TaxTMI 
TaxTMI 
2021 (4) TMI 533
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....bjections for Assessment Year 2004-05 & 2005-06 against the respective appeals filed by revenue. 2. Similarly appeals 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 ....
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....titioner, who is a businessman and prudent enough to know as to how monies, allegedly retained illegally, 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 i....
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....unal and no investigation or verifications of the facts are required. 13. In 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 wo....
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....on; ITA No. 8090/M/2011 [AY 2005-06-Revenue appeal] and 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 ....
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....e-32, Mumbai. Sub : Approval u/s,153D of the 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 in the form of passing on the relevant information to other Assessing Officers / agencies (if any) is taken expeditiously in e....
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....sions 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 approval under section 153D was disapproved. It was thus contended that text and tenor of approval by designated authority read in conjunction with the ....
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.... 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. This course must have been followed in the instant case as well. There is no reason for us to think that the ITO would have departed from this well-known and ....
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....tuous. > [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 that such an order has been passed after application of mind. 21. Further it has been held by the Hon'ble Supreme Court of India in the case of Director General of Income-tax (Investigati....
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....nging 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 0218 (Bom): (2019) 174 DTR 0086 (Bom) is distinguishable on facts. In this case the draft order was submitted and approved on the same day i.e. 31.12.2010 and the Addl. CIT has himself admitted that "no muc....
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....er law, since the order of assessment passed under section 158BC is made appealable under section 253(1)(GBP) 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 assessee had raised following additional grounds: 1. On the facts and in the circumstance of the case and in law the CIT(A) ought to have held that the AO had not complied with the provisions of Sec. 153D of the Act and hen....
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....ered 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 2009-10 u/s. 143(3) of the Act pursuant to search carried out under s.132 of the Act. For passing such assessment orders, the Assessing Officer is governed by s.153D of the Act whereby the Assessing Officer should complete the assessment proceed....
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.... 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 facts differently. A bare glance at the approval so accorded makes it evident that such approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect of any of the 7 assessment years. Apparently, th....
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....inst 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 approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at and/or other enquiry and examination was never carried out. From the said ....
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.... 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 assessee in 7595/M/2011;3752/M/2012; 7597/M/2012 stands allowed. ITA No. 6656/M/17- Arch Pharmalabs Ltd.- Assessee appeal & 6807/Mum/2017 -Revenue appeal -AY 2011-12 We shall now take up the cross appeals of the assessee & Revenue in ITA no. 6656/M/21 & 6807/Mum/2017 ....
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....s (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 10% of the value of purchases. We have noticed that the AO has made the addition without making any independent enquiries. The decision relied upon by the assessee (supra) also considers certain decisions wherein identical addition made by the AO has been deleted for want of proper enquirie....
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....SSTT. 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 considered while framing assessment order. 4. Your kind approval is solicited as per provisions of section 153D of the I.T. Act, 1961 for completing the search assessments in the above cases. Yours faithfully, Asstt. Commissioner of Income tax Central Circle-32, Mumbai Encl: As above:" 22. Similarly, ....