M/S Narayan Niriyat (I) Pvt. Ltd vs. Principal Commissioner Of Income Tax

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE ACTING CHIEF JUSTICE VIVEK RUSIA & HON'BLE SHRI JUSTICE PRADEEP MITTAL ON THE 15th OF JUNE, 2026 WRIT PETITION No. 6719 of 2016 M/S AMBIKA SOLVEX LTD. Versus PRINCIPAL COMMISSIONER OF INCOME TAX AND OTHERS Appearance: Shri Sumit Nema - Senior Advocate with Shri Ayush Gupta - Advocate for the petitioner. Shri Siddharth Sharma - Advocate for the respondents Nos. 1 to 3. WITH WRIT PETITION No. 6723 of 2016 M/S NARAYAN NIRIYAT (I) PVT. LTD Versus PRINCIPAL COMMISSIONER OF INCOME TAX AND OTHERS Appearance: Shri Sumit Nema - Senior Advocate with Shri Ayush Gupta - Advocate for the petitioner. Shri Siddharth Sharma - Advocate for the respondents Nos. 1 to 3. WRIT PETITION No. 6728 of 2016 M/S RAMKRISHNA SOLVEX PVT. LTD. Versus PRINCIPAL COMMISSIONER OF INCOE TAX AND OTHERS 1 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

Appearance: Shri Sumit Nema - Senior Advocate with Shri Ayush Gupta - Advocate for the petitioner. Shri Siddharth Sharma - Advocate for the respondents Nos. 1 to 3. WRIT PETITION No. 6737 of 2016 M/S DHULTAWALA EXIM PVT. LTD. Versus PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL AND OTHERS Appearance: Shri Sumit Nema - Senior Advocate with Shri Ayush Gupta - Advocate for the petitioner. Shri Siddharth Sharma - Advocate for the respondents Nos. 1 to 3. Reserved on : 05.05.2026 Pronounced on : 15.06.2026 ..................................................................................................................................... Per: Justice Vivek Rusia All these writ petitions have been filed by the petitioners under Article 226 of the Constitution of India, 1950, challenging the common order dated 28.08.2015 and 16.09.2015 passed by the ADIT (Investigation), Delhi in MP ICC/68/2013-14/IT, and Order dated 30.09.2015 passed in Case No. MP ICC/68/2013-14/IT by Income Tax Settlement Commission, Delhi, Principal Bench, New Delhi. 2. Since there are common facts and grounds and a common impugned order in all the petitions, all of them are being heard and decided analogously through a common order. For the purpose of this order, the facts 2 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

are being taken from W.P. No.6719/2016 as a leading case. FACTS OF THE CASE: 3. The petitioner, M/s Ambika Solvex Ltd. (now Sri Ambika Solvex Ltd.), is a company registered under the provisions of the Companies Act, 1956 ( now 2013) engaged in manufacturing activities with its registered office in Jaora, Madhya Pradesh. 4. On 19.01.2012, a search and seizure operation was carried out by the team of the Income Tax Department under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as the IT Act, 1961), at the business premises of the petitioner. 5. During the pendency of the assessment proceedings following the search, the petitioner filed an application for settlement under Section 245C of the Act, 1961, before the Income Tax Settlement Commission (ITSC), Additional Bench, Mumbai, seeking to resolve undisclosed income issues for several assessment years. 6. On 24.03.2014 in the case of the first three applicants and on 09.04.2014 in the rest of the four cases, an order was passed u/s 245D(1) of the Act,1961. In these orders, the applications were admitted for further proceedings on 09.06.2014, the ITSC passed an order under Section 245D(2C) of the Act, 1961, admitting the application as valid and allowing it to proceed. 7. On 27.08.2014, the Principal Commissioner of Income Tax (Respondent No. 1) submitted a report under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 (hereinafter referred to as 3 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

the Report), alleging that the petitioner had suppressed significant income, particularly involving bogus purchases of soya seeds and De-Oiled Cake (DOC), alongside stock discrepancies. 8. On 27.11.2014, the petitioner filed a comprehensive reply to the Report submitted under Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997 (hereinafter referred to as the Rules 1997), disputing the Department’s findings and maintaining that their disclosure was true and full. 9. During the final hearing on 07.08.2015, the ITSC directed Respondent No. 5, the Additional Director of Income Tax (Investigation) [ADIT (Inv.)], Delhi, to conduct specific verifications regarding the points of contention. The ADIT (Inv.) submitted an investigation report on 28.08.2015, and the ITSC subsequently passed the final impugned order on 30.09.2015, which the petitioner has now challenged before this Court. 10. While issuing notices in this writ petition, the Division Bench stayed the effect of the order dated 30.09.2015. After receipt of the notices, the respondents’ IT departments have filed the return to justify the impugned action. SUBMISSIONS OF THE PETITIONER : 11. The petitioner submits that the ITSC acted beyond its jurisdiction by directing Respondent No. 5 to conduct an investigation during the final hearing stage, as Section 245D(3) of the Act, 1961 only empowers the Commission to direct the Commissioner to conduct such inquiries. The direction to the ADIT (Inv.) was, therefore, unauthorised and contrary to the 4 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

statutory framework. 12. It is submitted that there was a grave procedural lapse as the investigation report dated 28.08.2015 submitted by ADIT(Inv.), was not provided to the petitioner until the conclusion of final hearings on 02.09.2015. This denied the petitioner a fair opportunity to rebut new findings, resulting in a gross violation of the principles of natural justice. 13. The petitioner contends that the ITSC illegally delegated its judicial and decision-making functions to the ADIT (Inv.), asserting that the final order appears to have been drafted or heavily influenced by the investigation wing rather than the independent members of the Commission, representing an illegal delegation of decision-making powers. 14. The petitioner argues that the Commission relied on extraneous materials and new facts that were neither part of the original search findings nor included in the Principal Commissioner’s Rule 9 report, thereby exceeding the scope of the settlement proceedings. 15. Shri Nema, learned senior counsel argued that the provision of section 245D(3) of the Income Tax Act does not envisage the investigation at the stage of final argument, especially through ADIT (Investigation). Even such investigation was done under Section 245D(3) that was done in complete violation of principle of natural justice and in a hurried manner. The Income Tax Settlement Commission cannot direct ADIT (Investigation) to conduct an investigation which can only be done through the Principal Commissioner or Commissioner of Income Tax. The ADIT (Investigation) was attached to the Settlement Commission under the guise of verification, 5 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

who submitted the report titled as Investigation Report in the case of M/s Ambika Solvex Private Limited. Itself demonstrate that full-fledged investigation was done by an incompetent authority without jurisdiction under 245D(3). The Settlement Commission being a creature of statute is bound strictly by the procedure prescribed under the Act. 16. Shri Nema, learned senior counsel has vehemently argued that the ADIT (Investigation) in fact prepared the impugned order and presented to the Settlement Commission for signature. The order sheet dated 29.09.2015 itself unequivocally reveals that the draft order under Section 245D(4) was prepared by ADIT (Investigation) and put up for approval before the honorable members of the Settlement Commission. Such course is ex-facie contrary to the statutory scheme of the Section 245D(4), which mandates that the Settlement Commission may in accordance with the provision of this Act pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of Principal Commissioner or Commissioner. In order to verify the aforesaid allegations, we called the entire record of the case along with the order sheets. 17. Finally, the petitioner submits that the Settlement Commission’s primary role is to settle disputes based on a true and full disclosure, but by acting as an adjudicating or assessing authority through an independent investigation wing, it has frustrated the intent of the settlement scheme. Hence, this writ petition deserves to be allowed, and the impugned orders be set aside. 6 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

SUBMISSIONS OF THE RESPONDENTS : 18. The respondents submit that the Settlement Commission possesses wide and plenary powers under Sections 245D(3) and 245D(4) of the Act, 1961, to call for any records and order any inquiry it deems necessary to reach a conclusive settlement. 19. It is argued that the ADIT (Inv.) is an officer specifically placed at the disposal of the Commission for the purpose of carrying out verifications and investigations, and thus, the direction given to Respondent No. 5 was well within the legal framework and procedural rules of the Commission. It is argued that the ADIT (Inv.) and DIT (Inv.) are officers placed at the disposal of the Commission specifically for verification purposes. The Commission has the discretion to utilize its own investigation wing rather than the Principal CIT, as per the Manual of the ITSC. 20. The respondents deny the allegation of a violation of natural justice, stating that the petitioner was given opportunities to be heard and that the investigation was necessitated by the complex nature of the bogus transactions and financial discrepancies revealed during the hearings, necessitated specialized verification. 21. The respondents contend that the Commission's order is final and conclusive under Section 245-I of the Act,1961, and a writ court should not interfere with the Commission's findings unless there is a clear jurisdictional error or patent illegality. They further submit that the investigation wing only provided a factual verification of the data, and the final decision-making authority remained solely with the members of the Commission, who applied 7 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

their minds to the entire record before passing the order dated 30.09.2015. Hence, Shri Siddharth Sharma, learned counsel, submits that this petition, being devoid of merit and substance, deserves to be dismissed. APPRECIATION AND CONCLUSIONS : 22. We have heard the learned counsel for the parties. 23. The petitioners are engaged in the business of manufacturing, exporting and trading of Soyabean De-oiled cakes, soya solvent oil, edible oil and soya lecithin (by product). Later on, the petitioners started manufacturing, exporting and trading of various value added products like soya flakes, untoasted grits, soya flour, etc. A search and seizure operation under Section 132(1) of the Income Tax Act was conducted on 19.01.2012 at the business and residential premises of the petitioners and the group companies. Therefore, several documents were found and seized by the department. Followed by notice under Section 153A, the petitioners submitted settlement application under Section 245C(1) for the Assessment Year 2006-07 to 2013-14 on 11.03.2014 and 28.03.2014 by the petitioner company as well as three individual persons, namely, Kailash Chand Garg, Suresh Chand Garg and Ramadevi Garg. The seven applications were entertained and admitted vide order dated 24.03.2014 and 09.04.2014 under Section 245D(1). Thereafter, the order under Section 245D(2C) was passed on 09.06.2014 and the cases were declared "not invalid". The petitioners were represented by CA and authorized representative, and whereas the Tax Department was represented by CIT(DR), ACIT, DIT (Investigation), Additional DIT (Investigation). The details of the returned income and 8 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

additional income disclosed before the Settlement Commission are reproduced in para 3 of the order. The Settlement Commission after hearing the parties on 07.08.2015 and 02.09.2015, directed Additional DIT, ITSC to verify specific issues mentioned in the subsequent para and submit a report. The report was submitted on 28.08.2015, a copy of which was given to the petitioners on 02.09.2015 at Mumbai. The Bench further directed the Additional DIT to verify the issues of source and share capital, unsecured loans and various points referred by the Additional DIT in his report. On 16.09.2015, the Additional DIT submitted a report summarizing the details of loan and advances and share in the Financial Year 2008-09, 2009-10, 2010-11, etc. 24. The petitioner submitted a reply to the report submitted by the Additional DIT. The petitioner also raised an objection before the Settlement Commission that direction for verification and no specific inquiry or investigation as contemplated under Section 245D(3) of the Act was ordered on 07.08.2015. Such an enquiry or investigation under Section 245D(3) can only be done by the CIT as per the provisions of the Act. It is also argued that the DIT on being directed by the Settlement Commission can only do the factual verification and cannot make any enquiries, roving or otherwise. The said objection was considered by the Commission, and after placing reliance on a judgment passed by Delhi High Court in case of M/s. Omax Ltd. vs. ACIT reported in 254 CTR 0370, has rejected the contention. The Delhi High Court in M/s Omax (Supra) has observed thus:

"By virtue of the provisions of Section 245F (2) once the application for settlement was filed and an order was passed 9 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

allowing the application to be proceeded with, it was the ITSC which has the exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority under the Act relating to the case, till the final order of settlement is passed under Section 245D(4). Thus the moment the application of the assesse was allowed to be proceeded with by the ITSC till the final order of the settlement is passed on 17.03.2008, it was the ITSC which had exclusive jurisdiction in relation to the assessee's case. Therefore, all matters which could be examined by the Assessing officer could be examined by the ITSC in these proceedings, including the asessee's claim for deduction u/s 80IB(10). The total income of the assesse for the AY 2006-07 has been computed by the ITSC at Rs. 89,38,76,630/- which is Rs. 18,00,000/- more than the income of Rs. 89,20,76,630/- declared by the petitioner, which figure is after the petitioner claimed deduction of Rs. 78,99,00,509/- u/s 80IB (10). It is irrelevant that no undisclosed income was offered by the petitioner in regard to the housing project. Again a harmonious reading of the provisions of the statute would show that it does not postulate the existence of two orders, each of a different income tax authority, determining the total income of an assesse for the same assessment year. If the contention of the Revenue is accepted, not only will the finality of the order of settlement be disturbed, but it will also result in different orders relating to the same assessment year and relating to the same assessee being allowed to stand. We have grave doubts whether such a result, which is likely to create chaos and confusion in the tax administration could have been intended. The order of the ITSC can be reopened only in cases of fraud and misrepresentation and in no other case."

the Settlement Commission finds appropriate to call for the record from Principal Commissioner or Commissioner, and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Principal Commissioner or Commissioner to make or cause to be made such further enquiry or investigation and furnish a report. In this case, no such order has been passed under Section 245D(3) by the Settlement Commission directing Principal Commissioner or Commissioner to conduct an inquiry and submit a report. The Commission has a power to direct its DIT or Additional DIT (Investigation) to verify certain facts and submit a report. That will not fall under Section 245D(3). 26. So far, the allegation of Shri Nema, learned senior counsel that the DIT prepared a draft order and presented before the Commission for signing is also not tenable because main order is written by Shri M.K. Mirani, a member of Commission and Shri S.K. Sahu, Chairman made his own observation in para 21. The report in respect of computation of income prepared by the Additional Director has been annexed as Annexure-1 of the impugned order. Therefore, the allegation of Shri Nema, learned senior counsel is unfounded that the entire order was prepared by DIT and put up before the Commissioner for signature as a final order. On these grounds, the petitioner filed a writ petition in the year 2016 and obtained the stay order. The order passed on 30.09.2015 could not be given effect to for almost 10 years. Therefore, now, the petitioner has enjoyed the interim order for 10 years without paying any tax liability. Accordingly, the writ petitions are 11 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified

(VIVEK RUSIA) ACTING CHIEF JUSTICE (PRADEEP MITTAL) JUDGE dismissed with cost of Rs.1,00,000/- to each of the petitioners. The cost shall be paid to the respondent department. Let the order passed by the Settlement Commission be implemented forthwith. 27. A copy of this order be placed in the file of W.P. No.6723/2016, W.P. No.6728/2016 and W.P. No.6737/2016. ak 12 WP-6719-2016 NEUTRAL CITATION NO. 2026:MPHC-JBP:40416 Signed by: ASHISH KOSHTA Signing time: 15-06-2026 18:47:15 Signature Not Verified