Case Number: ITA 1612/DEL/2019
Appellant: Rajnish Talwar, New Delhi
Respondent: ACIT, Central Circle-4, New Delhi
Assessment Year: 2011-12
Date of Case Filing: 27th February 2019
Order Type: Final Tribunal Order
Date of Order: 19th January 2021
Pronounced On: 19th January 2021
The case involves Rajnish Talwar, who filed an appeal against the Assistant Commissioner of Income Tax (ACIT), Central Circle-4, New Delhi, concerning the assessment year 2011-12. The appeal was filed on 27th February 2019, and the final judgment was pronounced on 19th January 2021.
The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench “E”, with Judicial Member Shri Bhavnish Saini and Accountant Member Shri Prashant Maharishi presiding over the matter.
A search and seizure operation was conducted on 29th December 2015 against Shri Rajnish Talwar, former General Manager (Sales) of Jagatjit Industries Ltd. (JIL), and Shri Sanjay Duggal, former Deputy General Manager (Sales) of JIL, along with their family members and the MAPSKO Group. The primary issue was the deposit of significant sums in the bank accounts of M/s. Alfa India, a proprietary concern of Shri Arun Duggal, and the transfer of these funds to various bank accounts held by the Talwar and Duggal families.
The Income Tax Department discovered that substantial amounts were transferred from the bank accounts of M/s. Alfa India to the bank accounts of Shri Rajnish Talwar, his family members, and Shri Sanjay Duggal’s family members. These funds were withdrawn in cash, generally.
The investigation revealed that the funds in M/s. Alfa India’s accounts were received from various liquor distributors, including M/s. Sohan Lal Singla AOP and M/s. Om Prakash Singla AOP, part of the MAPSKO Group. These transactions were routed through bank accounts maintained in various branches of South Indian Bank. The bank authorities raised concerns due to large value transactions and requested the account holders to provide copies of their PAN cards, which were initially refused by the customers.
Enquiries conducted by the Income Tax Department revealed that M/s. Alfa India was used as a conduit to route unaccounted money generated through ‘rebates and discounts.’ The funds in M/s. Alfa India’s account were transferred to the Talwar and Duggal family members’ bank accounts. These transactions were not reflected in the books of M/s. Jagatjit Industries Ltd.
During the search, Shri Sanjay Duggal and Shri Rajnish Talwar made various statements admitting to their involvement in these transactions. Shri Sanjay Duggal stated that M/s. Alfa India was in the business of promotional activities like brand promotion through gift distribution in liquor trade on behalf of M/s. Discovery Asia AOP and its member Sh. O.P. Singla. However, these claims were found to be unverifiable.
Shri Rajnish Talwar admitted that the funds withdrawn in cash were used to incentivize key managerial persons belonging to L-1 license holder groups and other wholesale and retail salesmen in Haryana. These funds were borne by M/s. Jagatjit Industries Ltd. in the form of rebate adjustments to these wholesalers.
The Assessing Officer (AO) observed inconsistencies in the statements given during and after the search. The comparison of the statements recorded at the time of the search and those recorded in the post-search enquiries revealed glaring inconsistencies regarding the utilization of cash withdrawn from the bank accounts of the Talwar and Duggal families.
The AO noted that no credible evidence was provided to support the claims of gift purchases or the identities of beneficiaries. The statements of Shri Sanjay Duggal and Shri Rajnish Talwar regarding the utilization of cash were found to be contradictory and unverified.
The Tribunal concluded that the funds transferred to the Talwar and Duggal family members’ accounts were unaccounted for and not reflected in the books of M/s. Jagatjit Industries Ltd. The Tribunal found that the approval granted under section 153D by the Joint Commissioner of Income Tax (JCIT) was done in a mechanical manner without proper application of mind.
The Tribunal emphasized that the approval process should involve a detailed examination of the seized material and other records, ensuring that all statutory requirements are met. The Tribunal held that the assessments made under section 153A were not valid as they were based on improper approval under section 153D.
The Tribunal quashed the assessments made under section 153A for the assessment year 2011-12, as the approval under section 153D was found to be invalid. The case highlights the importance of proper application of mind and adherence to statutory requirements in the approval process under section 153D of the Income Tax Act.
This case serves as a significant precedent in ensuring that the approval process under section 153D is conducted with due diligence and proper scrutiny, safeguarding the interests of the taxpayers and maintaining the integrity of the assessment process.
Income Tax Appeal: Rajnish Talwar vs. ACIT, Central Circle-4, New Delhi
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