ITAT Delhi Remands ₹1.38 Crore Addition Case Citing Lack of Reasoned Order by CIT(A) and Mandates Review of Section 153D Approval

The principles of natural justice mandate that appellate authorities within the tax administration must pass "speaking orders." A speaking order is one that stands the test of scrutiny by clearly articulating the reasons for a decision, addressing the specific contentions raised by the assessee, and applying the law to the facts on record. When an appellate authority, such as the Commissioner of Income Tax (Appeals), dismisses an appeal summarily without adjudicating on the merits, the higher judiciary often intervenes to restore the matter for proper adjudication.

In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, addressed this precise issue in the case of Forum Sales Pvt. Ltd. Vs DCIT. The Tribunal set aside an appellate order confirming an addition of ₹1.38 crore, holding that the lower appellate authority failed to pass a reasoned order. Furthermore, the Tribunal directed the adjudication of the validity of administrative approval granted under Section 153D of the Income Tax Act 1961, in light of the judicial precedent set by the Delhi High Court in PCIT vs. Shiv Kumar Nayyar.

Factual Matrix of the Case

The dispute arose from search and seizure proceedings initiated against the assessee. The litigation spanned two assessment years, with the Assessment Year (AY) 2013–14 being treated as the lead case due to the similarity of issues involved.

Initial Assessment and First Round of Litigation

The assessee had originally filed a return of income under Section 153A of the Income Tax Act 1961, declaring a total income of ₹75.88 lakh. However, the Assessing Officer (AO), upon scrutiny, framed the assessment under Section 143(3) read with Section 153A, determining the income at a substantially higher figure of ₹7.43 crore.

A significant portion of this demand stemmed from an addition regarding alleged unaccounted profits derived from transactions with two specific entities: M/s Bajrang Traders and Gurunanak Enterprises. The Revenue alleged that the assessee had earned profits outside the books of accounts.