Delhi High Court Affirms ITAT’s Authority to Directly Remit Cases to TPO, Renders AO’s Second Reference Redundant

 Case Name: New Delhi Television Ltd. v. Dispute Resolution Panel 2 & Anr 

Case No.: W.P.(C) 2322/2021 

Dated: May20, 2024 

Quorum: Justice Yashwanth Varma and Justice Purushaindra Kumar Kaurav 



The writ petitioner challenges the Dispute Resolution panel’s ruling. Panel from January 29, 2021, which has refuted its concerns about the preliminary evaluation order formulated on March 31, 2013. That particular draft the evaluation order was created in response to a directive issued by the Officer of Transfer Pricing on October 29, 2019. It appears that the petitioner to have argued before the DRP that, in essence, the reference to the TPO on December 27, 2018, was a follow-up reference to allegedly implement the Income Tax Appellate Court’s ruling tribunal on July 14, 2017.  

Despite having framed an order on October 17, 2017, the record would show that no equivalent order as required by Income Tax Act, 1961 Section 92CA(4) was framed. In order to give effect to the original ITAT order dated July 14, 2017, the petitioner had urged the DRP to consider that the reference made on December 27, 2018, as well as the consequential order dated October 29, 2019, framed by the TPO, were manifestly barred by the statute of limitations as embodied in Section 153(3) of the Act. 

Nevertheless, the DRP declined to consider the restriction challenge, pointing out that Section 144C(8) limits its authority to verifying, modifying, or improving the changes suggested in the draft order. It seems to have essentially adopted the stance that it could not consider a jurisdictional challenge brought forth as an objection under Section 144C(2) of the Act. It is offended by the aforementioned action, which led to the current writ petition being filed.  

According to the Special Bench’s previously stated opinion, it seems that the appeal itself was instructed to be presented before the suitable ITAT Bench for resolution with regard to the findings as produced. It would be relevant to remember that on July 14, the ITAT when discussing the topic of corporate guarantees in 2017, returned the matter with the warning for the TPO’s consideration. That the aforementioned query will be held until the decision was made by the Particular Bench in the ongoing case.  


  • Section 92CA(4) of the Income Tax Act, 1961- After receiving the order under sub-section (3), the Assessing Officer will calculate the assessee’s total income under section 92C, sub-section (4), taking into account the arm’s length price that the Transfer Pricing Officer determined under sub-section (3). 
  • Section 153(3) of the Income Tax Act– An order under section 254 or section 263 or section 264, setting aside or cancelling an assessment or an order under section 92CA, as the case may be, may be made at any time before the end of the nine-month period following the end of the fiscal year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner. 


The learned counsel for the appellants fiercely and strongly argued that a reading of the ITAT’s order dated July 14, 2017, makes it clear that the parties’ permission was obtained before the TPO was mentioned. Mr Jolly emphasised that the respondents had not contested the order dated July 14, 2017, insofar as it related to the referral to the TPO. As a result, they were ineligible to criticise or raise doubts about the propriety of the process used by the ITAT to make that referral. 

It was also emphasised that while the respondents filed appeals on January 02, 2018, against the ITAT’s order dated July 14, 2017, those appeals are limited to the merits of the several issues that were ultimately decided. Even in those appeals, which The learned counsel filed, the respondents do not criticise or cast doubt on the propriety of the ITAT’s decision to forward the case to the TPO.  

The learned counsel went on to say that a simple reading of the TPO’s first ruling, dated October 17, 2017, would prove beyond a reasonable doubt that the aforementioned authority had acted in accordance with the ITAT’s instructions and to give effect to and carry out the order dated July 14, 2017.  

The TPO’s reference and assumption of jurisdiction were subsequently challenged on the basis of limitation as outlined in Section 153 of the Act. The learned counsel contended that the time frame within which the AO or the TPO could have concluded that exercise would be governed by Section 153(3) of the Act, unquestionably in terms of the order of July 14, 2017, and which would clearly be liable to be read as requiring a fresh assessment to be undertaken.  

When considering this, skilled counsel argued that the deadline for creating a draft appeal effect order would have ended on December 31, 2018. The learned counsel stated that this would logically follow from the Act’s Section 153(3)’s straightforward language.   


The arguments put forward by the learned counsel for the appellants were sharply and passionately rejected by the learned counsel for originally filed a preliminary objection, arguing that the writ petition should not be granted in defiance of the DRP’s directives. According to The learned counsel’s submission, Section 144C of the Act establishes a unique method to address situations in which alterations in transfer pricing may lead to variances. According to The learned counsel’s submission, qualified assessees are provided with a draft assessment order in all circumstances whereby they are entitled to file objections with the DRP under the Act. It was mentioned that after the DRP rejects those objections, the issue is brought before the AO, who would then decide whether to issue an assessment order.  

As per the advice of knowledgeable legal counsel, an assessee’s entitlement to challenge the respondents’ actions or pursue legal remedies will only be acknowledged upon the drafting of a final assessment decision that follows the DRP’s directives. The learned counsel argued that the DRP’s resolution of objections does not create a liability and is merely a step towards assessment in the event that the assessee is eligible. According to knowledgeable counsel, a tax liability wouldn’t materialise until after a final assessment decision was approved and was subject to an ITAT appeal.  

Subsequently, it was argued that the challenge to the DRP’s recommendations is misguided because it is evident that the aforementioned authority lacks the authority to consider any potential jurisdictional issues, including objections to limitations. It was argued that the DRP’s authority is limited to “confirming, reducing or enhancing the variations proposed,” as would be clear from Section 144C(8) of the Act. The learned counsel argues that this authority cannot be seen as equivalent to or similar to the authority to set aside.  


First, the court noted that the provisions included in the Finance Act, 2016 were the first to introduce and structure the “nine” and “twelve” month window governing assessments to be made post remit by the ITAT and in cases where a reference under Section 92CA(1) of the Act may be made during an ongoing assessment. Section 153 of the Finance Act, 2014 fully acknowledged and established provisions regarding assessments that may need to be made in compliance with the method outlined under Section 92CA of the Act. This is the second aspect of some relevance.  

After outlining the main points of contention, we believe it is fair to take a closer look at Mr. Hossain’s preliminary objection. Recall that Mr. Hossain had argued that the petitioner was only contesting a DRP order, which in any event carries no legal consequences. The main argument of the submission was that this Court would not be able to use the Article 226 of the Constitution’s jurisdiction if no corresponding order of assessment had been framed. For the following reasons, we are unable to support that objection.  

The court also noted that the Act’s Section 92CA(1) specifies that the concerned AO alone may refer to the TPO. Nonetheless, we see no reason to question the ITAT’s authority to make such a reference while reviewing an appeal that might be brought before it, given the stature and position that have been bestowed upon it. This is because, according to Section 253 of the Act, an assessee has the right to contest a directive that the DRP issued and that may have been converted into a real assessment order.  

The court also discovered that the ITAT’s order referring the case to the “Assessing Officer/Transfer Pricing Officer/Dispute Resolution Panel” was at issue in the ruling made by a knowledgeable single judge of the Karnataka High Court in the TE Connectivity case.  

In any event, the High Court finally ruled in favour of the assessee in that particular case. We are unable to find any observation or conclusion in that decision that might be interpreted as supporting the arguments made by the respondents in this particular process.  

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Judgment reviewed by Riddhi S Bhora. 

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Income Tax Orders cannot be a ground to discharge the accused from Corruption Charges: Supreme Court

Case title: Puneet Sabharwal Vs CBI and R.C. Sabharwal Vs CBI

Case no.: SLP (Criminal) No. 2044 OF 2021

Decision on: March 19th, 2024

Quoram: Justice Vikram Nath and Justice K.V. Viswanathan

Facts of the case

R.C. Sabharwal, an Additional Chief Architect at NDMC, owned assets disproportionate to his known sources of income. It was alleged that he was party to criminal conspiracy wherein, he amassed assets disproportionate to his income, with his son, Puneet Sabharwal who allegedly received Rs. 79 lakhs through encashment of Special Bearer Bonds and abetted the commission of the offence as a conspirator.  This act contributed to the crime, as R.C. Sabharwal managed to purchase properties in the name of entities such as the M/s Morni Devi Brij Lal Trust and M/s Morni Merchants, among others which affirmed Puneet Sabharwal as the sole beneficiary. While Puneet Sabharwal was charged under Section 109 IPC read with Section 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988, the charge against appellant R.C. Sabharwal was under Section 13(1)(e) read with 13(2) of the Prevention of Corruption Act, 1988.

The appellants approached the Delhi High Court to dismiss the charges against them. The Court dismissed the petitions based on the following reasons. (i) Puneet Sabharwal being a minor, would not by itself be a reason to disregard the fact that he was a major for 7 long years of investigation; (ii) Immunities under S. 3(2) of Special Bearer Bonds (Immunities and Exemptions) Act, 1981 do not cover charges framed under the PCA; (iii) In State of Karnataka v. Selvi J. Jayalalitha & Ors., the Supreme Court held that IT orders are apropos tax liability on income and would not mandatorily establish the lawfulness of the sources of income and thereby, the Court upheld the charges framed against the appellants. The matter was preferred before the Apex Court challenging the decision of High Court.

Issue – Whether the Courts were justified in refusing to quash the charges against the appellants?

Legal Provisions

The appellants were convicted under Section 120B IPC and Section 109 IPC read with Section 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988.

Section 13 of PCA – This provision deals with the Criminal Misconduct by a Public Servant.

Contentions of the Appellant

The Counsel for Puneet Sabharwal submitted that the Court has erred in discarding the fact that he was minor and endorsing the allegation solely on account of being named as a beneficiary in the trust deed of M/s Morni Devi Brij Lal Trust. It was contended that the criminal proceedings were saddled against appellant merely by virtue of being his father’s son. Moreover, the Court has ignored the exoneration of the appellant’s father by the ITAT. The Counsel for R.C. Sabharwal heavily relied on the ITAT order, asserting that he was not the owner of entities whose properties were wrongly added to his income. They quoted several authorities and contended that where there is exoneration on merits in a civil adjudication, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue since the underlying principle is that the standard of proof in criminal cases is higher.

Contentions of the Respondents

The Counsel submitted that at the stage of framing the charges, the availability of relevant material would suffice and the Court is not required to ascertain probative value of the evidence for convicting the accused. It was contended that the criminal prosecution does not depend upon the order of ITAT and hence, the same cannot be effectuated to nullify the order of framing charges by a criminal court. He also relied on various authorities and asserted that the findings of the IT authorities are not binding on a criminal court to readily accept the legality of the source of income.

Court’s Analysis and Judgement

The Court upon perusal of the submissions and evidence presented noted that the appellants have not made out a case for interference with the order on framing of charges. The Court observed that the decision in Selvi Jayalalitha would be fully applicable, as it examined in detail about previous rulings which laid down that the IT Returns and the Orders passed in IT Proceedings are not conclusive proof as mentioned under S.13 of Prevention of Corruption Act. The income tax returns/orders may at best be admissible as evidence, but the probative value of the same would depend on the nature of the information furnished and findings recorded. Hence, the same would not ipso facto either conclusively prove or disprove a charge.

The Court thereby held that the probative value of the Orders of the IT Authorities, including the Order of the ITAT and the subsequent Assessment Orders, are not conclusive proof which can be relied upon for discharge of the accused persons. In view of the same it upheld the decision of the High Court.

The Court, further refused accept the argument of the appellants that when there is an exoneration on merits in a civil adjudication, a criminal prosecution on the same set of facts and circumstances would not be permitted. Therefore, dismissing the appeal, the Court directed the trial to be concluded expeditiously considering its pendency for nearly 25 years.

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Assessing Officer not entitled to make additions again, when the same had been deleted by the CIT(A): Bombay High Court

Case title – CCIT (OSD)/Pr. Commissioner of Income Tax VS Bhupendra Champaklal Dalal

Case no. – Income Tax Appeal No.1491 OF 2019 (A.Y. 1989-1990)

Decision on – March 06, 2024

Quoram – Justice K. R. Shriram & Justice DR. Neela Gokhale

Facts of the case

The Respondent/Assessee, an individual, was carrying on business as sole proprietor in the name and style of M/s B.C. Devidas. Assessee, who was a registered broker of Bombay Stock Exchange, was also engaged in trading in securities and shares. In addition to the profit, assessee also received salary and commission from CIFCO Limited and Food and Inns Limited in which he was a director.

The Assessee having been involved in the multicrore securities transactions scam of 90’s infamously known as Harshad Mehta Scam, got labelled as notified party on 2nd July 1992 under the Special Court’s (TORTS) Act, 1992. The investigation of Assessee by CBI was followed by a search and seizure action by the IT Department.

The assessment was originally completed after the search operations. Both assessee as well as Revenue filed appeals before the ITAT. The ITAT restored the matters to the file of the Assessing Officer for denovo assessments. Consequently, the assessment order was passed under Section 143(3) read with Section 254 of the IT Act 1961, wherein, certain additions to the income were made.

The Assessee aggrieved by the said order, filed an appeal before Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) partly allowed the appeal. The parties being discontented by the order preferred appeals before ITAT. The ITAT by a common order partly allowed the contentions of assessee for the AY-1989-1990.

The Revenue challenging this decision filed an appeal under Section 260A of the Act before the Bombay High Court.

Court’s Analysis and Judgement

The first issue relates to the disallowance of interest expenses incurred for non-business purposes. The AO disallowed interest of Rs. 12,19,181/- paid to banks and others on the ground that the assessee diverted interest-bearing funds for giving interest-free advances.

The ITAT came to a factual finding that the assessee had huge interest-free debts with him and the assessing officer has failed to recognize the same. The Court agreeing with the findings of ITAT opined that when interest-free funds and interest-bearing funds are mixed together, they lose their respective identities, and hence, the presumption should be that the assessee has used interest-free funds to give interest-free advances.

The ITAT order concluded that even for AY 1989–1990, interest-free funds available with the assessee were sufficient to take care of interest-free advances made. The Court held that ITAT right in concluding that the interest expenditure claimed by the assessee was allowable.

The final issue is related to the deletion of various additions aggregating to Rs. 10,89,30,545/. It is noted by the ITAT that various types of additions aggregating to this amount were made by the Assessing Officer in the original assessment proceedings, and in the appeal filed by the assessee, the CIT(A) deleted these additions.

The department did not prefer an appeal challenging the order of the CIT (A), and hence, the same has attained finality. Only the assessee challenged the additions confirmed by the CIT(A). The ITAT has also restored those additions, which were confirmed by the CIT(A), to the file of the Assessing Officer for fresh examination.

The Bombay High Court upholding the ITAT’s ruling held that the Assessing Officer could not have assessed additions again since the CIT (A) had deleted the same in the first round of proceedings and the concerned matters have attained finality. The Court re-affirmimg the ruling of ITAT held that Assessing Officer was not legally entitled to make these additions again in the second round of proceedings.

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Judgement Reviewed by – Keerthi K

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