TaxTMI 
TaxTMI 
2021 (8) TMI 998
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngly the assessment order passed on the foundation of such notice(s) is liable to be quashed and CIT(A) erred in not holding so. b. On the facts and circumstances of the case and in law, no notice u/s 143(2) was issued within the stipulated statutory time and accordingly the assessment order passed by the assessing officer is liable to. be quashed and CIT(A) erred in not holding so. c. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is without jurisdiction and CIT(A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of Share Capital / Share Premium of Rs. 1,89,35,760/- made by the assessing officer as alleged unexplained cash credits u/s 68 of Income Tax Act, 1961. 3. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming addition of unsecured loans of Rs. 1,36,30,27,066/- made by the assessing officer as alleged unexplained cash credits u/s 68 of Income Tax Act, 1961. 4. On the facts and circumstances of the case and in law, the various alleged adverse inferences drawn / ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ailed to provide even bank statement, profit and loss account of the investor companies and therefore, he held that the assessee has failed to discharge its onus, creditworthiness of the investors, genuineness of the transactions and existence of the investors. Therefore, the addition of Rs. 1,89,35,760/- was made. Assessment order passed u/s 143(3) of the Act after taking approval of the Joint Commissioner of Income Tax on 31.12.2016 u/s 153D of the Act. 5. The assessee is aggrieved with the order of the ld AO preferred an appeal before the ld CIT(A). The assessee submitted that the addition of Rs. 1,89,35,760/- is unwarranted as assessee has not received any amount during the year but the same is on account of merger vide order of the Hon'ble High Court dated 09.09.2014 u/s 394 of the Companies Act, wherein, 9 different companies were amalgamated with the assessee company and on amalgamation of the aforesaid company where the effective date is 01.04.2013 the above said share capital represent shares allowed to the share holders of 9 amalgamated companies. Therefore, there is no sum received during the year and the share capital has arisen on account of amalgamation. 6. With....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f creditors advancing money to the assessee has Nil or very meager income and therefore, the ld AO has rightly made the addition u/s 68 of the Act. With respect to the claim of the assessee, that most of the credit does not related to this assessment year as this plea is not raised before the ld AO. Accordingly, he upheld both the additions. The assessee also raised a ground before him that no approval u/s 153D has been granted. The ld CIT (A) held that the detail of approval is mentioned in the last line of the assessment order and dismissed this ground. Therefore, the assessee is aggrieved with that order has preferred this appeal before us. Parties were heard on this appeal. 9. Ground No. 1 is general in nature and no arguments were advanced by the assessee therefore, it is dismissed. 10. Ground No. 2 of appeal is with respect to the addition of Rs. 1363027066/- on account of unsecured loan. The ld AR argued that share capital of Rs. 189,35,760/- is allotment of shares to the share holders of amalgamated companies and no sum is received during the year therefore, no addition has been made u/s 68 could not have been made. He referred to the order of the Hon'ble Delhi Hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther referred to clause 9 of the order of the Hon'ble High Court wherein, the assessee was to issue shares to the shareholder of the respective companies. He also referred to schedule of the period of various amalgamated companies. He therefore, submitted that no addition can be made in the hands of the assessee as no sum is found credited in the books of account of the assessee. 12. With respect to ground No. 5 he challenged the approval granted by the Joint Commissioner of Income Tax u/s 153D of the Act and submitted that approval given by the ld JCIT is without application of mind and is an empty ritual. He relied on the order of the Hon'ble Bombay High Court in case of Srilekha Damani 11 TMI 1563. He also referred to the decision of the coordinate bench in case of Rishabh Buildwell Pvt. Ltd 7 TMI 365. He also referred to several other case laws and submitted that approval u/s 153D is invalid. The facts and circumstances are identical to the issues decided in the above judicial precedents stated. He submitted in his synopsis as under :- "3. Ground no 5 The assessment order passed by the assessing officer is contrary to the provisions of section 153D of the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15-16 15 M/s Apple Insurance Brokers Pvt. Ltd., AAECA5320N 2009-10 to 2015-16 16 M/s Zync Global Pvt. Ltd., AAACZ5235H 2012-13 to 2015-16 17 M/s Apple Iron Enterprises Pvt. Ltd., AAHCA8642G 2010-11 to 2013-14 18 M/S Mastermind Trade-in-Private Ltd AAECM9435E 2009-10 to 2015-16 Draft assessment order received Late i.e. on 31/12/2016 Yours sincerely Beyond the time as per internal Action Plan. And thus having a very little time/ almost no time for proper Examination of facts of the case/ further enquiries etc. -sd Deputy Commissioner of Income Tax Central Circle Noida For J.C.I.T., Central Range (Meerut) 3.3 The letter addressed by the JCIT to A.O. granting his approval is reproduced as under:- F. No. JCIT/Central Range/Meerut/S&S/153D/2016-17/1477 Dated: 31-12-2016 To, The Dy. Commissioner of Income Tax. Central Circle, Noida. Subject:-Prior approval u/s 153D in the cases of Apple Group cases-regarding. Please refer to your office letter F. No. DCIT/CC/Noida/S&S/153D/2016-17/2623 dated 30-12-2016 received in this office ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ately on passing the assessment orders. 5. 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. Encl. : As above Sd Joint Commissioner of Income Tax, Central Range, Meerut 3.4 From the above, it is apparent that the JCIT received the draft assessment order from the AO on 31/12/2016 and he granted the approval on the same day. In the letter of the AO for seeking approval from JCIT, the JCIT has himself made the following remarks:- Draft assessment order received late i.e on 31/12/2016 Beyond the time as per internal Action Plan And thus having a very little time /almost no time for proper Examination of the facts of the case/further enquiries etc. From the above remarks of the JCIT himself, it is evident that he has granted the approval without examination of the facts of the case. The approval by the JCIT is as in empty ritual. The approval given by the JCIT is not a statutory approval as is required under the Act. The approval is not a final approval as required u/s 153D ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid. 6. Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks : "To, The DCIT(OSD)1, Mumbai Subject: Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref: No. DCIT (OSD)1/ CR7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft 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 analise the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted. Approval to the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned below: S. No. Name of the assessee PAN A.Yrs. 1 M/s Risabh Buildcon Pvt. Ltd. AACCR7502F 2009-10 to 2015-16 2 M/s R. G. V. Fininvest Pvt. Ltd. AAACR4383G 2009-10 to 2015-16 3 M/s Aggarwal Capfin Financial Services P. Ltd. AABCA0925E 2009-10 to 2015-16 4 M/s Arihant Info Solutions P. Ltd. AADCA5015H 2009-10 to 2015-16 5 M/s Sethi Estate P. Ltd. AABCS7643B 2009-10 to 2015-16 7 Sh. Gulshan Sethi AASPS1248Q 2009-10 to 2015-16 8 M/s East View Developers P. Ltd. AABCE5324R 2009-10 to 2015-16 9 Sh. Desh Bhushan Jain A AFPJ6467R 2009 10 to 2015-16 10 M/s Max City Developers Pvt. Ltd. AAECM5401A 2009-10 to 2015-16 11 Sh. Sanjeev Jain ACFPJ3817P 2009-10 to 2015-16 12 M/s Sethi Buildwell Pvt. Ltd. AAICS9/42C 2009-10 to 2015-16 13 Sh. Satpal Nagar AAFPN6467M 2009 10 to 2015-16 14 M/s Risabh Buildwell Pvt. Ltd. AACCR9776R 2009-iO to 2015-16 15 Srnt. Magan Jain AIMPJ8085G 2009-10 to 2015-16 16 M/s Angel Buildcon Pvt. Ltd. AAFCAI968H 2009-10 to 2015-16 2. A technical approval is accorded to pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder once the approval has been accorded. The approval to be given is statutory in nature and legally binding. In the instant case, the approving authority has clearly mentioned that the approval given is a technical approval. Moreover, he has directed the DCIT to ensure the seized materials and the findings of the appraisal report to be incorporated in the final assessment order. This clearly goes to proves that the approval given by the JCIT is not a final approval as required u/s 153D of the Act but a conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval has to be statutory nature after due application of mind, it should be neither technical nor proforma approval which is envisaged u/s 153D of the Act. Reliance is placed the judgment of Coordinate Bench in the case of M3M India Holdings (ITA 2691/2018). And the judgment of Hon‟ble High Court of Bombay i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ditional CIT while granting an approval for passing the order of assessment, had made following remarks:- "To, The DCIT(OSD)-1 Mumbai Subject: Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08reg. Ref: No. DCIT (OSD)-1/CR-7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft 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 3 of 4 Uday S. Jagtap 668-16- ITXA-15=.doc 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 e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ning authority was sitting at Noida. Further, vide common letter, the approval has been granted to multiple draft assessment orders passed in 20 odd cases on the very same day of receiving the draft assessment orders. Another glaring fact noted is that the Addl. CIT granted the so-called approvals merely on the basis of draft assessment orders without even examining the assessment record of each case. It is self-evident that the approval has been accorded without going through the facts of the individual cases. This position is further corroborated from the contents of the approval letter itself wherein the approving authority is admitting that due to limitation of time, only broad issues were discussed. The relevant paragraph i.e. paragraph 3 in the approval letter is reproduced hereunder: "3. ...As most of the draft orders have been received at the end of the limitation period, it is not possible to discuss minute details and only broad issues have been discussed with you. Due to limitation involved, approval is being accorded. " 7.2 We find it difficult to comprehend as to how the approving authority satisfied itself about the correctness of the search....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and ors v. ACIT (ITA No. 1813/Del/2019 dated 19/01/2021) (Delhi Bench). The relevant findings are reproduced hereunder: "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 the appraisal report, the seized documents and further enquiries made by the A.O. during the course of assessment proceedings. Therefore, necessarily at the time of grant of approval of the assessment made by the A. O, the Joint Commissioner is required to verify the above issues, apply his mind that whether they have been properly appreciated by the A.O. while framing the assessment orders or not. The JCIT is also required to verify whether the required procedure have been followed by the A. O. or not at the time of framing of the assessments. Thus, the approval cannot be a mere discretion or formality, but, is mandatory being Quasi Judicial function and it should be based on reasoning. In our view, when the leg....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments and their effect, if any. But, in the present case, the Approving Authority i.e., JCIT has granted common approval for all the assessment years in respect of the single assessee. Thus, there is no application of mind on the part of JCIT while granting approval for all the common years instead of granting approval under section 153D for each assessment years separately. 16. In some of the cases the approval was granted on the date the request was made for approval by the A.O. In all those cases merely draft assessment order and the assessment folders were available with the A. O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized materia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also placed on the following case laws wherein, on similar facts as in the case of the assessee, the approval under section 153D was held to be invalid and consequently the assessment order was held to be null and void:- M/S Inder International Versus the A.C.I.T., Central Circle-II 2021 (6) TMI 416 - ITAT CHANDIGARH Rajesh Ladhani v. Dy. CIT - Central Circle, Agra - 2019 (11) TMI 920 - ITAT Agra Uttarakhand Uthan Samiti v. ITO, Ward - 45(5), New Delhi 2020 (4) TMI 878 - ITAT Delhi Dilip Constructions Pvt Ltd. Versus ACIT, Circle-1, Bhubaneswar. And (Vice-Versa) And Shilpa Seema Constructions Pvt Ltd. Versus ACIT, Circle-1, Bhubaneswar. And (Vice-Versa) 2019 (12) TMI 311 - ITAT Cuttack Shri Tarachand Khatri, Ramnath Building, Opp. Bhawartal, Jabalpur. Versus The Acit, Central Circle, Jabalpur. 2020 (1) TMI 1027 - ITAT Jabalpur Arch Pharmalabs Ltd. Versus ACIT Cc-32, Mumbai And (Vice-Versa) And M/S Arch Impex P. Ltd. Versus ACIT CC- 32, Mumbai 2021 (4) TMI 533 - ITAT Mumbai Sanjay Duggal, Kritika Talwar, Arun Duggal, Ratna Talwar, C/O Kapil Goel, Adv, Neha Duggal, Nany Duggal, Poonam Duggal, Neeru Duggal, Rajnish Talwar,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the assessee company and further according to clause 2 of liabilities and duties of the transferor became the liabilities and duties of the assessee company. The shareholders of the transfer companies were to be issued the shares of the assessee company as per exchange ratio laid down in para 9 of the order. Accordingly, in the annual accounts of the assessee company for the year ended on 31.03.2014 note No. 18 details were mentioned as under:- "NOTE-18 OTHER EXPLANATORY NOTES a) Revision of Accounts and Amalgamation Hon‟ble High Court of Judicature at Delhi by their orders dated September 09, 2014 approved the Scheme of amalgamation of Shreem Ispat Private Limited, Apple (ran Enterprises Private limited, Madan Gopal Alloys Private Limited, Yuven Steels Private limited, Manohar Mattalloys Private limited, Apple Buildtech Limited, Manan Power Private Limited, Sanidhya Steels. Private Limited, Shubh Sponge Iron Private Limited with die company which has become effective on 29th September, 2014 from the appointed date 1st April, 2013 In accordance with the provisions of section 391 & 394 of the Companies Act, 1956. The scheme of amalgamatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uity shares of Rs. 10/- each fully paid up held in Manan Power Private Limited. d) 7 fully paid-up of equity shares, of Rs. 10/- each of the Company for every 10 equity shares of Rs. 10/- each fully paid up held in Yuven Steels Private Limited. e) 2 fully paid-up of equity shares of Rs. 10/- each of the Company for every 10 equity shares of Rs. 10/- each fully paid up held in Shreem Ispat Private Limited. f) 1 fully paid-up of equity shares of Rs.-10/- each of the Company for every 2 equity shares of Rs. 10/- each fully paid up held in Sanidhaya Steels Private Limited. g) 4 fully paid-up of equity shares of Rs. 10/- each of the Company for every 5 equity- shares of Rs. 10/- each fully paid up held in Madan Copal Alloys Private Limited. h) 1 fully paid-up of equity shares of Rs. 10/-each of the Company for every 49 equity shares of. Rs. 10/- each fully paid up held In Manohar Metallys Private Limited.' i) 1 fully paid-up of equity shares of Rs. 10/- each of the Company to each shareholder irrespective of their shareholding; in Apple Buildtech Limited. J) Any fraction of share arising out of the aforesaid share exchan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ach has been consolidated into one equity share of Rs. 10/- each. To give a full impact of scheme of Amalgamation, we have considered the fresh issue of shares' under the amalgamation, subsequent capital reduction and thereafter the consolidation of shares in the Balance sheet as on 31.03.2014. Accordingly, company shall Issue fresh shares of 18,93,576 shares to the shareholders of transferee companies. Further an amount of Rs. 2,15,83,940/- shah be transferred to securities premium on account of capital reduction (5096). d) Brief note on the business activity/ operations of the Company and transferor companies The company is engaged in trading business, investment in group companies, providing loans and advances and other related activities. Whereas prior to the scheme of amalgamation transferor companies were engaged in same activities as of the company." 15. Accordingly, the assessee issued share capital to the following shareholders of the transferor companies, which was added by the ld AO u/s 68 of the Act. :- Details of addition of share capital by AO. S. No. Name of the share holder Amount Remarks 1. Amay Garg 1020 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... loans of the transferor companies are transferred to the assessee company which were also added u/s 68 of The Act by the lower authorities in case of following parties:- Name Amount Remarks 1. Krishnaswami 4000000 No loan amount has been received. Krishnaswami has sold Equity Shares of Apple Commodities Limited to the Company. 2. Jetspeed Tradecom Pvt. Ltd. 50268603 No loan amount has been received during the year. Previous year balance transferred from Shreem Ispat Pvt Ltd. Originally purchase made by Shreem Ispat Pvt Ltd. in F.Y. 2012-13. Shreem Ispat Pvt Ltd amalgamated with the assessee company pursuant to high court order. 3. Apple Industries Ltd. 152275000 During the year the assessee company paid Rs. 15,50,00,000/- to Apple Industries Ltd. Amount received during the year from Apple Industries during the year was Rs. 35,00,000/- and 29,75,000/- only and that too against the advances made by Manohar Metalloy Pvt. Ltd in the FY 2013-14. The company Manohar Metalloy Pvt. Ltd amalgamated with the assessee company pursuant to High court order. These amounts paid by (Not received) M.G Metalloy Pvt. Ltd. During the period against the demand of Ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....27066 17. With respect to issue of share capital it is apparent that no share capital has been received during the year but only in exchange of the shares of the transferor companies the shares have been allotted to the share holders of the transferor companies. As there is no sum of money received during the year no addition u/s 68 on account of the share capital can be made. The assessee has also shown form No. 2 of the return of allotment filed with the Registrar of Companies which also clearly shows that the share capital is only on account of amalgamation approved by the Hon'ble High Court. 18. Similar is the fact with respect to the addition on account of unsecured loan except in case of i) Krishna Swamy where a sum of Rs. 40 lakhs was received by the assessee has shown that the above sum is on account of sale of shares. ii) And amount of Rs. 290 lakhs from Nishu Agrico is stated to be refund of the earlier sums to be paid by the assessee iii) It is also a fact that in case of Apple Metal industries Pvt. Ltd there are total credits of Rs. 1,26,00,325/- and total debits of Rs. 1,91,03,725/- whereas the ignoring the debits the ld AO ha....