TaxTMI 
TaxTMI 
2025 (1) TMI 378
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.... adjudication which relates to impugned assessment made under section 153C of the Act being barred by limitation. This issue is involved in the following appeals:- ITA no.108/Nag./2024 for A.Y. 2009-10 ITA no.109/Nag./2024 A.Y. 2010-11 ITA no.110/Nag./2024 A.Y. 2011-12 and ITA no.111/Nag./2024 for A.Y. 2012-13 4. The facts of the issue are that whether or not it is beyond the 10 years block as per first proviso to section 153C and Explanation-1 to section 153A of the amended provisions of law by the Finance Act, 2017 w.e.f. 01/04/2017; whether, notice under section 153C of the Act and the assessment made under section 153C for the assessment year 2009-10 to 2012-13 is invalid as time barred by limitation, as per first proviso to section 153C and Explanation-1 to section 153A of the Act. 5. The assessee has raised additional ground of appeal in ITA No.108/Nag./2024, for the assessment year 2009-10 by relying on National Thermal Power Co. Ltd. v/s CIT, [1998] 229 ITR 383 (SC) which is as under:- Additional Gr.No.1: "On the facts & circumstances of the case and in law, assessment under sect....
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....ers PL(2023) (Cal HC); AR Safiullah (2021) (Mad); Rakesh Bansal (2024) (Del-Trib); Bhagwati Suresh Modi (2023) (Mum-Trib)." 8. In the appeal being ITA no.111/Nag./2024, for the assessment year 2012-13, the following additional ground of appeal has been raised: Additional Gr.No.1: "On the facts & circumstances of the case and in law, assessment under section 153C dt.31-3-22 for AY12-13 is invalid; as per first proviso to section 153C, date of search shall be the date of receiving the documents/ material by the AO of the assessee; notice under section 153C dt.6-12-21 shall be considered the date of search; AY12-13 would be beyond the block of 10 AYs as per Expln.-1 to section 153A; assessment made under section 153C for AY12-13 is barred by limitation, is liable to be quashed; relied on Ojjus Medicare PL (2024) (Del HC); Jasjit Singh (2023) (SC); Shalimar Town Planners PL (2024) (SC); RB Jewellers PL(2023) (Cal HC); AR Safiullah (2021) (Mad); Rakesh Bansal (2024) (Del-Trib); Bhagwati Suresh Modi (2023) (Mum-Trib)." 9. We, keeping in view of the judgment of the Hon'ble Apex Court in the case of NTPC Ltd (supra), admit the additional grounds of appeal being a le....
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....t, the date of search shall be the date of receiving the documents/information by the Assessing Officer of the assessee-Company. The notice under section 153C of the Act dated 11/03/2022 and 06/12/2021 for the assessment year 2009-10, 2010-11, 2011-12 and 2012-13 shall be considered the date of search; and thus, it is submitted by the learned A.R. that the assessment year 2009-10 to 2012-13 would be beyond the block of 10 assessment years as per Explanation-1 to section 153A of the Act. Notice issued under section 153C and assessment made under section 153C for the assessment year 2009-10 to 2012-13 would be barred by limitation and it is requested to quash the impugned assessments for the assessment year 2009-10 to 2012-13. For this, the learned A.R. submitted that there has been amendment made by the Finance Act, 2017 (wef.01/04/2017) in section 153A and section 153C of the Act which read as under:- "Section 153A. Assessment in case of search or requisition- (1) Notwithstanding anything contained in sec139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned ....
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....he expression "relevant AY" shall mean an AY preceding the AY relevant to the PY in which search is conducted or requisition is made which falls beyond 6 AYs but not later than 10 AYs from the end of the AY relevant to the PY in which search is conducted or requisition is made. Explanation-2.- For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account." "Section 153C. Assessment of income of any other person- (1) Notwithstanding anything contained in sec139, 147, 148, 149, 151 and 153, where the AO is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the AO having jurisdiction over such other person for 6 AYs immediately preceding the AY rele....
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....(3) Nothing contained in this sec shall apply in relation to a search initiated u/s 132 or books of account, other documents or any assets requisitioned u/s 132A on or after the 1-4-21." 13. The learned A.R. for the assessee submitted that the notice under section 153C for the assessment year 2009-10 to 2012-13 has been issued on 11/03/2022 and 06/12/2021 for filing the return of income under section 153C of the Act to the assessee-Company (i.e., non-searched person); search under section 132 was conducted on 22/01/2019 on M/s.RKTC Group, Korba; M/s.Rashi Steels PLtd, Kolkata and Shri Suresh Agrawal, Kolkata (i.e., the searched person). It is submitted that the assessment made under section 153C on 31/03/2022 for the assessment year 2009-10 to 2012-13 is barred by limitation. 14. As per the amended provisions of law by the Finance Act, 2017 w.e.f 01/04/2017, the first proviso to section 153C of the Act reads as under:- "Provided that in case of such other person, the reference to the date of initiation of the search u/s 132 or making of requisition u/s 132A in the second proviso to section 153A(1) shall be construed as reference to the date of receiving the books of ....
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....ould be AY22-23 2nd year AY 2021-22 3rd year AY 2020-21 4th year AY 2019-20 5th year AY 2018-19 6th year AY 2017-18 7th year AY 2016-17 8th year AY 2015-16 9th year AY 2014-15 10th year AY 2013-14 AY 2012-13 beyond the block of 10 AYs AY 2011-12 beyond the block of 10 AYs AY 2010-11 beyond the block of 10 AYs AY 2009-10 beyond the block of 10 AYs 17. Thus, the learned A.R. submitted that the assessment year 2009-10 to 2012-13 would be beyond the block of 10 assessment years as per first proviso to section 153C and Explanation-1 to section 153A. The assessment made under section 153C dated 31/03/2022 for the assessment year 2009-10 would be time barred, is liable to be quashed. In support of this argument, reliance is placed on the following case laws:- i) PCIT v. Ojjus Medicare (P) Ltd [2024] 161 taxmann.com 160 (Del.); ii) A.R. Safiullah v. ACIT, [2021] W.P. (MD) no.4327 of 2021 (Mad. HC) judgment dated 24/03/2021; iii) CIT v. Jasjit Singh, [2023]....
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....g Officer are reproduced below:- "Annexure-A An information has been received in this office on 21-1-21 from DCIT, Central Circle, Raipur dated 15-1-21 in the case of M/s.Maheshwari Coal Benefication & Infrastructure P Ltd to initiate proceedings under section 153C of the IT Act, 1961 for AYs 09-10 & 10-11." 20. Similarly, for the assessment year 2011-12 to 2013-14, in the report of the Assessing Officer dated 16/05/2024 submitted by the learned D.R. before us, wherein also, it is clear that the documents/information related to the assessment year 2011-12 to 2013-14 has been transferred from the Assessing Officer of the searched person i.e., DCIT, Central Circle-1, Raipur, to the Assessing Officer of the assessee i.e., DCIT, Central Circle-1(1), Nagpur, which is mentioned in the letter written by the Assessing Officer of the assessee i.e., DCIT, Central Circle-1(1), Nagpur, dated 29/11/2021 to the Addl. CIT, Central Range, Nagpur, which is received by the Addl. CIT, Central Range, Nagpur, on 29/11/2021. The contents of the report of the Assessing Officer are extracted below:- "Annexure-A An information has been received in this office from DCI....
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....ducted. The long arm of the law can go up to this terminal point and not one day beyond, when the statute is clear and admits of no ambiguity, it has to be strictly construed and there is no scope for looking to the explanatory notes appended to statute or circular issued by the Department for which, following case laws are relied on:- i) PCIT v. Ojjus Medicare (P) Ltd. [2024] 161 taxmann.com 160 (Del.); which concluded as under:- "91. Tested on the aforesaid precepts, it would be manifest that AY22-23 would form the first year of the block of 10 AYs and with the maximum period of 10 AYs terminating in AY13-14. We, in this regard also bear in consideration the following instructive passages as appearing in the decision handed down by a ld Judge of the Madras HC in AR Safiullah (2021) (Mad HC). We deem it appropriate to extract the following paragraphs from that decision: 9. Explanation-1 is clear as to the manner of computation of the 10 AYs. It clearly and firmly fixes the starting point. It is the end of the AY relevant to the PY in which search is conducted or requisition is made. There cannot be any doubt that since search was made in this case on 10-....
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....as invoked the writ jurisdiction at the notice stage. Since the petitioner has demonstrated that the subject AY lies beyond the ambit of the provision, the respondent has no jurisdiction to issue the impugned notice. Once lack of jurisdiction has been established, the maintainability of the WP cannot be in doubt." In our considered opinion, the decision in AR Safiullah (2021) (Mad HC) correctly expounds the legal position and the interpretation liable to be accorded to the identification of the 10 AYs which are spoken of in ss. 153A and 153C. K. Summary of conclusions 119. We thus record our conclusions as follows: B. Both section 153A and 153C embody non-obstante clauses and are in express terms ordained to override sec139, 147 to 149, 151 and 153. By virtue of the 2017 Amending Act, significant amendments came to be introduced in section 153A. These included, inter alia, the search assessment block being enlarged to 10 AYs consequent to the addition of the stipulation of "relevant AY" and which was defined to mean those years which would fall beyond the 6 year block period but not later than 10 AYs. The block period for search assessment thus, ....
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....f the AY" while speaking of the 10 year block." ii) A.R. Safiullah v. ACIT, [2021] (Mad.) judgment dated 24/03/2021, W.P. (MD) no.4327 of 2021, concluded that- "2. The petitioner is an IT assessee. His premises were searched on 10-4-18. Pursuant to the said search, the respondent issued notices u/s 153A requiring the petitioner to file his ROI for various AYs. One such notice issued for the AY09-10 is impugned in this WP. The only question that arises for my determination is whether the AO herein is possessed of the power to issue the same. The respondent has filed a detailed counter affidavit and the ld standing counsel took me through its contents. 3. The contest between the parties is as regards Expl.-1 to section 153A(1). It reads as under: "For the purposes of this sub-sec, the expression "relevant AY" shall mean an AY preceding the AY relevant to the PY in which search is conducted or requisition is made which falls beyond 6 AYs but not later than 10 AYs from the end of the AY relevant to the PY in which search is conducted or requisition is made." The above explanation assigns a particular meaning to the expression "relevant AY". ....
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....ision, there are clearly 2 limbs. The first limb says that the AO shall assess or reassess the total income of 6 years immediately preceding the AY relevant to the PY in which the search is conducted. The second limb enables the AO to go up to 10 AYs. The stand of the respondent is that the search AY should not be included while computing the 10 AYs u/s 153 A. Otherwise, AY13-14 will come under both i.e., under the original category of 6 years and also under the extended category of 10 years. He would strongly urge that the very purpose of introducing the amendment was to extend the reach of the AO by 4 more years. In other words, apart from the 6 AYs already provided for, the long arm of the authority must go up to the 4 more years. Otherwise, the very purpose of the amendment would be lost. 6. The contention of the petitioner's counsel is that the provision talks of 2 categories, namely, 6 years and 10 years and that different yardsticks have been prescribed for computing the 2 periods. On the other hand, the ld standing counsel would contend that the statutory provision talks of 6 years and 10 years, the second category "10 years" must be understood as....
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....h is conducted. The long arm of the law can go up to this terminal point and not one day beyond. When the statute is clear and admits of no ambiguity, it has to be strictly construed and there is no scope for looking to the explanatory notes appended to statute or circular issued by the department. 10. In the case on hand, the statute has prescribed one mode of computing the 6 years and another mode for computing the 10 years. Section 153A(1)(b) states that the AO shall assess or reassess the total income of 6 years immediately preceding the AY relevant to the PY in which search is conducted. Applying this yardstick, the 6 years would go up to 13-14. The search AY, namely, 19-20 has to be excluded. This is because, the statute talks of the 6 years preceding the search AY. But, while computing the 10 AYs, the starting point has to be the end of the search AY. In other words, search AY has to be including in the latter case. It is not for me to fathom the wisdom of the parliament. I cannot assume that the amendment introduced by the FA, 2017 intended to bring in 4 more years over and above the 6 years already provided within the scope of the provision. When the law ....
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....onging to the third party, to the concerned AO. In that event if the date would virtually "relate back" as is sought to be contended by the Revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is disproportionate. For instance, if the papers are in fact assigned under section 153C after a period of 4 years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of section 153C supports the interpretation which this Court adopts." iv) Rakesh Bansal v. ACIT [2024] 159 taxmann.com 1632 (Del. Trib), concluded as under- "5. A satisfaction note was recorded by the ACIT, Cen-Cir-16, New Delhi in the case of Shri Rakesh Jain being the "searched person". Satisfaction note reads as under: "Search u/s 132 was conducted in the case of Rakesh Jain group on 2-11-17." 6. Satisfaction note was also drawn ....
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....gram group of companies. During search residential premises of Viral K Patel, Ahd, was also covered as he is the key person handling the cash transaction relating to M/s.Satyam Developers Ltd. During the course of search certain incriminating documents and digital data was found and seized. 5. Therefore, the information in the seized documents related to the assessee. Accordingly, a satisfaction note by the ITO(IT)-3(2)(1), Mum was recorded on 31-3-21 and respective notice under section 153C were issued to the assessee for AY08-09 to AY17-18. 6. For AY08-09, assessee has not filed any ROI u/s 139. 7. In this case, the satisfaction of the ld AO i.e., Jt.CIT, Cen-Cir-,2(2), Ahd, being the AO of the searched person was recorded on 18-2-21 and satisfaction of the ld AO of the assessee was recorded on 31-3-21 for all these years. 8. The respective reasons were provided to the assessee. On 15-11-21, the assessee was also provided with seized material found being a ledger account of the assessee from the Tally data. The assessee was also provided with satisfaction note of the ld AO. assessee filed objections which were disposed off by the ld AO on 9-12-....
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....has been initiated before the expiry of limitation as provided u/s 153A Explanation-1 and he also could not distinguish both the aforesaid judgments upon which Mr.Mazumder has relied either on facts or law. 7. Considering the facts and circumstances of the case as appears from record and submission of the parties and the judgments relied upon by them, I am of the considered view that the impugned proceeding u/s 153A and all subsequent proceedings relating to AY10-11 on the basis of search and seizure dt.13-4-19 is not sustainable in law and accordingly the same were quashed." 23. Thus, we find that the assessment year 2009-10, 2010-11 and 2011-12 is beyond the block of 10 year as per first proviso to section 153C read with Explanation-1 to section 153A and, therefore, notice issued under section 153C and assessment made under section 153C by the Assessing Officer for the assessment year 2009-10, 2010-11 and 2011-12 is barred by limitation and is invalid, bad in law and is hereby quashed for the want of valid assumption of jurisdiction on the part of the Assessing Officer. Thus, it is concluded as under:- (a) Appeal being ITA no.108/Nag./2024, for the assessment....
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.... Rs. 60 lakhs for impugned AY09-10 in the assessment order; in absence of a valid "satisfaction note" recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s 153C, search assessment made u/s 144 rws.153C would be invalid and is liable to be quashed." ITA No.109/Nag./2024 Assessment year : 2010-11 Ground no.1: "On the facts & circumstances of the case and in law, assessment made u/s 153C is invalid as there is no satisfaction recorded by the AO of the searched person (i.e., RKTC Group) and also by the AO of the assessee-Co, since both the AOs are different; there is no mention of any "satisfaction note" recorded for the alleged escaped income of Rs. 4,43,55,000 for impugned AY10-11 in the assessment order; in absence of a valid "satisfaction note" recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s 144 rws.153C, search assessment made u/s 153C would be invalid and is liable to be quashed." ITA No.110/Nag./2024 Assessment year : 2011-12 Ground no.1: "On the facts & circumstances of the case and in law, assessment made u/s 153C is invalid as there is no satisfaction recorded by the AO o....
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....epared by the Assessing Officer of the searched persons for the assessment year 2009-10 to 2019-20, which are placed on record. For better appreciation of the facts, it is necessary to reproduce the contents of the letter dated 15/01/2021, issued by the DCIT, Central Circle-2, Raipur, to the DCIT, Central Circle-1(1), Nagpur, which are as under:- "F. no.DCIT(C)-2/RPR/RKTC/Sharing Information/20120-21/2026 dated 15/01/2021 To The Dy. Commissioner of Income Tax Central Circle-1(1), Nagpur Sir, Sub:- Assessment proceedings u/s 153C of the I.T. Act, 1961, in the case of M/s. Maheshwari Coal Benefication and Infrastructure Pvt. Ltd., (PAN-AAECM9298D), House no.647, Behind 16 Kholi, Tikrapara, Bilaspur, CG - regarding. Kindly refer to the above and find enclosed herewith Satisfaction Note drawn in the case of Mis Maheshwari Coal Beneficiation and Infrastructure Pvt. Ltd.. PAN- AAECM9298D along with Proforma for recording satisfaction u/s 153C of the I.T. Act. 1961. 2. In this regard, you are requested to kindly initiate assessment proceedings u/s 153C of the Act for A.Ys 2009-10 to 2018-19 and kindly issue notice ....
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....the I.T. Act, 1961 A search and seizure action was conducted on RKTC Group, Korba, on 22.01.2019 and concluded on 22.03.2019. In search, 35 premises were covered u/s 132(1) of the I.T. Act. 2. During the course of search action at the office premises of Shri Suresh Kumar Agrawal, one f the Directors of M/s. Rashi Steel and Power Pvt. Ltd. at no.28 & 29, 2nd Floor, 9 Mangoe Lane, Hare Street, Kolkata on 22.01.2019, many documents were found and seized ............ 3. It is also pertinent to mention here that the findings of the search also reveal that the assessee company has Income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years (falling beyond the sixth year), it is therefore, necessary to initiate assessment proceedings u/s 153C of the I.T. Act, 1961 in the case of M/s.Maheshwari Coal Beneficiation and Infrastructure Pvt. Ltd., PAN-AAECM9298D for the A.Ys 2009-10 to 2018-19 and u/s 143(3) of the 1.T. Act, 1961 for A.Υ.2019-20." Yours faithfully, Sd// (Sunny Kachhwaha) Deputy Commissioner of Income Tax ....
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....y the Assessing Officer of the searched person before transmitting the documents to the Assessing Officer of the non-search person when there are two different Assessing Officers and it also must be a separate satisfaction note recorded for each year separately and further it is submitted by the learned A.R. that the separate satisfaction note must be recorded by the Assessing Officer of the non-searched person i.e., the assessee company before issuing notice under section 153C of the Act which must be reflected its determination of undisclosed income of the assessee company for the respective assessment year(s), this is sine qua non for usurping jurisdiction for initiating proceedings under section 153C of the Act which is absent in the present case. In support of such arguments, the following case laws have been relied upon:- i) Agni Vishnu Ventures (P) Ltd. v/s DCIT (2024) 157 taxmann.com 242 (Madras HC) concluded that- "77. The ingredients of section 153C are: Satisfaction of the AO who is AO of the section 153A noticee that money/ bullion/ jewellery/ other valuable article or thing/ books of account or documents (incriminating materials) seized/ requ....
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.... requisition is made, that such notice would have to be issued for all the years. 82. It thus, flows from the provision that the receiving AO must apply his mind to the materials received and ascertain precisely the specific year to which the incriminating material relates. It is only when this determination/ ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of a notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by an AO. 83. The construction of section 153A and 153C is consciously different and is seen to apply different yardsticks to an entity searched and a third party, such yardstick being more exacting in the case of the former. The process of assessment is demanding and an assessee, once in receipt of a notice, is bound by the stringent procedure under the Act, till finalisation of the process." ii) SLP of the revenue has been dismissed by the Hon'ble SC in the case of PCIT v. Gali Janardhana Reddy (2023) 157 taxmann.com 392 (SC) dt.4-12-23, against the judgment of the Hon'ble Karnataka HC in the case of Gali Janardhana Reddy (2023) 152 ....
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.... documents etc. are to be handed over to the AO having jurisdiction over "such other person". (2) The second stage commences from the recording of such satisfaction by the AO of the "searched person" followed by handing over of all the requisite documents etc. to the AO of such "other person", thereafter followed by issuance of the notice of the proceedings u/s 153C rws.153A against such "other person". The initiation of proceedings against "such other person" are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the "searched person", or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the "such other person" u/s 153C. Even in a case, where the AO of both the persons is the same and assuming that no handing over of documents is required, the recording of "satisfaction" is a must, as, that is the foundation, upon which the subsequent proceedings against the "other person" are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of ....
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....position of law laid down by the Hon'ble Karnataka HC in the case of Smt G Lakshmi Aruna (2023) 150 taxmann.com 107 (Karnataka HC) dt.31-3-23; against which, SLP of the revenue has been dismissed by the Hon'ble SC in the case of PCIT v. G Lakshmi Aruna (2024) 159 taxmann.com 183 (SC) dt.11-12-23. iv) Thereafter, the Hon'ble Karnataka HC in the case of Sunil Kumar Sharma (2024) (Kar HC) dt.22-1-24, has concluded that- "26. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, we are of the view that the action taken by the respondent Revenue against the Assessee based on the material contained in the diaries/loose sheets, are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and ....
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....n i.e., DCIT, Central Circle, Raipur, to the Assessing Officer of the assessee i.e., DCIT, Central Circle-1(1), Nagpur on 21/01/2021, which is mentioned in the letter written by the Assessing Officer of the assessee i.e., DCIT, Central Circle-1(1), Nagpur, vide letter dated 11/03/2022 to the Addl.CIT, Central Range, Nagpur, which is received by the Addl.CIT, Central Range Nagpur on 11/03/2022. The contents of the report of the Assessing Officer are reproduced below:- Proforma for recording satisfaction u/s 153C of the I.T. Act, 1961 (To be filled by the Assessing Officer of the person referred to in section 153A) 1. Name of the Group Searched RKTC Group, Korba 2. Name of PAN of the person referred to in Section 153A Suresh Kumar Agrawal ACIPA8846Q 3. Name and PAN of the person referred to in Section 153C M/s. Maheshwari Coal Beneficiation and Infrastructure Pvt. Ltd. PAN - AAFCM9298D 4. Date of initiation of search in the case of the person referred to in Section 153A 22/01/2019 5. Name, address and PAN of the person in whose case action under section 153C is proposed M/s. Maheshwari Coa Beneficiation and Infrastructure Pvt. Ltd. P....
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....he report by the Assessing Officer are reproduced below:- Proforma for recording satisfaction u/s 153C of the I.T. ACT, 1961 (To be filled by the Assessing Officer of the person referred to in section 153A) 1. Name of the Group Searched RKTC Group, Korba 2. Name of PAN of the person referred to in Section 153A Shri Suresh Kumar Agrawal (ACIPA8846Q) 3. Name and PAN of the person referred to in Section 153C M/s. Maheshwari Coal Beneficiation and Infrastructure Pvt. Ltd. PAN - AAFCM9298D 4. Date of initiation of search in the case of the person referred to in Section 153A 22/01/2019 5. Name, address and PAN of the person in whose case action under section 153C is proposed M/s. Maheshwari Coa Beneficiation and Infrastructure Pvt. Ltd. PAN - AAECM9298D House no.647, Behind 16 Kholi, Tikrapara Bilaspur, CG 6. to 7. .......... ........ 8. Satisfaction of the Assessing officer of the person referred to in section 153A that the seized material referred to in S. No.6 belongs to the person referred to in S. No.5 1)As per annexure A (Copy Enclosed) & Documents seized from the above mentioned premises belongs/show the person r....
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....'ble Karnataka High Court rendered in Sunil Kumar Sharma (supra) wherein it has been held that satisfaction note is required to be recorded under section 153C for each assessment year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different assessment year by both the Assessing Officers i.e., the Assessing Officer of the searched person has recorded consolidated satisfaction note for the assessment year 2009-10 to 2019-20 and thereafter the Assessing Officer of the assessee has recorded consolidated satisfaction note for the assessment year 2009-10 and 2010-11 and another consolidated satisfaction note for the assessment year 2011-12 to 2013-14. There is no co-relation with the documents year-wise to clearly point out as to how the documents pertain to the assessee. Thus, we hold that the assessment order made under section 153C for the assessment year 2009-10 to 2013-14 is treated as invalid, bad-in-law and unsustainable in the eyes of law for want of valid assumption of jurisdiction on the part of the Assessing Officer. 34. Thus, we conclude as under:- (a) Appeal being ITA no.108/Nag./2024, for the assessment year 2009-10, vide....
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....oviso to section 153A(1) sets out certain further conditions which is required to be fulfilled before issuing notice u/s 153C; in absence of valid assumption of jurisdiction u/s 153C, assessment made u/s 144 rws.153C would be invalid & is liable to be quashed." Additional Gr.No.2: "On the facts & circumstances of the case and in law, assessment made u/s 153C dt.31-3-22 for AY09-10, i.e., "relevant AY" as per section 153A(1) as amended by FA, 2017 (wef.1-4-17); addition made on unexplained cash credits u/s 68 of Rs. 60,00,000; the AO has not made any addition on undisclosed "asset" which is sine qua non/ pre-condition for assuming valid jurisdiction for making assessment u/s 153C for "relevant AY" as per "fourth proviso" to section 153A(1) read with "Expln-2"; in absence of this, assessment made u/s 153C would be invalid & is liable to be quashed; relied on Goldstone Cements Ltd (2023) (Gau HC); Fortune Vanijya (P) Ltd (2023) (Gau HC)." 38. The assessee has also raised additional grounds of appeal in ITA No. 109/Nag./ 2024, A.Y. 2010-11. Ground no.2 "On the facts & circumstances of the case and in law, assessment made u/s 153C is invalid as wit....
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....xpln-2"; in absence of this, assessment made u/s 153C would be invalid & is liable to be quashed; relied on Goldstone Cements Ltd (2023) (Gau HC); Fortune Vanijya (P) Ltd (2023) (Gau HC)." 40. In the appeal of the assessee bearing ITA No.111/Nag/ 2024, for the assessment year 2012-13 along with following additional ground of appeal has been raised:- Ground no.2 "On the facts & circumstances of the case and in law, assessment made u/s 153C is invalid as without having jurisdiction to issue notice u/s 153C, as the reason for issuing notice u/s 153C does not come within the purview of 4th proviso to section 153A(1) sets out certain further conditions which is required to be fulfilled before issuing notice u/s 153C, more so, reason for escaped income of Rs. 22,46,300 is below the limit of Rs. 50 lakhs; in absence of valid assumption of jurisdiction u/s 153C, assessment made u/s 143(3) rws.153C would be invalid & is liable to be quashed." Additional Ground no.2 "On the facts & circumstances of the case and in law, assessment made u/s 153C dt.31-3-22 for AY12-13, i.e., "relevant AY" as per section 153A(1) as amended by FA, 2017 (wef.1-4-17); additio....
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....7 (w.e.f. 01/04/2017); assessment made under section 153C dated 31/03/2022 for the assessment year 2009-10 to 2013-14, which is "relevant AY/ AYs" as per section 153A(1) as amended by the Finance Act, 2017 (w.e.f. 01/04/2017) and additions have been made on account of unexplained loans and advances, share capital/share application money as unexplained cash credits under section 68 and the Assessing Officer has not made any addition on undisclosed asset which is sine qua non/pre-condition for assuming valid jurisdiction for making assessment under section 153C for the "relevant AY/ AYs" as per "fourth proviso" to section 153A(1) r/w Explanation-2 to section 153A as amended by the Finance Act, 2017 (w.e.f. 01/04/2017), the addition on account of unexplained cash credit could not have been made by the Assessing Officer, unless he first made the addition of undisclosed asset; as the Assessing Officer has not made any addition on account of undisclosed asset. There was no jurisdictional fact in the hands of the Assessing Officer or in his possession when he assumed jurisdiction under section 153C for the assessment year 2009-10 to 2013-14 in the first place itself. When the very usurpat....
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....f "Asset" but represents undisclosed/ unexplained income / expenditure / credit etc. 46. Perusal of the assessment order impugned before us, shows that that Assessing Officer did not make any addition/s in respect of escaped/ undisclosed asset in the relevant assessment year 2009-10 to 2013-14. 47. We, therefore, find ourselves in agreement with the contention of the learned A.R. for the assessee that unless the Assessing Officer made addition of Rs. 50 lakh or more (in aggregate) in relation to the escaped / undisclosed asset, he could not assume jurisdiction to make addition on other items (viz. liabilities like credit entry, etc.) for the reason that, because in such a scenario, it bellies the claim of the Assessing Officer in issuing notice under section 153C / 153A, the Assessing Officer is in possession of the jurisdictional fact i.e., undisclosed asset valued Rs. 50 lakh or more has escaped assessment, which constitutes the key to open the lock and then re-assess the income of the assessee for the extended period of relevant AY / AYs; It is therefore, incumbent upon the Assessing Officer to show that the key used for opening the lock for the concluded the extended peri....
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....ps it (after making enquiries in the course of assessment) while framing the reassessment order, then the Assessing Officer cannot legally proceed further with the assessment/ reassessment and/ or make any other items of additions / disallowances, because the jurisdictional fact on the strength of which he assumed section 153C jurisdiction is absent or not in existence. In the light of the aforesaid discussion and in our considered opinion, this plea of learned A.R. for the assessee is well founded and deserves to be accepted. In view of the above and on a perusal of the impugned assessment order, we note that the only addition made by the Assessing Officer in the assessment year 2009-10 to 2013-14 was on account of unexplained cash credit represented by loans and advances and share capital / share application monies under section 68 of the Act are as under:- A.Y. Addition made by the Assessing Officer 09-10 Addition made by AO of Rs. 60,00,000 on the count of loans/ advances treating it as unexplained cash credits u/s 68 10-11 Addition made by AO of Rs. 4,43,55,00,000 on the count of loans/ advance treating it as unexplained cash credits u/s 68 11-12 Additi....
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.... in a casual manner by stating/substituting the specific jurisdictional fact. It is imperative that before issuance of notice u/s 153C (for the extended period) the AO sets out his objective satisfaction from the seized material, the details of the specified/undisclosed assets in possession qua the assessee for AY11-12 valued at Rs. 50 lacs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law to invoke the jurisdiction u/s 153A for 7th to 10th AY. At the cost of repetition, it is pertinent to mention that the assessee had disclosed the sale transactions and liquidation of shares in his regular books of accounts and the liquidation of shares were received in bank. Thus the aforementioned assets cannot be termed as undisclosed assets. It has been appositely concluded in the concurrent decisions of the CITA and ITAT that it cannot be held that the allegedly undisclosed assets have escaped assessment. 20. It has emerged from the foregoing discussions that the addition made by the AO in AY11-12 was on account of unexplained "cash credit" represented by sale proceeds of Rs. 9,63,00,000 u/s 68. The additions on account of unexpl....
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....respect of escaped/ undisclosed asset in the relevant AY11-12. We therefore, find ourselves in agreement with Shri Dudhwe that, unless the AO made addition/s of Rs. 50 lakhs or more in relation to escaped/ undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. liabilities like credit entry etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153A, that he is in possession of the jurisdictional fact i.e., undisclosed asset valued Rs. 50 lakhs or more has escaped assessment, which constitutes the key to open the lock and then re-assess the income of the assessee for the 7th to 10th AY. It is therefore, incumbent upon the AO to show that the key used for opening the lock for the concluded 7th to 10th AY is the most appropriate key to unlock and thereby reopen the proceedings for bringing to charge any other items of escaped/unexplained income unearthed in the course of search. However in a case where, either the assessee demonstrates that the key used by the AO for reopening the assessment is either incorrect or where the AO himself abandons the jurisdictional fact in the course of assessment ....
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.... unexplained cash credit u/s 68. As noted above, the additions on account of unexplained cash credit and that too share capital, which is in the nature of "liability" could not have been made by AO, unless he first made an addition of undisclosed "asset" valued at Rs. 50 lakhs or more. So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO"s hand or in his possession when he assumed jurisdiction u/s 153A for AY11-12 in the first place itself. As, the very usurpation of jurisdiction u/s 153A is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY11-12. Hence, the AO"s action of making addition u/s 68 in the relevant AY11-12 is held to be unsustainable for want of jurisdiction and is therefore, is quashed. The assessee thus succeeds on this ground raised in the cross objections and the same is allowed." 50. In our opinion, as the very usurpation of jurisdiction under section 153C is found to be bad in law for want of jurisdiction, the Assessing Officer was precluded from making any other addition in the assessme....
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....arch assessment made u/s 144 rws.153C would be invalid and is liable to be quashed." 53. Insofar as the facts of the issue in hand for our adjudication is concerned, during the course of hearing, the learned A.R. argued that a separate approval dated 31/03/2022, granted under section 153D of the Act for each assessment year i.e., A.Y. 2009-10 to 2013-14 are individually invalid, as it is granted on the same day itself i.e., on 31/03/2022 on the basis of letter dated 31/03/2022, issued by the Assessing Officer for seeking approval from the Addl. CIT, though it is separate approval for each year, but it is stereo-typed, copy-paste approval, which is also in a mechanical & routine manner without application of mind by the Addl. CIT. Moreso, without even considering the facts of the case; without pointing out the mistake / error committed by the Assessing Officer in the impugned draft assessment orders put up before the Addl. CIT for seeking separate approval for assessment year 2009-10 to 2013-14. 54. Thereafter, on the same day itself, i.e., on 31/03/2022, the Addl. CIT has granted separate approval dated 31/03/2022, under section 153D of the Act for each assessment year i.e., ....
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..../CR-1/NGP/153D/2021-22 Date: 31.03.2022 To, The Deputy Commissioner of Income Tax Central Circle-1(1), Nagpur Sub: Approval u/s 153D of I.T. Act in the case of M/s. Maheshwari Coal Benefication & Infrastructure Pvt. Ltd., PAN:AAECM9298D for A.Y. 2013-14 reg. Ref: Letter F. no.DCIT CC-1(1)/Approval u/s 153D/MCBIPL/2021-22, dated 31.03.2022. 2. I have perused the draft assessment order submitted by you in the case M/s. Maheshwari Coal Benfication & Infrastructure Pvt. Ltd. PAN: AAECM9298D for A.Y. 2013-14 vide above referred letter. Accordingly, an approval u/s 153D of the I.T. Act is hereby accorded to pass the assessment order u/s 143(3) r.w.s. 153C of the IT Act, 1961 for A.Y. 2013-14 in respect of the following case:- Sr. no. Name of the Assessee Section A.Y. 1. M/s. Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. PAN: AAECM9298D u/s 143(3) r.w.s. 153C of the I.T. Act, 1961 2013-14 Sd/- (MILIND V. PATIL) Addl. Commissioner of Income Tax Central Range-1, Nagpur" 55. The learned A.R. for the assessee further argued that the separate approval dated 31/03/2022,....
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....sfaction note by the Assessing Officer of the searched person (i.e., DCIT, Central Circle-1, Raipur) before transmitting the documents / records / information to the Assessing Officer of the assessee-Company i.e., non-searched person (i.e., DCIT, Central Circle-1, Nagpur). The Addl.CIT has not even perused the assessment records / files wherein date of transmitting the documents is 21/01/2021 and not applied his mind to the fact that it would be deemed date of search and therefore, on his part, the Addl. CIT has not pointed out the glaring mistake of the Assessing Officer for computation of block period of 10 assessment years as per Explanation-1 to section 153A by the Finance Act, 2017 (w.e.f. 01/04/2017) which is a jurisdictional fact / pre-condition / sine qua non for usurping / assuming jurisdiction under section 153C for the assessment year 2009-10 to 2011-12 (i.e., 3 consecutive years) and for issuing notice under section 153C for assessment year 2009-10 to 2011-12. The learned A.R. further argued that the Addl. CIT has not cared that in absence of this jurisdictional fact, whole proceedings for the assessment year 2009-10 to 2011-12 would be vitiated amd to be held as invali....
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....(1) and the Addl.CIT has not cared that the documents found in searched premises (i.e., Suresh Agrawal, Kolkata) has been transferred to the Assessing Officer of the assessee-Company on 21/01/2021, which is in possession of the Assessing Officer of the assessee-Company, does not constitute "asset" as per fourth proviso to section 153A(1) and Explanation-2 of the fourth proviso which is sine qua non for issuing notice under section 153C for the "relevant AY/ AYs". There is a violation of fourth proviso to section 153A(1). It is not cared by the Addl. CIT while granting such mechanical approval. The learned A.R. further argued that the Addl.CIT has also not cared that the Assessing Officer has not made any addition on account of undisclosed assets in the assessment year 2009-10 to 2013-14, which comes to the "relevant AY/ AYs" as per Explanation-1 to section 153A(1) and it is mandatory to make first addition on account of undisclosed assets, then only, he would be empowered to make any other addition on certain independent issue of unexplained cash credits under section 68 of the Act. This fact has not been cared by the Addl. CIT while granting such mechanical approval on 31/03/2022 ....
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....the assessment files / records with regard to opening balances of loan accounts which are added by the Assessing Officer under section 68 which is invalid as per mandate of section 68, as only fresh credits during the year concerned are liable to be assessed under section 68. The learned A.R., in support of his arguments, relied upon the following case laws: i) PCIT v. MDLR Hotels P Ltd (2024) 166 taxmann.com 327 (Del HC); ii) PCIT v. Anuj Bansal (2024) 165 taxmann.com 2 (Del HC); iii) PCIT v. Subash Dabas (2024) (Del HC) dt.17-5-24; ITA No.243/2023 & CNAPPL.20652/ 2023 iv) PCIT v. Shiv Kumar Nayyar (2024) 163 taxmann.com 9 (Del HC); v) ACIT v. Serajuddin & Co (2023) 150 taxmann.com 146 (Ori HC); vi) SVP Southwest Industries Ltd v. DCIT (2024) (Mum-Trib) dt.30-4-24; ITA No.1275/ Mum/ 2022; vii) SMW Ispat (P) Ltd v. ACIT (2024) 163 taxmann.com 119 (Pune-Trib); viii) Subhash Bhawnani v. DCIT (2023) 37 NYPTTJ 807 (Indore-Trib) dt.25-5-23, ITA No.38 to 40/Ind/ 2020; ix) Mysore Finlease P Ltd. (2024) (Del-Trib) dt.10-1-24, ITA No.8821/Del/ 2019 11-12; x) Inder International v. ACIT (2021) 213 TTJ 251 (Chd-Trib) dt.7-6-21, IT....
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....1/04/2017 has been completely ignored by the Addl. CIT while granting such mechanical approval in routine manner/stereo type on the same day itself (i.e., 31/03/2022) without even perusing / reading / verifying the assessment records / files of the assessee, the Addl.CIT has not even seen / perused the assessment records files wherein date of transmitting the documents is 21/01/2021 and not applied his mind to the fact that it would be deemed date of search and therefore, on his part, he has not pointed out the glaring mistake of the Assessing Officer for computation of block period of 10 assessment years as per Explanation-1 to section 153A by the Finance Act, 2017 (w.e.f. 01/04/2017) which is a jurisdictional fact / pre-condition / sine qua non for usurping / assuming jurisdiction under section 153C for the assessment year 2009-10 to 2011-12 (i.e., 3 consecutive years) and for issuing notice under section 153C for the assessment year 2009-10 to 2011-12, he has not cared that in the absence of this jurisdictional fact, the whole proceedings for the assessment year 2009-10 to 2011-12 would be vitiated and to be held as invalid, bad in law, and therefore, there would be a futile exe....
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....erson, which is in possession of the Assessing Officer of the assessee-Company, does not constitute "asset" as per fourth proviso to section 153A(1) and Explanation-2 of the fourth proviso which is sine qua non for issuing notice under section 153C for the "relevant AY/ AYs", there is a violation of fourth proviso to section 153A(1), which is not cared by the Addl.CIT while granting such mechanical approval. (c) More so, thereafter, the Addl.CIT has also not cared that the Assessing Officer has not made any addition on account of "undisclosed assets" for the assessment year 2009-10 to 2013-14 which comes to the "relevant AY/ AYs" as per Explanation-1 to section 153A(1) and it is mandatory to make first addition on the count of "undisclosed assets", then only, he would be empowered to make any other addition on certain independent issue of unexplained cash credits under section 68 etc. This fact has not been cared by the Addl.CIT while granting such mechanical approval on 31/03/2022 fpr the assessment year 2009-10 to 2013-14. (d) Further, in the draft assessment order for the assessment year 2009-10 to 2013-14, the Assessing Officer has made addition on account of ....
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....re assessment under section 153C would be vitiated. 60. In the present case before us, we noted that the Addl.CIT did not mention anything in the approval order passed under section 153D dt.31/03/2022, even though for each year separately, towards his process of deriving satisfaction so as to exhibit his due application of mind. The Addl.CIT has failed to satisfactorily record its concurrence. Even the approval granted by the Addl.CIT does not refer to any seized material/assessment records/ satisfaction note or any other documents which could suggest that the Addl.CIT has duly applied his mind before granting approvals. We noted that the Addl.CIT merely approved the letter and the relevant para is noted in above paras. We noted that the relevant para of the above approval letter (i.e., for A.Y. 2013-14) merely says that "I have perused the draft assessment order submitted by you in the case of the assessee for AY13-14 vide above referred letter. Accordingly, an approval u/s 153D is hereby accorded to pass the assessment order u/s 143(3) rws.153C for AY 13-14" which clearly proves that the Addl.CIT had routinely given approval to the Assessing Officer to pass the order only on t....
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.... raised by the Assessing Officer on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the questionnaires issued by the Assessing Officer and the conclusions drawn by the Assessing Officer vis- à-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, has to be performed by the Addl.CIT in a judicious way after due application of mind. 63. Even though, as vehemently argued by the learned Departmental Representative, the Addl.CIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and the "Satisfaction Note"/documents received from the Assessing Officer of the searched person, still, the Addl.CIT, while granting the approval under section 153D has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Assessing Officer in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Assessing Officer and the Addl.CIT are merely guidance to the Assessing Officer a....
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....aterials or any incriminating documents or other connected documents and papers/ various statements recorded under section 132(4) and section 131(1A) of the assessee or any other person/ appraisal report of the Investigation Wing of the Department/ materials on hand with the Department at the time of initiation of search or material evidences gathered were placed for its verification and the same were duly verified and/or examined by him as mandated under section 153D. In the absence of compliance of the above mandate, the approval order dated 31/03/2022, passed under section 153D becomes an empty formality without due process of law and, thus, not sustainable. This is nothing but an approval by way of mere mechanical exercise accepting the draft assessment order without any independent application of mind by the Addl.CIT. Following case laws are relied on:- (i) Sahara India (Firm) Luck v. CIT (2008) 169 Taxman 328 (SC), the Hon'ble SC explained as under: "8. There is no gainsaying that recourse to the said provision cannot be had by the AO merely to shift his responsibility of scrutinizing the accounts of an assessee and pass on the buck to the special auditor. S....
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....sments/ reassessments of search and seizure cases should be made with the prior approval of superior authorities which also means that the superior authorities should apply their minds on the material on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authorities have to approve the assessment order. 19. Thus, the worthy Addl.CIT, Cen-Range-2, New Delhi gave approval To 246 assessment order by a single approval letter u/s 153D by mentioning as under: "The above draft orders, as proposed, are hereby accorded approval with the direction to ensure that the orders are passed well before limitation period. Further, copies of final orders so passed be sent to this office for record." 20. In our considered opinion, there is no whisper of any seized material sent by the AO with his proposal requesting the approval u/s 153D. All the requests for approval are exhibited at pages 123 to 135 of the Convenience Compilation. 21. Even the approval granted by the Addl.CIT, Cent-Range-2, New Delhi does not refer to any seized material/assessment records or any oth....
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....se reasons, the court is satisfied that the findings by the ITAT cannot be disturbed." 18. Further, this Court in Central India Electric Supply Co Ltd [2011] has taken a view that merely rubber stamping of "Yes" would suggest that the decision was taken in a mechanical manner. Paragraph 19 of the said decision is reproduced as under:- "19. In respect of the first plea, if the judgments in Chhugamal Rajpal (1971) (SC), Chanchal Kumar Chatterjee (1974) (Cal) and Govinda Choudhury and Sons (1977) (Orissa) are examined, the absence of reasons by the AO does not exist. This is so as along with the proforma, reasons set out by the AO were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by an Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this court as it suggests that the decision has been taken in a mechanical manner. E....
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....it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase "Yes" does not appropriately align with the mandate of sec 151 as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. 22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas P Ltd is concerned, the same was a case where the satisfaction was specifically appended in the proforma in terms of the phrase- "Yes, I am satisfied". Moreover, paragraph 16 of the said decision distinguishes the approval granted using the expression "Yes" by citing Central India Electric Supply (2011) (Del HC), which has already been discussed above. The decision in the case of Experion Developers P Ltd would also not come to the rescue of the Revenue as the same does not deal with the expression used in the instant appeal at the time of granting of approval. 23. Therefore, it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression "Yes" could be considered to be a valid approval. In fact, the approval in the insta....
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.... notes that all that was looked at by the ACIT, was the draft assessment order. 13. In another words, it was emphasised that the approval was granted without examining the assessment record or the search material. The relevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: "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 of Rs. 87,20,580. Similarly, when the total assessed income as per the AO comes to Rs. 16,69,42,560, the Addl.CIT could not have approved the assessed income at Rs. 1,65,07,560 had he applied his mind. The addition of Rs. 15,04,35,000 made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. 17.2. Even the factual situation is much worse than the facts decided by the Tribunal in the case of Sanjay Duggal (Del Trib). In that case, at least the assessment folders were sent whereas in the instant case, as appears....
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....ught process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like "see" or "approved" will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of sec158BG, it would equally apply to sec153D. There are 3 or 4 requirements that are mandated therein, (i) the AO should submit the draft assessment order "well in time". Here it was submitted just 2 days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order." 14. During the course of arguments, ld counsel for the assessee apprised this Court that the SLP pr....
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.... granting the approval. Had there been application of mind, he would not have approved the addition of Rs. 8 crores in respect of M/s.Tirupati Real Tech Pvt Ltd and Rs. 7 1akhs in respect of M/s.Golden Buildmart P Ltd which are opening balances and the very same amounts were added in the preceding AY. Even the AO in his remand report has also admitted the mistake that the addition of an amount of Rs. 8 crores, was the opening balance and the mistake is apparent from record and needs to be rectified." 14. It is, therefore, discernible from the impugned order of the ITAT which reckons a categorical finding, and rightly so, that the approval u/s 153D has been granted without due application of mind in the present case. Admittedly, the ITAT notes that the Addl.CIT has approved the draft assessment order without verifying the record which was made available before the said authority. It is further seen that the approval in the present case was accorded on the same day when it was sent to the concerned authority. It is also noteworthy that 35 draft assessment orders were approved by the Addl.CIT in one go on the said day. 15. Thus, in light of the decision rendered by u....
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....oval u/s 153D cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind. 16. In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under:- "10. We have gone through the approval granted by the ld Addl.CIT on 30-12-18 u/s 153D which is enclosed at page 36 of the PB of the assessee. The said letter clearly states that a letter dt.30-12-18 was filed by the ld AO before the ld Addl.CIT seeking approval of draft assessment order u/s 153D. The ld Addl.CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30-12-18 for 7 AYs in the case of the assessee and for 7 AYs in the case of Smt Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the PB which contains information obtained by Smt.Neetu Nayyar from Central Public Information Officer who is none other than the ld Addl.CIT, Central Range-S, New Delhi, under RTI Act, wherein, it reveals that the ld Addl.CIT had granted approval for 43 cases on 30-12-18 itself. This fact ....
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....2007) 2 SCC 181 (SC) observed as under: "58. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the AO if he was found to have adopted a wrong approach or posed a wrong que unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/ or the entries made therein. While exercising its power, the AO has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief CIT or the CIT, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given." 17. It is therefore, not correct on the part of the Revenue to contend that the approval itself....
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....ntails civil consequences, must be consistent with the rules of natural justice. (Also see: Maneka Gandhi (1978) 1 SCC 248 and SL Kapoor v. Jagmohan (1980) 4 SCC 379). 30. As already noted above, the expression "civil consequences" encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. Anything which affects a citizen in his civil life comes under its wide umbrella. Accordingly, we reject the argument and hold that since an order u/s 142(2A) does entail civil consequences, the rule audi alteram partem is required to be observed." 20. The non-compliance of the requirement was held to have vitiated the notice for reopening of the assessment. Likewise, in Syfonia Tradelinks P Ltd (2021) (Del HC) the Del HC disapproved of the rubber stamping by the superior officer of the reasons furnished by the AO for issuance of the sanction. 22. As rightly pointed out by ld counsel for the assessee there is not even a token mention of the draft orders having been perused by the Addl.CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving....
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....y the ld Addl.CIT is identically worded as approval considered by Seerajuddin & Co (2023) 150 taxmann.com 146 (Ori HC) as per para No.22 of that decision, where there was not even a token mention of the draft orders having been pursued by the Addl.CIT. The letter simply grants approval. The bare minimum requirement of the approving authority having to indicate what thought process involved is also missing in the aforementioned approval order. 47. We are not on the issue that how the ld approving authority would approve all such orders on one day on 26-2-21 because it may be possible for a person to approve all such orders if he is in know of things since the stage of commencement of the assessment proceedings. However, we are unable to understand and appreciate the situation where the glaring mistakes in the assessment order as stated above and also fact of approval with approval No. and date of approval is mentioned in the draft assessment order itself which is sent for approval of the approving authority. This itself forces us to state that all such approval granted u/s 153D by the approving authority in all these appeals are without application of mind. Neither the inte....
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....is not to be exercised casually or any routine manner, rather the concerned authorities are expected to grant approval upon examination of the entire materials before approving the draft assessment-order and the authority is legally required to ensure due application of mind. Ld AR strongly contended that the Revenue does not have any evidence to show that the approval was granted with due diligence upon exercising adequate time and upon examining the materials needs to be considered in terms of the statutory provisions. Clearly, therefore, the approval is violative of the mandate of sec153D and therefore not sustainable at all. Ld AR argued that the case of assessee is fully covered by the decision of Hon'ble Co-ordinate Bench in ITA No.70 to 76/Ind/2020, Gurumukhdas Contractors (P) Ltd which is in fact a case of one of the group-entities part of the same search/ assessment proceeding and deal with by same AO and Addl.CIT in the same manner; therefore, the view taken therein by the Hon'ble Co-ordinate Bench is applicable to assessee without any hesitation. Still to strengthen assessee's case, ld AR also relied upon the Trib, Cuttack Bench in ITA No.25 to 28/CTK/2012, Serajuddin & ....
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....oceeding requiring application of mind by the Jt.CIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme, it is the bounden duty of the AO to seek to place the draft assessment order together with copies of the seized documents before the Jt.CIT well in time much before the due date of completion of search assessment. The Jt.CIT is supposed to examine the seized documents, quenaires raised by the ld AO on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the quenaires issued by the ld AO and the conclusions drawn by the ld AO vis- à-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the Jt.CIT in a judicious way after due application of mind. Even though as vehemently argued by the ld DR, the Jt.CIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the Jt.CIT, while granting the approval u/s 153D has to independently apply his mind dehors the conclusions drawn ....
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....hereinabove u/s 153D. The said approval letter clearly states that a letter dt.29-12-17 was filed by the ld AO before the Jt.CIT seeking approval of draft assessment order u/s 153D. The Jt.CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 29-12-17 for various AYs in the case of various assessees. In any event, whether is it humanly possible for an approving authority like the Jt.CIT to grant judicious approval u/s 153D for 40 cases for various AYs on a single day is the subject matter of dispute before us. Further, sec153D provides that approval has to be granted for each of the AY whereas, in the instant case, the Jt.CIT has granted a single approval for all AYs put together. We find that the reliance placed by the ld AR on Serajuddin & Co (Ori HC) dt.15-3-23 is well founded. The que before the Hon'ble Ori HC is as under:- "Whether on the facts and circumstances the ITAT was correct in holding that the approving authority has not applied his mind for giving approval u/s 153D?" 15. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in hol....
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....rvise. 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 to accord approval in all assessments involved. Manifestly, the Addl.CIT, without any consideration of merits in proposed additions with reference to incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Addl.CIT, Central has rendered the approval to be a mere formality and cannot be considered as actual approval in law. Hence, we quash the assessment framed u/s 153A on this Addl. Gr. alone. 16. Needless to say that we need not adjudicate the Gr.s raised on merits by the assessee as we have already quashed the assessment on jurisdictional issue that the statutory approval granted u/s 153D is without application of mind by the Addl.CIT." (xiii) Arch Pharmalabs Ltd v. ACIT (2021) (Mum-Trib) dt.7-4-21, ITA No.3752, 7597/Mum/ 2012, held as under: "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/ he....
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....uthority u/s 153D. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the plea raised by the assessee against maintainability of hollow approval u/s 153D totally devoid of any application of mind. The approval so granted under the shelter of sec153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various AYs as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments relatable to search in captioned appeals are non est and a nullity and hence, quashed." (xiv) Sanjay Duggal v. ACIT (2021) (Del-Trib) dt.19-1-21, ITA No. 1813/Del/2019, held as under: "11.5. Dharampal Satyapal Ltd (2019) (Gau HC) Manu/GH/07070/2018 in para-28 has held as under: "When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must coexist and, therefore, where an ....
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....us Benches of the Trib, it is held that while granting approval u/s 153D, the Jt.CIT shall have to peruse all the incriminating material and other seized material on record and proper procedure if have been adopted by the AO and appraisal report as well. The Jt.CIT shall apply his mind to such material on record before granting his approval, otherwise, it will be invalid and bad in Law. We may refer to such Orders as under: 13. In the present cases various approvals were granted by the Jt.CIT, Central Range-1, New Delhi, and forwarding letter of the AO are placed on record in all the cases. In all the cases as per the forwarding letter of the AO only assessment records were forwarded to the Jt.CIT, Range-1, New Delhi at the time of granting approval. Therefore, it is evident that the Jt.CIT being the Approving Authority was neither having seized material nor the appraisal report or other material at the time of granting approval. In the approval u/s 153D there is a reference to the AO letter only. There is no reference to the seized material or record or notice u/s 142 and reply of the assessee and if procedure for its inspection or perusal is there. There is no material c....
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....cal manner granted approval u/s 153D even without reference to any reason in the Order u/s 153D. We, even, otherwise failed to understand that in search cases how an approval can be granted to an AY which is required to be based only on incriminating material without verification of those material and its reference in the appraisal report. The Jt.CIT even in approval did not mention if assessment record is seen by him. 14. Another interesting aspect that has come to the notice on the basis of various documents submitted for approval as well as request for approval by the AO to the Jt.CIT. We make a specific reference to letter dt.29-12-17 written by ACIT, Central Circle-4, New Delhi, which is placed at page 144 of the PB. This letter dt.29-12-17 is a request for obtaining approval u/s 153D in the case of Shri Rajnish Talwar and family wherein the approval in the case of Shri Rajnish Talwar for AY10-11 to 16-17 is sought for. The AO send the draft assessment order along with assessment records of the above named assessee. In para 4 of the letter, AO stated as under: "It is certified that all issues raised in the appraisal reports have been duly examined with refere....
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....(P) Ltd v. ACIT (2024) 163 taxmann.com 119 (Pune-Trib) held as under: "15. Heard both the parties and perused the material available on record. Coming to the main contention of non-application of mind by the approving authority. The ld AR placed reliance primarily on Serajuddin & Co (2023) (Ori HC). The relevant portion of the said judgment is reproduced here-in-below for ready reference: "22. As rightly pointed out by ld counsel for the assessee there is not even a token mention of the draft orders having been perused by the Addl.CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like "see" or "approved" will not satisfy the requirement of the law. ....
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....mstances in the present case are similar to the facts of the case before the Serajuddin & Co (2023) (Ori HC) and the ratio laid down therein is applicable to the present case. Therefore, the Jt.CIT granted approval u/s 153D mechanically without application of mind which resulting in vitiating the present final assessment order dt.30-3-16 u/s 143(3) rws.153A. 17. We find the Department of Revenue filed SLP against the decision of Hon'ble HC of Orissa in the case of M/s. Serajuddin & Co. before the Hon'ble SC. The Hon'ble SC was pleased to dismiss the SLP (c) Diary No. 44989/2023. The relevant decision is reproduced as under: "ACIT v. M/s.Serajuddin And Co. Date: 28-11-23 UPON hearing the counsel the Court made the following ORDER Delay condoned. Having regard to facts and circumstances of the case, we are not inclined to interfere in the matter. The SLP is dismissed. Pending application(s) shall stand disposed of." 18. On careful reading of the above, we note that the Hon'ble SC declined to interfere in the finding recorded by Serajuddin & Co (Ori HC) holding that the approval u/s 153BD is mandatory requirement and such approval is not me....
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.... 10. In view of the concurrent findings recorded by the ld appellate authorities and the law laid down in Arjun Singh (MP HC), we see no que of law involved in the matter, warranting reconsideration. 11. The appeals are, therefore, dismissed." 23. We find the Department of Revenue filed SLP before the Hon'ble SC against the decision of S Goyanka Lime & Chemicals Ltd (MP HC). The Hon'ble SC dismissed the SLP in favour of the assessee which reported in (2015) 64 taxmann.com 313 (SC) which is at page No.162 of the case laws PB. We find the facts and circumstances relating to challenging the approval granted by the Jt.CIT on 21-3-16 are similar to the facts in the case of S Goyanka Lime & Chemicals Ltd (MP HC). Therefore, the ratio laid down by S Goyanka Lime & Chemicals Ltd (MP HC) which was confirmed by the Hon'ble SC is applicable to the facts on hand, therefore, the approval granted by the Jt.CIT on 21-3-16 is invalid, consequently, the final assessment order dt.30-3-16 passed u/s 143(3) rws.153A is liable to be quashed. 24. Further, Sahara India (Firm) (2008) (SC), while discussing the requirement of prior approval, opined that the requirement of pre....
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....g./2024 for A.Y. 2012-13 and ITA no.112/Nag./2024 A.Y. 2013-14 70. Ground no.5 and Additional Grounds no.3 and 4, relates to addition on account of unexplained cash credit under section 68 of the Act in assessment year 2009-10, 2010-11. 2011-12, 2012-13 and 2013-14. The only difference in the said grounds are variation in figures and name of parties involved. Rest the facts and circumstances of the issue in the aforesaid assessment years are identical. The year-wise connected grounds to the said issue are reproduced below:- Ground no.5 (A.Y. 2009-10) On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs. 60,00,000 made u/s 68 on count of unexplained cash credits, while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY09-10; addition is not justifiable in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted." Ground no.5 (A.Y. 2010-11) "On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs. 4,43,55,000 ....
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....credits while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY13-14; addition is not justified in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted. Additional Gr.No.4: On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs. 1,25,00,000 made u/s 68 on count of unexplained cash credits, which had already recorded in the books of account and it had also included in IDS, 2016 dt.29-9-16 of Rs. 5,25,00,000 made for AY13-14 on the count of impugned share capital received in the AY13-14 & paid due taxes thereon, which is much prior to the date of search on 22-1-19; it had also accepted in reassessment order made u/s 147 rws.143(3) dt.22-12-17 by the ld AO; further addition on the same count, would be tantamount to double addition on the same income, would be highly unjustified and is liable to be deleted. 71. Ground no.4, raised in assessment year 2013-14, is not pressed, hence dismissed. 72. Now, we deal with the common issue which relates to the unexplained cash credit under section 68 of the Act.....
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....on 132 conducted upon Shri Suresh Agrawal, Kolkata, the director of M/s.Rashi Steel & Power P. Ltd, Kolkata, on 22/01/2019 (i.e., Suresh Agrawal, Kolkata, who is director of the assessee-Company also but he is not involved in any of the affairs/ business of the assessee-Company since last 9-10 years, he is not even in touch with the assessee-Company in any manner since last 9-10 years). The alleged party "Raj Roadways", which is not even transacted/ related/ linked/ pertain to the assessee-Company in the assessment year 2009-10 in any manner and on this count also, the Assessing Officer made addition of Rs. 60 lakh under section 68 in assessment year 2009-10 on merely presumption and surmises, which is unjustified. In support of these argument, the learned A.R. relied on the decision of the Hon'ble Delhi High Court rendered in Usha Stud Agricultural Farms Ltd (2008) 183 taxmann.com 277 (Del HC); and the decision of the Co-ordinate Bench of the Tribunal, Chennai Bench, in Ravindra Arunachala Nadar, reported as (2021) 129 taxmann.com 275 (Chen-Trib) wherein one of us Judicial Member of this Bench is one of the parties to this order. 76. The learned Departmental Representative supp....
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....lance of Rs. 15 lacs is being reflected in the accounts of the assessee over the past 4 to 5 years or so and hence, this was not a fresh credit entry of the PY u/c and these credit entries were already made and accounted for in the AY95-96 and 97-98 which were introduced in the form of advance against breeding stallions owned by the assessee and thus, these credit entries did not relate to the year u/c for being considered u/s 68. Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessee, does not pertain to the year u/c, under these circumstances, the AO was not justified in making the impugned addition u/s 68 and as such no fault can be found with the order of the Trib which has endorsed the decision of the CIT(A). The above being the position, no fault can be found with the view taken by the Trib." ii) Ravindra Arunachala Nadar v. ACIT (2021) 129 taxmann.com 275 (Chen-Trib) dt.23-2-21, held as under: "9. Coming to invocation of sec68, the AO has simultaneously invoked sec68 in addition to sec41(1), to bring into tax, said credit for the impugned AYs, but fact remains is that all these credit....
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....o exclude the same from the addition u/s 68 after duly verifying the same." 10. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that the ld AO was erred in making additions towards credits shown in the books of accounts u/s 41(1)/68. The ld CIT(A) without appreciating facts, has simply confirmed additions made by the AO. Hence, we reverse the findings of the CIT(A) and direct the AO to delete additions made towards sundry creditors u/s 41(1) & 68." 78. We also find that the said sum is not found credited in the books of account of the assessee-Company in the assessment year 2009-10, which is sine qua non/ pre-requisite/ pre-condition for making addition under section 68 on account of unexplained cash credits and in absence of this pre-condition of recording of credit entry in the books of account which is mandatory for applying section 68, the addition is unjustified. Thus, we conclude that addition of Rs. 60 lakh made in the assessment year 2009-10 is merely on presumption, surmises and conjectures without bringing any material/ evidence on record by the Revenue for substantiating its contention th....
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....d by the Revenue. 81. The aforesaid issue is involved in the following assessment year:- 2009-10 - ground no.3 and 6 2010-11 - ground no.3 and 6 2011-12 - ground no.3 and 6 2012-13 - ground no.3 and 6 2013-14 - ground no.2 and 6 82. The learned A.R. for the assessee submitted that the year of assessment year 2009-10 to 2013-14 was an unabated/ completed assessment on the deemed date of search i.e., on 21/01/2021 for the non-searched person when the documents has been transmitted from the Assessing Officer of the searched person to the Assessing Officer of the assessee. No assessment was pending for the assessment year 2009-10 to 2013-14 on the deemed date of search on 21/01/2021. There is no incriminating material found from the searched premises of Shri Suresh Agrawal, Kolkata (i.e., the searched person who is director of the assessee-Company residing at Kolkata) which has direct nexus/ bearing on determination of income of the assessee-Company (i.e., non-searched person) for the impugned assessment year 2009-10 to 2013-14, and in the absence of this factual finding given by the Assessing Officer, addition could not be made for an....