TMI Blog2022 (5) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... power vested in the Commissioner to grant or not to grant approval is coupled with a duty and cannot be exercised casually and in a routine manner. In the present case, we have no hesitation in stating that there is complete non-application of mind by the Ld. Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income has been taken at Rs.Rs.11,00,460/- as against the returned income of Rs.87,20,580/-. Similarly, when the total assessed income as per the AO comes to Rs.16,69,42,560/-, the Addl. CIT could not have approved the assessed income at Rs.1,65,07,560/- had he applied his mind. The addition of Rs. 15,04,35,000/- made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. Even the factual situation is much worse than the facts decided in the case of Sanjay Duggal [ 2021 (1) TMI 909 - ITAT DELHI] . In that case, at least the assessment folders were sent whereas in the instant case, as appears from the letter of the Assessing Officer seeking approval, he has sent only the draft assessment order without any assessment records w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of M/s. Maa Son through banking channels. 3.1. The AO further noted that a search seizure action u/s 132 was undertaken by the Income Tax Department at the residence of Sh. AnujBansal at A-108, SwasthayaVihar, Delhi and survey u/s 133A was conducted at the business premises of M/s Maa Son at KuchaMahajani, Delhi on 22.12.2016. During the course of search, Sh. AnujBansal was asked to provide the KYC of SNRK and contact details of the owners of SNRK. In his statement u/s 132(4) of the Act, Sh. AnujBansal stated that he did not know the owners of SNRK and that all the dealings for the sales transactions of M/s Maa Son to SNRK were done through one Sh. VipinSoni of M/s Kanishka Jewellers. Sh. VipinSoni was also asked to provide the contact details of the owners of SNRK. In his statement u/s 131(1A) dated 14.03.2017, Sh, VipinSoni stated that one Sh. Ashok Kumar Sharma was the owner of SNRK. However, he was not able to produce the said Sh. Ashok Kumar Sharma despite sufficient opportunities given to him. Further enquiries conducted revealed that the address of Sh. Ashok Kumar Sharma, as provided by Sh. Vipin Soni was non-existent. Further, as per the bank KYC documents of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 Paradise Sales Company 13.11.2016 to 22.11.2016 17108000 ..Do.. ..Do.. No ITR filed 10 Progressive Commodity 21.11.2016 to 24.11.2016 15077000 ..Do.. ..Do.. No ITR filed 11 Kaira Advertising Pvt. ltd. 11.11.2016 to 12.11.2016 1891000 ..Do.. ..Do.. No ITR filed 3.2. Further, information was also received from Investigation Wing, Chandigarh, with respect to one entry operator Sh. VipinGarg who had admitted to be managing and controlling a number of non -descript and shell entities. Three of the said shell entities, managed and controlled by Sh. VipinGarg, viz. M/s Garg Trading Company, M/s Summax Enterprises and M/s S N Brother, had transferred Rs. 1,54,07,100/- in the bank accounts of M/s Maa son in the post demonetization period. Sh. AnujBansal was not able to provide any proof of delivery or KYC details of the said buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity had transferred the amounts as per the table above, to the bank account of M/s SNRK through I FT, which can be done through login id password of authorized person to handle these accounts. Neither in the search on the appellant, any evidence of control of the appellant on any of these accounts had been found nor established in the assessment proceedings, by which the funds can be transferred out from these accounts electronically. (iii) The amounts transferred by these 11 alleged entities to M/s SNRK are at Rs 21,70,33,818/- (including pre-demonetization period transfers) out of which, the funds to the tune of Rs.11,42,12,057/-(52.6%) had only been received by appellant from M/s SNRK, only after demonetization. Thus, it cannot be said that the appellant was in any way party to these alleged entities or M/s SNRK. If there is any possibility of any connivance, it is between these 11 entities and M/s SRNK, as they had been doing transactions even before 8.11.2016 and even after 8.11.2016, ail the transaction amounts between them had not ultimately flowed to the account of the appellant. (iv) There is nothing on record to prove the connivance of the appellant with M/s S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue cannot justifiably claim to put itself in the armchair of the businessman and assume the rote to decide as to how much expenditure is reasonable having regard to the circumstances of the case; no businessman can be compelled to maximize his profit; the IT authorities must put themselves in the shoes of he assesses and see how a prudent businessman would act; and that the authorities must not look at the matter from their view point, but that of a prudent businessman impelled by commercial expediency. In CIT Vs. Edward Keventer (P.) Ltd. [1972] 86 ITR 370, the Calcutta High Court considering identical provision in 1922 Act, it was held that the section places two limitations in the matter of exercise of the power. The section enjoins the Assessing Officer in forming any opinion as to the reasonableness or otherwise of the expenditure incurred must take into consideration (i) the legitimate business needs of the company and (ii) the benefit derived by or accruing to the company. The legitimate business needs of the company must be judged from the view point of the company itself and must be viewed from the point of view of a prudent businessman. It is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of same amount in two different entities on same account, on substantive basis, which is not permissible under law in the given circumstances. There is no evidence on record, which shows any unaccounted SBNs belonging to the appellant and if these sales transactions were bogus transactions of converting the black money of the appellant to Gold, then the stock inventory of Gold found during the search/survey on the appellant should have been excess by this amount of 50Kgs, which is not the case here, as no stock discrepancy had been brought on record by the AO. The appellant does not appear to be the only beneficiary of the SBN's deposited in alleged accounts as it had not received all the amounts, but only part of it. The real beneficiary, if any, will be M/s SNRK, as it is having continued relations with these entities, without explanation on nature of transactions with them and the AO of it had treated it so in its scrutiny assessment. The amounts received by the appellant from M/s SNRK had been utilized in purchase of gold and as no discrepancy had been found in stock of gold of the appellant during search/survey, the natural presumption is that the appellant had parte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od for which payments had been received through banking channels, out of which only sales of Rs 15 cr are to M/s SNRK for which even payments had been received through the banking channel. In these facts circumstances of the case, it is held that the appellant had made the sales transactions to M/s SNRK during the normal course of business through the regular banking channel. Therefore, the amounts credited to the bank account of the appellant on account of sales transactions with M/s SNRK are in the ordinary course of business and represent the trading receipts as per the books of account. Therefore the source of these receipts stands explained. Accordingly, the addition of Rs.15,04,35,000/- made by the AO u/s 68 r.w.s 115BBE is not sustainable and is hereby deleted. 5. The Ld. CIT(A) however sustained the addition of Rs.1,54,07,100/- made by the AO u/s 68 of the Act r.w.s 115BB of the Act, by observing as under :- 8. Ground Nos.12, 13 16; These grounds relate to the issue of addition of Rs.1,54,07,100/- made by the AO u/s 68 r.w.s. 115BBE of the IT act 1961. 8.1. As per para 4.3 above, there was information with the AO that appellant had received accommo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y confirmed and these grounds of appeal are dismissed. 6. So far as the ground challenging the validity of reopening, in absence of proper approval u/s 153D is concerned, the Ld. CIT(A) dismissed the same by observing as under:- 12. Ground No, 17 relates to the approval u/s 153D of the I T Act, 1961. The appellant had claimed that the approval has been given mechanically without application of mind on the same date as the passing of order u/s 153A. It is pertinent to mention over here that the Range head is involved in search assessment right from the date of issuing first questionnaire. There are generally multiple discussions between the AO Range head on various issues arising in the assessment before finalisation of search assessments. The final approval of draft order is given after making thorough discussions made earlier to this approval. It may be observed that in all approvals of Range heads, there are not any further directions and this approval forming part of assessment order is only visible to the appellant. All other processes done internally between AO Range Head are not visible to the appellant. Accordingly it cannot be said that approval u/s. 153D ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts have nowhere been doubted much less rejected u/s 145(3), so entire exercise at end of Ld Assessing officer (AO) to intervene in selected regular trading transactions of Assessee already recorded in regular audited books by invalid recourse to sec. 68/115BBE of the Act, is without authority of law and is ultra vires to provisions of the Act, so Ld. CIT(A) ought to have quashed the assessment order itself on this jurisdictional count itself which is ergo pleaded here. 2. That Ld CIT-A in his impugned order dated 16.08.2021 erred in not accepting the appellants ground for deletion of addition made u/s 68 of the Act (amounting to Rs.154,07,100) by sustaining the assessment order to that extent on untenable grounds which is evident from shining flaw that despite Assessee denial on Vipingarg named by Ld AO qua said transaction , no meaningful effort is made at any stage to make independent inquiry on said aspect as per sec. 142(3) of the Act and further principles of natural justice (requested cross examination etc) are not complied with at any stage qua bald allegations levelled against Assessee. Ergo we request for deletion of said addition of Rs.154,07,100 as arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring to the following decisions submitted that when the approval has been given in a mechanical manner without verifying the records, such approval u/s 153D is not in accordance with law and accordingly the assessment has to be quashed. i. Pr. CIT vs Smt. ShreelekhaDamani in Income Tax Appeal No.668 of 2016, order dated 27.11.2018 ii. M/s Inder International in ITA No.1573/CHD/2018, order dated 07.06.2021 iii. Arch Pharmalabs Ltd. in ITA No.6656/Mum/2017, order dated 07.04.2021, iv. Sanjay Duggal in ITA No.1813/Del/2019, order dated 19.01.2021 v. Rajesh Ladhani in ITA No.106, 107 and 108/Agra/2019, order dated 06.11.2019 vi. SaurabhAgarwal in ITA No.263 to 267/Agr/2017, order dated 18.09.2019 vii. Dilip Constructions Pvt. Ltd. in IT(SS) Nos.66 to 71/CTK/2018, order dated 29.11.2019 viii. UttarakhandUthanSamiti in ITA No.48 to 52/DDN/2019, ix. RishabhBuildwell P. Ltd. in ITA No.2122/Del/2018, order dated 04.07.2019 x. M3M India Holding vs DCIT, reported in [2019] 71 ITR (Trib.) 451 (Del.) xi. C R Mittal Sons (HUF), in ITA No.100/JAB/2014, order dated 15.03.2021 xii. Rajat Minerals Pvt. Ltd. in IT(SS)A. No.41 to 47/Ran/2019, order dated 20.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns cited before us. We find the AO in the instant case completed the assessment u/s 153A r.w.r.143(3) of the Act on 31st December, 2019 determining the total income of the Assessee at Rs.1,65,07,560/- as against the returned income of Rs.87,20,580/- at para 6 of the order by making the following two additions, the details of which are as under:- Sl. No. Particulars Amount (in Rs.) 1 Returned income Rs.11,00,460/- 2 Addition u/s 68 Cash deposit in bank Rs.15,04,35,000/- 3. Addition u/s 68 Cash introduced through Mr.VipinGarg entry operator Rs.1,54,07,100/- Assessed income Rs.1,65,07,560/- 14. A perusal of the same shows that the AO has stated the returned income at Rs.11,00,460/-, whereas, para 3 of the assessment order reads as under:- 3. A notice u/s 153A of the Income Tax Act,1961 was issued to the Assessee. In response to the notice u/s 153A of the Act, the Assessee submitted that the original re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval . 16.2 The Hon ble Allahabad High Court in the case of Verma Roadways vs. ACIT, 75 ITD 183 while dealing with the identical situation held to the following effect: Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval presupposes a proper and thorough scrutiny and application of mind. In the case of KirtilalKalidas Co. (supra), the I.T.A.T Madras Bench A has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasijudicial act, particularly because their Act, function, is likely to affect the rights of affected persons. 16.3 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analyze the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted. Approval to the above said draft order is granted u/s 153D of the I.T. Act, 1961. 7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. Thus, the approval is granted in a most mechanical manner and without application of mind. Therefore, same is invalid, bad in Law and void abinitio and as such all assessments under section 153A got vitiated and as such A.O. was not having jurisdiction to pass the assessment orders under section 153A of the I.T. Act, 1961. ( highlighted by us ) 13. We have considered the rival submissions. . The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under : No.Addl.CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated the 31st January, 2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... want of valid approval under section 153D of the I.T. Act and as such no addition could be made against all the Assessees. In view of the above, we set aside the Orders of the authorities below and quash the assessment orders passed under section 153A of the I.T. Act as well as the impugned appellate Order. Resultantly, all additions are deleted. The additional grounds are allowed. In view of the above findings, the other issues on merits are left with academic discussion only. Accordingly, all the appeals of the Assessees are allowed. 17. In the result, all the appeals of the Assessees are allowed. 17. From the analyzations made above, it emerges that the function to be performed by the Addl. CIT or CIT in granting previous approvalu/s 153-D of the Act, requires to adopt judicial approach and to apply his mind independently and to conduct the enquiry himself on the entire facts, material, evidence and proposal put up to him for approval in the light of the material placed and relied upon by the Assessing Officer because where any act or function requires application of mind and judicial discretion or approach by any authority it partakes and assumes the character and s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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