2022 (6) TMI 25 - AT - Income Tax

Assessment orders annulled for lack of proper consideration under Section 153D.

The Tribunal annulled the assessment orders due to the mechanical approval under Section 153D without proper consideration. The appeals were partially ... Assessment u/s 153A - approval u/s 153D - Addition u/s 68 - HELD THAT:- Hon'ble Supreme Court in the case of ‘Sahara India vs. CIT & Others’,[2008 (4) TMI 4 - SUPREME COURT] while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of the provisions of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of the said provision being an inbuilt protection against arbitrary or unjust exercise of power by the Assessing Officer, casts a very heavy duty on the said high-ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. A similar view has been taken by this Bench of the Tribunal in a group of cases of Shri Navin Jain and others [2021 (9) TMI 1068 - ITAT LUCKNOW] wherein also, the approval under section 153D was given through the same letter by the ACIT, Central, Kanpur and the Ground raised in this regard by the assessee was allowed, and the assessment orders were annulled by us. While allowing the Ground raised by the assessee, the Tribunal had also considered various cases laws, including that of the Hon'ble Supreme Court. In view of these facts and circumstances and in view of the unrebutted judicial precedents relied on by the ld. Counsel for the assessee, the grievance of the assessee by way of Ground no.6 is allowed and the assessment order is annulled. Issues Involved:1. Legality of assessment under Section 153A of the Income Tax Act, 1961.2. Addition of Rs. 4,00,00,000 under Section 68 of the Income Tax Act, 1961.3. Addition of Rs. 10,00,000 under Section 69C of the Income Tax Act, 1961.4. Treatment of profit in wholesale trading in cloth as unexplained cash credit under Section 68 read with Section 115BBE of the Income Tax Act, 1961.5. Addition of Rs. 21,34,759 as unexplained expenditure under Section 69C of the Income Tax Act, 1961.6. Validity of assumption of jurisdiction and assessment order under Section 127 of the Income Tax Act, 1961.7. Mechanical nature of approval granted under Section 153D of the Income Tax Act, 1961.8. Prejudgment and predecision in the Show Cause Notice dated 12.12.2018.9. Treatment of business of trading in cloth as bogus.10. Arbitrary additions contrary to principles of natural justice and equity.Detailed Analysis:1. Legality of assessment under Section 153A of the Income Tax Act, 1961:The assessee argued that the assessment under Section 153A was invalid as no incriminating material was found during the search. The Tribunal noted that the assessments were completed under Sections 153A/143(3) by the Dy. CIT, Central Circle-2, Kanpur, and various additions were made without proper incriminating material.2. Addition of Rs. 4,00,00,000 under Section 68 of the Income Tax Act, 1961:The Tribunal observed that the Ld. CIT(A) sustained the addition of Rs. 4,00,00,000 on account of alleged unexplained share capital and share premium. The assessee contended that no incriminating material was found during the search to justify this addition, making it illegal and void-ab-initio.3. Addition of Rs. 10,00,000 under Section 69C of the Income Tax Act, 1961:The Tribunal noted that the Ld. CIT(A) sustained the addition of Rs. 10,00,000 for alleged unexplained expenditure. The assessee argued that no incriminating material was found during the search to support this addition, rendering it illegal and void-ab-initio.4. Treatment of profit in wholesale trading in cloth as unexplained cash credit under Section 68 read with Section 115BBE of the Income Tax Act, 1961:The Tribunal observed that the Ld. CIT(A) sustained the treatment of Rs. 10,67,37,470 as unexplained cash credit. The assessee contended that no incriminating material was found during the search, making the assessment under Section 153A and the treatment of profit as unexplained cash credit illegal and void-ab-initio.5. Addition of Rs. 21,34,759 as unexplained expenditure under Section 69C of the Income Tax Act, 1961:The Tribunal noted that the Ld. CIT(A) sustained the addition of Rs. 21,34,759 as unexplained expenditure. The assessee argued that no incriminating material was found during the search, making this addition based on mere surmises and conjectures.6. Validity of assumption of jurisdiction and assessment order under Section 127 of the Income Tax Act, 1961:The assessee challenged the validity of the assessment order under Section 127, arguing that the Ld. CIT(A) erred in law and on facts by sustaining the assessment order without proper jurisdiction.7. Mechanical nature of approval granted under Section 153D of the Income Tax Act, 1961:The Tribunal found that the approval granted by the Addl. CIT under Section 153D was mechanical and without proper application of mind. The approval was granted on the same day for multiple assessments, which was humanly impossible to review thoroughly.8. Prejudgment and predecision in the Show Cause Notice dated 12.12.2018:The assessee contended that the Show Cause Notice prejudged and predecided the issues, making the consequential treatment of gross profit as deemed income under Section 68 and the additions unsustainable in law.9. Treatment of business of trading in cloth as bogus:The Tribunal observed that the Ld. CIT(A) treated the business of trading in cloth as bogus without appreciating that it was accepted in the original assessments. The reassessment under Section 153A without any incriminating documents found during the search was deemed illegal.10. Arbitrary additions contrary to principles of natural justice and equity:The Tribunal noted that the Ld. CIT(A) sustained arbitrary additions, ignoring the principles of natural justice and equity. The assessee argued that these additions were unsustainable and deserved to be deleted.Conclusion:The Tribunal annulled the assessment orders, finding that the approval under Section 153D was granted in a mechanical manner without proper application of mind. The appeals were partly allowed, indicating that the assessments were not conducted in accordance with the legal requirements and principles of natural justice.