TaxTMI 
TaxTMI 
2022 (5) TMI 279
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....urn filed in response to notice u/s 153A of the Act. The AO thereafter issued statutory notice u/s 143(2) and 142(1) of the Act in response to which, the Assessee appeared from time to time and filed the requisite details as called for. 3. During the course of assessment proceedings, the AO noted that a survey u/s 133A of the Act was carried out by the Department on Axis Bank Mundka and ChandniChowk Branch, Delhi on 25.11.2016 and 08.12.2016 respectively. During the course of such survey, it was found that there was large amount of cash deposited in the bank accounts of 11 entities after 8th of Nov. 2016 and transferred to the bank account of M/s. ShriNiwas Ram Kishore (SNRK), then part of these funds were transferred to bank account of M/s. Maa& Son through banking channels. 3.1. The AO further noted that a search & seizure action u/s 132 was undertaken by the Income Tax Department at the residence of Sh. AnujBansal at A-108, SwasthayaVihar, Delhi and survey u/s 133A was conducted at the business premises of M/s Maa& Son at KuchaMahajani, Delhi on 22.12.2016. During the course of search, Sh. AnujBansal was asked to provide the KYC of SNRK and contact details of the owners of....
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.....2016 to 24.11.2016 15077000 ..Do.. ..Do.. No ITR filed 11 Kaira Advertising Pvt. ltd. 11.11.2016 to 12.11.2016 1891000 ..Do.. ..Do.. No ITR filed 3.2. Further, information was also received from Investigation Wing, Chandigarh, with respect to one entry operator Sh. VipinGarg who had admitted to be managing and controlling a number of non -descript and shell entities. Three of the said shell entities, managed and controlled by Sh. VipinGarg, viz. M/s Garg Trading Company, M/s Summax Enterprises and M/s S N Brother, had transferred Rs. 1,54,07,100/- in the bank accounts of M/s Maa& son in the post demonetization period. Sh. AnujBansal was not able to provide any proof of delivery or KYC details of the said buyers despite sufficient opportunities given to him. Accordingly, the AO made additions u/s 68 r.w.s 115BBE being: (i) The amount of Rs. 15,04,35,000/- treating the Assessee as final beneficiary of demonetised currency deposited in various shell companies and routed through M/s SNRK and (ii) The amount of Rs. 1,54,07,100/- transferred in the bank accounts of M/s Maa& Son from the shell entities of entry operator Sh. VipinGarg. 4. Before the ....
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....ctronically. (iii) The amounts transferred by these 11 alleged entities to M/s SNRK are at Rs 21,70,33,818/- (including pre-demonetization period transfers) out of which, the funds to the tune of Rs.11,42,12,057/-(52.6%) had only been received by appellant from M/s SNRK, only after demonetization. Thus, it cannot be said that the appellant was in any way party to these alleged entities or M/s SNRK. If there is any possibility of any connivance, it is between these 11 entities and M/s SRNK, as they had been doing transactions even before 8.11.2016 and even after 8.11.2016, ail the transaction amounts between them had not ultimately flowed to the account of the appellant. (iv) There is nothing on record to prove the connivance of the appellant with M/s SRNK. M/s SRNK was registered as partnership firm in 2013 and it got registered with VAT on 28.12,2015. It had opened bank account on 14.03,2016 and had entered into substantial transactions with many entities before entering into transactions with the appellant. Further the transactions of M/s SRNK with the appellant were at Rs 15 Cr as against total transactions of Rs 39 Cr done by it during the year under considera....
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....ok at the matter from their view point, but that of a prudent businessman impelled by commercial expediency. * In CIT Vs. Edward Keventer (P.) Ltd. [1972] 86 ITR 370, the Calcutta High Court considering identical provision in 1922 Act, it was held that the section places two limitations in the matter of exercise of the power. The section enjoins the Assessing Officer in forming any opinion as to the reasonableness or otherwise of the expenditure incurred must take into consideration (i) the legitimate business needs of the company and (ii) the benefit derived by or accruing to the company. The legitimate business needs of the company must be judged from the view point of the company itself and must be viewed from the point of view of a prudent businessman. It is not for the Assessing Officer to dictate what the business needs of the company should be and he is only to judge the legitimacy of the business needs of the company from the point of view of a prudent businessman. The benefit derived or accruing to the company must also be considered from the angle of a prudent businessman. The term ''benefit'1 to a company in relation to its busines....
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....d found during the search/survey on the appellant should have been excess by this amount of 50Kgs, which is not the case here, as no stock discrepancy had been brought on record by the AO. The appellant does not appear to be the only beneficiary of the SBN's deposited in alleged accounts as it had not received all the amounts, but only part of it. The real beneficiary, if any, will be M/s SNRK, as it is having continued relations with these entities, without explanation on nature of transactions with them and the AO of it had treated it so in its scrutiny assessment. The amounts received by the appellant from M/s SNRK had been utilized in purchase of gold and as no discrepancy had been found in stock of gold of the appellant during search/survey, the natural presumption is that the appellant had parted with the physical gold. Thus, the allegations of the AO are not supported by the facts and are based entirely on presumptions, conjectures and surmises. 7.2. In view of the above discussion, it is observed that : * There is no evidence on record, which establishes any connection with the money deposited by 11 alleged entities. * There is nothing on reco....
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....business through the regular banking channel. Therefore, the amounts credited to the bank account of the appellant on account of sales transactions with M/s SNRK are in the ordinary course of business and represent the trading receipts as per the books of account. Therefore the source of these receipts stands explained. Accordingly, the addition of Rs.15,04,35,000/- made by the AO u/s 68 r.w.s 115BBE is not sustainable and is hereby deleted." 5. The Ld. CIT(A) however sustained the addition of Rs.1,54,07,100/- made by the AO u/s 68 of the Act r.w.s 115BB of the Act, by observing as under :- "8. Ground Nos.12, 13 & 16; These grounds relate to the issue of addition of Rs.1,54,07,100/- made by the AO u/s 68 r.w.s. 115BBE of the IT act 1961. 8.1. As per para 4.3 above, there was information with the AO that appellant had received accommodation entries of Rs l,54cr. from the bank accounts of three entities controlled by Sh. VipinGarg. Sh. VipinGarg had stated in his statement u/sl32 that it had received cash in SBNs from the parties to whom these entries have been given through a web of entities. He had received cash of SBNs from various beneficiaries or their agent....
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....claimed that the approval has been given mechanically without application of mind on the same date as the passing of order u/s 153A. It is pertinent to mention over here that the Range head is involved in search assessment right from the date of issuing first questionnaire. There are generally multiple discussions between the AO & Range head on various issues arising in the assessment before finalisation of search assessments. The final approval of draft order is given after making thorough discussions made earlier to this approval. It may be observed that in all approvals of Range heads, there are not any further directions and this approval forming part of assessment order is only visible to the appellant. All other processes done internally between AO & Range Head are not visible to the appellant. Accordingly it cannot be said that approval u/s. 153D had been given mechanically and at last moment without application of mind. It is observed from the assessment order that the AO had taken due approval of competent authority u/s 153D before passing this assessment order. In these facts & circumstances, I do not find any violation of provisions of section 153D. Accordingly, this gro....
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....d is ultra vires to provisions of the Act, so Ld. CIT(A) ought to have quashed the assessment order itself on this jurisdictional count itself which is ergo pleaded here. 2. That Ld CIT-A in his impugned order dated 16.08.2021 erred in not accepting the appellants ground for deletion of addition made u/s 68 of the Act (amounting to Rs.154,07,100) by sustaining the assessment order to that extent on untenable grounds which is evident from shining flaw that despite Assessee denial on Vipingarg named by Ld AO qua said transaction , no meaningful effort is made at any stage to make independent inquiry on said aspect as per sec. 142(3) of the Act and further principles of natural justice (requested cross examination etc) are not complied with at any stage qua bald allegations levelled against Assessee. Ergo we request for deletion of said addition of Rs.154,07,100 as arbitrarily sustained by Id CITA. 3. That Ld CIT-A in his impugned order dated 16.08.2021 erred in not reversing the unlawful and incorrect and arbitrary invocation itself of provisions of section sec. 68 and sec. 115BBE of the Act to bonafide recorded/accounted sale transactions which recorded/accounted s....
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.... 2016, order dated 27.11.2018 ii. M/s Inder International in ITA No.1573/CHD/2018, order dated 07.06.2021 iii. Arch Pharmalabs Ltd. in ITA No.6656/Mum/2017, order dated 07.04.2021, iv. Sanjay Duggal in ITA No.1813/Del/2019, order dated 19.01.2021 v. Rajesh Ladhani in ITA No.106, 107 and 108/Agra/2019, order dated 06.11.2019 vi. SaurabhAgarwal in ITA No.263 to 267/Agr/2017, order dated 18.09.2019 vii. Dilip Constructions Pvt. Ltd. in IT(SS) Nos.66 to 71/CTK/2018, order dated 29.11.2019 viii. UttarakhandUthanSamiti in ITA No.48 to 52/DDN/2019, ix. RishabhBuildwell P. Ltd. in ITA No.2122/Del/2018, order dated 04.07.2019 x. M3M India Holding vs DCIT, reported in [2019] 71 ITR (Trib.) 451 (Del.) xi. C R Mittal & Sons (HUF), in ITA No.100/JAB/2014, order dated 15.03.2021 xii. Rajat Minerals Pvt. Ltd. in IT(SS)A. No.41 to 47/Ran/2019, order dated 20.01.2020. 10. Referring to the decision of the Hon'ble Delhi High Court in the case of SynfoniaTradelinksPvt. Ltd. v. ITO (2021)435 ITR 642 (Del) and ESS Advertising (Mauritius) SNC Et Compagnie v. ACIT, reported in (2021) 437 ITR 1(Del.), he s....
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....at para 6 of the order by making the following two additions, the details of which are as under:- Sl. No. Particulars Amount (in Rs.) 1 Returned income Rs.11,00,460/- 2 Addition u/s 68 Cash deposit in bank Rs.15,04,35,000/- 3. Addition u/s 68 Cash introduced through Mr.VipinGarg entry operator Rs.1,54,07,100/- Assessed income Rs.1,65,07,560/- 14. A perusal of the same shows that the AO has stated the returned income at Rs.11,00,460/-, whereas, para 3 of the assessment order reads as under:- "3. A notice u/s 153A of the Income Tax Act,1961 was issued to the Assessee. In response to the notice u/s 153A of the Act, the Assessee submitted that the original return of Income for the A.Y. 2017-18 filed on 31/10/2017 declaring total income at Rs.87,20,580/- may be treated as return filed u/s 153A. Statutory notice u/s 143(2) of the I.T. Act, 1961 was issued on 31/08/2018." 15. A perusal of para-3 of the assessment order shows that the Assessee has filed original return as well as return in response to notice u/s 153A declaring total income of Rs.87,20,580/-. Further, when the addition has been made by the AO of Rs.15,04,35,....
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....we are of the view that requirement of approval presupposes a proper and thorough scrutiny and application of mind. In the case of KirtilalKalidas& Co. (supra), the I.T.A.T Madras Bench 'A' has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasijudicial act, particularly because their Act, function, is likely to affect the rights of affected persons." 16.3 The Hon'ble High Court of Bombay in the case of Pr CIT vs. Smt. ShreelekhaDamani[ ITA no 668 of 2016 Dated: 27th November, 2018 ] also dealt with the issue related to approval granted u/sSection 153A of the Act and held as under: 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 2007-08. This was on the ground t....
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....Section 153D of the Act was submitted only on 31st 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 examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the 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.....
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....invalid, bad in Law and void abinitio and as such all assessments under section 153A got vitiated and as such A.O. was not having jurisdiction to pass the assessment orders under section 153A of the I.T. Act, 1961. (highlighted by us ) 13. We have considered the rival submissions. .................................................................................... ..................................................................................... The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under : "No.Addl.CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated the 31st January, 2014. T....
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....t pass the assessment orders under section 153A of the I.T Act against all the Assessees. Therefore, all assessment orders are vitiated for want of valid approval under section 153D of the I.T. Act and as such no addition could be made against all the Assessees. In view of the above, we set aside the Orders of the authorities below and quash the assessment orders passed under section 153A of the I.T. Act as well as the impugned appellate Order. Resultantly, all additions are deleted. The additional grounds are allowed. In view of the above findings, the other issues on merits are left with academic discussion only. Accordingly, all the appeals of the Assessees are allowed. 17. In the result, all the appeals of the Assessees are allowed. 17. From the analyzations made above, it emerges that the function to be performed by the Addl. CIT or CIT in granting previous approvalu/s 153-D of the Act, requires to adopt judicial approach and to apply his mind independently and to conduct the enquiry himself on the entire facts, material, evidence and proposal put up to him for approval in the light of the material placed and relied upon by the Assessing Officer because where any a....