TMI Blog2021 (4) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking obtained from the Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. Very recently, the co-ordinate bench in Sanjay Duggal ors [ 2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been filed by the assessee in the case of another connected assessee captioned above namely M/s Arch Impex Ltd. raising similar grievance on an identical legal issue. 3. Since the legal issue of legitimacy of approval under S. 153D raised in all the appeals/ cross objections of both the assessee are similar, hence, all the matters were heard together and is being disposed off by this consolidated order. 4. At the commencement of hearing, Ld. AR representing both the assessee pointed out that both assessee captioned above have also filed the additional grounds of appeal whereby legality of approval granted by the designated superior authority u/s 153D have been challenged. It was further submitted that assessee M/s Arch Pharmalabs Ltd. has also filed the cross objection for Assessment Year 2004-05 AY 2005-06 in revenues appeal and has also invoked Rule 27 of the ITAT Rules to seek remedy on legal fatality committed by the designated authority under S. 153D of the Act. It was submitted that all relevant facts for adjudication of legal issue are available on record and hence it was urged that the additional ground raised by the Assessee under Rule 11 of IT(AT) Rules, 1963 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gally, have to be recovered promptly and expeditiously. He does nothing despite a favourable order from this Court for more than a decade. Such a litigant does not deserve any relief in our discretionary and equitable jurisdiction. 9. Further, it is held by the Hon'bleHigh Court of Bombay in the case of Ultratech Cement Ltd. Vs. Additional Commissioner of Income Tax (2017) 298 CTR 0437 (Bom) : (2017) 157 DTR 0253 (Bom) : (2018) 408 ITR 0500 ((Bom) that before an additional ground is allowed to be raised, the appellate authority must be satisfied that the ground raised could not have been raised earlier for good reasons (Para 23). 10. And it is held by the Hon'ble High Court of Punjab and Haryana in Commissioner of Income-tax (Central), Ludhiana v. S.A. Builders Ltd. [2013] 38 taxmann.com 255 (Punjab Haryana) that The Tribunal, thus, cannot permit a party to raise an entirely new plea for the first time for which no factual foundation has been laid before the Assessing Officer or CIT(Appeals). 11. Identical is the view held by the Hon'ble High Court Of Calcutta in Indian Steel and Wire Products Ltd. v. Commissioner of Income tax [1994] 208 ITR 740 (CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case the records have been misplaced. Some of the records have been recovered partially. Therefore, it requires fresh investigation and enquiries for investigation or verifications of the facts. No adverse inference can be drawn against the revenue, for records being untraceable. In this regard Reliance in placed on the decision of the Hon'ble High Court of Rajasthan Commissioner of Wealth-tax v. Balu Ram Raghunath Kalla [1993] 69 TAXMAN 540 (RAJ.) wherein it is held that There mavbe number of reasons for not challenging the judgment and it maybe negligence, carelessness, connivance, mistake or the like on the part of the authorities in not taking timely action........................ 14. In view of the aforesaid, it is humbly submitted that the Additional Grounds of Appeal shall not be admitted. 4.2. In rejoinder, Ld. AR submitted that additional grounds of appeal purely bear legal issue which goes to the root of the matter and thus the assessee should not be prevented to raise such legal question on the grounds of estoppel. It was reiterated that material available on record would demonstrate that the Addl. Commissioner (Authority giving appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CO no. 7/M/21 of assessee thereon ; ITA No. 7595/M/2011[ AY 2005-06-Assesee Appeal]; 3752/M/2012[AY 2007-08-Assessee appeal]; 7597/M/2012[AY 2008-09-Assessee appeal] 7. As noted in the preceding para, the assessee, by way of additional grounds and cross objections has called in to question the validity, efficacy maintainability of search assessments carried out by the AO which is cardinal and goes to the root of the matter. Therefore, the legal objection by way of additional grounds/ cross objections raised by the respective assessee requires to be adjudicated at the threshold. 8. Turning to the background facts briefly, a search and seizure operation was carried out on the assessee under section 132 of the Act in connection with Arch group of cases on 24.04.2008. Consequently, proceedings under S. 153A were initiated and assessment was framed under S. 153A r.w.s 143(3) of the Act relevant to assessment year 2003-04 to 2008-09 and assessment order under S. 143(3) was passed relevant to AY 2009-10. An approval dated 31.12.2010 from the Additional Commissioner of Income Tax(designated authority) was obtained by the AO under section 153D of the Act in respect of search asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act in the cases of of Arch Group - Order u/s 143(3) r.ws. 153A for A.Ys. 2003-04 to 2008-09 Order u/s 143(3) for A.Y.2009-10 - Reg. Ref.: letter No.ACIT-32/Appr. u/s. 153D/2010-11 dated 29.11.2010. *** Please refer to the above. 2. Approval is hereby accorded u/s.153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders for the A.Ys. 2003-04 to 2008-09 and A.Y. 2009-10 u/s. 143(3) forwarded by you, vide your letter No.ACIT-32/ Appr. u/s. 153D/2010-11 dated 29-12-2010: Sr. No. Name of the Assessee A.Y. Section under which order passed 1. M/s. Arch Pharma Labs Ltd. 2003-04 to 2008-09 143(3) rws 153A 3. Approval is also accorded to complete the assessment u/s.143(3) of the I.T. Act in the above case for A.Y. 2009-10. 4. You are requested to ensure that suitable office notes are prepared and put on record in each case where necessary and also remedial action or consequential action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er available on record that has been purportedly forwarded to him. These facts show that it is only a ritualistic approval to comply with the provisions of law. It was contended that the whole procedure adopted by the revenue clearly defeats the intent and purpose behind insertion of section 153D brought in the statute by the Finance Act, 2007. 9.3 To support the proposition that a mechanical approval by the superior authority is only illusory and cannot be equated with statutory approval contemplated under section 153D of the Act, it was submitted that several decisions have been rendered by the co-ordinate benches to this effect and have also been vetted by the Hon ble High Courts. The Ld. AR referred to the decisions of Jurisdictional High Court in the case of Pr. CIT vs. Smt Shreelekha Damani 307 CTR 0218 (Bom) to assert the legal objection. The decision of Tribunal in Shrelekha Damani vs. DCIT (2015) 173 TTJ 0332 (Mum.) was also referred to and relied upon. Another decision of co-ordinate bench in the case of The Navbharat Refrigeration Industries Limited vs. DCIT in ITA No 136/Mum/2013 and ors. dated 01.10.15 was referred wherein also mechanical exercise of statutory app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true and worthy of reliance. It is neither a rule of prudence nor a rule of law that the statements made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to clothe the statements on affidavit with truthfulness and reliability. In view of the special facts and circumstances of this case, we are not inclined to accept the statement of the karta made on oath in the affidavit that the notices of demand in respect of the assessment years in question were not served on him before the commencement of recovery proceedings. As said earlier, this statement is clearly an after-thought and was made when the deponent became sure that the department is handicapped by the non-availability of the relevant records. The normal and natural course for the ITO is to send the assessment order along with notice of demand and tender for deposit of the amount due in treasury or bank to the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 are correct in view of the provisions of section 114(e) of the Indian Evidence Act, 1872 and the contentions raised in the application are highly misconceived, wrong and contemptuous. [Hon'ble ITAT Lucknow Bench 'SMC in Omkar NagreeyaSahkari Bank Ltd.v.DCIT- ^ Kanpur[2013] 143 ITD 703 (Lucknow - Trib.)/[2013] 156 TTJ 491 (Lucknow - Trib.) / [2013] 34 taxmann.com 283 (Lucknow -Trib.)] 20. It is well known that a presumption can also be raised that in terms of section 114(e) of the Evidence Act, judicial and official acts have been regularly performed. [Hon'ble ITAT Delhi Bench D in Smt. Manisha Sharma v. Income-tax, Officer, Ward 1(2), Muzaffarnagar [2010] 35 SOT 37 (DELHI)] 21. Further, reliance was placed on the decision of Hon'ble Bombay High Court in the case of Asteroids Trading Investments (P.) Ltd. v. Dy. CIT [2009] 308 ITR 190 , in which a reference was made to the decision of Full Bench of Hon'ble Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 11, in which the Hon'ble Court observed that when a regular order of assessment is passed in terms of section 143(3). a presumption can be raised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u / s 143 (3) r.w.s. 153A of the Income - tax Act, 1961. Although, the assessee has relied upon certain judicial precedents, we find that those case laws were rendered under different set of facts, where the assessee had taken the ground challenging validity of the assessment before the CIT (A) and also the fact that there was no specific observation in the assessment order for taking approval required to be taken u / s 153D of the Income tax Act, 1961. In this case, the AO has categorically recorded at para 7 of his assessment order in respect of approval taken u / s 153D and such reference has been further strengthened by the affidavits of two officers, who were part of assessment proceedings. Therefore, the case laws relied upon by the assessee cannot be considered as applicable to the facts of the assessee case. 22. Judgement of Hon'ble Bombay High Court in the case of Pr. CIT vs. Smt. Shreelekha Damani (2019) 307 CTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for approving the order would not render the order of the Assessing Officer void ab initio and would not invalidate the assessment order. Assuming without admitting that some infirmity is there, it is curable under law, since the order of assessment passed under section 158BC is made appealable under section 253(1)( ) of the Income-tax Act in which the assessee is entitled to canvass all the points available to invalidate any part of the assessment and thus the defect, if any, existing previously would be completely cured. (Para 31) 24. Further, the Hon'ble ITAT, Mumbai B Bench has passed an order in the case of The Navbharat Refrigeration Industries Ltd. Simplex Realty Ltd. vs. The DCIT- (OSD -1), CR-7, Mumbai in ITA No.136, 137, 147, 148, 149, 150, 151 / Mum / 2013 dated 01-10-2015 wherein it is held that in search cases if the order is annulled as done in the present case the AO is at liberty to take any course of action as per the provisions of the law. The relevant para of the said order is re-produced herewith: 4. We have heard the rival submissions and perused the material before us. We find that in the case of Smt. Shreelekha Damani (supra) the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of section 153A calling upon the persons searched or requisitioned to file return, that being so, no further notice under section 143(2) can be contemplated for assessment under section 153A. 11. We have carefully considered the rival submissions and material placed on record and case laws cited. The legal objection of transgression of requirements of approval under section 153D is in controversy. Pursuant to search carried out in the premises of the Assessee and other connected group cases, the assessment was carried out under S. 153A/ 143(3) of the Act. The Assessing officer has forwarded the draft assessment orders for 7 years ( AY 2003-04 to AY 2009-10) for endorsement and approval of the superior authority at the fag end of the limitation period on 29/12/2010 to meet the legal requirement imposed by section 153D of the Act. The Addl. CIT i.e. the superior authority has, in turn, granted a combined and consolidated approval for all 7 assessment years in promptu on 31/12/2010. 11.1 It may be pertinent to observe at this stage that the impugned assessment orders were passed u/s. 143(3) rws 153A of the Act for the AY 2003-04 to AY 2008-09 and for the AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impression of approval on dotted line and thus defeats the purpose of supervision of search assessments (iv) initialed draft assessment orders not available in office records. 11.3 As observed, Section 153D bestows a supervisory jurisdiction on the designated authority in respect of search related assessment and thus enjoins a salutary duty of statutory nature. The designated superior authority is thus expected to confirm to the statutory requirement in letter and spirit. It is evident from the communication of AO and consequent approval thereon under S. 153D that no assessment record for any assessment year in question or any seized material had traveled to the authority concerned for his objective consideration of the same qua the draft assessment orders. No reference in this regard is made in the approval note either which may discard such allegation as untrue. No other material or order sheet in assessment proceedings etc. were placed before us either to establish otherwise. Except these two documents namely, a solitary communication from AO to the Addl. CIT dated 29/12/2010 and an in turn approval by Addl. CIT dated 31/12/2010, there is nothing else before us to gauge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard. 11.5 At the cost of repetition, it may be reiterated that in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that Para 2 of the above approval letter merely says that Approval is hereby accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders... which clearly proves that the Addl. CIT had routinely given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee against maintainability of hollow approval under S. 153D totally devoid of any application of mind. The approval so granted under the shelter of section 153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments relatable to search in captioned appeals are non est and a nullity and hence quashed. 12. In view of prima facie merits found in the legal objections, We do not consider it expedient to look into the aspects on merits of additions/ disallowance. 13. The cross objection memo captioned above of the Assessee inter-alia includes legal objection under section 153D in addition to other grounds on merits. As the legal objections on S. 153D has been answered in favour of the assessee, other objections raised in the respective cross objections of the Assessee are infructuous and does not need any separate adjudication. 14. As a result, the captioned appeals of revenue in ITA No. 8089/M/2011 8090/M/2011 are dismissed whereas the CO/6/M/21 CO/7/21 of the Assessee are allowed. Similarly, the appeal of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2015 dated 30-09-2016), another co-ordinate bench had also fully deleted the addition by observing that the addition has been made on conjectures and surmises. The co-ordinate bench also considered the decision rendered by Hon ble Bombay High Court in the case of Nikung Eximp Enterprises (P) Ltd (372 ITR 619), wherein the Hon ble High Court had also confirmed the deletion of the addition of alleged bogus purchases by observing that the nonproduction of suppliers before the AO cannot be considered to draw adverse inferences. However, since the assessee has purchased the goods locally and in the absence of transportation bills, the co-ordinate bench directed the AO to restrict the addition in the range of 3.5% to 4% of the value of purchases. 17. In the instant case also, we notice that the assessee has reconciled the purchases with sales. There should not be any doubt that the sales could not be made without making corresponding purchases. The AO has also accepted the purchases as well as sales. However, since the assessee did not furnish evidences for transportation of goods, the AO presumed that the assessee would have made extra profit and accordingly estimated the same at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... designated authority under S. 153D while granting the approval of draft assessment orders for AY 2003-04 to 2009-10. 21. The communication made by the AO to the Addl. CIT seeking approval of draft assessment orders in relation to search assessments is reproduced hereunder for ready reference; OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLEC-32 R. N. 32(3), AAYKAR BHAVAN, M K ROAD, MUMBAI-400 020. (022) 22030602 No. ACIT-32/Appr. u/s 153D/2010-11 Dated: 14.12.2010 To, The Addl. Commissioner of Income tax, Central Range -VIII, Mumbai. Sir, Sub : Draft assessment orders under section 143(3) rws 153A in the case of M/s. for A.Ys. Arch Impex Pvt. Ltd. 2003-04 to 2008-09 and 143(3) for A. Y. 2009-10 Approval reg. ****************** Kindly refer to the above. 2. I am submitting herewith a draft assessment order u/s. 143(3)/153A for A.Ys. 2003-04 to 2008-09 and u/s. 143(3) for AY 2009-10 in the case of M/s. Arch Impex Pvt. Ltd. 3. Further, it is submitted that all seized materials and data on electronic devices copied during the search operation have been cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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