readings and invoice raised only and no other fact was brought as evidence. 5.7 Considering all these facts, Ld. AO concludes that solar plants of 1000 KWP and 350 KWP had not been put to use during the year under consideration and hence claim of depreciation amounting to Rs 4,29,71,548/- for both solar plants cannot be allowed. 5.8 On the other hand Ld. AR submits that in the assessment proceedings, copy of Bank statement showing release of payments against solar power plants purchase & installation, commissioning, etc. He submits that invoice 001 dt. 31.03.2015 was raised by appellant against payee M/s. Tata Motors Ltd. for Solar Plant of capacity for 350KWP and amount of Rs 31,236/- was billed for producing 4460 units (KWH) Further in the matter of invoice solar plant of capacity 1000 KWP, he submits that invoice no. 002 dt. 31.03.2015 was raised by appellant against payee M/s. Tata Communications Ltd. for Solar Plant of capacity for 1000KWP and amount of Rs. 13,906/- was billed for producing 2123 units (KWH) 5.9 Ld. AR submits that the said solar power plants were purchased by the assessee company from M/s Clean Max Enviro Energy Solutions Pvt. Ltd. (CMEESPL) and also, the said solar power plants were erected, commissioned & installed by this company in March 2015 itself. To support this claim, the appellant company has provided the invoices issued by this company and duly submitted the same to the Ld. AO along with replies furnished during the course of Printed from counselvise.com Page | 9 assessment proceedings. Ld. AR submits that invoice of 1000 KWP Solar Power Plant amounting to Rs. 7.47 crores dt. 27.03.2015 has been produced in the assessment order alongwith service invoice dt. 31.03.2015 for erection, commissioning and installation of this solar plant. He further states that invoice of 350 KWP Solar Power Plant amounting to Rs. 2.56 crores dt. 27.03.2015 has been produced in the assessment order alongwith service invoice dt. 31.03.2015 or erection, commissioning and installation of this solar plant 5.10 Ld AR further submits that the appellant has duly produced Chartered Engineer Certificate dt. 31.03.2015 of Sh Dharmesh Rajnikant Shah and also furnished installation certificates issued by Chartered Engineer for each of the solar power plants which certifies their installation and functioning as on date of certificate being 31 March 2015. Ld. AR submits that neither CMEESPL, TCL nor TML are related to the appellant assessee company in any way. Accordingly, the invoices received from or raised to these parties duly authenticate the transaction entered and which evidently show that the said Solar Power Plants were installed and put to use before 31 March 2015. Also, Proper exchange of service (consumption of electricity units)& payment of manies were duly executed, which proves that there was actual provision of service (sale of units) before 31 March 2015 The appellant has also placed reliance on various judicial pronouncements, in which based on such evidences, decisions have been given in favour of appellant 5.11 From the facts of the case, it is clear that the appellant has furnished details of two solar plants of 350 KWP and 1000 KWP ie purchase bills and payments for the same. Further separate invoices ie. invoice no. 1 & invoice no. 2 issued to M/s. Tata Motors Ltd. and M/s Tata Communications Ltd mentioning clear details of production of 4460 units (KWH) and 2123 units (KWH) respectively on 31.03.2015 have been furnished According to these invoices both of Printed from counselvise.com Page | 10 these consumers were required o pay Rs. 31,236/- and Rs. 13,906/- respectively. Apart from these details the appellant has also furnished Certificate of Charted Engineers dt. 31.03.2015 who has inspected and certified generation of solar power from these plants. Ld. AO has disallowed claim of appellant based on suspicion that the capacity of these plants is much more than the production of claimed units of solar power in a day. Ld. AO has further raised some doubts on the erection of these plants but these doubts are not based on some inquiry physical inspection or solid reasoning based on which the claim of appellant may be conclusively rejected. 5.12 The reliance of appellant on various judicial pronouncements is acceptable since sufficient evidences of 'put to use of the solar plants under consideration have been furnished and looking to the same, claim of appellant cannot be countered unless these certificates and evidences are found bogus. And from the observation of the Ld. AO in the assessment order, there is no trace of such inquiry which may conclusively establish that these certificates are bogus. Therefore, looking to the facts and circumstances of the case, the disallowance of Rs. 4,29,71,548/- is hereby deleted. All the grounds of appeal are adjudicated accordingly . 9. On careful perusal of the order of the Ld. CIT(A) and the findings therein we do not see valid reason to disturb the findings of the Ld. CIT(A) which are based on the evidences on record which suggest that the assessee had indeed put to use the solar power plants, generated power and sold power to M/s. TATA Communications, the payments have been received through banking channels. The Chartered Engineer also certified installation and generation of power by the assessee during the assessment year under consideration. Thus, Printed from counselvise.com Page | 11 sustaining the order of the Ld. CIT(A) grounds raised by the revenue are rejected. 10. Now, we take up the appeal of the revenue for the A.Y. 2017-18 and the grounds are as under :- 1. On facts and circumstances of the case L’d. CIT(A) – IV, Kanpur has erred in deleting the addition of Rs.44,95.23,926 circumstances of the case Ld. CIT(A)- IV, Kanpur has erred in deleting the addition of Rs 44,95,23,926/-w/s 56(2)(viib) of the IT Act on account of excess premium despite the fact that valuation of shares was not as provided in Rules 11UA of the IT Rules, 1962. The valuation produced was as per DCF method which is not completely reliable as the valuation varies based on the assumptions taken during computation. 2. On facts and circumstances of the case L'd. CIT(A)- IV, Kanpur has erred in deleting the addition of Rs. 2.31.617/-made u/s 40(a)(ia) of IT Act without appreciating the fact that the assessee had not deducted TDS on payment of commission of Rs. 7.12 Lakh made to Mis Venutra Commodities Lmt NCX. The assessee has only furnished list of entities to whom payment of commission has been made. However, mo evidence was produced that company was ineligible for deduction of TDS as per provisions of section 194 H of the IT Act, 1961. 3. On facts and circumstances of the case L'd. CIT(A)- IV, Kanpur has erred in deleting the addition of Rs. 1,24,12,044/- made u/s 14A. The assessee in its reply had stated that it has not incurred any expenditure corresponding to exempt income. However, as per CBDT circular 05/2014 dated 11.02.2014 and modification to the same dated 02.06.2016, Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income or can be made even if there is no income but investment has the potentiality to earn income in future. Hence, the provisions of section 14A were Printed from counselvise.com Page | 12 rightly applicable in the case in the light of CBDT circular. Further it is nowhere mentioned in the Act of any CBDT circular that the amount of disallowance u/s.14A cannot exceed the amount of exempt income. 11. Brief facts are that during the assessment year under consideration the assessee received share capital alongwith premium from M/s.RRK. Holdings Pvt. Ltd. and Mr. Raghav Bahl. In the case of RRK Private Pvt. Ltd. the assessee issued preference shares and in the case of Raghav Bahl the assessee issued equity shares. 12. In the course of assessment proceedings the AO noticed that the assessee issued these shares with the huge premium though the company is making losses. He required the assessee to give the details of valuation as per Rule 11 UA of IT Rules. In response the assessee furnished valuation report as on 01.04.2016 and 24.03.2017 under DCF method valuing fair market value of shares at Rs.65,000/- and Rs.84,904/- respectively. The valuation report was furnished to the AO. However, the AO was of the view that the financial projection for issue of shares according to him was done on unrealistic basis and issued a show cause notice as to why DCF method be rejected and valuation should not be done on the basis of Net Asset Value (NAV) and the difference between the valuation and premium received should not be added back to the total income of the assessee u/s.56(2)(viib)of the Act. The assessee furnished a detailed reply which was rejected by the AO. The AO placing reliance on the decision of the Delhi Bench of the Tribunal in the case of Agro Portfolio Private Limited Vs. ITO reported in 171 Printed from counselvise.com Page | 13 ITD 74 wherein the Tribunal held that the AO was justified in rejecting DCF method, made addition rejecting the DCF method of valuation adopted by the Assessee. The AO valued the shares applying NAV method. On appeal the Ld. CIT(A) deleted the addition accepting the DCF method adopted by the Assessee. 13. The Ld.DR strongly supported the order of the AO. 14. On the other hand the Ld. Counsel for the assessee strongly placed reliance on the orders of the Ld. CIT(A). The Ld. Counsel for the assessee further submitted that the decision of the Delhi Bench in the case of Agro Portfolio Pvt. Ltd. (supra) which the Ld. DR placed reliance was reversed by the Hon’ble Delhi High Court which is reported in 161 taxmann.com 303. 15. Heard rival submissions and perused the orders of the authorities below. In this case the AO rejected the DCF valuation method adopted by the Assessee through registered valuer’s report for valuing of shares / share premium, on the ground that such valuation is unrealistic. The AO adopted NAV and determined the valuation of shares / premium and the difference was brought to tax. On appeal the Ld. CIT(A) considering the submissions and evidences furnished by the assessee and various case laws accepted the method adopted by the assessee and deleted the addition observing as under :- 6.3 in the matter of addition of Rs. 44,95,23,926/- made u/s 56(2)(viib) of IT Act, Ld. AO states that Discounted Cash Flow method (DCF) for evaluating the share market value of the shares' is descriptive method of company's financial health and that the DCF analysis is a process of evaluating the attractiveness of an investment Printed from counselvise.com Page | 14 opportunity in future at present as such DCF analysis tries to calculate the value of company today based on forecast of how much money the company is going to make in future However he observes that it is very easy to increase or decrease the valuation substantially in the DCF method by changing the assumptions that is why it is so important to be thoughtful and careful when specifying the reports. Ld. AO observes that the assumptions should be based on sufficient research and that there should be complete foot notes and details of documentary evidences and thought process behind the assumptions and also the projections should be near the actual figures. He states that the presumptions should not in any way be based on wild guess or imagination and that the presumptions should be based on rationality and the market trend. Ld. AO states that in the instant case, there is no rationality in the projections and the assumptions are not based on any research, which is evident from the valuation report. He states that there are no foot-notes regarding the basis of assumptions and also that there is no match between the presumptions and the actual business trend which can be ascertained from the facts that the assumptions are nowhere near the actual. Therefore Ld. AO concludes that considering all this, the legislature has introduced the section 56(2)(viib) of the IT Act, 1961 and provided the definition of fair market value as per explanation (a) of section 56(2)(viib) of the IT Act. 6.4 Ld. AO observes that when all the facts are analyzed in totality, it becomes clear that the valuation report should satisfy the AO about its correctness and the assessee cannot contend that since it has selected any one method as prescribed under Rule TTUA of the IT Rules 1962. so the assessee is free to choose any value in its valuation report on the basis of wild presumption/imagination Ld AD observes that this type of contention is contrary to the intent of legislature since the intent of the legislature is very clear and the assessee is required to produce Printed from counselvise.com Page | 15 a satisfactory report. failing which the excess consideration shall be taxed as income from other sources under section u/s 56(2)(vib) of the IT Act. 1961 6.5 Ld AO further observes that the case laws cited by the assessee have also been considered but the facts of the same are different in such cases. He observes that in this case, the investors are related parties and they are well aware of the financial health of the company and that they are not required to have a valuation from the outsider. He observes that valuation in such a situation can be easily fudged by providing wrong figures to the valuer and that is why no footnotes or basis of assumption have been elaborated by the valuer. Ld. AO has placed reliance on the decision of Hon'ble ITAT Delhi in case of Agro Portfolio Pvt Ltd. vs. ITO, Ward-1(4), Delhi, wherein it has been held that where assessee allotted shares to a company and FMV of share was done by Merchant Banker only on the basis of DCF method, only depending on data supplied by the assessee and no evidence was produced for verifying the correctness of data supplied by the assessee, the AO was justified in rejecting DCF method. 6.6 Based on these observations, Ld. AD concludes that the assessee failed to substantiate the fair market value derived as per DCF method to his satisfaction and hence he applied the provisions of IT Rules 1961 as given in Rule 11UA(2)(a) of IT Act and ascertained the excess share premium received by the assessee as Rs. 44,95,23,926/- 6.7 On the other hand, Ld. AR submits that the premium is received in the share as under: Printed from counselvise.com Page | 16 Ld. AR submissions that taxability of aforesaid transactions, Ld AO has invoked provisions of section 56(2) (viib) of the IT Act and IT Rule, section 11UA of the IT Rules, as applicable on the date of execution of said transactions. Ld. AR submits that section 56(2)(viib) provides that when a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares may be taxed as income from other source. And as per Explanation given below this section, the fair market value of the shares shall be the value (i) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher. Ld. AR submit that Rule 11UA has been formulated to determine fair market value of unquoted share and securities but the provisions of Rule 11UA(2) are very clear that the value on t valuation date of such unquoted equity shares as determined under clause (a) clause (b), shall be at the option of the assessee, Ld. AR submits that the legisla intent is that choice is given to the company to adopt anyone of the value and Ld. has forcedly Printed from counselvise.com Page | 17 deprived the appellant from this choice and has determined the value in ccordance to Rule 11UA(2)(a) and has not considered the valuation as done by approved valuer in accordance to Rule 11UA(2)(b), which was choice of the appellant, as was rightfully given to it by the legislature. 6.8 Ld AR submits that on perusal of the provisions of section 50(2)(vib) of IT Act and Rule 11UA(2)(a) and (b) it can be seen that where any company, other than public company, issues any share at a value in excess of Face Value of shares, impugned provisions will be applicable on such transaction and tax implication on such transaction will be that any amount received by such company, in respect of issuance of such shares (including share premium received thereon), in excess of fair market value (FMV) of such share as computed in method prescribed under Rule 11UA of the IT Rules shall be deemed to be income from other sources in the hands of the said company. He submits that in case, where provisions of section 56(2)(viib) of the IT Act are applicable, the assessee company shall determine the FMV of such shares in accordance with Rule 11UA of the IT Rules. Ld. AR submits that in respect of equity shares issued by a company, provisions of Rule 11UA(2) of the IT Rules will be applicable, which provides the company with an option to opt for any of the following, whichever is beneficial to the company valuation based of Net Asset Value Method, with certain modifications prescribed u/r 11UA(2)(a) of the rules or valuation determined by any merchant banker or an independent Chartered Accountant as per Discounted Cash Flow Method Ld. AR further submits that in respect of preference shares issued by a company, provisions of Rule 11UA(1)(c)(c) of the rules will be applicable, wherein it has been prescribed that the company shall adopt the valuation of shares Printed from counselvise.com Page | 18 as determined by any merchant banker or an independent Chartered Accountant. 6.9 It is submission of Ld. AR that in light of the aforesaid legal analysis of the applicable provisions of the IT Act, the appellant company had duly adhered with the applicable provisions of the Act while determining the tax implication in respect of impugned transactions related to issuance of preference shares and equity shares during the period under consideration. He submits that in respect of both of the aforesaid transactions executed by the appellant company during the period under consideration, the appellant company had duly obtained valuation report from independent chartered accountant, as prescribed in afore-discussed Rule 11UA of the IT Rules, and had duly relied upon said reports to determine the FMV of shares being issued and accordingly, made all necessary compliances in respect of issuance of said shares and subsequent taxation and reporting thereof under various applicable statutes including the Income Tax Act, 1961. It is submission of Ld. AR that the appellant company had duly determined the FMV of impugned shares in accordance with prescribed rules, no non-compliance persists on the part of the appellant company and thereby, no additions in respect of impugned transactions, related to issuance of impugned equity and preference shares during the period under consideration, is called for. 6.10 Ld. AR submits that the impugned addition of Rs. 44,95,23,926/- made u/s 56(2)(viib) of the IT Act has been made by Ld. AO by computing FMV of impugned shares issued by the appellant company during the period under consideration on the basis of Net Asset Value Method without appreciating the fact that the appellant company has the right to opt for method of valuation of FMV of said shares determined under either of the prescribed method, at its own choice. Ld. AR submits that the Ld AO was not justified in invoking Net Asset Method in place of Discounted Cash Flow Method adopted by the appellant Printed from counselvise.com Page | 19 company, being the option to adopt any of the prescribed methodology, provided by the Legislature in the statute to the appellant company. He submits that such option could not be withdrawn by the Ld. AO merely due to certain apprehensions, as said option has been prescribed under statute and under no circumstances, such option could be withdrawn legitimately. Hence he submits that impugned additions made by the Ld. AO by rejecting the claim of the appellant company and by invoking Net Asset Value Method is purely unjustified and bad in law. 6.11 Ld. AR has placed reliance on various judicial pronouncements. Ld. AR states that in case of Pr. CIT vs. Cinestaan Entertainment Pvt. Ltd. [2021] 433 ITR 82 (Del.), Hon'ble Delhi High Court has observed that \"the law requires determination of fair market values as per prescribed methodology The Appellant-Revenue had the option to conduct its own valuation and determine FMV on the basis of either the DCF of NAV Method The Respondent-Assessee being a start-up company adopted DCF method to value it's shores This was carried out on the basis of information and material available on the date of valuation and projection of future revenue. There is no dispute that methodology adopted by the Respondent-Assessee has been done applying a recognized and accepted method Since the performance did not match the projections, Revenue sought to challenge the valuation, on that footing This approach lacks material foundation and is erational since the valuation is intrinsically based on projections which can be affected by various factors. We cannot lose sight of the fact that the valuer makes forecast or approximation, based on potential value of business However, the underline facts and assumptions can undergo change over a period of time The Courts have repeatedly held that valuation is not an exact science, and therefore cannot be done with arithmetic precision. It is a technical and complex problem which can be appropriately left to the consideration and wisdom of experts in the field of accountancy, Printed from counselvise.com Page | 20 having regard to the imponderables which enter the process of valuation of shares. The Appellant- Revenue is unable to demonstrate that the methodology adopted by the Respondent- Assessee is not correct. The AO has simply rejected the valuation of the Respondent- Assessee and failed to provide any alternate fair value of shares. The valuation is a question of fact which would depend upon appreciation of material or evidence The methodology adopted by the Respondent- Assessee, accepted by the learned ITAT, is a conclusion of fact drawn on the basis of maternal and facts available. The test laid down by the Courts for interfering with the findings of a valuer is not satisfied in the present case, as the Respondent-Assessee adopted a recognized method of valuation and Appellant-Revenue is unable to show that the assessee adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it committed a mistake which goes to the root of the valuation process.\" 6.12 Ld. AR further placed reliance in the (i) decision of ITAT Delhi in the case of DCIT vs. Kissandhan Agri Financial Services Pvt. Ltd., ITA No. 8734/ DEL/ 2019, Date of Pronouncement: 15.03.2023, (ii) SA Builders vs. CIT [2006] 288 ITR 1 (SC) and in case of (iii) CIT vs. Panipat Woollen and General Mills Company Ltd. [1976] 103 ITR 66 (SC) and submitted that in light of aforesaid submissions and legal judicial pronouncements, it is clearly evident that the Ld. AO was not justified in invoking Net Asset Value Method instead of Discounted Cash Flow Method adopted by the appellant company and accordingly, impugned additions to the tune of Rs. 44,95,23,926/- made u/s 56(2)(viib) of the IT Act deserves to be deleted. 6.13 Ld. AR submits that Ld. AO has rejected the valuation adopted by the appellant company by Printed from counselvise.com Page | 21 merely alleging that the appellant company had failed to substantiate the fair market value derived as per DCF method to his satisfaction without appreciating the fact that said valuation has been determined by the independent Chartered Accountant ie. M/s VR Associates, Chartered Accountants and the appellant company has appropriately adopted the valuation determined by the independent specialists, prescribed under applicable provisions of the IT Act, whereas rejecting the valuation determined by independent specialist without any cogent reason is nowhere justified on the part of the Ld. AO. He submits that Ld AO observes that there was no rationality in the projections, the assumptions were not based on any research which is evident from the valuation report and no foot-notes regarding the basis of assumptions are mentioned, however Ld. AO failed to justify his observations regarding impugned valuation reports issued by independent Chartered Accountants and merely mentioned general observations to be addressed by the valuer while computing valuation of any shares without supporting his allegations relating to unreliable projections, assumptions and presumptions with necessary supporting factual findings in such regard. 6.14 Ld. AR further submits that the Ld. AO had erred in law in making additions to the tune of Rs. 44,95,23,926/- u/s 56(2)(viib) of the IT Act merely on the apprehension that the valuation adopted by the appellant company was not reasonable, irrespective of the fact that the appellant company had adopted the valuation computed by independent Chartered Accountant, a prescribed specialist, in such regard whereas no proper application of mind has been applied by the Ld. AO and that he had mentioned unsubstantiated findings regarding impugned valuation reports and had refrained from referring the matter of the appellant company to Departmental Valuation Officer as prescribed u/s 55A of the act, whereas the Ld. AO was duty bound to invoke provisions of section 55A of the IT Act being the valuation adopted by the appellant company was not Printed from counselvise.com Page | 22 acceptable to him, whereas, Ld. AO was not a prescribed / competent authority to conduct such Valuation on his own. Ld. AR submits that irrespective of the fact that the Ld. AO holds a discretionary power to refer the case of appellant company to the Departmental Valuation Officer u/s 55A of the IT Act, it is necessary that such provisions of the IT Act must be invoked by the Ld AQ where, decision is regarding certain aspects which require specific skill-set such as valuation, which he may not the in possession to the extent of expertise, whereas any decision in such regard may have extravagant impact on the total income of the respondent, being the valuation adopted by the appellant company was based upon valuation determined by expert al such field and to counter such report, no person other than an expert of that field shall be the only person to challenge such report with corroborating factual findings. Ld. AR submits that as such, impugned action of La. AD to proceed with impugned assessment proceeding and making impugned additions without referring said valuation to the Departmental Valuation Officer u/s 55A of the act is unjustified 6.15 Ld. AR submits that in respect of preference shares issued by the appellant company, the appellant has brought report of an accountant as is mentioned in Rule 11UA(1)(c)(c). Ld. AR submits that if in respect of impugned equity shares as well as preference shares issued during the period under consideration, DCF method is discarded and Net Asset Value Method is adopted for determination of Fair Market Value of said shares, then also, the Ld. AO has erred in computing the valuation of impugned shares adopting the Net Asset Value Method in his impugned assessment order while making the impugned additions, Ld. AR submits that if the computation of FMV of impugned shares adopting the Net Asset Value Method is done based on Audited Financial Statements of the appellant company prepared for FY 2015-16, the same would not be correct since transaction related to equity shares was executed on 24.03.2017. He submits that as per Rule 11U of IT Rules, valuation should be based upon figures of most recent Audited Financial Statements and accordingly, for preference shares, figures of audited financial statements drawn for year Printed from counselvise.com Page | 23 ending on 31.03.2015 is adopted whereas for equity shares, figures of audited financial statements drawn for year ending on 31.03.2016 is adopted, the valuation is as under: Printed from counselvise.com Page | 24 Printed from counselvise.com Page | 25 Ld. AR submits that from the above table, it is clearly evident that the valuation denved by the independent Chartered Accountant by adopting Discounted Castr Flow Method for valuation of impugned shares are more or less at parity with the fair market value, if determined by adopting Net Asset Value Method as the variance between both of the valuations are less than 5% which is below tolerable limit prescribed u/s 50C of the act, which could be reasonably adopted as benchmark in impugned matter. Ld. AR submits that in the light of these facts Fair Market Value of impugned shares computed by the Ld. AO in the impugned assessment order is incorrect in facts of the matter and accordingly, impugned additions to the tune of Rs. 44,95,23,926/- made u/s 56(2)(viib) of the IT Act deserve to be deleted 6.16 From the facts of the case, it has been found that the appellant company has issued 7587 preference shares @65000 per share (FV Rs. 100 per share) on 04.04.2016 and 19.04.2016 for total consideration of Rs. 49,31,55,000/-. For the valuation the appellant has adopted value as per valuation report dt. 01.04.2016 obtained from M/s. VR Associates, Chartered Accountants, wherein valuation has been determined at Rs. 65,000 per share as per DCF method. Further the appellant company has issued 7067 equity shares @84,904 per share (FV = Rs. 10 per share) on 24.03.2017 for total consideration of Rs. 60,00,16,568/-. For the valuation the appellant has adopted value as per valuation report dt. 24.03.2017 obtained from M/s. VR Associates, Printed from counselvise.com Page | 26 Chartered Accountants, wherein valuation has been determined at Rs. 84,904 per share as per DCF method. Ld. AO has not accepted this valuation and has invoked provisions of section 56(2)(viib) of the IT Act and section 11UA of the IT Rules, as applicable on the date of execution of said transactions. However as per provisions of section 56(2) (viib) of IT Act, the fair market value of the shares shall be the value (1) as may be determined in accordance with such method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences franchises or any other business or commercial rights of similar nature, whichever is higher For this purpose Rule 11UA of IT Rules has been formulated to determine fair market value of unquoted shares and securities but the provisions of Rule 11UA(2) are very clear that the value on the valuation date of such unquoted equity shares as determined under clause (a) or clause (b), shall be at the option of the assessee, Thus in respect of equity shares issued by a company, provisions of Rule 11UA(2) of the IT Rules will be applicable, which provide the company with an option to opt for any of the following, whichever is beneficial to the company valuation based of Net Asset Value Method, with certain modifications prescribed u/r 11UA(2)(a) of the rules or valuation determined by any merchant banker or an independent Chartered Accountant as per Discounted Cash Flow Method. However, in case of preference shares issued by a company, provisions of Rule 11UA(1)(c)(c) of the rules will be applicable, wherein it has been prescribed that the company shall adopt the valuation of shares as determined by any Printed from counselvise.com Page | 27 merchant banker or an independent Chartered Accountant 6.17 Further the appellant has objected the methodology of valuation as adopted in assessment order by Ld. AO by adopting Net Asset Value Method taking all the existent shares and new 7587 preference shares which were issued on 04.04.2016 & 19.04.2016 and new 7067 equity shares which were issued on 24.03.2017 together. Ld. AO has taken all these shares together. Since 7587 preference shares were issued on 04.04.2016 and 19.04.2016 therefore for valuation of these preference shares by taking asset (A) and liabilities (L) and paid up capital (PE) and paid up value (PV) o available audited financial statements as on these dates i.e. financials of FY 2014-15 would have been more appropriate. Further since 7067 equity shares were issued 24.03.2017, therefore for valuation of these equity shares by taking asset (A) and Rabilities (L) and paid up capital (PE) and paid up value (PV) of available audited financial statements as on these dates ie financials of FY 2015-16, would have been more appropriate. Therefore the issues raised by Ld. AR questioning methodology of Ld. AO for valuation of both of these shares (7587 preference shares and 7087 equity shares) by adopting Net Asset Value Method need due consideration 6.18 In various judicial pronouncements this choice of the assessee has been allowed and it has been declared that the assessee is free to adopt any valuation method In this particular case, the appellant has exercised this choice of adopting DCF method for valuation of equity shares. In case of preference shares, the valuation of Merchant Banker or an Accountant is required and the appellant has furnished the same. From the assessment order, it can be seen that there is no mention of any specific deficiency in Printed from counselvise.com Page | 28 the valuation of these equity and preference shares except other than some doubts raised by Ld. AO. Even if Ld. AO had some doubts on the correctness of the valuation as done by a registered valuer, he was free to exercise option of provisions of section 55A of IT Act and to refer the valuation to Departmental Valuation Officer, but the same has not been done. Therefore it is held that in the valuation of Independent Chartered Accountant ie. M/s. VR Associates, Chartered Accountants, which was based on Discounted Cash Flow Methods on the choice of the appellant, Ld. AO could not find out such discrepancies due to which this valuation may be discarded. Therefore, the decision of Ld. AO to reject the valuation of the appellant and to determine the fair market value based on the basis of Net Asset Value Method is not upheld. 6.19 in light of the facts and circumstances of the case and various judicial pronouncements as relied by the appellant, it is clearly evident that addition made by the Ld. AO by invoking the provisions of section 56(2)(viib) of IT Act is not sustainable, hence the addition of Rs.44,95,23,926/- made by the Ld. AO is hereby deleted and relief is allowed to the appellant. All the grounds of appeal are adjudicated accordingly. 16. On careful perusal of the findings and observations of the ld. CIT(A) we do not see any valid reason to disturb the findings in accepting the method adopted by the assessee. We further observed that the decision relied on by the AO in the case of Agro Portfolio Pvt. Ltd. was reversed by Hon’ble Delhi High Court in the case of Agro Portfolio Pvt. Ltd. vs. PCIT (464 ITR 348) wherein the Hon’ble High Court held that where the assessee company, for valuation of shares, placed reliance on the valuation report drawn by merchant banker wherein DCF Printed from counselvise.com Page | 29 method was adopted, the AO could not have rejected such method and adopted NAV method for valuation of shares. Following the decisions of Hon’ble Delhi High Court similar view has been taken by the Delhi Bench of the Tribunal in the following cases :- 1. Ninecube Technologies Pvt. Ltd. 177 taxmnan.com 71 (Del-Trib) 2. Autope Payment Solution (P) Ltd. 170 taxmnan.com 333 (Del-Trib) 3. Ipsaa Holding Pvt. Ltd. 176 Taxmann.com 71 (Del- Trib) 17. Thus, we see no infirmity in the order of the Ld. CIT(A) in accepting the DCF method adopted by the assessee in valuing the shares. Thus, we sustain the order of the Ld. CIT(A) and reject ground No.1 of grounds of appeal of the revenue. 18. Coming to ground no.2 of grounds of appeal which is in respect of disallowance made u/s.40(a)(ia) of the Act for non deduction of TDS u/s.194 of the Act in respect of commission paid to M/s. Ventura Commodities Lmt-NCX, we observed that the AO made disallowance under section 40(a)(ia) of the Act on the payment of brokerage to M/s.Venutra Commodities Lmt- NCX on account of trading commodity derivatives on exchanges. The assessee furnished copies of contract ledger accounts etc, before the ld. CIT(A) and contended no TDS is required to be made u/s.194H on brokerage income on securities. Considering the submissions of the assessee and the provision of Section 194H of the Act the Ld. CIT(A) deleted the addition holding the provisions of section 194H of the Act Printed from counselvise.com Page | 30 have no application to the brokerage paid by the assessee on account of trading of securities including commodities derivatives observing as under :- 7.2 in this regard Ld. AR submits that Ld AO had erred in making disallowance of Rs. 2.31,617/- on brokerage payment made to Mis Venutra Commodities Ltd- NCX on total payment of Rs. 7.12 lacs Ld. AR submits that it is to be noted that the appellant company has paid brokerage charges of Rs. 7.12 lakhs to Mis Venutra Commodities Ltd- NCX on account of trading of Commodity Derivatives on exchanges. Copy of Ledger A/c of 'Brokerage Contract Note' in the books of the appellant company alongwith relevant Contract Notes have been furnished. Ld. AR submits that the Ld. AO failed to appreciate that deduction of TDS is not applicable on brokerage income on securities In this regard the relevant provisions of section 194H of the Income Tax Act 1961 are as under “194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 19401 or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five) per cent: Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed [fifteen thousand rupees]. Printed from counselvise.com Page | 31 Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed [one crore rupees in case of business or fifty lakh rupees in case of profession) during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid shall be liable to deduct income-tax under this section) [Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Lented or Mahanagar Telephone Nigam Limited to their public call office franchisees/ Explanation-For the purposes of this section, (i) commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; Whereas, as per the definition of term Securities prescribed under Explanation 2 to section 2(14) of the act read with section 2(h) of the Securities Contracts (Regulation) Act, 1956 secunties include derivatives Relevant extract of provisions of Securities Contracts (Regulation) Act, 1956 is reproduced hereunder for your ready reference Printed from counselvise.com Page | 32 \"(h) securities\" include- (1) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate, (ia) derivative, 7.3 From these provisions it can be seen that Explanation (1) of section 194H of the Act, makes it clear that the provision of deducting TDS is not applicable on brokerage payment made on account of trading of Securities whereas securities include commodity derivatives. From this it is clear that the appellant company had not contravened any provision relating to TDS on impugned transaction and thereby, no disallowances can be made. It is observed that if the appellant company had not deducted TDS on brokerage payment made for trading in Securities/commodities on exchanges/ NCX, no provision of TDS has been violated under law. Hence, in light of the aforesaid legal position, it is clearly evident that disallowances cannot be made as such since payment of brokerage has been done in case of trading in Securities/Commodities, hence deduction of TDS thereon was not required as laid down in section 194H of the IT Act. 7.4 Looking to the facts and circumstances of the case, the disallowance of Rs.2,31,617/- made by the Ld.AO cannot be sustained and hence the same is deleted and relief is allowed to the appellant. 19. We find no valid reason to interfere with the findings of the Ld. CIT(A) in holding that the provisions of section 194H Printed from counselvise.com Page | 33 have no application on brokerage amount paid in leading securities which includes derivatives. Ground No.2 is rejected. 20. Coming to last ground, ground No.3 which is in respect of disallowance made u/s.14A r.w.s. 8D of the IT Rules we observed that the Ld. CIT(A) restricted the disallowance to exempt income following the decision of the jurisdictional High Court in the case of PCIT Vs. TV Today Network Ltd. (141 taxmann.com 275). Thus, we see no infirmity in the order passed by the Ld. CIT(A). Ground No.3 is rejected. 21. Now we take up the appeal of the Assessee for the A.Y.2018-19. Assessee has raised following grounds of appeal :- 1. That the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred as 'Ld. CIT(A)') has erred in law and facts of the case while upholding the Assessment Order, without appreciating the fact that impugned assessment proceeding has been conducted and completed in contravention of provisions of section 153C of the act being the satisfaction note prepared by the Ld. AO before initiation of impugned assessment proceeding was neither prepared adherence with said provisions of the statute nor the same is factually correct. Therefore, impugned assessment proceeding is purely bad in law and may please be quashed. 2. That the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred CIT(A)') has erred in law and facts of the case while upholding the Assessment Orders, without appreciating that the online assessment order, uploaded on the ITBA portal, was incomplete, thus, the same is illegal and bad in law, whereas, the physical order issued without mentioning Document Identification Number (DIN) in the body of the assessment order has no sanctity in the eyes of law. Therefore, the Assessment Order passed online as well Printed from counselvise.com Page | 34 as physically are bad in law and may please be quashed. 3. That the Ld. CIT(A) has erred in law and facts of the case while upholding the Assessment Orders without appreciating that the same is barred by limitation u/s 153B of the Income Tax Act, 1961 (hereinafter referred as 'the act') as the online order have not been uploaded entirely within the limitation prescribed under section 153B of the Act whereas the physical order have not been dispatched within said time limit. As such, the Assessment Orders passed online as well as dispatched in physical are barred by limitation and may please be quashed. 4. That the Ld. CIT(A) has erred in law and facts of the case while upholding the assessment framed u/s 153A read with section 143(3) of the Act, in absence of any incriminating material being found and seized during the course of impugned search operation. As such, the assessment framed is illegal, arbitrary and unjustified and may please be quashed. 5. That the Ld. CIT(A) has erred in law and facts of the case while upholding the Assessment Orders without appreciating that the mandatory notice u/s 143(2) of the Act was not issued after filing of return u/s 153A of the Act. As such, the Assessment Orders are bad in law and may please be quashed. 6. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the Assessment Orders without appreciating the fact that the officer passing the Assessment Order and the officer approving the Assessment Order u/s 153D of the Act were placed at same hierarchy in the Income Tax Department, which is purely against the basic premise of said provision of the Act. As such, Assessment Order passed contravention of basic premise of provisions of section 153D of the Act is illegal and may please be quashed. the in Printed from counselvise.com Page | 35 7. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the Assessment Order without appreciating that the mandatory approval u/s 153D of the Act have been given in mechanical manner without application of mind and the copy of approval has not been provided to the Appellant despite being requested for during the course of impugned appellate proceeding. As such, the Assessment Order is illegal and may please be quashed. 8. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the Assessment Order without appreciating that the same have been passed by the office of Deputy Commissioner of Income Tax but the officer holding such office was Joint Commissioner of Income Tax whereas no order u/s 120 of the Act, mandating said person being an authority higher in rank to hold the office of Deputy Commissioner of Income Tax has been brought on record. As such, the Assessment Order passed without valid jurisdiction is illegal and may please be quashed. 9. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the Assessment Order without appreciating that the additions have been made without providing adequate opportunity of being heard to the Appellant and without furnishing copy of satisfaction note prepared u/s 153C of the act, despite of the multiple requests made in such regard. As such, the Assessment Order passed in violation of the principle of natural justice is illegal and may please be quashed. 10. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the addition made by the Ld. AO amounting to Rs. 50,00,000/- u/s 68 of the Act on account of alleged accommodation entry in form of unsecured loan availed from M/s. CEA Consultants Pvt. Ltd. without appreciating the submissions of the Appellant. As such, the addition of Rs. 50,00,000/- is- bad in law and may please be deleted. Printed from counselvise.com Page | 36 11. That the Ld. CIT(A). has erred in law and facts of the case while confirming the addition of Rs. 50,00,000/- u/s 68 of the Act on account of alleged accommodation entry in form of unsecured loan availed from M/s. CEA Consultants Pvt. Ltd. in violation of the principle of natural justice being made on the basis of ex-parte material and statement of third parties without confronting said material and statements with the Appellant in its entirety and without providing opportunity of cross examination. As such, the addition of Rs. 50,00,000/- is bad in law and may please be deleted. 12. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the addition of Rs. 2,00,000/- u/s 69C of the Act made on account of alleged commission, estimated at the rate of 4% of the alleged accommodation entry in form of unsecured loan discussed in ground no. 10 & 11, considered as unexplained expenditure without any tangible basis or evidence. As such, the addition of Rs. 2,00,000/- is bad in law and may please be deleted. Rs. 1,04,026/- 13. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the addition of Rs. 3,14,630/- made on account of disallowance of interest incurred on aforesaid unsecured loan discussed in ground no. 10 & 11 considered as alleged accommodation entry without any tangible basis or evidence. As such, the addition of Rs. 3,14,630/- is bad in law and may please be deleted. 14. That the appellant craves leave to add, alter or delete any ground of appeal during the course of hearing. 22. The ld. Counsel for the assessee, at the outset, referring to ground Nos. 6 and 7 of grounds of appeal, submitted that the mandatory approval given u/s.153D of the Act is in a Printed from counselvise.com Page | 37 mechanical manner, without application of mind and it is a common approval given for various assessee’s including the assessee for various assessment years i.e. from 2013-14 to 2019-20. Therefore, the Ld. Counsel for the assessee contended that since the Additional CIT passed common approval u/s.153D for various assessment years the same is without application of mind, illegal bad in law and therefore, the consequential assessment framed u/s.153C of the Act pursuant to such illegal approval u/s. 153D, is also bad in law and void ab intio. 23. On the other hand the Ld. DR supported the orders of the authorities below. 24. Heard rival contentions and perused the orders of the authorities below. In this case the Addl. CIT granted common approval u/s.153D dated 30.09.2021 as under :- Printed from counselvise.com Page | 38 25. We observed that the issue as to whether the common approval granted u/s. 153D for various assessment years is a valid approval and is in accordance with the provisions of u/s. 153D or not, came up before various High Courts including the jurisdictional High Court in the case of PCIT Vs. Anuj Bansal (65 taxmann.com 2) and the Hon’ble Allahabad High court in the cases of PCIT Vs. Siddharth Gupta (450 ITR 534), PCIT Vs. Subodh Aggarwal (149 taxmann.com 373), PCIT Vs. Sapna Gupta (147 taxmann.com 288). Following the said decision the Printed from counselvise.com Page | 39 coordinate Bench of this Tribunal to which both of us are parties held such a common approval granted u/s.153D is in violation of provisions of section 153D of the Act and is granted in a mechanical manner without due application of mind, in the case of Tish Consultants Pvt. Ltd. vs. DCIT in ITA Nos. 2310 and 2311/Del/2025 dated 16.06.2025 holding as under :- 3. We have heard the rival submissions and perused the materials available on record. A search and seizure operation under section 132(1) of the Act was carried out in the case of Samtel Group on 18-01- 2018. Various residential and business premises of the directors and group companies were covered under the search and survey operations. Warrant was issued in the name of M/s Tish Consultants Pvt. Ltd i.e assessee herein. In view of the search operation, the group case was centralized to Central Circle II, Noida. vide order passed by the Learned PCIT under section 127 of the Act on 15-04-2019. Pursuant to the search, notice under section 153A of the Act stood issued to the assessee on 23-04-2019. In response to the notice, the assessee electronically filed its return of income on 08-12-2019 declaring total income of Rs. Nil. It is pertinent to note that assessee had also filed its original return of income for Assessment Year 2016-17 on 28-09-2016 declaring total income of Rs. Nil. The search assessment was completed under section 153A read with section 144 of the Act on 29-12-2019 for Assessment Year 2016-17 determining total income of the assessee at Rs. 51,54,04,230/-. This assessment order was framed by the Learned AO after getting approval under section 153D of the Act from the Learned Additional Commissioner of Income Tax Central Range, Meerut vide proceedings dated 28-12- 2019. The assessee preferred an appeal before the Learned CIT(A), wherein the fact of approval under section 153D of the Act being granted in a mechanical manner by the Learned Additional CIT thereby making the entire assessment proceedings void ab initio, was indeed raised, vide Ground No. 1.1. The case of the assessee falls under the jurisdiction of Hon’ble Allahabad High Court. Hence, the decision of Hon’ble Printed from counselvise.com Page | 40 Allahabad High Court would become Jurisdictional High Court decision for the assessee and would be binding on all the subordinate authorities. Accordingly, the assessee placed reliance on the decision of Hon’ble Jurisdictional Allahabad High Court in the case of PCIT vs Siddharth Gupta reported in 450 ITR 534 (All) in support of its contentions. The assessee also pointed out that the Special Leave Petition (SLP) preferred by the revenue against this decision before the Hon’ble Supreme Court has been dismissed by the Hon’ble Supreme Court in Special Leave Petition (Civil) Diary No. 43280/2023 dated 9.8.2024. However, the Learned CITA chose to rely on the decision of Hon’ble Chhattisgarh High Court in the case of Hitesh Golcha vs ACIT reported in TAXC No. 76 of 2024 dated 10.4.2024, wherein it was held that there cannot be any presumption as to non-application of mind by the Learned Addl CIT while granting approval under section 153D of the Act. No comments were made by the Learned CITA regarding the non- applicability of decision of Jurisdictional High Court decision of Allahabad. 4. The Learned DR before us filed detailed written submissions supporting the approval granted by the Learned Additional CIT under Section 153D of the Act to be a valid approval and accordingly all the decisions relied upon by the Learned AR cannot be made applicable to the facts of the instant case. But on perusal of the entire written submissions of the Learned DR, we find that what has been sought to be addressed by the Learned DR is only to drive home the point that the approval proceedings of Learned Additional CIT is merely an administrative act and not a quasi-judicial act and hence such administrative approvals cannot be subjected to challenge. But the moot point to be noted in the instant case is the Learned Additional CIT has given consolidated approval for 11 assessees’ for Assessment Years 2012-13 to 2018-19 on a single day which is in violation of provisions of Section 153D of the Act itself as the said section mandates approval to be given for each assessee for each assessment year separately. Hence the entire written submissions of the Learned DR would not advance the case of the revenue in any manner. Printed from counselvise.com Page | 41 5.The Learned DR vehemently argued that very existence of high presumption of law which is also codified u/s 114(e) of the then Indian Evidence Act, 1872 that all official acts are regularly performed and therefore, the Tribunal had to accept that the presumption of approval are validly granted. The Learned DR further stated that merely because the approvals were granted by one letter does not mean that it was not granted for each assessment year. 6. For the sake of convenience, the approval granted under section 153D of the Act by the Learned Additional CIT, Meerut is reproduced below:- 7. On perusal of the above, we find that the Learned Additional CIT, Central Range, Meerut had granted approval in terms of Section 153D of the Act Printed from counselvise.com Page | 42 for all the cases for all assessment years vide consolidated approval in F.No.Addl CIT/CR/MRT/Approval/153D/2019-20/1516 dated 28.12.2019. Hence, it is very clear that a common approval was given by the Learned Additional CIT under section 153D of the Act vide Approval No. 1516 dated 28.12.2019 for various assessees’ for various assessment years. This goes to prove that the approval under section 153D of the Act has not been given by the Learned Addl. CIT for ‘each assessment year’ and for ‘each assessee’ separately which is mandate of the provisions of Section 153D of the Act. This issue is no longer res integra in view of the decision of the Hon’ble Jurisdictional Allahabad High Court in the case of PCIT vs Sidharth Gupta reported in 450 ITR 534 (All) wherein it was held as under:- “16. The approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant- revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval of superior authority means that it should appraise the material before it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the Assessing Authority before preparing the draft assessment order. It is trite in law that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. The requirement of approval under section 153D is pre-requisite to pass an order of assessment or re-assessment. Printed from counselvise.com Page | 43 17. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of \"each assessment year\" referred to in clause (b) of sub-section (1) of section 153A which provides for assessment in case of search under section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of \"each assessment year\" falling within six assessment years (and for the relevant assessment year or years), referred to in clause (b) of sub-section (1) of section 153A. The proviso to section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years). 18. The careful and conjoint reading of section 153A(1) and section 153D leave no room for doubt that approval with respect to \"each assessment year\" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment orders under section 153A. 19. In the instant case, the draft assessment orders in 123 cases, i.e. for 123 assessment years placed before the Approving Authority on 30-12-2017 and 31-12-2017 were approved on 31-12-2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 123 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record.” (emphasis supplied by us) 8. Similar views were expressed by the Hon’ble Allahabad High Court in the case of PCIT Vs. Subodh Agarwal reported in 149 taxmann.com 373 (All. HC); PCIT Vs. Sapna Gupta reported in 147 taxmann.com 288 (All. HC) and by Hon’ble Delhi High Court in the Printed from counselvise.com Page | 44 case of PCIT vs Anuj Bansal reported in 165 taxmann.com 2 (Del. HC), among others. 9. We find that if a consolidated approval given by the Learned Addl. CIT for various assessees’ for various assessment years is to be considered as an approval given for “each assessment year”, then it would render the requirement of passing an order for “each assessment year” with prior approval under section 153D of the Act, nugatory. Therefore, the obligation on the approving authority is to verify the draft assessment order of each assessment year together with the related seized document to ascertain whether it complies with law as well as the procedure laid down. Hence it is established that the action of the Learned Additional CIT in granting common approval for all the assessment years for various assessees’ in a mechanical manner without application of mind is writ large. 10. Since the issue is covered by the decision of Hon’ble Jurisdictional Allahabad High Court, the decision of Hon’ble Chhattisgarh High Court relied upon by the Learned DR need not be gone into in view of the principles of binding precedents. 11. In view of the aforesaid observations and respectfully following the judicial precedents relied upon herein above, we have no hesitation in holding that the approval under section 153D of the Act has not been granted for each of the assessment year which is in violation of provisions of Section 153D of the Act itself thereby making the approval being granted in a mechanical manner without due application of mind. Hence, the Ground No. B raised by the assessee is hereby allowed. Consequentially the assessment framed for Assessment Years 2016-17 and 2018-19 are hereby quashed. Since, the assessments are quashed based on Ground No. B, the other grounds raised by the assessee need not be gone into and they are left open. 26. Thus, respectfully following the decision of various High Courts and the coordinate Bench of Tribunal referred to above, we hold that the common approval granted u/s.153D of the Printed from counselvise.com Page | 45 Act dated 30.09.2021 in Assessee’s case is not in accordance with provisions of section 153D of the Act as it is granted in a mechanical manner and without due application of mind and therefore, the same is bad in law and consequently the assessment framed u/s.153C for the A.Y.2018-19 pursuant to such illegal approval is also bad in law and void ab initio. Thus, we hereby quash the assessment framed u/s.153C r.w.s. 143(3) dated 30.09.2021. Ground Nos. 6 and 7 are allowed. 27. Since the assessment is quashed on legal issue, all other legal grounds and the grounds on merits need not be adjudicated at this stage since they become only academic in nature and hence they are left open. 28. In the result, the appeals of the revenue are dismissed for A.Y. 2015-16 and 2017-18 and appeal of the assessee for the A.Y. 2018-19 is partly allowed as indicated above. Order pronounced in the open court on 25.03.2026. Sd/- Sd/- [M. BALAGANESH] [C.N. PRASAD] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25.03.2026 *Neha, Sr.PS Printed from counselvise.com Page | 46 Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "