TaxTMI 
TaxTMI 
2020 (4) TMI 878
X X X X Extracts X X X X
X X X X Extracts X X X X
....iety registered with the Registrar of Societies and was also registered u/s 12AA of the IT Act, 1961 by the CIT, Dehradun vide order Order No.C-40(206)/ Registration/Dehradun/200607/Tech/9703 dated 24.11.2007. The society runs various educational institutes in the name of Dev Bhoomi Group of Institutes at Dehradun and Saharanpur. A search and seizure operation u/s 132 of the IT Act was conducted on the Dev Bhoomi Institute of Technology, Uttarakhand Uthan Samiti and other group concerns on 26th April, 2012. In response to notice u/s 153A, the assessee filed its return of income declaring nil income. During the course of assessment proceedings, the AO noted that the assessee society has siphoned off its funds by the founder member and trustee of the society Shri Sanjay Bansal by floating some fictitious entities in the names of trusted employees/accountants, namely, Shri Sunil Dandriyal, Shri Sushil Kumar and their family members and opened bank accounts in their names by forging the documents submitted with the account opening forms. The deposits credited in these accounts were from the term loan/OD accounts of Uttarakhand Uthan Samithi and Dev Bhoomi Institute of Technology, Dehra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transfer funds of the society which were then withdrawn for personal use, the AO completed the assessment u/s 153A determining the total income of the assessee at Rs. 33,01,340/- for the A.Y. 2008-09 wherein he disallowed proportionate interest on bogus loans, depreciation on fictitious assets, etc. He similarly disallowed the exemption claimed by the assessee u/s 12AA/10(23C) and brought to tax the surplus income. Similarly, for other A.Ys, the AO determined the total income of the assessee at Rs. 2,09,19,860/- for A.Y. 2009-10, Rs. 5,16,28,950/- for A.Y. 2010-11, Rs. 7,21,99,580/- for A.Y. 2011-12, Rs. 6,20,72,846/- for A.Y. 2012-13 and Rs. 7,28,35,130/- for A.Y. 2013-14. 6. In appeal, the ld.CIT(A) not only confirmed the addition made by the AO, but also directed the AO to enhance the income of the assessee to the extent of amount siphoned off for non-charitable/educational purposes which were not disallowed by the AO inadvertently in the assessment order. The amount of such enhancement made by the CIT(A) for the A.Ys 2008-09 to 2012-13 as per Para 10.4 of his order are as under:- M/s. Uttarakhand Uthan Sam A.Y. 2008-09 to A.Y. 201. S.No. A.Y. Amount siphoned off ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 153D of the Act and therefore, without setting aside the directions of the Addl. CIT/without seeking approval under section 153D of the Act, the order under section 143(3) r.w.s 153C of the Act, cannot be enhanced. 11. That without prejudice even when enhancing, the income, the learned CIT(A) has neither stated even the source of income or head of the income, which is stated to have been enhanced. Hence, the enhancement is illegal and bad in law. 12. That in view of the facts and in circumstances of the case and in law, the CIT(A) has erred in law and on facts in enhancing the income by Rs. 32,00,000/-. 13. That the order by the CIT(A) in enhancing the income is without jurisdiction and is wholly arbitrary as the order passed is without providing sufficient and adequate opportunity. 14. That the order passed by AO and also by CIT(A) are without giving reasonable and sufficient opportunity to the appellant and said orders have been passed in violation of principles of natural justice. 15. That the CIT(A) has arbitrarily rejected the ground of 'Nonopportunity' as no reasonable opportunity was afforded by the AO while framing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the explanations/ evidences available on record and based upon mere surmises and conjectures. 24. That CIT(A) has erred in upholding the action of AO in not allowing the full credit of prepaid taxes as claimed by the appellant in the return of income filed, without assigning any reason thereof. 25. That in view of the facts and circumstances of the case the AO & the CIT(A) has failed to appreciate that the additions cannot be made on the basis of alleged statements of Sunil Daundriyal & Sushil Kumar. The recorded statement do not have any evidentiary value. 26. That the AO & CIT(A) has failed to appreciate that the procedure prescribed under section 65B of the Information Technology Act 2000 was not fulfilled, therefore, various electronic evidences relied upon by the AO & CIT(A) are inadmissible in law and no adverse inference can be taken on these electronic evidences. 27. That the hard disk seized during the search was operated by the Income Tax Authorities in their office in the absence of Appellant or its representative and hence, the alleged contents of the same cannot be used against the Appellant. It has no evidentiary value. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....val had added a condition precedent to the passing of the final order. He submitted that the approval, if any, accorded to the proposed draft order has to be in clear terms and cannot be based on certain conditions. Referring to the decision of the Delhi Bench of the Tribunal in the case of Rishabh Buildwell Pvt. Ltd. vs. DCIT, vide ITA No.2122/Del/2018, order dt. 04.07.2019, he submitted that the Tribunal under identical circumstances has quashed the assessment on the ground that the approval was given in a mechanical manner and was a conditional approval subject to modification by the DCIT after receiving of the approval which makes it an invalid, qualified and uncertain approval. 11. Referring to various pages of the paper book, the ld. Counsel for the assessee submitted that the alleged draft order was prepared on 30th March, 2015 by the DCIT at Dehradun which was submitted on the same day for approval u/s 153D of the Act to the Addl.CIT at Meerut which is about 250 Kms. away. Further, the proposal for obtaining approval u/s 153D of the Act along with submission of draft assessment order is dated 30th March, 2015 and it would show that such proposal is prepared in the office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es that the AO was very much present at Dehradun on 30th March, 2015. Therefore, when the draft assessment order was sent for approval on 30th March, 2015 from the office of the AO at Dehradun which was received by the Office of the Addl.CIT, Central Range, at Meerut, who went through the records/suggested changes and amendment, granted approval on the same date i.e., on 30th March, 2015 in 130 cases and returned the records to the AO, who, thereafter passed the orders on the same day after considering the changes/amendments suggested and issued demand notice is nothing, but, an impossible task. Therefore, it is very clear that the provisions of section 153D were not complied with and approval, if any, was nothing, but, mere farce and is in a mechanical manner. Relying on various decisions, he submitted that approval u/s 153D is not a mere mechanical exercise and sanction has to be given only after independent application of mind and after considering the relevant issues. He accordingly submitted that the orders passed by the AO being not in accordance with the law should be quashed. For the above proposition, he relied on the following decisions:- i) Indra Bansal & Others....
X X X X Extracts X X X X
X X X X Extracts X X X X
....parties. The only issue to be decided in the impugned appeals are regarding the validity of the assessment order in absence of proper approval necessary for assessment as per the provisions of section 153D. The provisions of section 153D read as under:- "153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner. Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA." 13.1 A perusal of the order sheet entries copy of which is placed at page 37 of the paper book, Volume-I shows that on 30th March, 2015, the AO has mentioned as under:- "Draft order submitted for approval u/s 153D. Approval received vide letter No.1158. Order passed u/s 153A. Issue notice of d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers u/s 153A/143(3) or 144 and 153C/143(3) of the I.T. Act, 1961 in respect of the assesses for the assessment years as mentioned below:- U/s. 153 A Sl.No. Name of the assessee PAN Asstt. Years 01 Smt. Seema Bansal AHBPB3579P 2007-08 To 2013-2014 02 Smt Bimal Bansal ADCPB1768R 2007-08 To 2013-2014 03 Drishti Builders AAIFA4643E 2012-13 to 2013-14 04 Sh. Sushil Kumar AQLPK2365D 2007-08 To 2013-2014 05 Sh Sunil Dandriyal ALTPD8489N 2007-08 To 2013-2014 06 Strategic Marketing AADFS8010M 2007-08 To 2013-2014 07 Sh. Ashok Mehta ABNPM2590F 2007-08 To 2013-2014 08 CKSR Animation pvt ltd AAECC0802F 2011-12 to 2013-14 09 Bharti Water Pvt Ltd AACCB5459M 2007-08 To 2013-2014 10 Chand sons education city pvt ltd AAECC0801G 2011-12 to 2013-14 11 Water wealth infra tech india pvt ltd./ AABCW0319C 2011-12 to 2013-14 12 Sumer chand and sons AACFS6622C 2007-08 To 2013-2014, 13 Sh. Sanjay Bansal ACZPB9725A 2007-08 To 2013-2014 14 Uttarakhand Uthan samiti AAAAU1376N 2007-08 To 2013-2014 15 W....
X X X X Extracts X X X X
X X X X Extracts X X X X
....val get it back." 17. A perusal of the above clearly shows that the approval was given in a mechanical manner by the Addl.CIT to the draft assessment orders passed by the AO. As mentioned earlier, the AO has submitted the draft assessment orders on 30th March, 2015 as per the order sheet entry which indicated that the AO was very much available in her office at Dehradun on 30th March, 2015. The Office of the Addl.CIT is situated at Meerut which is about 250 Kms from Dehradun. There is no other record to suggest that the files containing the draft orders were, in fact, moved from the office of the AO at Dehradun to the office of the Addl.CIT at Meerut who went through the same and has given approval with certain amendments. It is not possible on the part of the Addl.CIT to go through the orders in about more than 100 cases on the very same day and give approval. Even if such approval has been given, it can be said that the same is nothing but a technical formality without application of mind. Further, as mentioned earlier, there is nothing on record to suggest that the files have in fact moved from Dehradun to Meerut for obtaining approval. Therefore, in our opinion, the mandator....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e directed to ensure taking into account the seized documents/papers and comments in the appraisal report pertaining to AYs. The fact of initiation of penalty proceedings, wherever, applicable, must also be incorporated in last para of the order. The initiation of correct penalty provisions of I.T. Act u/s 271 (1)(c)/ 271AAB, as per facts of the ease, must be ensured. 3. This office reference no of approving the draft orders shall invariably be quoted in the assessment orders to be passed. A copy of final assessment orders passed in these cases should be sent to this office for record immediately on passing the assessment orders. 4. It must also be ensured that if any document in this case, pertains to any third party assessed with a different AO, the necessary information for taking necessary action must be sent to concerned AO immediately. 12. The salient points of the approval letter is as under: 1. It is a technical approval 2. The AO was directed to ensure that the comments in the appraisal report are duly ensured. 3. The penalty proceedings should be mentioned wherever applicable for the initiation of correct penalty provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015. 2. Following question was argued before us for our consideration:- "Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 1 of 4 Uday S. Jagtap 668-16-ITXA15=.doc 2007-08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with. 4. This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. The Tribunal reproduced the observations made by the Ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises. 8. Accordingly, the Tax Appeal is dismissed." 15. Hence, keeping in view the facts and circumstances of the case and peculiarities of the instant case, owing to the judgment of the Hon'ble High Court, we hereby hold that the assessments completed by the DCIT do not stand in the eyes of law. Since the orders have been treated as null and void, any adjudication on other issues would be academic in nature only....