PARNIKA COMMERCIAL AND ESTATE PRIVATE LIMITED ,NEW DELHI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE , GHAZIABAD

ITA 4494/DEL/2024

AI Insights

The case involves multiple appeals by Parnika Commercial and Estate Pvt. Ltd., Balkishan Jain, and the DCIT, Central Circle, against the orders of the Commissioner of Income Tax (Appeals) concerning the assessment years 2018-19 and 2019-20. The primary legal issue revolved around the validity of the jurisdiction assumed under section 153C and the procedural correctness of the approvals granted under section 153D of the Income Tax Act, 1961. The Tribunal examined whether the approvals for the assessments were granted with due application of mind or were merely mechanical, leading to the quashing of the assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41835 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2019-2020
• Other Referred Cases: PCIT vs. Siddarth Gupta, M/s Millenium Vinimay (P) Ltd. vs. ACIT, PCIT vs. Shiv Kumar Nayyar, ACIT, Circle-1 (2) Vs. Serajuddin and Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA GUPTA
• Assessee Lawyers: PARIKSHIT AGARWAL; INVOKING SECTION C OF
• Keywords: Set aside; Opportunity of being heard; Question of law; Income from undisclosed sources
• Section: 143(3); 250; 64; 132; 153A; 43; 69C; 13; 69A; 153C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT and SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.4494/DEL/2024 (Assessment Year: 2019-20) Parnika Commercial and Estate Pvt. Ltd., vs. DCIT, Central Circle, D-64, 6th Floor, Himalaya House, Ghaziabad. 23, Kastoorba Gandhi Marg, New Delhi – 110 001. (PAN : AAACP0555C) ITA No.4476/DEL/2024 (Assessment Year: 2018-19) ITA No.4474/DEL/2024 (Assessment Year: 2019-20) DCIT, Central Circle, vs. Parnika Commercial and Estate Pvt. Ltd., Ghaziabad. D-64, 6th Floor, Himalaya House, 23, Kastoorba Gandhi Marg, New Delhi – 110 001. (PAN : AAACR9819F) ITA No.4600/DEL/2024 (Assessment Year: 2019-20) Balkishan Jain, vs. DCIT, Central Circle, 508, Pargati Deep, 8, District Centre, Ghaziabad. Laxmi Nagar, Delhi – 110 092. (PAN : AYAPJ8498B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Parikshit Agarwal, CA REVENUE BY : Ms. Amisha Gupta, CIT DR Date of Hearing : 24.02.2025 Date of Order : 26.03.2025 2 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. The assessee, Parnika Commercial and Estate Pvt. Ltd. and Revenue has filed cross appeals against the orders of the ld. Commissioner of Income Tax (Appeals)-3, Noida [“ld. CIT(A)”, for short] dated 29.07.2024 for AY 2019-20 and the Revenue has also filed appeal for AY 2018-19 against the order of ld. CIT (A)-32, Noida dated 29.07.2024.. The assessee, Balkishan Jain has filed appeal against the order of ld. CIT (A)- 3, Noida dated 29.07.2024 for AY 2019-20. 2. Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. First we take up assessee’s appeal (Parnika Commercial and Estate Pvt. Ltd.) in ITA No.4494/Del/2024 for AY 2019-20 as the lead case and the assessee has taken the following grounds of appeal :- “1. That on the facts, circumstances and legal position of the case, Worthy CIT(A),in Appeal No. CIT(A), Kanpur-4/11280/2018-19has erred in passing order dtd. 29.07.2024 in contravention of provisions of S. 250 of the income Tax Act, 1961 (hereinafter referred to as \"Act\"). 2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of passing asst. order by illegally assuming jurisdiction u/s 153C and more-so when no material existed for assumption of valid jurisdiction u/s 153C and also when the satisfaction note does not satisfy the requirements of valid assumption of jurisdiction u/s153C. 3. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of passing asst. order even when the said order had been passed on the basis of illegal transfer order u / s 127. 3 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition made by Ld. AO of Rs.1,00,00,000/- to the income of the appellant u/s 69C r.w.s 115BBE of the Act, even when; 4.1 The appellant made genuine purchases of Rs.1,00,00,000/- from M/s Vaishno Steels which were supported by ledgers and bills. 4.2 Though the total purchases invoices from M/s Vaishno Steels during the year in question was for Rs.2,14,48,865/- but these invoices included GST/VAT of Rs.32,71,861/- which had not been debited to P/L account and when said amount has not been claimed as expenditure, disallowance thereof was not at all warranted. 4.3 Without prejudice, even if the said purchases are to be held as not-genuine, only the reasonable profit element could have been added; 4.4 Without prejudice, even if addition of disallowance of purchases was to be made, it could not have been made u/s 69C and could only have been made u/s 37. 4.5 Without prejudice, even if addition of disallowance of purchases was to be made, it could not have been made u/s 69C and could only have been made u/s 37. 5. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition made on substantive basis by Ld. AO of Rs.1,14,00,000/ - by erroneously holding that the cash found during the course of search u/s 132 on vehicle bearing no.DL12CM8716 justifies similar addition regarding purchases made from Vaishno Steels by the appellant even when addition for same cash was made and confirmed on substantive basis in the hands of Bal Kishan Jain also. 6. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the addition made by Ld. AO of Rs.2,05,25,949/- by erroneously holding that the Whatsapp conversations' between the son of the director i.e. Sh. Piyush Gupta and Sh. Mahender Singh regarding the alleged cash transactions is unaccounted income of the appellant u/s 69A r.w.s 115BBE and more-so when the Ld , AO had wrongly deciphered the whatsapp conversations and when such conversation did not satisfy the test of being a valid evidence. 7. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO in imposing tax rate of 60% u/s 115BBE plus surcharge thereon on above additions made, even when if the said addition is accepted academically, the same could only have been taxed at normal rates. 8. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO in acquiring jurisdiction u/s 153C as such order is invalid and unlawful since the approval u/s 153D was without due application of mind and was merely ritualistic. 4 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 9. That on facts, circumstances and legal position of the case Worthy CIT(A) has erred in confirming the action of Ld. AO of passing assessment order without having DIN. 10. That on facts, circumstances and legal position of the case, the order passed by Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been passed without affording reasonable opportunity of being heard to the appellant. 3. At the time of hearing, ld. AR of the assessee mainly pressed Ground No.2 of the grounds of appeal wherein assessee has raised the issue of approval granted under section 153C of the Income-tax Act, 1961 (for short ‘the Act’) wherein approval granted u/s 153D was granted group approval. In this regard, he brought to our notice pages 317 & 318 of the paper book and he brought to our notice the letter drafted by the AO for seeking approval in the case of the assessee by invoking section 153C of the Act. However, approval was granted u/s 153D was for section 153A of the Act. He submitted that common approval granted for all the assessees as listed at page 318 of the paper book for AYs 2013-14 to 2019-20 are bad in law. In this regard, he relied on the decisions of Hon’ble Allahabad High Court in the case of PCIT vs. Siddarth Gupta (2023) 147 taxmann.com 305 (Allahabad). He submitted that it is held that each assessee and for each assessment year, the approval has to be granted by the approving authority. He submitted that the approval was granted mechanically without properly referring to the detailed facts in each case and in particular, he submitted that the approval sought by the 5 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 AO is u/s 153C whereas approval was granted for section 153A of the Act. 4. Further with regard to AY 2018-19, he submitted that the assessee has raised specific ground of jurisdictional issue u/s 153C and assumption of valid jurisdiction u/s 153C before the ld. CIT (A), however ld. CIT (A) did not adjudicate the above issue, but gave relief on merits. Accordingly, he invoked Rule 27 of Income Tax (Appellate Tribunal) Rules and submitted that assessee draws powers to defend the order appealed by the Revenue and accordingly he raised cross objections. He submitted that the issue under consideration is similar in AYs 2018-19 & 2019-20 and also in the case of Balkishan Jain in AY 2019-20. 5. On the other hand, ld. DR of the Revenue relied on the findings of ld. CIT (A) at page 55 of the appellate order for AY 2018-19 wherein ld. CIT (A) has given specific finding that the issue under consideration is not a mechanical approval. With regard to submission of ld. AR of the assessee on the approval sought by the AO u/s 153C whereas approval was granted u/s 153A of the Act, she submitted that it is only a clerical mistake and it cannot be taken out of proportion. Accordingly, she objected to the submissions of the ld. AR of the assessee. 6. Considered the rival submissions and material placed on record. Before deciding the legal issue in dispute, we may gainfully reproduce the approval u/s. 153D of the Act, which read as under:- 6 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 7 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 9. We observed that at the time of hearing, Ld. AR of the assessee filed a Written Submissions containing 64 pages wherein, plethora of case laws have been referred, whereby the legal issue in dispute has been decided in favour of the assessee. However more particular, ld. AR drew our attention towards Hon’ble Allahabad High Court decision in the case of PCIT vs. Sidddarth Gupta (supra) wherein Hon’ble Court held that, “wherein approval u/s 153D was given for 123 cases through a single letter. On considering the above facts, court held that the approval granted u/s 153D is mechanical in nature and consequential impugned order is void-ab-initio. 10. Further we also find support from the decision of ITAT Delhi Bench in the case of M/s Millenium Vinimay (P) Ltd. vs. ACIT, ITA No.458/Del/2022 dated 31.5.2024 and Hon’ble Delhi High Court decision in the case of PCIT vs. Shiv Kumar Nayyar in ITA No. 285/2024 (Del), dated 15.05.2024 that the legal issue is in favour of the assessee. The relevant findings of the Coordinate Bench in the case of M/s Millenium Vinimay (P) Ltd. (supra) are reproduced as under:- “15. There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D of the Act. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the co-ordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332(Mum.) which has been approved by jurisdictional High Court subsequently, reported in 307 CTR 218 8 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 affirms the plea of the Assessee, wherein the Hon'ble Bombay High Court held as under:- \"1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal (\"the Tribunal\" for short) dated 19th August, 2015. 2. Following question was argued before us for our consideration: \"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 (\"the Act\" for short) for Assessment Year 2007- 08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with. 4. This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record. 5. The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid. 6. Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks : \"To, The DCIT(OSD)1, Mumbai Subject: Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref: No. DCIT (OSD)1/ CR7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analyze the issue of draft order on merit. Therefore, 9 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 the draft order is being approved as it is submitted. Approval to the above said draft order is granted u/s 153D of the I. T. Act, 1961.\" 7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises. 8. Accordingly, the Tax Appeal is dismissed.\" 16. In the case of ACIT, Circle-1 (2) Vs. Serajuddin and Co. the Hon'ble Supreme Court in SLP (Civil) Dairy No. 44989/2023 vide order dated 28/11/2023, dismissed the Appeal filed by the Department of Revenue against the order dated 15/03/2023 in ITA No. 43/2022 passed by the Hon'ble High Court of Orissa at Cuttack, wherein the Hon'ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. 17. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the arguments advanced by the Ld. the Assessee's Representative on the Additional Ground of Appeal. In our considered opinion the approvals so granted under the shelter of section 153D of the Act does not pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments orders in the captioned appeals are non-est and a nullity and hence the same are quashed. 18. In view of prima facie merits found in the legal objections raised in the Addl. Grounds of the Assessees, we do not consider it expedient to look into the aspects on merits of additions/disallowance as the legal objections on sanction granted under Section 153D of the Act has been answered in favour of the Assessee. Thus the other Grounds raised in the Appeals of the Assessee in both 10 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 the Appeals have rendered in- fructuous, which do not need any separate adjudication. 19. In the result, the Appeals filed by the Assessee in ITA Nos. 294/Del/2022 and ITA No. 295/Del/2022 are allowed. 11. Upon considering the entire aspect of the matter, we find that the approval has been granted not separately for each assessment year for the assessee whereas the provision of Section 153D of the Act stipulates conditions that no order of assessment or reassessment shall be made by an Assessment Officer below the rank of Joint Commissioner in respect of each assessment year referred to in Clause (b) of Sub Section (1) of Section 153A of the Act or the assessment year referred to in Clause (b) of Sub Section 153B of the Act except the prior approval of the Joint Commissioner. It further appears from the approval dated 08.06.2018 that the same was a common and composite order whereas the Addl. Commissioner is required to verify and approve that each of assessment year is complied with as well as procedural laid down under the Act. Such fact clearly reveals non-application of mind on the part of the Learned Addl. Commissioner of Income Tax, Central Range-7, New Delhi. Thus granting approval for all the common years instead of approval under Section 153B for each assessment year separately de horse the rules. The said approval is found to have been given in a mechanical and routine manner. We find that the order issuing authority has not discharged its statutory duties cast upon him even by assigning cogent reasons in respect of the issues involved in the matter. Thus granting approval in the absence of due application of independent mind to the material on record for each assessment year in respect of the assessee's case separately vitiates the entire proceedings; the same is found to be arbitrary and erroneous and therefore, liable to be quashed. We are also inspired by the ratio laid down in the Judgment narrated hereinabove passed by the Hon'ble Jurisdictional High Court and respectfully relying upon the same with the above observation, we quash the entire proceeding initiated under Section 153C r.w.s 153A of the Act in the absence of a valid approval granted by the Learned Additional Commissioner of Income Tax, Central Range-7, New Delhi. 12. In the result, appeal of the assessee is allowed.” 13. We further find that Hon’ble jurisdictional High Court in the case of PCIT vs. Shiv Kumar Nayyar (supra) has decided the similar legal issue in favour of the assessee and against the Revenue. The relevant findings of the Hon’ble Delhi High Court are reproduced as under :- 11 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 “15. A similar view was taken by this Court in the case of Anuj Bansal (supra), whereby, it was reiterated that the exercise of powers under Section 153D cannot be done mechanically. Thus, the salient aspect which emerges from the abovementioned decisions is that grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind. 16. In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under:- \"10. We have gone through the approval granted by the ld. Addl. CIT on 30.12.2018 u/s 153D of the Act which is enclosed at page 36 of the paper book of the assessee. The said letter clearly states This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 that a letter dated 30.12.2018 was filed by the ld. AO before the ld. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The ld. Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30.12.2018 for seven assessment years in the case of the assessee and for seven assessment years in the case of Smt. Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. Neetu Nayyar from Central Public Information Officer who is none other than the ld. Addl. Commissioner of Income-tax, Central Range-S, New Delhi, under Right to Information Act, wherein, it reveals that the ld. Addl. CIT had granted approval for 43 cases on 30.12.2018 itself. This fact is not in dispute before us. Of these 43 cases, as evident from page 36 of the paper book which contains the approval u/s 153D, 14 cases pertained to the assessee herein and Smt. Neetu Nayyar. The remaining cases may belong to some other assessees, which information is not available before us. In any event, whether it is humanly possible for an approving authority like ld. Addl. CIT to grant judicious approval u/s 153D of the Act for 43 cases on a single day is the subject matter of dispute before us. Further, section 153D provides that approval has to be granted for each of the assessment year whereas, in the instant case, the ld. Addl. CIT has granted a single approval for all assessment years put together.\" 17. Notably, the order of approval dated 30.12.2020 which was produced before us by the learned counsel for the assessee clearly signifies that a single approval has been granted for AYs 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact 12 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above. 18. Therefore, under the facts of the present case, considering the foregoing discussion and the enunciation of law settled through This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 judicial pronouncements discussed hereinabove, we are unable to find any substantial question of law which would merit our consideration.” 14. Respectfully following the above precedents, we quash the entire proceedings initiated under section 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the Ld. Addl.CIT, Central Range, Meerut. 15. We are refrained from adjudicating the other grounds of appeal and at this stage, we keep the other grounds of appeal open. 16. In the result, the appeal being ITA No.4494/Del/2024 (Parnika Commercial and Estate Pvt. Ltd.) for assessment year 2019-20 stands partly allowed. 17. With regard to Revenue’s appeals for AYs 2018-19 & 2019-20 are concerned, since the facts are exactly similar to assessee’s appeal in AY 2019-20 our above findings in AY 2019-20 are applicable mutatis mutandis in AYs 2018-19 & 2019-20. Accordingly, the appeals being ITA Nos.4476 & 4474/Del/2024 for AYs 2018-19 & 2019-20 filed by the Revenue are dismissed. The facts in assessee’s (Balkishan Jain) appeal 13 ITA Nos.4474, 4476, 4494 & 4600 /Del/2024 for AY 2019-20 are exactly similar to assessee’s (Parnika Commercial and Estate Pvt. Ltd.) appeal in AY 2019-20 our above findings in AY 2019-20 are applicable mutatis mutandis in AYs 2019-20 and accordingly, the assessee’s appeal is partly allowed. 18. To sum up : the assessee’s appeals in Parnika Commercial and Estate Pvt. Ltd. and Balkishan Jain are partly allowed and the appeals filed by the Revenue are dismissed. Order pronounced in the open court on this 26th day of March, 2025. Sd/- sd/- (MAHAVIR SINGH) (S.RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 26.03.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "