TaxTMI 
TaxTMI 
2023 (9) TMI 884
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....he 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 into search action u/s 132 of the Act. During the cours....
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.... 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 Officer proceeded to make the following additions: - 8. Aggrieved....
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....unt 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. 1,05,212/- from Reliance Life Insurance Company Ltd. has been accepted, the action of the AO in making a....
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....ng 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 loan is not appearing in the balance sheet filed along with the return of income. Accordingly, the AO asked the assessee to show ca....
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....roceedings 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 explained either during the assessment proceedings or in the appellate proceedings. Therefore, this addition of Rs. 2,25,000/- on account of loan give....
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....ppearing 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 Sahakari Bank. This bank account maintained with M/s Janata Sahakari Bank is different than the bank accounts numbering 30099 and 30100 maintained with UBI. The deposits made in these two bank ac....
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....iability/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/-. 2. On facts and in circumstances of the case and in law the Ld. ACIT has erred in making addition of Rs. 9,50,000/- towards income from undisclosed sources. The CIT(A) allowed is in error confirm the addition. 3. On facts....
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....n 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 grounds for adjudication. 12. Assessee has filed following additional grounds: - "14. Because the assumption of jurisdiction u/s 153C is not in accordance with the law and without complying with the various conditions laid down under the law. 15. Because the ld. CIT(A) ought to have quashed th....
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....ssion 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 instant case, all the additions in the instant case, are made solely on the basis of the Special Audit Report, without there being any other material, whatsoever. The said fact unequivocally proves that the very assumption of jurisdiction is bad-in-law and the proceedings, thus, are liable to be quashed. For ready reference and the convenience of this Hon'ble bench, a tabula....
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....case at hand: * M/S ATS Infrastructure vs. ACIT, ITA 5811-13/Del/2014 (Del ITAT) 12. In view of the law laid down by Hon'ble jurisdictional High Court in Kabul Chawla (supra) case, we are of the considered view that when no incriminating material has come on record during the search and seizure operation conducted at the premises of the assessee rather assessment has been based upon special audit report whereas such facts were already brought on record by the assessee by filing original return of income along with computation, the assessment framed u/s 153A read with section 143 (3) is not sustainable in the eyes of law. Hence, the assessments for AYS 2002-03 & 2003-04 are ordered to be quashed. * PCIT vs. M/s Abhisar Buildwell Pvt. Ltd. ITA No. 239/2018 & ITA No. 240/2019 (Del HC) 7. Learned counsel for the Revenue repeated the submission made before the ITAT viz, that the report of Special Audit should be treated as incriminating evidence. Clearly the report of the Special Auditor, having been commissioned subsequent to the search, and during the assessment proceedings against DSL, cannot obviously be treated as incriminating material qua the Assessee, recovered d....
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....ainable and they came to be deleted. 32. We do not think that any view other than the one taken by the Division Bench of this court in the case of CIT v. SKS Ispat and Power Ltd. (Income Tax Appeal NOS. 1874 of 2014 and 58 of 2015) dated July 12, 2017 - (2017) 308 ITR 584 (Bom) ox the reported judgment in Continental Warehousing Corporation and All Cargo Global Logistics (supra) can be taken. * Skylark Build vs. ACIT, [2018] 97 taxmann.com 682 (Mumbai) IT: Where in appeal before Tribunal, assessee has raised additional jurisdictional issue/legal issue with respect to issuance of notice under section 153C alleging non-compliance of statutory provisions and procedures prescribed under section 153C, same was to be admitted IT: In absence of any incriminating material found during search that assessee was member of AOP against which bogus purchase was alleged, no addition could be sustained in hands of assessee 5. Thus, in the absence of any material found during the course of search, much less being incriminatory in nature cannot be sustained and it is prayed that the same may kindly be held so. Ground No. 14 & 16: The Assessment Order is liable to be quashed as all ....
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....tion to the taxpayer against arbitrary or unjust exercise of discretion by the AQ. 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. 11.6 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. 11.7 Very recently, the co-ordinate bench in Sanjay Duggal & ors (ITA 1813/Del/2019 & ors order dated 19.01.2021 has also echoed the same view after a detailed analysis of similar facts and also expressed a discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. Hence, vi....
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....the Ld. Addl. CIT to file an affidavit and fixed the case on 20.07.2023. In compliance to the direction of this Hon'ble Bench, an affidavit dated 14.07.2023 has been filed by the Ld. Joint CIT, whereby it has been contended that: a. The Draft Assessment Order was passed after receipt of the approval (Para 2) b. The Appraisal Report dated 19.10.2007 was also marked and forwarded to the Ld. Addl. CIT and as per department's procedure the same presumably must've been taken into consideration by the Ld. Addl. CIT while giving the Approval (Para 3-4) 5. It is submitted that the Appellant does not dispute the fact that the Approval was given. However, it is the case of the Appellant that the approval so given was perfunctory, given mechanically and without any application of mind due to which vitiates the sanctity of the Approval and makes it non-est in the eyes of law. The stand of the Appellant emanates from a bare perusal of the Approval Order whereby only the following remarks were given - "Draft Assessment Order is Approved" (See Page 28 of the Synopsis filed on 28.11.2022). This approval does not spell out as to how, why and on basis was the approval given, wha....
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....account the appraisal report, even then, there was other material which the Approving Authority had to look into and examine, before giving the approval, viz. the material found during the course of search, inquiries and investigation conducted by the AO qua the search material, inquiries made during the assessment proceedings, replies of the Assessee filed during the course of assessment proceedings, inquiries conducted by the Special Auditor, replies filed before the Special Auditor and then the final Draft Assessment Order. However, all of such inquiry/verification was admittedly ignored by the Ld. Addl. CIT while granting approval and is also absent in the order giving approval, which unequivocally proves that the impugned approval was an approval, just in form and not in substance. In this regard, reliance is placed on the order of the ITAT Delhi in Sanjay Duggal and Ors. vs. ACIT (ITA No. 1813/Del/2019 dated 19/01/2021), wherein it was held as under: 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 as....
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.... 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 material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT. It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in appraisal report. Thus, we hold the approval under section 153D have been granted without application of mind and is invalid, bad in Law and is liable to be quashed. Since we have held that approval under ....
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....;ble ITAT was pleased to hold that: There is a statutory duty laid down u/s 153D of the Act, on the Additional Commissioner of Income Tax with a corresponding obligation on him to examine the record and thereafter accord the statutorily required Approval. The reason for granting the Approval may not be subject matter of the challenge but the manner and the material on the basis of which the approval was granted can always be examined by the Tribunal to come to the conclusion whether the Approval was granted in a mechanical manner or after applying mind looking into the record. No evidences required to be appreciated as the approval is self- evident, Le, that it was granted by the Additional Commissioner of Income Tax without application of mind and without looking into the record. 11. It is to be noted from the aforesaid orders, that the duty of the Approving Authority is to look and examine the entire record and thus on this count also the averment of the JCIT that appraisal report was forward and presumably must've been taken into consideration, is unsustainable. 12. Rather, the blatant non-application of mind of the Ld. Addl. Commissioner is also evident from the fa....
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....e 27, 28 CIT(A)). However, the said amount was also a part of the cash deposits made by Prem Chand Kamble in the bank account of the assessee and then transferred back to him. Thus, this addition could not have been made in the first place, let alone sustained. Such an addition is arbitrary and without any valid basis, to say the least. 17. As mentioned in Para A & B of the Synopsis filed on 28.11.2023, that the Assessee not being in possession of the assessment records and the same not being supplied to the Assessee despite inspection being sought and RTIS being filed, has made the Assessee incapable of addressing the merits in detail. However, the Assessment Order & the CIT(A) Order show that all along the Appellant had stated that the transactions pertained to Sh. Prem Chand Kamble (Searched person) (See Page 11 CIT(A) Order) but despite the same, the additions were made in ignorance of facts, circumstances and logic. Thus, such additions which are fundamentally flawed and bereft of any reasoning were made in the assessment order, which, without any examination, were approved by the Ld. Addl. Commissioner and further even wrongly sustained by the Ld. CIT(A), which makes the a....
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....y the superior authorities in mechanical manner without application of mind then the very purpose of obtaining approval is defeated. Moreover, where 4 clear days' time was available with the administrative authority, it was a half-hearted approval and as' such held as no approval in the eyes of law. Accordingly, we have no hesitation in declaring that the Approval granted by the Additional CIT, Central, Kanpur on 27.03.2015 is no approval in the eyes of law and therefore, the assessment made by the AO based on such an approval is also declared to be null and void. 20. Thus, in light of the same, it is prayed that the approval be held to be bad in law and the assessment be annulled." 15. On the other hand, Ld. DR submitted that provisions of section 153D is continues process and objected to the various submissions made by the Ld. AR. Ld. DR submitted that ACIT is aware of the establishment and the findings, therefore he did not have to give a detailed approval. Ld.DR relied on the order of the Ld.CIT(A) and filed its written submissions vide letter dated 26.07.2023, for the sake of clarity, the submissions are reproduced below: - " During the course of search and seiz....
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....he same is totally incorrect. It is submitted that the JCIT has filed the affidavit based on the record available with him. Also, in Para 1 of the affidavit he has clearly admitted that he is fully conversant with the relevant facts as available in the case records. Thus, this statement of assessee is totally incorrect. 6. Further the entire assessment is based on the appraisal report and the seized material as forwarded by the Investigation wing, the special audit report and the replies filed by the assessee during the course of assessment. Moreover, as mentioned in Para 4 of the affidavit, the Range head guides the AO till final approval is granted. This procedure is followed in all the cases which was followed in this case too. a. Regarding appraisal report and seized material, the Range head has clearly stated that the same was in the knowledge of Addl. CIT since day one. Thus, he was aware of the facts of case since starting of the process. b. Regarding special audit, it has been clearly mentioned in the assessment order that the matter was referred for Special audit as no regular books were available, banks showed huge deposits, turnover of concerns ran into crores, ....
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....essee has NOT DISCHARGED THE PRIMARY ONUS to cooperate and provide details and explanations as called for during the course of assessment or during appellate stage. 9. Accordingly, it is prayed that the appeal of the assessee may be dismissed." 16. Considered the rival submissions and material placed on record, we observe from the record that, the case of the assessee is covered based on the search conducted in the case of Shri Premchand Ashok Kamble. Since the assessee and her husband were dealing with the M/s. Unique Finance Group concerns, the case of the assessee was included u/s. 153C of the Act. Accordingly, assessment was completed based on the statement given by the assessee and findings in the special audit conducted u/s. 142(2A) of the Act. Most of the additions were made based on the special audit report and some of the additions with high value were made in the hands of the assessee on protective basis, the same was deleted by the Ld.CIT(A) and however, he proceeded to sustain the other additions. 17. Before us, Ld. AR of the assessee heavily argued on the technical ground, whether the approval obtained by the Assessing Officer u/s. 153D is proper and approval gra....
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....retion 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 approval, it can be easily inferred tha....