Case Number: ITA 1618/DEL/2019
Appellant: Ratnashri Buildtech Pvt Ltd., Delhi
Respondent: ACIT Central Circle 4, New Delhi
Order Type: Final Tribunal Order
Case Filed on: 2019-02-27
Date of Order: 2021-01-19
Pronounced on: 2021-01-19
The case revolves around the assessment for the year 2010-11, initiated due to a search and seizure operation conducted on 29.12.2015. The appellant, Ratnashri Buildtech Pvt Ltd., was subjected to scrutiny following substantial financial transactions involving related entities and individuals.
The primary issues in this case were the unexplained credits in the bank accounts and the alleged use of a dummy concern, M/s Alfa India, to route unaccounted money. The appellant argued that they were merely conduits for funds directed by M/s Jagatjit Industries Ltd. (JIL).
The search operation revealed significant transactions in the bank accounts of the appellant and related parties, including the Duggal and Talwar families. The funds were traced back to liquor wholesalers, notably M/s Sohan Lal Singla AOP and M/s Om Prakash Singla AOP, part of the MAPSKO Group.
Detailed analysis of bank transactions showed a pattern of funds being transferred from M/s Alfa India to various accounts belonging to family members of Sanjay Duggal and Rajnish Talwar. These funds were withdrawn in cash, raising suspicions of unaccounted income.
The appellant contended that they were not the actual beneficiaries of the funds. They argued that the funds belonged to JIL and were used as part of the company’s sales promotion strategies. The appellant maintained that they had no control over the funds and acted under the directions of JIL.
The AO observed inconsistencies in the statements of the appellant and other involved parties, particularly regarding the utilization of cash withdrawals. The AO noted that the funds were not reflected in the books of JIL and were routed through M/s Alfa India to avoid taxes.
The AO made several additions to the appellant’s income, treating the unexplained credits as income under Section 68 of the Income Tax Act. The AO also disallowed various expenses claimed by the appellant, citing lack of evidence.
The assessments were made under Section 153A, requiring prior approval under Section 153D. The appellant argued that the approval was mechanical and lacked application of mind. The ITAT scrutinized whether the JCIT had indeed reviewed the assessment orders adequately before granting approval.
The Income Tax Appellate Tribunal (ITAT) analyzed the procedural aspects of the case, focusing on the validity of the approval under Section 153D. The ITAT emphasized that the approval process must involve a thorough review of the material and application of mind by the approving authority.
The ITAT found that the JCIT’s approval lacked detailed examination and was granted in a mechanical manner. The ITAT stressed that the assessment orders under Section 153A must be backed by proper approval under Section 153D, ensuring the procedural requirements are met.
As a result, the ITAT concluded that the assessment orders were invalid due to the improper approval process. The case was remanded back to the AO for fresh consideration, following the correct procedures for approval under Section 153D.
This case underscores the importance of adhering to procedural requirements in tax assessments, especially in cases involving search and seizure operations. The ruling highlights that approvals under Section 153D must be thorough and reflect an application of mind, ensuring fair and just assessments.
The decision also reinforces the need for detailed documentation and evidence to support claims and defenses in tax disputes. It serves as a reminder for tax authorities to follow due process and for taxpayers to maintain comprehensive records to substantiate their financial transactions.
Overall, the ITAT’s ruling in ITA 1618/DEL/2019 provides valuable insights into the complexities of tax assessments post-search operations and the critical role of procedural compliance in upholding the integrity of the assessment process.
Ratnashri Buildtech Pvt Ltd vs ACIT Central Circle 4, New Delhi: Analysis of ITA 1618/DEL/2019
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