M.B. Power Vs DCIT (ITAT Delhi)
153C Jurisdiction Fails Without Incriminating Material; Bogus EPC Allegation & Depreciation Disallowance Quashed – ITAT Delhi
The Delhi Bench of the ITAT, in a batch of cross-appeals in M.B. Power (Madhya Pradesh) Ltd. vs. DCIT & connected matters (ITA Nos. 3850/Del/2023, 3874/Del/2023, 3870/Del/2023, 3923/Del/2023, 211/Del/2024 & 267/Del/2024; AYs 2016-17, 2017-18, 2018-19 & 2021-22; order dated 19-12-2025), upheld the CIT(A)’s order deleting disallowance of depreciation of about ₹36.35 crore and quashed the very assumption of jurisdiction u/s 153C.
The Tribunal held that the entire case of the Revenue—alleging that EPC contractor LANCO routed bogus payments of about ₹242.33 crore through five subcontractors as kickbacks to promoters—was founded only on third-party statements and loose Excel sheets seized during search on Paras Mal Lodha / Rajiv Saxena, none of which constituted incriminating material belonging to or pertaining to the Assessee. Crucially, all seized documents and digital data related to FY 2010-11 / AY 2011-12, whereas proceedings were initiated for AYs 2016-17 onwards, violating the settled law that seized material must pertain to the assessment year in question.
ITAT noted that (i) no document belonging to the Assessee was seized, (ii) no valid satisfaction was recorded by the AO of the searched person as mandated by Calcutta Knitwears, (iii) statements u/s 132(4), especially when retracted, cannot substitute incriminating material, (iv) cross-examination was denied, vitiating the proceedings, and (v) loose sheets / Excel files have no standalone evidentiary value (relying on Common Cause, V.C. Shukla, Abhisar Buildwell, UK Paints Overseas).
On merits also, the Tribunal accepted that the EPC contract was awarded through international competitive bidding, vetted by Tata Consulting Engineers and SBI-led consortium, the power plant was actually constructed and commissioned, and depreciation could not be disturbed years later without reopening the year of capitalisation. Accordingly, the ITAT dismissed the Revenue’s appeals, allowed the Assessee’s appeals, and held that 153C proceedings themselves were void, rendering all consequential additions unsustainable
FULL TEXT OF THE ORDER OF ITAT DELHI
