TaxTMI 
TaxTMI 
2022 (5) TMI 279
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....he 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 SNRK. In his statement u/s 132(4) of the Act, Sh....
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....nvestigation 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 Ld. CIT(A), the Assessee made elaborate arguments based on which the ld. CIT(A) deleted the addition of Rs.15,04,35,000/- made by the AO by observing as under :- "7. Conclusion: 7.1 In view of the facts of the case and the above di....
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.... 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 consideration. Thus, the appellant had only part of total transactions done by M/s SNRK, (v) The AO had alleged that: "the appellant could not give any plausible explanation w.r.t identity & creditworthiness of M/s SNRK ,as well as, for the cash deposited in number of bank accounts....
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....f 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 business, it must be remembered, has a very wide connotation and may not necessarily be capable of being accurately measured in terms of pound, shillings and pence in all cases. Both these aspects have to be considered judiciously, dispassionately without any bias of any kind from the viewpoint of a reasonable and honest person in busines....
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....y 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 record which suggests that the appellant had any control over the online bank transactions of 11 alleged entities and M/s SNRK. * There had been transactions of some of the alleged entities with M/s SNRK even before 8.11.2016 to which appellant was not a party and even in the transactions after 8.11.2016, the appellant had received only 11.42 cr out of total am....
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....nable 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 agents since 09.11.2016 against which he had only given RTGS entries without conducting any actual business transactions. He has charged commission from the beneficiaries @ 0.5% to 2%. The appellant had not submitted any proof of delivery of gold, KYC documents or any other contract of these sales parties and had stated that Sh. VipinGarg is not known to him. During the appellate proceedings, the appellant had submitted that some of t....
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....pproval 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 ground of appeal is dismissed." 7. Aggrieved with such order of the ld. CIT(A), the Assessee is in appeal before the Tribunal by raising the following grounds :- 1. That in the given facts assessment order passed u/s 153A/ 143(3) dated 31.12.2019, being passed without authority of law and is patently ultra vires to the provisions of the Act , and ergo impugned order of Ld C1T-A dated 16.08.2021 in not accepting the appellants jurisdiction....
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....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 sales on cardinal legal principles cannot be subject matter of such farcical and preposterous taxation which manifestly runs counter to legislative scheme and intent behind sec. 68 and sec. 115BBE of the Act. 4. That the appellant craves leave to add add/alter any/all grounds of appeal before or at the time of hearing of the appeal." 8. The ld. Counsel for the Assessee, at the time of hearing confined his arguments to the ground challenging the validity of approval u/s 153D of the Act. ....
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....ttarakhandUthanSamiti 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 submitted that the above decisions of the Hon'ble High Court on validity of approval under section 151 of the Act, which is pari-materia with the provisions of section 153D of the Act, fully cover the issue of validity of impugned approval u/s 153D of the Act. Referring to the above decision, he submitted that since the approval given by the Addl. CIT u/s 153D of the I.T. Act,1961 in the instant case being not in accordance with law, therefore, the assessment order passed u/s 153A r.w.s. 143(3) of the Act stand vitiated since, the said order suffers from various infirmities. He accord....
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..... 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.15,04,35,000/- u/s 68 and another addition of Rs.1,54,07,100/- how the total assessed income can be at Rs.1,65,07,560/-. This clearly shows that there is complete non-application of mind either by the AO who passed the order u/s 153A r.w.s. 143(3) of the Act and the Addl. CIT who has given his approval u/s 153D of the Act. 16. Therefore the question that arisesis, aswhat to do in case of approval given without application of mind by the Higher Authority. 16.1 The Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. v. CIT258 ITR 317 while considering the identical issue u/s 153D of the Act,has held asunder; " Th....
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....n, 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 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 Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to variou....
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....r 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." 16.4 Even the co-ordinate Bench of the Tribunal in the case of Sanjay Duggalvs ACIT (ITA No.1813/Del/2019decided on dated 19.01.2021) and batch of 52 appeals, while adjudicating an identical issue, has extensively dealt with various judgments of Hon'ble Apex Court, High Courts and Tribunal as well and quashed the assessment orders itself by observing as under :- "11. We have considered the rival submissions and perused the written submissions filed by the parties and .................................................................................... .................................................................................... ...............................
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....handigarh. 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. To Shri Tatung Padi Dy. Commissioner of Income Tax, Central Circle-II, Faridabad. Sub: Approval u/s.153D of the I.T. Act, 1961, in the case of M/s. M3M India Holdings, Formerly M/s.Krishna Flexi Solution, C- 13, SushantLok-I, Gurgaon for the A.Y. 2012-2013 - regarding. Please refer to the Draft Assessment Order U/s. 153B(1)(b) of the I.T. Act, 1961, referred for approval u/s.153D of the I.T. Act, 1961, dated 30.01.2014. The approval u/s. 153D of the I.T. Act, 1961, is accorded for the Assessment Year 2012-13. Sd/-RAJEEV KUMAR, Addl.Commissioner of Income Tax, Range (Central), Chandigarh. Encl: As Above." 16.......................................................................................... ................................................................................ In all those cases merely draft assessme....
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....t 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 act or function requires application of mind and judicial discretion or approach by any authority it partakes and assumes the character and status of judicial or at least quasi-judicial act, particularly because their Act or function is likely to affect the rights of affected persons. As the question of validity of the approval goes to the root of the case and can vitiate the assessment proceedings itself and therefore the said power vested in the Commissioner to grant or not to grant approval is coupled with a duty and cannot be exercised casually and in a routine manner. 17.1 However, in the present case, we have no hesitation in stating that there is complete non-application of mind by the Ld. Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income has been taken at Rs.Rs.11,00,460/- as against the returned income of ....