Delhi HC Sets Aside ITAT Order in Patanjali Ayurved Appeals, Cites Recklessness and Non-Application of Mind

A Division Bench found the Tribunal disposed of seven appeals in an order lacking logic or reasoning, with two different pronouncement dates inexplicably merged into one document.

The High Court of Delhi has set aside a common order passed by the Income Tax Appellate Tribunal (ITAT) disposing of seven appeals involving Patanjali Ayurved Limited, holding that the order was bereft of logic, reasoning, or rationale and reflected undue haste amounting to recklessness. Justice Dinesh Mehta, leading the Division Bench alongside Justice Rajneesh Kumar Gupta, described the Tribunal's conduct as a “shocking picture of the procedural lapses and opaqueness” and directed the matter to be placed before a fresh bench. The court went further and ordered that a copy of its judgment be sent to both the President of the Tribunal and the Secretary of the Ministry of Law and Justice.

Seven Appeals, One Defective Order

The four income tax appeals before the Delhi High Court arose from a batch of seven appeals that had been pending before the ITAT. The seven appeals concerned Patanjali Ayurved Limited as the common assessee and related to Assessment Years 2013-14 to 2015-16 and 2017-18. The proceedings originated from a search action conducted from 31 October to 3 November 2018 on what the Tribunal described as the M/s. Hawala Traders Group, which led to the initiation of proceedings under Section 153C of the Income Tax Act, 1961.

The assessee had filed four appeals bearing ITA Nos. 534 to 537/Del/2025, while the Revenue filed three cross-appeals bearing ITA Nos. 605, 606 and 607/Del/2025. These were disposed of by the Tribunal through a single common order. The Principal Commissioner of Income Tax, Central-1, Delhi then approached the High Court.

The Procedural Anomaly That Alarmed the Bench

When the matter first came up before the Division Bench on 2 February 2026, even the counsel for the respondent-assessee, Mr. Vaibhav Kulkarni, was taken aback and sought to verify the certified copy of the Tribunal's order. The cause of the surprise was plain: the Tribunal's common order bore two different dates of hearing and pronouncement.

According to the order, four assessee appeals — ITA Nos. 534 to 537/Del/2025 — were heard and the order was pronounced on 6 August 2025. However, the Revenue's three cross-appeals — ITA Nos. 605 to 607/Del/2025 — were stated to have been heard and decided on 13 August 2025. Despite these being separate hearings on separate dates, the Tribunal released a single combined order that recorded its pronouncement as being “in the open court on 6th & 13th August, 2025.”

When the matter returned to the High Court, Mr. Kulkarni fairly conceded, after reviewing the certified copies and making enquiries, that there was an apparent procedural error on the Tribunal's part, possibly due to inadvertence.

What the Tribunal's Order Actually Said

The Division Bench reproduced the full text of the impugned ITAT order within its judgment. The Tribunal's reasoning, in its entirety, ran to five short paragraphs. It noted that the Assessing Officer's own assessment order acknowledged that a search of the Hawala Traders Group had found non-genuine bills provided to several entities including Patanjali Ayurved Limited, and that no addition had been made based on any specific incriminating or seized material. The Tribunal then relied on the Supreme Court's ruling in PCIT v. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC) for the proposition that additions in Section 153C proceedings must be based on incriminating material found during search.

The Tribunal concluded that since the Assessing Officer had issued his Section 153C notice on 6 August 2021, all the assessment years in question — AY 2013-14 to 2015-16 and 2017-18 — were “unabated” ones. On that basis alone, it found no merit in the Revenue's contentions, quashed the four impugned assessments, allowed the assessee's four appeals and dismissed the Revenue's three cross-appeals.

For the High Court, the brevity was not itself the problem. The bench made clear it was “not much concerned with the size of the order” but was troubled by the complete absence of engagement with the parties' contentions and the issues involved in the appeals — all disposed of in an order that did not even contain seven paragraphs.

The Bench's Findings on Conduct and Reasoning

Justice Dinesh Mehta, writing the oral judgment, was unsparing. The court found that the learned Members of the Tribunal had neither dealt with any contention of the assessee nor discussed the issues involved in the appeals. Mr. Puneet Rai, Senior Standing Counsel for the Revenue, pointed out that the Tribunal had rejected the Revenue's contentions merely by observing that the assessment years were unabated, without any analysis of the Revenue's specific arguments in support of the assessments.

On perusal of the impugned order, the bench recorded that it was “unable to comprehend anything out of it, as it is bereft of any logic, reasoning or rationale.” The Tribunal's members had, in the court's view, shown “undue haste rather recklessness” while passing and signing the order. The bench also noted that even the Tribunal's staff had failed to bring the anomaly to the attention of the Members at the time of signing.

The court observed that the ITAT is the highest fact-finding body in the income tax appellate hierarchy and that appellate authorities occupying that position cannot be seen to pass orders in this manner. The bench stated that “such type of negligence cannot be countenanced.”

Quashing All Seven Orders, Including Unchallenged Ones

The High Court's response was categorical. It set aside not only the orders under challenge in the four High Court appeals but also the remaining orders that formed part of the same common ITAT order — specifically those not challenged before the High Court because the Revenue's claim amounts fell below the monetary threshold prescribed by the Central Board of Direct Taxes for filing appeals.

The bench held that it had no option but to quash all seven orders passed by the Tribunal, regardless of whether the Department had filed an appeal against each of them. All seven ITAT appeals — ITA Nos. 534 to 537/Del/2025 and ITA Nos. 605 to 607/Del/2025 — were restored to their original numbers before the Tribunal to be decided afresh.

The bench expressly clarified that it had made no observation on the merits of the tax dispute. The Tribunal, on rehearing, would be free to take an independent view in accordance with law.

Order

The Division Bench disposed of ITA 80/2026, ITA 81/2026, ITA 83/2026 and ITA 91/2026 on 10 September 2026. All pending applications were also disposed of. The court directed that the seven ITAT appeals be listed before a bench other than the one that passed the impugned order. A copy of the High Court's order was directed to be sent to the President of the ITAT and to the Secretary of the Ministry of Law and Justice for information.