TaxTMI 
TaxTMI 
2025 (1) TMI 258
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....the Income Tax Act 1961 (in short 'the Act') were conducted on 23.03.2021 and ON subsequent date in the case of assessee along with the other cases of KK Spun and other group of cases at various residential and business premises. The cases were centralised in Central Circle- 02, New Delhi. 4. A notice under section 153A of the Act was issued on 10.11.2021 requiring the assessee to file its return of income. In response the assessee filed its return of income for the year under consideration declaring total income as disclosed in the original return of income. The Assessing Officer issued notice under section 143 (2) and 142 (1) of the Act. The assessing officer observed that several notices were issued to the assessee but due to partial compliance on the part of the assessee, he has no option but to complete the assessment on the basis of material evidences gathered during the post assessment proceedings. 5. Based on the above observation, Assessing Officer considered the documents found during the course of search proceedings and on examination of Annexure-A12, various incriminating evidences were found, this is the printout from the pen drive found during the search at the ....
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....he submissions and material available on record, the assessing officer rejected the submissions of the assessee and observed that the details contained in annexures A-12 are relating to cash flow against the ingenuine sales and purchases. The cheque transactions contained in the annexures are tallying with the books of accounts maintained by the assessee. Further he observed that the movement of cash is also evidenced by the WhatsApp chats found in the mobile phones of Shri Shailendra Goyal and Shri Himanshu Gupta. The above said employees not only accepted the ingenuine transactions but also explained the modus operandi thereof. He rejected the contention of the assessee that all the transactions are GST compliant and no evasions were reported. The mismatch between the sales \ purchases reported in show cause notice and the cash trial found during the search and the purchases constituted major raw material consumed by assessee. In this regard, AO referred to the alternate submissions made by assessee, accordingly, the Assessing Officer reproduced the same in the order at para number 5.8.4. For the sake of clarity it is reproduced below :- "5.8.4 ALTERNATIVE SUBMISSIONS RE....
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....in incongruency and impossibility. g. A list of alleged bogus purchase and sale is attached herewith (on the basis of SCN, figures being corrected along with corroborating documents). h. If bogus sale is alleged, then it is not possible to make the sale without any purchase. The purchase in such a case should also be bogus to balance the figures since there can be no bogus purchase against actual sale in the given circumstances of the case as explained below. i. Thus, the real picture would then be obtained only after exclusion of both sale and purchase. 3.2 If the alleged excel sheets print outs and the inferences of the department in that regard are assumed to be correct, then it would transpire that the alleged cash received from alleged bogus purchases has moved to the alleged bogus sales either directly or through various other means like Aditya or Anand. This would also establish a correlation between such purchases and sale." 8. After considering the above submissions, the Assessing Officer observed that from the records, it is clearly established that the assessee has engaged in ingenuine sales and purchases during the year. The Annexu....
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....late with the books of accounts of the assessee and the trail of transactions, it clearly establishes that these transactions are ingenuine and commission received and paid by them are proved beyond doubt. Accordingly, he dismissed the grounds raised by the assessee. Further, he dismissed all the grounds raised by the assessee including the issue of approval granted under section 153D of the Act. 11. Aggrieved with the above order, Assessee is in appeal before us raising following grounds of appeal: "1. INVALID APPROVAL U/S 153D: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto because they are founded and based on invalid and unlawful so called "approval" u/s 153D of 1 961 Act (dated 23.05.2022); 2. INADMISSIBLE ELECTRONIC EVIDENCE (SEC 65B) AND CBDT DIGITAL EVIDENCE MANUAL VIOLATED: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quas....
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....2024) are both invalid and deserve to be quashed in toto as entire assessment /impugned additions are made on basis of mere conjecture, surmises and guesswork only, that too without any valid invocation of sec 145(3) (book results never doubted) sans which entire asst. is jurisdictionally flawed; 8. PERVERSE CIT-A REASONING: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto in so far impugned additions are concerned which are Sustained by ld cit-a on basis of totally perverse "reasoning" 9. SEC 28 AND SEC 69C MECHANICALLY INVOKED FOR IMPUGNED ADDITIONS: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto as provisions of sec 28 and sec 69C have been perfunctorily and mechanically invoked without any application of mind vis a vis respective /impugned additions; so impugned assessment /first appeal order are to be quashed /set asi....
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....69C) 14,20,45,084 TI: 37,40,60,513 2021-2022 507,10,326 167,99,109 28,03,950 (69C) Unexplained expenditure on hawala transaction 10,10,289 (ON a/c of commission paid/recd on bogus sale/purchase) 14,31,000 (unexplained expenditure) 291,30,185 (disallowance of misc expenses) 30,70,67,000 (repayment of loans) 861,42,020 (interest u/s 69C) 49,50,93,879 TI: 51,87,71,949 6. Further relevant factual position of dates of 153D forwarding and final approval and final impugned asst order passed u/s 153A/143(3) with corresponding position in CIT -A impugned order is as below: CHART 3 AY DATE OF FORWARDING OF DRAFT ORDERS (LETTER OF AO SEEKING APPROVAL U/S 153D) FINAL APPROVAL U/S 153D IMPUGNED ASST. ORDER CIT-A order 2018-2019 23.05.2022 23.05.2022 23.05.2022 sec 153a/143(3) 05.01.2024 (PARA 30 TO 36 PAGE 10/11) 2019-2020 23.05.2022 23.05.2022 23.05.2022 Sec 153A/143(3) 05.01.2024 PARA 30 TO 36 PAGE 9/10 2020-2021 23.052022 23.05.2022 23.05.2022 Sec 153A/143(3) 05.01.2024 PARA 30 TO 36 PAGE 10/11) 2021-2022 26.09.2022 30.09.2022 30.09.2022 Sec 153A/143(3) 05.01.2024 PARA 34 TO 39 P....
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....s that no tax shall be levied or collected except by authority of law. A taxing statute must be valid and conform to other provisions of the Constitution. Article 265 makes a distinction between "levy" and "collection." The expression "levy" has a wider connotation. It includes both the imposition of a tax as well as assessment. A taxing statute must be valid and conform to other provisions of the Constitution. 23. Thomas Cooley describes assessment as the most important of all the proceedings in taxation. He further describes the necessity of assessment thus: "An assessment, when taxes are to be levied upon a valuation, is obviously indispensable. It is required as the first step in the proceedings against individual subjects of taxation, and is the foundation of all which follow it. Without an assessment they have no support, and are nullities. The assessment is, therefore, the most important of all the proceedings in taxation, and the provisions to insure its accomplishing its office are commonly very full and particular. If there is no valid assessment, a tax on sale of lands is a nullity. A want of assessment is not a mere irregularity remedied by a curative statute. ....
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....td. v. Golden Chariot Airport, (2010) 10 SCC 422Hon'ble apex court in case of UOI vs Murugesan 2022 2 SCC 525APPROBATE AND REPROBATE: 26. These phrases are borrowed from the Scott's law. They would only mean that no party can be allowed to accept and reject the same thing, and thus one cannot blow hot and cold. The principle behind the doctrine of election is inbuilt in the concept of approbate and reprobate. Once again, it is a principle of equity coming under the contours of common law. Therefore, he who knows that if he objects to an instrument, he will not get the benefit he wants cannot be allowed to do so while enjoying the fruits. One cannot take advantage of one part while rejecting the rest. A person cannot be allowed to have the benefit of an instrument while questioning the same. Such a party either has to affirm or disaffirm the transaction. This principle has to be applied with more vigour as a common law principle, if such a party actually enjoys the one part fully and on near completion of the said enjoyment, thereafter questions the other part. An element of fair play is inbuilt in this principle. It is also a species of estoppel dealing with the conduct of....
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....ts. A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction". It is clear from the above observations that the maxim that a person cannot 'approbate and reprobate' is only one application of the doctrine of election, and that its operation must be confined to reliefs claimed in respect of the same transaction and to the persons who are parties thereto. The law is thus stated in Halsbury's Laws of England, Vol. XIII, p. 464, para 512: "On the principle that a person may not approbate and reprobate, a species of estoppel has arisen which seems to be intermediate between estoppel by record and estoppel in pais, and may conveniently be referred to here. Thus a party cannot, after taking advantage under an order (e.g. payment of costs), be heard to say that it is invalid and ask to set it aside, or to set up to the prejudice of persons who have relied upon it a case inconsistent with that upon which it was founded; nor will he....
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....equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when he has to speak, from asserting a right which he would have otherwise had."  Rajasthan State Industrial Development & Investment Corpn. v. Diamond & Gem Development Corpn. Ltd., (2013) 5 SCC 470: "I. Approbate and reprobate 15. A party cannot be permitted to "blow hot-blow cold", "fast and loose" or "approbate and reprobate". Where one knowingly accepts the benefits of a contract, or conveyance, or of an order, he is estopped from denying the validity of, or the binding effect of such contract, or conveyance, or order upon himself. This rule is applied to ensure equity, however, it must not be applied in such a manner so as to violate the principles of what is right and of good conscience. [Vide Nagubai Ammal v. B. Shama Rao [AIR 1956 SC 593], CIT v. V. MR. P. Firm Muar [AIR 1965 SC 1216], Ramesh Chandra Sankla v. Vikram Cement [(2008) 14 SCC 58 : (2009) 1 SCC (L&S) 706 : AIR 2009 SC 713], Pradeep Oil Corpn. v. MCD [(2011) 5 SCC 270 : (2011) 2 SCC (Civ) 712 : AIR 2011 SC 1869], Cauvery Coffee Traders v. Hornor Resources....
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.... working for a living d: showing a desire for freedom" 35.3 The Black's Law Dictionary defines: "INDEPENDENT. Not dependent; not subject to control, restriction, modification, or limitation from a given outside source." Independence, which is the state of being independent would also be instructive in our understanding. "INDEPENDENCE. The state or condition of being free from dependence, subjection, or control. A state of perfect irresponsibility. Political independence is the attribute of a nation or state which is entirely autonomous, and not subject to the government, control, or dictation of any exterior power." 10.5 ABDICATION CASE: That fifthly entire asst is made ostensibly on dictate and direction of investigation wing (appraisal report) which vitiates the impugned asst; reference is made to i) hon'ble apex court in case of hon'ble apex court three judge bench in epochal case of Dr. Premachandran Keezhoth and Another ... Appellant(s); Versus Chancellor Kannur University and Others ... Respondent(s).2023 SCC OnLine SC 1592 ii) HON'BLE DELHI HIGH COURT IN CASE OF ACME HEERGARH POWERTECH PRIVATE LIMITED VS CENTRAL BOARD OF ....
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....trusted with statutory discretions, be they executive officers or members of distinct tribunals, are usually entertained and are often obliged to take into considerations of public policy, and in some contexts the policy of a minister or of the Government as a whole may be a relevant factor in weighing those considerations; but this will not absolve them from their duty to exercise their personal judgment in individual cases, unless explicitly statutory provision has been made for them to be given binding instructions by a superior, or (possibly) unless the cumulative effect of the subject-matter and their hierarchical subordination (in the case of civil servants and local government officers) make it clear that it is constitutionally proper for them to receive and obey instructions conveyed in the proper manner and form." 119. The aspect of abdication of discretion was succinctly explained by the Supreme Court in AnirudhsinghjiKaransinhji Jadeja in the following terms: - "11. The case against the appellants originally was registered on 19-3-1995 under the Arms Act. The DSP did not give any prior approval on his own to record any information about the commission of an offe....
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....rrendering of discretion (3) General power of superintendence must be distinguished from the interference in the adjudication process. (4) The true test of bias is not whether the judge is actually biased or not, but whether there is a real danger of bias from view point of fair minded and informed observer. 10.6 STATUS IN HANDS OF OTHER TRANSACTING PARTY; UNKNOWN: That sixthly there is no clue as to what is status of asst in hands of other transacting party (like so called cash lender and commission giver and commission receiver and expense recipient u/s69C) sans which entire exercise is one sided and can not be legally justified (REFERENCE IS MADE TO HON'BLE APEX COURT DICTUM IN CASE OF ORISSA CORP 159 ITR 78 & RECENT DETAILED HON'BLE BOMBAY HIGH COURT DECISION IN CASE OF Principal Commissioner of Income-tax-1 Vs. SVD Resins &Plastics (P.) Ltd [2024] 166 taxmann.com 242 (Bombay); Hon'ble BOMBAY HIGH COURT DECISION IN CASE OF GAURAV TRIYUGI SINGH VS ITO (2020) 423 ITR 531; refer fatal impact of "admitted" not making independent inquiry u/s 133(6)/131: ; Hon'ble Allahabad high court decision in case of Kehsarwanisheetalya vs CIT (2020) 315 CTR 815; Hon'bl....
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....quirements of Rule 56A. Once the Tribunal took the view that they were liable to pay duty on the intermediary product and they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. We are, therefore, of the opinion that the appellants should be permitted to avail of the benefit of the notification by complying at this stage with Rule 56A to the satisfaction of the Department." 25. In our view also, if assessments are to be completed, deductions and applicable exemptions that are otherwise available to an assessee ought to have been extended by the Assessing Officer to an assessee before finalizing the assessment. Since the appellant/assessee was not entitled to exemption as a Trust under Sections 11, 12 and 12A of the Act in absence of registration under the Act as it stood Section 12AA of the Act, the benefit of other deductions under the Act ought to have been give....
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....hey should have cross examined him before disbelieving the statement. Therefore, an issuance of summon to Mr.Thangasamy who had given statement by the Income Tax department is not sufficient. 16. The Income Tax department should have secured the presence of Mr.Thangasamy to answer to the summons and should have confronted him and contradicted the content of the statement of Mr.Thangasamy produced by the appellant by way of cross examination. 17. Therefore, without cross examination, the statement of Mr.Thangasamy can neither be disbelieved nor disregarded. The statement of Mr.Thangasamy cannot be therefore discredited. If Mr.Thangasamy had refused to co-operate, the Income Tax Department was not without remedy under the provisions of the Income Tax Act, 1961 to secure his presence. 18. Since this exercise was not done, the demand confirmed vide order passed under Section 144(A) of the Income Tax Act, 1961 dated 28.12.2011 which view was affirmed by the Assessing Officer vide order dated 29.12.2011 passed under Section 143(3) of the Income Tax Act, 1961 and by the Commissioner of Income Tax (Appeals) vide order dated 12.11.2013 and by the Income Tax Appell....
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....allowed the assessee the benefit of telescoping the original disclosure made against the negative balance in the books of accounts. No substantial question of law arises. Under the circumstances, present Tax Appeal deserves to be dismissed ..." 9.9 ON FAIRNESS IN TAX ASST. :On aspect of apparent malafide (legal malice) in admitted facts of instant case on part of Ld AO (based on glaring and patent contradiction and errors on part of Ld AO) leading to invalidity of impugned asst in toto, reference is made to recent hon'ble Bombay high court decision in case of M/s Soremartec S. A., Luxembourg vs The State of Maharashtra2024:BHC-AS:41233-DB in context of VAT assessment has held as under "39. In R S Garg vs State of UP & Ors.6, the Hon'ble Supreme Court explained the differences between "malice in law" and "malice in fact". Any action resorted to for an unauthorized purpose would constitute malice in law. The Court explained that 'malice' in its legal sense means malice such as may be assumed for a wrongful act done intentionally but without just cause or excuse or for one of the reasonable or probable causes. The term 'malice on fact' would come within the purview o....
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....er hand, ld. DR for the Revenue brought to our notice relevant facts on the record and in particular, he brought to our notice findings of the Assessing Officer at para number 5.7 of the order. He submitted that the facts in this case are very clear from the material found during the search and the respective employees have accepted the ingenuine transactions and also explained the modus operandi. Therefore, he relied on the findings of lower authorities. 14. Considered the rival submissions and material placed on record. We observed from the record that during the search proceedings, certain documents were found in the form of pen drive and the details contained therein show the transactions of purchase and sales including certain cash transactions between certain parties, the details of the transactions are already reproduced in the assessment order. In corroboration with the information available with the assessing officer, the employees including Managing Director of the assessee have accepted the transactions contained in the Annexure A-2, also explained the modus operandi, even though in the post search proceedings, assessee has denied the same, the Assessing Officer came ....
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....red by the assessee i.e., average of 28% to 31%. 16. We are not able to understand that the AO has retained the returned income as per the ROI and also made the commission income on top of the retuned income. Strictly speaking he has to determine the actual income earned by the assessee not on the basis of presumption. In that case, he has to rework the actual income earned by the assessee. As discussed above, the AO may have to reduce the bogus purchases and sales to the extent it is booked in the financial statements and must have added the commission income which is the payment presumed to have been made. The net result would have been lesser than the retuned income. 17. The concept of what approbate and reprobate is settled in the following case by the Hon'ble Supreme Court as under:- "Nagubai Ammal v. B. Shama Rao, 1956 SCR 451: "It is clear from the above observations that the maxim that a person cannot 'approbate and reprobate' is only one application of the doctrine of election, and that its operation must be confined to reliefs claimed in respect of the same transaction and to the persons who are parties thereto. The law is thus stated in Halsbury's....
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....Where one knowingly accepts the benefits of a contract or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience. 26. It is evident that the doctrine of election is based on the rule of estoppel, the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when he has to speak, from asserting a right which he would have otherwise had."  Rajasthan State Industrial Development & Investment Corpn. v. Diamond & Gem Development Corpn. Ltd., (2013) 5 SCC 470: "I. Approbate and reprobate 15. A party cannot be permitted to "blow hot-blow cold", "fast and loose" or "approbate and reprobate". Where one knowingly accepts the benefits of a contract, or conveyance, or of an order, he is estopped from denying the validity of, or the....