TMI Blog2023 (9) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... ould indicate that proper procedure and the officer has applied his mind as per the procedures laid down by the legislature and as per the provisions. The claim made in affidavit is only afterthought. Therefore, the assessment made u/s. 144 r.w.s. 143(3)/153C of the Act is also bad in law. Accordingly, additional grounds filed by the assessee are allowed. - SHRI KULDIP SINGH, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER For the Appellant : Shri Sankalp Malik For the Respondent : Shri Shanti Subramanian ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), Pune-11 [hereinafter in short Ld. CIT(A) ] dated 12.01.2022 for the A.Y. 2008-09. 2. Brief facts of the case are, in the course of police action it was found that Shri Mukesh Surajprakash Gupta, residing at 101, Shiv Darshan Apartments, Chandanwadi, Thane(W) was in the possession of huge cash. The information was given to the Income-tax Department. Consequent to this, search action u/s 132 of Income-tax Act, 1961 (in short Act ) was conducted on 22.08.2007 at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cash of ₹. 4.65 crores was seized from the residential premises of Mr. Mukesh Gupta. Consequent to the search and based on the seized material notices u/s.153A and u/s 142(1) were issued but there was no response to such notices. Since there is no compliance and based on the materials found during search which showed that huge deposits and withdrawal were made in the bank accounts. Some of the bank accounts were in the names of trusted employees also. The turnover of the various concerns was running in crores of rupees and no tax audit was carried out for any of the assessment years. As a result, there were multiple transactions of the same entry which led to complexity in the matter to arrive at correct profit. Investments were made by the assessee or his employees and associate concerns of the Unique Group in various assets. From the residential premises of Mr. Mukesh Gupta, a trusted employee of Mr. Premchand Kamble, diaries and other documents were found and seized The entries in these diaries and documents were stated to be related to the business of Mr. Premchand Kamble. The contents of the diaries and materials seized from the various premises need to be co-related wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 35,362/-. Accordingly, the third ground of appeal of the appellant is PARTLY ALLOWED. 14.4. As mentioned above, the appellant herself has accepted that the said amount of Rs. 4,50,000/- was paid in cash and has accepted that the same may be added to assessee's income. It may also be mentioned that this payment of Rs. 4,50,000/- is nothing to do with the loan taken from Tata Motor Finance Limited because as per the documents furnished by Tata Motor Finance, the loan of Rs. 4,00,000/- was sanctioned on 24/04/2007 and a net loan amount of Rs. 3,85,870/- was disbursed on 16/07/2007. Moreover, a perusal of bank account of the appellant maintained with Thane Janta Sahkari Bank suggests that the loan amount of Rs. 3,85,870/- was credited on 21/07/2007 and immediately after that from this bank account, a payment of Rs. 4,00,000/- was made on 24/07/2007. However, this cash payment of Rs. 4,50,000/- stated to be made in the month of November, 2007. Thus, this payment is not out of the loan received from M/s Tata Motors Finance Limited. As the appellant has failed to explain the source of this amount, the addition of Rs. 4,50,000/- made by the Assessing Officer is her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Premchand Kamble nor has she filed any evidence suggesting that a loan was raised from Shri Kamble during F.Y. 2006-07 and the said amount was used for making investment in Reliance Life Insurance Limited. In the absence of any documentary evidence, it cannot be accepted that the amount claimed was received in F.Y. 2007-08 and the same amount was used for investment made during F.Y. 2007-08. Accordingly, the submission made by the appellant is rejected and the addition of Rs. 9,00,000/- made by the Assessing Officer is upheld. The ground of the appeal raised by the appellant is DISMISSED. 17.4. I have examined the facts of the case and submission of the appellant. It has been claimed that the said amount of Rs. 2,00,000/- was received from Shri Prathmesh P Bhange. However, the confirmation filed by the appellant does not carry complete address of the creditor. Also, no document substantiating the creditworthiness of Shri Bhange has been filed. Even after these shortcomings were pointed out by the Assessing Officer in his remand report, these details have not been furnished in the rejoinder filed by the appellant. It is a well settled law that in order to discharge his on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the appellant has categorically admitted of giving a loan of Rs.10,62,70,163/- to Shri Premchand Kamble. During the appellate proceedings, the assessee has filed an affidavit dated 29/10/2012, which is in complete contradiction to the above submission. The affidavit filed by the assessee is a self-serving document which is filed after more than 30 months of filing reply during the Special Audit. If the correct fact was that the appellant has not given any loan to Shri Premchand Kamble and the reply filed before Special Auditor was under any wrong impression, the appellant had full opportunity of explaining the same to the Assessing Officer during the assessment proceedings, when she was specifically asked to explain this issue. But the assessee conveniently chose to remain silent during the assessment proceedings. Even now, the appellant has not given any reason for which the reply filed before the Special Auditor should be considered as incorrect. Her affidavit is a bald denial of submissions made by her during the Special Audit without giving any reason for retracting the same. It is a well settled law that a bald denial of any statement made by an assessee cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor before the undersigned, the appellant has taken a plea that the said amount of Rs. 15,00,000/- is included in the amount of Rs. 10,91,50,000/-. Also, the appellant has not filed copy of relevant bank account indicating that the said amount of Rs. 15,00,000/- was given to M/s Unique Finance out of the deposits made by Shri Premchand Kamble. In view of these facts, since the appellant has accepted that a loan of Rs. 15,00,000/- was given to M/s Unique Finance and on the other hand she has failed to furnish any explanation regarding the source of this loan coupled with the fact that said loan is not appearing in the balance sheet as noted by the Assessing Officer, the addition made by the Assessing Officer is hereby upheld. The ground raised by the appellant is DISMISSED. .. 23.2 During the appellate proceedings, the appellant has simply stated that this addition is of undisclosed income (cash in hand) Rs.32,900/-, the same may not be added to the assessee's income. No explanation as to why the said addition should be deleted has been made during the appeal proceedings. In view of this, the addition made by the Assessing Officer is hereby confirmed. The ground ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of deposits in the bank account maintained with UBI is deleted and the addition of Rs. 9,00,000/- on account of deposits made in the bank account maintained with Thane Janata Sahakari Bank is upheld. The ground of appeal raised by the appellant is PARTLY ALLOWED. 9. And finally he gave a passing comments on the telescopic benefit and general submissions made by the assessee in the following observations: - 29. In the written submission dated 30/10/2012, the appellant has taken a general argument that certain additions are made on the basis of diary entries. Except the diary, AO has failed to make any other evidence which shows the transactions actually took place and represent income of the assessee. This general ground of the appellant is not acceptable because the section 292C of the Act provides that contents of the documents seized during the search or survey operation, shall be presumed to be correct. During the assessment proceedings or appellate proceedings, the appellant has not file any submission or explanation as to why the notings made on these papers are incorrect. Since, the appellant has failed to rebut the presumption; the general ground raised by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in circumstances of the case and in law the Ld. ACIT has erred in making addition of Rs. 6,25,000/- towards income from undisclosed source, being loan given to M/s. Unique Finance the same being not appearing in the Balance Sheet. The CIT(A) in in error to confirm. 8. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 10,64,95,163/- + (22,500) i.e., Rs. 10,14,95163/- and Prem Chand Kambley and 2,25,000/- to Sanjay Sindhey loan given from undisclosed source the same being not reflected in the Balance Sheet. The CIT(A) is in error to confirm. 9. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 15,00,000/- towards loan given to Unique Finace Prop. Premchand Kamble, same being not seen the Balance Sheet of the Appellant. The CIT(A) is in error to confirm. 10. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 32,900/- towards difference between the cash in the Balance Sheet and cash mentioned in the special audit report. The CIT(A) is in error to confirm. 11. On facts and in circumstances of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and goes to the root of the matter, it is prayed that it may please be admitted in view of the Hon'ble Supreme Court decision in the case of NTPC Limited 229 ITR 383. 13. With regard to additional ground, Ld. AR of the assessee submitted as under: - A. At the very outset, it is submitted that the Appellant is not in a position to argue the case ground-wise, Ground Nos. 1-13 (merits) in absence of the requisite and vital documents for which RTI had been filed and rejected. B. It is further brought to the attention of this Hon'ble Bench that against the denial of information, the Appellant, filed an Appeal before the First Appellate Authority (FAA), which also came to be denied and currently, the Second Appeal before the Central Information Commission (CIC) is pending (copy of the RTI application, Order u/s 7(1) of the RTI Act, Order of the First Appellate Authority Appeal before the Hon'ble Central- Information Commission along with its acknowledgement is enclosed herewith). C. Therefore, it is prayed that the Appellant be allowed to argue legal grounds (which go to the root of the matter) raised by way of additional grounds and the matter be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.1-12.6 5 Depreciation Disallowed 67,500 22 N 13.1 - 13.4 6 Alleged unexplained Cash Purchase 4,50,000/- 23 Y 14.1 - 14.4 7 Income allegedly from Undisclosed Commission 1,05,212/- 24 Y 15.1-15.3 8 Alleged Undisclosed Investment 9,00,000/- 25 Y 16.1 - 16.5 9 Income allegedly from Undisclosed Sources 2,00,000/- 26 Y 17.1 - 17.4 10 Disallowance u/s 40A(3) 5,00,000/- 27 N 18.1-18.6 11 Income alleged to be from Undisclosed Sources 6,25,000/- 28 Y 19.1 - 19.5 12 Income allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating material has come on record during the search and seizure operation conducted at the premises of the assessee rather assessment has been based upon special audit report whereas such facts were already brought on record by the assessee by filing original return of income along with computation, the assessment framed u/s 153A read with section 143 (3) is not sustainable in the eyes of law. Hence, the assessments for AYS 2002-03 2003-04 are ordered to be quashed. PCIT vs. M/s Abhisar Buildwell Pvt. Ltd. ITA No. 239/2018 ITA No. 240/2019 (Del HC) 7. Learned counsel for the Revenue repeated the submission made before the ITAT viz, that the report of Special Audit should be treated as incriminating evidence. Clearly the report of the Special Auditor, having been commissioned subsequent to the search, and during the assessment proceedings against DSL, cannot obviously be treated as incriminating material qua the Assessee, recovered during the course of search, in order to justify the addition made in the assessment under Section 153A of the Act. This is consistent with the legal position explained in both CIT v. Kabul Chawla (supra) (which still holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appeal NOS. 1874 of 2014 and 58 of 2015) dated July 12, 2017 - (2017) 308 ITR 584 (Bom) ox the reported judgment in Continental Warehousing Corporation and All Cargo Global Logistics (supra) can be taken. Skylark Build vs. ACIT, [2018] 97 taxmann.com 682 (Mumbai) IT: Where in appeal before Tribunal, assessee has raised additional jurisdictional issue/legal issue with respect to issuance of notice under section 153C alleging non-compliance of statutory provisions and procedures prescribed under section 153C, same was to be admitted IT: In absence of any incriminating material found during search that assessee was member of AOP against which bogus purchase was alleged, no addition could be sustained in hands of assessee 5. Thus, in the absence of any material found during the course of search, much less being incriminatory in nature cannot be sustained and it is prayed that the same may kindly be held so. Ground No. 14 16: The Assessment Order is liable to be quashed as all the assessment order has been passed with an invalid, non- speaking, mechanical approval. Thus, without any valid, proper approval, no addition can be made. 6. It is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lect 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. 11.6 There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the co-ordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332(Mum) and approved by jurisdictional High Court subsequently as reported in 307 CTR 218 affirms the plea of the Assessee. 11.7 Very recently, the co-ordinate bench in Sanjay Duggal ors (ITA 1813/Del/2019 ors order dated 19.01.2021 has also echoed the same view after a detailed analysis of similar facts and also expressed a discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the plea raised by the Assessee against maintainability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit dated 14.07.2023 has been filed by the Ld. Joint CIT, whereby it has been contended that: a. The Draft Assessment Order was passed after receipt of the approval (Para 2) b. The Appraisal Report dated 19.10.2007 was also marked and forwarded to the Ld. Addl. CIT and as per department's procedure the same presumably must've been taken into consideration by the Ld. Addl. CIT while giving the Approval (Para 3-4) 5. It is submitted that the Appellant does not dispute the fact that the Approval was given. However, it is the case of the Appellant that the approval so given was perfunctory, given mechanically and without any application of mind due to which vitiates the sanctity of the Approval and makes it non-est in the eyes of law. The stand of the Appellant emanates from a bare perusal of the Approval Order whereby only the following remarks were given - Draft Assessment Order is Approved (See Page 28 of the Synopsis filed on 28.11.2022). This approval does not spell out as to how, why and on basis was the approval given, what was the material taken into consideration. The rationale / reasoning behind the same is absent and if such approvals are h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d examine, before giving the approval, viz. the material found during the course of search, inquiries and investigation conducted by the AO qua the search material, inquiries made during the assessment proceedings, replies of the Assessee filed during the course of assessment proceedings, inquiries conducted by the Special Auditor, replies filed before the Special Auditor and then the final Draft Assessment Order. However, all of such inquiry/verification was admittedly ignored by the Ld. Addl. CIT while granting approval and is also absent in the order giving approval, which unequivocally proves that the impugned approval was an approval, just in form and not in substance. In this regard, reliance is placed on the order of the ITAT Delhi in Sanjay Duggal and Ors. vs. ACIT (ITA No. 1813/Del/2019 dated 19/01/2021), wherein it was held as under: 11.6. Therefore, in the cases of search, assessment orders whether framed under section 153A or 153C, the Joint Commissioner [Approving Authority) is required to see that whether the additions have been made in the hands of assessee are based properly on incriminating material found during the course of search observations/comments in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT. It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in appraisal report. Thus, we hold the approval under section 153D have been granted without application of mind and is invalid, bad in Law and is liable to be quashed. Since we have held that approval under section 153D is invalid and bad in law, therefore, A.O. cannot pass the assessment orders under section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Additional Commissioner of Income Tax with a corresponding obligation on him to examine the record and thereafter accord the statutorily required Approval. The reason for granting the Approval may not be subject matter of the challenge but the manner and the material on the basis of which the approval was granted can always be examined by the Tribunal to come to the conclusion whether the Approval was granted in a mechanical manner or after applying mind looking into the record. No evidences required to be appreciated as the approval is self- evident, Le, that it was granted by the Additional Commissioner of Income Tax without application of mind and without looking into the record. 11. It is to be noted from the aforesaid orders, that the duty of the Approving Authority is to look and examine the entire record and thus on this count also the averment of the JCIT that appraisal report was forward and presumably must've been taken into consideration, is unsustainable. 12. Rather, the blatant non-application of mind of the Ld. Addl. Commissioner is also evident from the fact that despite the assessee partaking in the assessment through her Authorized Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by Prem Chand Kamble in the bank account of the assessee and then transferred back to him. Thus, this addition could not have been made in the first place, let alone sustained. Such an addition is arbitrary and without any valid basis, to say the least. 17. As mentioned in Para A B of the Synopsis filed on 28.11.2023, that the Assessee not being in possession of the assessment records and the same not being supplied to the Assessee despite inspection being sought and RTIS being filed, has made the Assessee incapable of addressing the merits in detail. However, the Assessment Order the CIT(A) Order show that all along the Appellant had stated that the transactions pertained to Sh. Prem Chand Kamble (Searched person) (See Page 11 CIT(A) Order) but despite the same, the additions were made in ignorance of facts, circumstances and logic. Thus, such additions which are fundamentally flawed and bereft of any reasoning were made in the assessment order, which, without any examination, were approved by the Ld. Addl. Commissioner and further even wrongly sustained by the Ld. CIT(A), which makes the addition and its wrongful sustenance liable to be quashed. 18. Without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of mind then the very purpose of obtaining approval is defeated. Moreover, where 4 clear days' time was available with the administrative authority, it was a half-hearted approval and as' such held as no approval in the eyes of law. Accordingly, we have no hesitation in declaring that the Approval granted by the Additional CIT, Central, Kanpur on 27.03.2015 is no approval in the eyes of law and therefore, the assessment made by the AO based on such an approval is also declared to be null and void. 20. Thus, in light of the same, it is prayed that the approval be held to be bad in law and the assessment be annulled. 15. On the other hand, Ld. DR submitted that provisions of section 153D is continues process and objected to the various submissions made by the Ld. AR. Ld. DR submitted that ACIT is aware of the establishment and the findings, therefore he did not have to give a detailed approval. Ld.DR relied on the order of the Ld.CIT(A) and filed its written submissions vide letter dated 26.07.2023, for the sake of clarity, the submissions are reproduced below: - During the course of search and seizure action u/s 132 of the IT Act 1961 at the concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the JCIT has filed the affidavit based on the record available with him. Also, in Para 1 of the affidavit he has clearly admitted that he is fully conversant with the relevant facts as available in the case records. Thus, this statement of assessee is totally incorrect. 6. Further the entire assessment is based on the appraisal report and the seized material as forwarded by the Investigation wing, the special audit report and the replies filed by the assessee during the course of assessment. Moreover, as mentioned in Para 4 of the affidavit, the Range head guides the AO till final approval is granted. This procedure is followed in all the cases which was followed in this case too. a. Regarding appraisal report and seized material, the Range head has clearly stated that the same was in the knowledge of Addl. CIT since day one. Thus, he was aware of the facts of case since starting of the process. b. Regarding special audit, it has been clearly mentioned in the assessment order that the matter was referred for Special audit as no regular books were available, banks showed huge deposits, turnover of concerns ran into crores, there were multiple transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions made are factually and legally unsustainable is without any basis as the assessee had not made any effort to explain these issues in any manner before the AO or LD CIT(A). In fact, from the records it is amply clear that the assessee has been NON-COOPERATIVE THROUGHOUT the assessment proceedings, at the time of special audit and during appellate proceedings and has now filed incorrect and baseless submissions. 8. As is clear from above facts on record, the assessee has NOT DISCHARGED THE PRIMARY ONUS to cooperate and provide details and explanations as called for during the course of assessment or during appellate stage. 9. Accordingly, it is prayed that the appeal of the assessee may be dismissed. 16. Considered the rival submissions and material placed on record, we observe from the record that, the case of the assessee is covered based on the search conducted in the case of Shri Premchand Ashok Kamble. Since the assessee and her husband were dealing with the M/s. Unique Finance Group concerns, the case of the assessee was included u/s. 153C of the Act. Accordingly, assessment was completed based on the statement given by the assessee and findings in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast 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 Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal exercise of responsibility placed on designated authority under section 153D of the Act. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the plea raised by 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. 20. Respectfully following the above decision, we are inclined to decide the issue in favour of the assessee that approval granted u/s. 153D is not as per law. Even Ld. DR submitted based on the affidavit filed by the JCIT that the Range Head guides the Assessing Officer till final approval is granted. However, in our view, the approval process should indicate that proper procedure and the officer has applied his mind as per the procedures laid down by the legislature and as per the provisions. The claim made in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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