TaxTMI 
TaxTMI 
2023 (9) TMI 884
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..../- was found. When questioned about the source of the said cash, Shri Mukesh Gupta stated that cash lying at his residence had been given to him by Shri Premchand Ashok Kamble. It was stated by Shri Mukesh Gupta that Shri Premchand Ashok Kamble is the Proprietor of 'Unique Finance' and he was an employee of 'Unique Finance. It was also stated by Shri Gupta that Shri Kamble was involved in various business activities but the exact details of the business activity from which the cash had come from where not known to him. It was also stated that the details of transactions/receipts of Unique Finance were being maintained on computers in Tally Package. It was also informed by Shri Mukesh Gupta that the office of the Unique Finance is at 306, Anant Lakshmi Chambers, Opp Waman Hari Pethe, Thane (W). It was stated that Shri Mukesh Gupta that his nature of duties includes looking after the cash and bank transactions of Unique Finance under the instructions of Shri Premchand Kamble. 3. Consequent to the information given by Shri Mukesh Gupta as stated above, a survey was immediately initiated at the office of Unique Finance at the above said address and later was converted in....
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....it u/s.142(2A) of the Act was proposed in order to arrive at the correct book results and the profit of the assessee. 6. It was noticed that Shri Premchand Ashok Kamble has not cooperated with the audit and has not furnished any information sought for by the auditor. Hence the audit in this case was completed on the basis of seized/impounded material containing Books of Accounts, documents, various bank accounts and tally data and M.S. Excel file and CDs. 7. As stated above the case of the assessee was covered under 133A of the Act. The return of income filed by the assessee on 09.04.2009 declaring total income of Rs.. 3,02,100/-. Subsequently, notice u/s 143(2) and 142(1) were issued and served on the assessee. The case of the assessee also covered under the special audit and accordingly the audit report was shared with the assessee on 10.06.2010. Based on the above 142(1) notice was issued on 21.07.2010 to the assessee and to her authorised representative, since there was no response from the assessee, Assessing Officer proceeded to complete the assessment based on the material available on record and special audit report u/s.142(2A) of the Act. Accordingly, Assessing Offic....
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....he appellate proceedings, vide its reply dated 30/10/2012, the appellant submitted that an amount of Rs. 47,210/- was shown as commission in the ROI as per the certificate available to the appellant and that the certificate for Rs. 1,05,212/- was not available to the appellant at the time of filing ROI. Therefore, the commission of Rs. 1,05,212/- was not considered in the ROI. It is claimed that the commission of Rs. 1,05,212/- was received from Reliance Life Insurance Company Ltd. towards Life Insurance and General Insurance Agency which the appellant held with the company. To substantiate the point that the omission of the commission of Rs. 1,05,212/- was not intentional, it is claimed that the TDS on the commission had also not be claimed in the ROI The appellant has also stated that she accept the addition of Rs. 1,05,212/- to her income. Vide her rejoinder filed on 16/3/2020, the appellant has further stated that she accept the addition and give consent to add the same in the total income of the assessee. 15.3 I have perused the assessment order and the submission made on behalf of the appellant. As the addition on account of the omission of the commission of Rs. 1,05....
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...., the creditworthiness of the creditor and the genuineness of the transaction. It is also a well settled law that filing of mere confirmation from the creditor is not sufficient to discharge onus casted on the assessee u/s 68 of the Act. As the appellant has failed to discharge its onus of prima facie substantiating the identity of the creditor, and the creditworthiness of the creditor, the addition of Rs.2,00,000/- made by the Assessing Officer u/s 68 of the Act is confirmed. This ground raised by the appellant is hereby DISMISSED. ..... 19.5 I have examined the facts of the case and submissions made by the appellant. Brief facts of the issue are that during the Special Audit proceedings, the auditor vide a questionnaire dated 12/03/2010, asked the assessee to inform whether she has taken or given any cash loan during F.Y. 2007-08. In response to this, the appellant assessee vide her letter dated 27/03/2010, stated that during the year she has not received any loan by cash. However, she has given a loan of Rs. 6,25,000/- to Unique Finance by cash withdrawing from my TJS Bank account. During the assessment proceedings, the Assessing Officer noticed that the said l....
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....rom Shri Premchand Kamble denying any loan transaction with the appellant. The appellant has taken a flip-flop position at various stages of proceedings and also chose to remain silent at her convenience. In view of these facts, the affidavit now filed by the appellant cannot be relied upon. As the appellant had earlier accepted that she has given loan amounting to Rs. 10,62,70,163/- to Shri Premchand Kamble and has failed to file any explanation regarding the source of this loan, the addition made by the Assessing Officer on account of unexplained loan given to Shri Premchand Kamble is therefore upheld. 21.7 Regarding the loan given to Shri Sanjay Shinde, the appellant has stated that confirmation has been filed along with written submission. However, no such confirmation is found enclosed. This fact was confirmed by the Assessing Officer in his remand report. Even after that along with her rejoinder, no such confirmation has been filed. The appellant has accepted that she has given an loan of Rs.2,25,000/- to Shri Sanjay Shinde which is not appearing in the balance sheet filed along with the return of income. No explanation regarding the source of this amount has been ex....
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.... 26.4 I have considered the facts of the case and submissions made by the appellant. It is an admitted fact that there is a difference of Rs. 1,59,183/- in the capital account appearing in the balance sheet filed along with return of income and the balance sheet filed with the Special Auditor. The appellant did not furnish any explanation on this discrepancy before the Assessing Officer. In the appellate proceedings, the appellant claims that this amount pertains to profit earned in her proprietorship concerns viz M/s Prime Motors and Prime Holidays in earlier assessment year and accordingly, requested to delete the same. It may however be mentioned that no documentary evidence in support of this claim has been filed before me. Accordingly, the claim of the appellant that this amount corresponds to income earned during the last year cannot be accepted. In view of this, the addition of Rs. 1,59,183/- made by the Assessing Officer is upheld. The ground raised by the appellant is DISMISSED. ..... 27.6 Another part of this ground relates to addition of Rs. 9,00,000/- on the basis of deposits made in the bank account of the appellant maintained with Thane Janata....
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.... 30. Before parting with the matter, it is important to mention that some of the additions confirmed by me are on the assets/receipt side of the balance sheet/P&L account and some of the additions are on the liability/payment side. One may argue here that 'telescoping benefit' should be given for arriving at the real income earned by the appellant. However, during the appellate proceedings, the appellant has neither made any claim for such telescoping benefit nor she has filed the date wise cash flow statement in order to correctly arrive at the figure of telescoping benefit. In view of this, it is not possible for me to set off some of the undisclosed income earned by the assessee against the investment made or loan given during the year. Hence, no telescoping benefit is being given to the appellant." 10. Aggrieved with the above order assessee is in appeal before us raising following grounds in its appeal: - "1. On facts in circumstances of the case and in law the Ld. ACIT has erred in making addition of Rs. 60,362/- by way of addition of business expenses not related to business and CIT(A) is not justified to confirm the addition upto Rs. 25,000/-. ....
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....case and in law the Ld. ACIT has erred in making addition of Rs. 1,59,183/- by way of undisclosed income shown as amounts received from Prime Motors, Prime holidays and CIT(A) has not justified to confirm. 12. That the AO in report accept that Rs. 9,00,000/- is double addition even The CIT (A) confirmed the addition is against the facts and law. 13. That the assessee has right to add, delete or modify any grounds of appeal during the proceedings." 11. At the time of hearing, Ld. AR of the assessee submitted that assessee is not in a position to argue the case ground wise i.e. ground Nos. 1-13 on merits in absence of requisite and vital documents for which RTI has been filed and rejected. Further, he submitted that against the denial of information, assessee filed an appeal before First Appellate Authority and then second appeal before Central Information Commission which is still pending. With the above information on record assessee has filed additional ground on the jurisdictional issues of incriminating material which is a legal ground which goes to the root of the matter. After considering the submissions of the Ld. AR we proceed to admit the additional gro....
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....additional grounds and the matter be decided accordingly, or, that the Ld. DR be directed to provide complete mirror file of the proceedings. D. However, it is prayed that the legal grounds go to the root of the matter be heard and disposed off, in the interest of justice, equity and good-conscience. Without prejudice to the same, ground-wise submission of legal grounds are as under: Ground No. 14 & 15: The Assessment Order is liable to be quashed as all the additions so made by the Ld. AO and the ones sustained by the Ld. CIT(A) are based solely on the Special Audit Report, without any material. let alone any "incriminating material found during the course of search. Therefore, in absence of any incriminating material, the assumption of jurisdiction u/s 153C is wholly illegal and liable to be quashed. 1. It is submitted that the instant proceedings have been initiated by assuming jurisdiction u/s 153C of the Act. In this regard, it is submitted that in order to assume valid jurisdiction there is a requirement that there should be incriminating material found during the course of search and only then can any addition be made. However, in the inst....
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....ged Undisclosed Income 25,44,0007- 33 N 24.1 - 24.4 17 Alleged Income from Undisclosed Sources 14,00,0007- 34 N 25.1-25.4 18 Alleged Undisclosed Income 1,59,183/- 35 Y 26.1 - 26.4 19 Alleged Undisclosed Income 5,68,50,000/- 36 Y (to the extent of Rs. 9,00,000) 27.1-27.7 TOTAL ADDITIONS 28,29,44,370/- 12,95,43,07 27- 2. That a bare perusal of Para 21, 23, 24, 25, 26, 28, 30, 31, 32, 35 & 36 would show that all the additions (under dispute) are based solely on the audit objections raised by the Special Auditor and not on any material found during search, let alone incriminating, as no material was found during the search. 3. It is further submitted that additions in a case u/s 153A or 15C, if made, solely on the basis of Special Tax Audit Report cannot be sustained and are liable to be deleted as a Special Tax Audit Report is not any incriminating material found during search. In this regard, reliance is placed on t....
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.... of search. For ready reference, reliance is placed on the following judgments: • PCIT vs. R.M. Investment & Trading Co. Pvt. Ltd. (Bom HC) "3. Perusal of the above portion of the judgment of the Tribunal would show that, besides the other findings, the Tribunal has come to the conclusion that, there was no incriminating material found during the search on the basis of which the additions for any of the years under consideration could have been sustained. In that view of the matter. Keeping other conclusions of the Tribunal aside, the additions were correctly deleted. This view is taken by Delhi High Court in the case of Commissioner of Income Tax v. Kabul Chawla reported in 2015 Vol. 234 Taxmann 300 (Delhi)." • CIT vs. Deepak Kumar Aggarwal & Ors. (Bom HC) IT: Assessment u/s 153A can be made only on basis of incriminating material found in search u/s 132 and only income related to incriminating documents found during search can be considered in assessment 31. The Tribunal concluded that the arguments relating to the validity of the notice under section 153A and though that provision could have been invoked in the given facts and....
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....onsistently held to be illegal in the eyes of law and an invalid approval makes the entire proceedings liable to be quashed. With respect to the same, reliance is placed on the following judicial pronouncements. • Arch Pharmalabs Ltd. vs. ACIT, CC-2, ITA No. 6656/Mum/2017 11.4. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval the respective Assessment order Solemn object of entrusting the duty of Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon....
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....e deep verification, therefore, it is prayed that the matter may be remitted to the file of the AO for verification of necessary facts. In this regard, assessee has also filed an affidavit on oath explaining the above-said facts. The said affidavit is enclosed herewith." 14. The bench re-fixed the case for clarification on certain issues, Ld.AR of the assessee, at the time of hearing on 20.07.2023 filed its additional written submissions vide letter dated 20.07.2023, for the sake of clarity it is reproduced below: - "1. That the present matter was heard on 28.11.2022, whereby detailed arguments were advanced, synopsis was filed, the case was heard and reserved for orders. 2. That vide order dated 24.02.2023, this Hon'ble Bench, fixed the case for clarification with respect to the approval given by the Ld. Addl. CIT to the draft assessment order dated 06.08.2010 (Pg. 28 of the Synopsis filed on 28.11.2022). 3. Thereafter, the case was then listed for hearing on 15.03.2023, 11.04.2023, 03.05.2023, 06.06.2023 & 28.06.2023 during which the bench first sought the DR to produce the letter dated 05.08.2010 seeking approval, as sent by the AO to the Ld. Ad....
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....oval has presumed that only because the appraisal report was marked to the Ld Addl. CIT on 19.10.2007, the same must've been considered by the Approving Authority. The said stand taken is without any merit. Neither does it make even the slightest of difference to the validity of the non-est approval. Mere marking of the appraisal report to the Ld. Addl. CIT in the year 2007, cannot imply that the same was seen or taken into consideration while giving the non-speaking approval in the year 2010, viz. 3 years after the appraisal report was purportedly sent. Secondly, the said approach of the Ld. ICIT shows that he is merely making such averments on presumptions and his own surmises, which has no place in the eyes of law. The said submission is also corroborated by the fact that the Ld. ICIT who filed the affidavit was not even involved with the Addl. CIT at that time of the assessment, Thus, the Ld. JCIT who was never involved in the present case or in the assessment thereof, cannot be permitted to make a general statement to supplement the Approval 13 years after the impugned approval was granted, that too without any corroboratory material is wholly unjust, unfair and gravely pr....
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....venue Authority enabling the A.O. to pass assessment order or reassessment order in search cases, then, it is the duty of the JCIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of two folds; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the A.O. in taxing right income in the hands of right person and in right assessment year and on the other hand, JCIT is also responsible and duty bound to do justice with the tax payer [Assessee] by granting protection against arbitrary or unjust or unsustainable exercise and decision by the A.O. creating baseless tax liability on the assessee and thus, the JCIT has to discharge his duty as per Law. Thus, granting approval under section 153D of the L.T. Act is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the JCIT on the application of mind and this exercise should be discernable from the Orders of the approval under section 153D of the I.T. Act. 16. In some of the cases the approval was granted on the....
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....g section 153D itself. In this regard, the reliance is placed on the judgment of the Hon'ble Supreme Court of India in Chuggamal Rajpal vs. S.P. Chahila, (1971) 1 SCC 453 where a similar provision of approval, u/s 151 of the Act was discussed and the Hon'ble Apex Court while adjudicating the importance of the approval held as under: "Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads "whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section 148", he just noted the word "yes" and affixed his signatures thereunder....... The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance....
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....entities. Therefore, the additions are based on notional value, which there being any income of the assessee. The interesting part is that the department had all along known about this. However, still went ahead to make addition in the hands of the Appellant, who was merely used like a pawn and her bank account, as a benami account. 15. Furthermore, the and the additions so made pertain to Sh. Prem Chand Kamble. The same is evident from the fact that cash of Rs. 10,91,50,000/- was deposited and sent into the account of M/s Unique Finance, M/s Unique Motors, M/s Unique Fin Corp etc. (proprietary concerns of Sh. Prem Chand Kamble). (See Para 10.1 & 10.2, Pg. 8-9 CIT(A)). The addition of cash deposits have been deleted by the CIT(A) (See Para 10.5, Pg. 12 CIT(A)) by accepting the same to be the income of Prem Chand Kamble. However, the remittance of Rs. 10,64,95,163/- (10.62 Cr to Prem Chand Kamble & 2,25,000 to the husband of the assessee) has been added (Para 30 AO) and remains sustained. (Para 21.7, Page 27 CIT(A)), which is logically flawed for the reason that once cash deposits are accepted to have been made by or on behalf of someone, the transfer thereof or transfer of....
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....ani, Faizabad vs., DCIT, Central Circle, Agra, ITA.Nos.106, 107 and 108/Agra/2019, Dated 06.11.2019. 23. The last submission made by the Ld. DR's was that the matter may be sent back to the AO to pass a fresh assessment order after seeking the approval from the competent authority. In this regard we are of the opinion that the Revenue is not entitled to second inning, for correction of its own mistake. Assessee cannot be made to run again for many more years for contesting the litigation. Hon'ble Supreme Court also in the case of Parashuram Pottery Works Co. Ltd. v. ITO 106 ITR 1 observed that "It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not....
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....ed by assessee, it led to complexity in the matter, because of which it was referred to Special Audit for arriving at correct profit. As mentioned by Assessing officer (AO) in the assessment order either NO COMPLIANCES were made by the assessee or NO EXPLANATIONS were provided during the course of assessment. Further there was NO COOPERATION from assessee during special audit. The Ld. CIT (A) has also passed the order in favour of the department as NO COMPLIANCES were made by the assessee or NO EXPLANATIONS were provided during the appellate proceedings. 4. Before the Hon'ble ITAT, additional grounds were taken by the assessee on 28.11.2022, stating that valid approval u/s 153D not taken. This ground was taken first time in its synopsis filed along with the prayer for admission of additional grounds where in Para 9, Page 8 of the synopsis, she has prayed that matter may be restored to the file of AO for necessary verification of facts. Thus, it was the assessee who had requested for restoration of matter to AO and not the department which has requested for set aside to AO. The assessee has thus tried to twist the facts. Further, after having not cooperated during the a....
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....ed on 22.09.09 NO RESPONSE 2. Again 142(1) issued along with questionnaire on 2.11.09 & served on 3.11.09 NO RESPONSE 3 On 10.12.09 letter filed by Tax consultant with response to some queries. 4 Final notice 142(1) on 21.07.10 along with showcause/questionnaire NO RESPONSE 5 Another copy of notice with show cause served on assessee on 22.07.10 NO RESPONSE 6 Para f of audit report shows receipt of income of Rs 9,50,000 in prop concern Prime Motors but not disclosed in return of income NO RESPONSE 7 Cash balance in bank accounts NOT EXPLAINED 8 Income shown from other sources but not reflected in P& L acct. NOT EXPLAINED 9 Various other queries as per notice u/s 142(1) NO RESPONSE During appellate proceedings also, the assessee has NOT COOPERATED at all. All the additions were challenged before the Ld. CIT (A), however the observations of Ld. CIT(A) in Para 6.4, Page 6 of the order clearly shows the Non cooperative attitude of the assessee. Al....
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..... Further, the basis of addition was also not shared with the assessee. The facts in this appeal are squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Arch Pharmalabs Ltd. v. ACIT in ITA. No. 6656/Mum/2017 and other appeals, dated 07.04.2021. The relevant ratio is reproduced below:- "11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 for the first time. It is axiomatic from the plain reading of approval memo that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 29.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized mate....
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.... in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be countenanced in law. 11.6 There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the co-ordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332 (Mum.) and approved by jurisdictional High Court subsequently as reported in 307 CTR 218 affirms the plea of the Assessee. 11.....