TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 1448
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....rried upon one "Vaswani Group" of Bhopal including the said M/s Gurmukhadas Contractor Pvt. Ltd. and assessee from 20/12/2016 to 23/12/2016, pursuant to which the case of assessee was centralized in the jurisdiction of Ld. AO alongwith all other cases of the group. Thereafter, assessments of past six years from AY 2011-12 to 2016-17 were made u/s 153A read with section 143(3) and the assessment of search-year being AY 2017-18 was made u/s 143(3); all were done vide a consolidated assessment-order dated 26.12.2018 after making certain additions. Present appeals relates to AY 2012-13, 2016-17 and 2017-18 for which the assessee contested additions in first-appeal and succeeded partly. Now, both sides have come in the captioned appeals assailing the orders of lower authorities. 4. Originally the assessee/revenue has raised various grounds in the Appeal-Memo (Form No. 36) of respective appeals placed on record; the same are not re-produced for the sake of brevity. Thereafter, the assessee also filed "Additional Ground" in all appeals, received in the office of ITAT on 26.10.2021, copies held on record. This additional ground is identical in all appeals, which reads as under: "On the ....
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....oduct of non-application of mind; approval has been given in a mechanical manner without due diligence. According to Ld. AR, the impugned approval is nothing but an empty formality and thus not a valid approval as mandated u/s 153D of the Act. For the sake of immediate reference, the aforesaid proposal-letter dated 22.12.2018 and approval dated 25.12.2018 are scanned below: 8. Then, the Ld. AR straightaway submitted that in the case of M/s Shri Gumukhdas Contractors Pvt. Ltd., another person/assessee who was one of the entities subjected to same search/assessment proceeding and in whose case too, identical issue arose before ITAT Indore Bench in ITA No. 70 to 76/Ind/2020, DCIT Vs. M/s Shri Gurumukhdas Contractors Pvt. Ltd. order dated 14.12.2022 wherein the Hon'ble Co-ordinate Bench has, after extensive analysis of the proposal-letter and approval u/s 153D, held that there was no application of mind by same authority (Ld. Addl. CIT, Central, Bhopal) who has carried out exercise in utmost haste; in mechanical manner; not in terms of the mandate prescribed u/s 153D of the Act. Therefore, the Co-ordinate Bench has quashed the entire proceeding. For the sake of immediate reference, th....
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....ined properly and are incorporated in the draft orders. * Relevant seized documents were verified before passing the draft orders and are kept in safe custody. 3. Subject to the above observations, the draft assessment orders are hereby approved, as required under the provisions of section 153D of the Income Tax Act in the following cases; S. No. Assessee PAN Draft order u/s A.Ys. 1 Prakash Assudani AEFPA8202H 153A 2011-12 to 2017-18 2 Lokesh Vaswani ADRPV6829J 153A 2011-12 to 2017-18 3 Shri Gurumukhdas Constractors Pvt. Ltd. AAHCS4756R 153A 2011-12 to 2017-18 4 Suresh Vaswani AAKPV6009J 153A 2011-12 to 2017-18 5 Sushil Vaswani AAKPV5987D 153A 2011-12 to 2017-18 4. It should be ensured that the final assessment orders are passed and served on the assessees well in time. A copy of the final assessment orders should be submitted to this office for record." 4.5 From a bare reading of the approval granted by the Ld. Addl. CIT, Central, Bhopal, dated 29.12.2018, it appears that Ld. AO has certified before the said authority while sending the draft assessment order that; (i) proper opportunity of being heard was provided to the assessee on all the is....
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....ned authorities expected to grant approval upon examination of the entire materials before approving the draft order and the authority is legally required to apply due application of mind. 5.1 On this aspect, we have considered followings judgments relied upon by the Ld. AR: 5.1.1 In case of Navin Jain & Ors. Vs. DCIT, reported in [2021] 91 ITR 682 (Luck.-Trib.): The said Bench on identical issue has been pleased to observe as follows: "7. It was submitted that the rationale of word 'each' as specifically referred to in s.153D and s.153A deserves to be given effective/proper meaning so that the underlying legislative intent as per the scheme of assessment of ss.153A to 153D is fulfilled. It was submitted that Addl. CIT in these cases has granted approval for all the assesses for all assessment years through a single approval letter which is against the intent of law and therefore, also the approval given by Addl. CIT is non-est and consequential assessment made on this basis of such approval is illegal and deserves to be annulled. Learned counsel for the assessee in this respect relied on a judgment of Hon'ble Allahabad High Court in the case of Mohd. Ayub vs. ITO 346 ITR 3....
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.... draft assessment orders has been made on 30/12/2018 and approval has been taken on 30/12/2018 and on the same day final assessment order has been passed and, therefore, clearly the CBDT instructions have been violated. In view of these facts and circumstances, it was submitted that approval has been given in a most mechanical manner without any application of mind and without any independent examination of seized material and other material on record. There is no mention about any incriminating material forwarded to Jt. CIT and there is no mention of the statements recorded at the time of search. It was submitted that the approval is granted in a hurried manner without looking into the serious lapses committed by the Assessing Officer and therefore, the approval u/s 153D is invalid and bad in law and consequent assessment order needs to be quashed and reliance in this respect was placed on the order of Delhi Bench of the Tribunal in the case of Sanjay Duggal and Others vs. ACIT in I.T.A. No.1813/Del/2019 wherein vide order dated 19/01/2021 the entire law relating to section 153D has been discussed and after relying on a number of case laws, the Tribunal has allowed the appeals of ....
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.... be heard on merits. 9. We have heard the rival parties and have gone through the material placed on record. We find that in these cases, in view of a search carried out on the Sigma Group, the assessments of various assessees were reopened and various assessees were required to file income tax returns as required under the provisions of section 153A of the Act. The search was conducted on 23/08/2016 which continued upto 25/08/2016 and therefore, assessment year 2017-18 became the search year and the years preceding the search year became the subject matter of reopening u/s 153A of the Act. The issue raised by Learned counsel for the assessee is that the approval granted by the Addl. CIT is bad in law as it is humanly impossible to go through documents exceeding 17,800 in a single day and then grant approval on the same day. Since the controversy involved here is with respect to approval u/s 153D of the Act, it would be appropriate to first visit the provisions of section 153D of the Act, which for the sake of completeness are reproduced below: "SECTION 153D. Prior approval necessary for assessment in cases of search or requisition No order of assessment or reassessment shall....
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....ent orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co-ordinate Benches of Mumbai and Allahabad as afore-mentioned and also applying the ratio of the judgment of the Hon'ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Join....
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.... procedure laid down. The assessee has filed details on record regarding returns filed under section 139(1) for A.Ys. 2010-2011 to 2015-2016. It is also explained that there are unabated assessments except A.Y. 2015-2016 in which the assessments have been abated. Therefore, for each unabated and abated assessments, the authorities below and the Approving Authority [JCIT] shall have to verify the incriminating material found during the course of search or the seized material if pertain to the same assessment year and its basis. The assessee has explained above that these cases are coming up because of the assessments framed in the case of M/s. JIL and others prior to the search in the case of assessee. Therefore, all material was within the knowledge of the Income Tax Authorities prior to the search in the cases of the assessees. Therefore, for granting approval under section 153D of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments and their effect, if any. But, in the present case, the Approvi....
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....o the account of M/s. Alfa India instead of paying the entire sale consideration to M/s. JIL. Thus, the nature of total receipt/addition is the sale proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale receipts cannot be the income either in the hands of M/s. JIL or M/s. Alfa India or the Assessees who may be the conduit as argued before us. The A.O. has failed to consider the concept of real income for the purpose of determining the correct tax liability and correct determination of income of the assessees. We rely upon the Judgment of the Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd., 225 ITR 746 (SC). This fact is also not verified and considered by the JCIT while granting approval under section 153D of the I.T. Act. It may be noted here that entire sale proceeds when cannot be added in the hands of M/s JIL as income which is also not done in the case of M/s. JIL, rightly so, how the same sale proceeds could be added as income in the hands of assessees under section 68 of the I.T. Act is not understandable. Thus, t....
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....the assessment folders were available with the A.O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT. It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in a....
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....ssioner (designated authority giving approval to search assessments u/s. 153D of the Act). The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement. 11.2 In the backdrop of facts narrated in the preceding paras, it is the contention on behalf of the assessee that approval granted under S. 153D does not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law. The assessment orders thus passed is vitiated in law which illegality cannot be cured. In support of charge of nonest approval, several contentions have be....
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.... non application of mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking / intials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity applied owing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 for the first time. It is axiomatic from the plain reading of approval memo that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 29.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.....
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....ed from the Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination/investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be countenanced in law. 11.6 There are several decisions, which supports the view that approval granted by the su....
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....ontentions against the proposed additions in show cause notice. The assessee was directed to file reply by 07.12.2018. The assessee filed its reply on 14.12.2018, which was duly accepted by AO, which is otherwise clearly discernable in para 3.7 of the assessment order. In the said reply the assessee explained the concept of abated and unabated assessment, proof of identity and existence of the investor Company, importance of cross-examination, etc. The Ld. AR for the assessee further submits that mere perusal of contents of approval granted under section 153D, it can be inferred from the approval sought by AO, from the Ld. JCIT was without considering such reply of the assessee dated 14.12.2018. The copy of the same is placed on record before the Hon'ble bench. The ld.AR for the assessee submits that the Ld. Joint Commissioner of Income-tax (JCIT) granted approval for finalizing the assessment on the request of the assessing officer without indicating any perusal of records, replies and material gathered in the course of search. Rather JCIT categorically mentions that even with respect to orders to be passed by the assessing officer he has 'presumed' that necessary records have bee....
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....action continued till 2.00 am of 22.01.2017. The authorised officer obtained a confessional statement of Deepak Aggarwal, Director of the assessee company by putting pressure and coercion for surrender of share capital. The statement of the Deepak Aggarwal was not recorded in the presence of Panchas. Mr. Deepak Aggarwal retracted from his statement by filing affidavit before Sub-Divisional Magistrate, copy of which is filed. The ld.AR for the assessee retreated that no incriminating evidence qua the share capital was found during the search. The authorised officer has not recorded even single evidence on the Panchnama about such evidence. The assessment order stands void-ab-initio for unabated assessment years in absence of incriminating evidence. The ld AR for the assessee furnished the year wise last date for issuing notice under section 143(2) for all Assessment Years in the following manner; AY Last date for issuing notice u/s 143(2) 2011-12 30.09.2012 2012-13 30.09.2013 2014-15 30.09.2015 2015-16 30.09.2016 15. The ld AR for the assessee submits that the statement under section 132(4) (obtained in absence of Panchas) cannot be treated incriminating evidence as....
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....oser statement of Director namely Deepak Aggarwal was recorded on 24.01.2017. The statement was retracted on 27.01.2017 by making sworn statement before Sub-divisional Magistrate. It is further admitted facts that on the date of search no assessment of AY 2011-12, 2012-13, 2014-15 & 2015- 16 was pending and/ or time limit for issuing notice under section 143(2) has already elapsed. Thus, any addition in the unabated assessment can only be made on the basis of incriminating material found during the search. The assessee right from the beginning has raised plea that no incriminating evidence qua the alleged share application or premium was found in the search on 17.01.2017. We find there is no reference in the Panchnama about incriminating evidence qua the share application money or share premium for all the impugned assessment years. We further find that the assessee while filing reply before AO on 14.12.2018, in response to the show cause notice dated 29.08.2018, clearly stated there is no incriminating evidences against the assessee for making the said additions. We find that the AO passed the assessment order on 14.12.2018 and placed the same before JCIT for his approval, thus th....
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.... Raipur Subject - Approval under u/s 153D of the I.T.Act - Goyal, Satya & Gumber Group - Regarding. Please refer to your letter in F.No. ACIT(C)-2/RPR/153D/Goyal & Satya/2018- 19 dated 05/12/2018, F.No. ACIT(C)-2/RPR/153D/ Goyal & Sriram Gumber/ 2018-19 dated 07/12/2018 and F.No. ACIT(C)/RPR/153D/Goyal & Satya/2018-19 dated 14/12/2018. 2. The draft assessment orders u/s 153D and 143(3) in the following cases submitted vide above mentioned letter are hereby approved u/s 153D of the I.T. Act- S. No. Assessee PAN Draft order u/s A.Ys. 1 Prakash Assudani AEFPA8202H 153A 2011-12 to 2017-18 2 Lokesh Vaswani ADRPV6829J 153A 2011-12 to 2017-18 3 Shri Gurumukhdas Constractors Pvt. Ltd. AAHCS4756R 153A 2011-12 to 2017-18 4 Suresh Vaswani AAKPV6009J 153A 2011-12 to 2017-18 5 Sushil Vaswani AAKPV5987D 153A 2011-12 to 2017-18 3. Further in view of this office letter no. F. No. JCIT(C)/RPR/Draft Asst. Order/2016-17/dated 09.09.2016 it is presumed that the AO has: * Given proper opportunity of hearing has been given to the assessee * thoroughly verified the seized material and that there are no adverse findings * satisfied himself that all the issues em....
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...., incriminating the assessee and hence such approval is in the realm of an abstract approval of draft assessment orders which was unsubstantiated and unsupported and consequently suffered from total non-application of mind. The relevant part of the order is extracted below: "11.5 At the cost of repetition, it may be reiterated that in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that Para 2 of the above approval letter merely says that "Approval is hereby accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders..."which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at and/or other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the said order was approved, solely relying upon the i....
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....n merit have become academic." 5.1.5 In the case of Inder International (2021) (Chandigarh-Trib) dtd. 7-6-21: The said Bench held as under: "14. In view of the above decision and the fact that in the present case before us also the Addl. CIT has accorded the approval u/s!53D only on 29-6- 17 when the AO placed the assessment order on that very date i.e., 29-6-17. The relevant approval by the Addl. CIT reads as under: "Necessary statutory approval u/s 153D is given to pass the above assessment order as such. Assessment record in this case is returned herewith." 15. From the above, it is clear that this is totally non application of mind by the Addl. CIT, who is the supervising authority of the AO while granting statutory approval u/s!53D, the issue stands covered in favour of the assessee by various decisions cited above. In the present case before us, we noted that the Addl. CIT did not mention anything in the approval memo towards his process of deriving satisfaction so as to exhibit his due application of mind. 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 lette....
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....ollows: "28. 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 Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements." 5.1.7 The crux of the judgment as relied upon as mentioned hereinabove is this that the required approval should satisfy all the statutory requirements having independent due application of mind and satisfy all the legal and procedural requirements which is in our considered opinion is absent in the case in hand. 5.1.8 We have further considered the judgment relied upon by the assessee in the case of Sahara India (Firm) (2008) 300 ITR 403 (SC), wherein, it is held that prior approval by the CIT or CCIT in terms of Section 142(2A) of the Act is an inbuilt protection against arbitra....
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....ntal appeals become infructuous and thus dismissed as infructuous. Since, the additions have been deleted by us on the ground of non-compliance of mandate prescribed under Section 153D of the Act, the other grounds raised by the assessee have become academic. No further adjudication is required." [Emphasis supplied] 9. Ld. AR compared the contents of aforesaid proposal-letter dated 22.12.2018 and approval dated 25.12.2018 involved in assessee's case in present-appeal (already scanned by us in Paragraph No. 7 of this order) with the proposal-letter dated 28.12.2018 and approval dated 29.12.2018 involved in ITA No. 70 to 76/Ind/2020, DCIT Vs. M/s Shri Gurumukhdas Contractors Pvt. Ltd. (supra) (already re-produced by us in Paragraph No. 8 of this order) and demonstrated successfully that the position/contents of proposal-letter and approval in both cases is exactly same and there is no change at all except a minor change in dates. Thereafter, reading the contents of approval letter dated 25.12.2018, line by line and word by word, Ld. AR strongly argued that the AO has made following certifications to the Addl. CIT while seeking approval u/s 245D, namely: "2. The AO has certified t....
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....tion 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 Section 153D of the Act 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, DCIT Vs. M/s Shri Gurumukhdas Contractors Pvt. Ltd. (supra) 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 decision of ITAT, Cuttack Bench in ITA No. 25 to 28/CTK/2012 ACIT, Bhubaneswar Vs. M/s Serajuddin & Co., Kolkata, order dated 21.01.2022 where an....