TaxTMI 
TaxTMI 
2024 (12) TMI 1636
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....found/seized from the searched premises of the assessee. Notices dated 16/09/2020, under section 153A of the Act issued for the assessment year 201415 to 2019-20 and separate assessment order dated 29/09/2021, was passed under section 143(3) r/w section 153A for the assessment year 2014-15 to 201920. Notice dated 11/06/2021 under section 143(2) was issued and the assessment made under section 143(3) for the assessment year 2020-21 on 29/09/2021. The facts and circumstances along with the issues involved in all the seven appeals are almost identical and for sake of convenience, all the appeals are taken up for adjudication together. 3. We, at the very onset, proceed to dispose off the following appeals which involve the issues in respect of unabated / completed assessment on the date of search, wherein no incriminating materials were found during the course of search. ITA no.113/Nag./2024 A.Y. 2014-15 ITA no.114/Nag./2024 A.Y. 2015-16 ITA no.115/Nag./2024 A.Y. 2016-17 4. The grounds raised for the year under consideration are as under: - Additions made by AO AY 2014-15 AY 2015-16 AY 2016-17 Unexplained cash credits u/s 68 Rs.12,00,0....
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....assessment completed u/s 143(3) dt. 18-8-16; more so, it had already been repaid on 4-10-18 prior to the search conducted on 11-719; the addition is not justified, is liable to be deleted." 6. On the facts and circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs. 3,99,600 on the count of interest treating it as bogus, when TDS has been deducted on such interest expenses claimed; it had already been accepted in scrutiny assessment completed u/s 143(3) dt. 18-8-16; more so, the alleged sum had already been repaid on 4-10-18 prior to the search conducted on 11-7-19; the addition of Rs. 3,99,600 is not justified, is liable to be deleted." 6. The assessee is engaged in the business of wholesale trading business of coal, filed its return of income for the year 2014-15, on 25/11/2014, under section 139(1) of the Act, disclosing total income of Rs. 27,17,190. A notice dated 16/09/2020, under section 153A of the Act was issued through online portal to the assessee requiring the assessee to file its return of income within 30 days of receipt of notice. Accordingly, the assessee filed its return of income on 27/01/2021, declaring total income at R....
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....of the AO and making addition of Rs. 12,00,000/- u/s 68 of the Act and Rs. 3,99,600/- on account of interest expenditure against the loans. I have perused ground-wise submission made by the AR of the appellant and the assessment order passed by the AO before deciding this appeal. I find no merit in the submission of the appellant. Hence, I confirm the assessment order passed by the AO. In view of the above the Ground No. 1 to 6 of the appeal are hereby dismissed." The assessee being aggrieved is in further appeal before the Tribunal. 10. Before us, the learned Counsel, Shri Sunil Kumar Agrawal, appearing for the assessee, submitted that the assessee is engaged in wholesale trading & transportation of Coal, Coal handling, washing, loading & unloading; having turnover of Rs. 24.86 crore for A.Y. 2014-15, turnover of Rs. 23.88 crore for A.Y. 2015-16 and turnover of Rs. 36.97 crore for A.Y. 2016-17, which are audited under section 44AB of the Act. He submitted that the assessee company purchases Coal from South Eastern Coal Fields, Gevra- Dipka- Korba (CG) and sell the same to various parties. However, the details of return of income filed under section 139(1) and under ....
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....r about any incriminating material found during the course of search from the premises of the assessee which is linked with the addition of Rs. 12 lakh for the assessment year 2014-15 and in the absence of this, addition is not sustainable in the eyes of law while making assessment for an unabated assessment year. 13. Similarly, addition of Rs. 3,99,600, on account of interest on unsecured loan treating it as bogus, when, on the date of search i.e., 11/07/2019, for the assessment year 2014-15 had already been unabated / completed, since scrutiny assessment under section 143(3) had been completed on 18/08/2016 (prior to the date of search) and no assessment was pending for the assessment year 2014-15 on the date of search i.e., 11/07/2019 and also, there is no mention in the assessment order about any incriminating material found during the course of search from the premises of the assessee which is linked with the impugned addition of Rs. 3,99,600, for assessment year 2014-15 and hence, addition is not sustainable in the eyes of law while making assessment for an unabated assessment year and as such addition is liable to be deleted. In support of these arguments, reliance is pla....
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....14 TTJ 388 (Del-Trib); *Andaman Timber Industries v. CCE, (2015) 281 CTR 241 (SC) 16. Learned A.R. further submitted that the addition of Rs. 12 lakh on account of unsecured loan taken from M/s. Gazal Textiles & Finance P. Ltd, Kolkata (Address: 40, Western Street, 3rd Floor, Bowbazar, Kolkata); Addition of Rs. 3,99,600 on account of interest on such unsecured loan taken from Best Advisory P. Ltd., M/s. Gazal Textiles, Lily Abasan P. Ltd., details of which are as under:- Loan creditors Opening balance as on 1-4-13 Interest credited during the year Closing balance as on 31-3-14 (repaid prior to the date of search, i.e., on 11-7-19) Best Advisory P Ltd 10,00,000 1,08,000 11,08,000 repaid on 4-10-18 Gazal Textiles 12,00,000 1,29,600 13,29,600 repaid on 4-10-18 Lily Abasan P Ltd 15,00,000 1,62,000 16,62,000 repaid on 4-10-18 Total 3,99,600 Addition made by AO 17. On merits of the case, the learned A.R. submitted that the unsecured loan amount of Rs. 12 lakh was opening balance as on 01/04/2013, which brought was forward from the prece....
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....in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to reopen the completed assessment. In paras 15 & 16, it is held as under:** 8. For the reasons stated here in below, we are in complete agreement with the view taken by Kabul Chawla (2015) (Del HC) and Saumya Construction (2016) (Guj), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material. 9.1. That prior to insertion of sec 153A in the statute, the relevant provision for block assessment was u/s 158BA. The erstwhile scheme of block assessment u/s 158BA envisaged assessment of 'undisclosed income' for 2 reasons, firstly that there were 2 parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment u/s 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% u/s 113 whereas income other than 'undisclosed income' was required to be assessed under regular asses....
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....ms to be that in case of search only the pending assessment/ reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire 6 years period/ block assessment period. The intention does not seem to be to re-open the completed/ unabated assessments, unless any incriminating material is found with respect to concerned AY falling within last 6 years preceding the search. Therefore, on true interpretation of sec 153A, in case of a search u/s 132 or requisition u/s 132A and during the search any incriminating material is found, even in case of unabated/ completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/ unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings u/s 147/48, subject to fu....
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....ent u/s 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/ unearthed, even, in case of unabated/ completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/ unabated assessments. Meaning thereby, in respect of completed/ unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132A. However, the completed/ unabated assessments can be re-opened by the AO in exercise of powers u/s 147/ 148, subject to fulfillment of the conditions as envisaged/ mentioned u/s 147/148 and those powers are saved. The que involved in the present set of appeals and review petition is answered accord....
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.... this Court in Best Infrastructure (India) (P) Ltd (2017) (Del HC) has held that statements recorded u/s 132(4) do not by themselves constitute incriminating material. The relevant portion of the said judgment is reproduced here-in-below: "36. Turning to the facts of the present case, requires to be noted that the statements of Mr. Anu Aggarwal, portions of which have been extracted hereinbefore, make plain that the surrender of the sum of Rs. 8 crores was only for the AY in que and not for each of the 6 AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal was confronted with A-1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs. 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded u/s 132(4), was not provided to the assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the C(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the a....
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....." ii) PCIT v. E-City Projects Lucknow (P) Ltd (2022) 143 taxmann.com 423 (Orissa HC) held as under: "5. On 6-8-14 a search and seizure operation was carried out u/s 132 in the business premises of the company and the resi-premises of the Directors at Cuttack. On 29-4-15 notices u/s 153A were issued pursuant to which ROI for the respective AYs were filed by the Assessee on 10-8-15 again disclosing 'Nil' income. This was followed by notices u/s 142(1) and 143(3) being served on the Assessee. 6. For AY12-13 the assessment was completed by the AO on 28-12-16 determining the total income as Rs. 6.92 crores and on the same date, a separate assessment order was passed for AY13-14 determining the total income as Rs. 3.06 crores. The appeals filed by the Assessee against the respective assessment orders were dismissed by the CIT(A) by order dt. 1311-17. Being aggrieved, the assessee preferred further appeals to the ITAT which have been allowed by the respective impugned orders for the 2 AYs. 7. The ITAT noted that for both AYs in que, the Assessee claimed to have received a corresponding loan amount from UAPL i.e. Rs. 6.92 crores by cheque for t....
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....completed on 7-11-14. Therefore, such statements could not be material unearthed during the course of search. Nevertheless, in those statements there was nothing brought out to show that cash was received from the Assessee by UAPL in lieu of the cheque issued by UAPL to the Assessee. Further, the name of the Assessee did not appear in the statement made to the IO by the Directors of the UAPL. The said loan amount of Rs. 3.06 crores was not mentioned by them as an accommodation entry. 12. Further, the said 2 persons were not allowed to be cross- examined by the Assessee. As regards the observation of the CIT(A) that the lack of opportunity to the Assessee to cross examine the Directors of UAPL was not fatal to the addition made by the AO, the ITAT found the said proposition to be contrary to the law explained by Andaman Timber Industries (2015) (SC), where it was held as under: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of princip....
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....emises of one Pradeep Kumar Jindal. During the search, statement of Pradeep Kumar Jindal was recorded on oath u/s 132(4) on the same date, wherein he admitted to providing accommodation entries to Anand Kumar Jain (HUF) and his family members through their CA. The AO framed the assessment order detailing the modus operandi as to how the cash is provided to accommodation entry operator in lieu of allotment of shares of a Pvt Co. Thereafter, when the matter was carried up in appeal before the CIT(A), the findings of AO were affirmed. However, in further appeal before the Trib, the said findings were set aside vide the impugned order. 6. We have considered the contentions of Mr. Sharma, however, we feel that the instant appeals do not raise any que of law, much less substantial que of law for our consideration. The relevant portion of the impugned order reads as under: "5. We find that the ld counsel for the assessee has drawn our attention towards the relevant portion of the judgment/ decision of the Hon'ble SC, Hon'ble HCs and various Benches of the Trib on the legal issue on which he argued, ld counsel for the assessee further submitted that admittedly fr....
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....trary we also note that during the course of the search, in the statement made by the assessee, he denied having known Mr. Jindal. Since there was insufficient material to support the additions, the Trib deleted the same. This finding of fact, based on evidence calls for no interference, as we cannot reappreciate evidence while exercising jurisdiction u/s 260A. 8. Next, we find that, the assessment has been framed u/s 153A, consequent to the search action. The scope and ambit of sec 153A is well defined. Kabul Chawla (2015) (Del HC), concerning the scope of assessment u/s 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this Court as well as the decisions of other HCs and Tribs. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue's case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material....
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.... block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The statement recorded u/s 132(4) may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/ material found during search in order to for an assessment to be based on the statement recorded. 27. It is also necessary to mention that the aforesaid interpretation of sec 132(4) must be r/w the explanation to sec 132(4) which expressly provides that the scope of examination u/s 132(4) is not limited only to the books of accounts or other assets or material found during the search. However, in the context of sec 158BB(1) which expressly restricts the computation of undisclos....
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.... Exim (P) Ltd v. DCIT (2024) 159 taxmann.com 1370 (Del-Trib) held as under: "7.1 It is the case of the assessee that additions/ disallowances could not be made in the assessment framed u/s 153A de-horse reference to any incriminating material found in the course of search in the hands of the assessee. It is further case of the assessee that any adverse statement of a third party (Pradeep K. Jindal in the instant case recorded u/s 132(4)) cannot be read as incriminating material found in the course of search in the case of these assessee(s). Thus, the statement recorded in the course of search in that case cannot be imported in the case of the captioned assessee(s) for the purposes of salutary condition of existence of incriminating material at the time of search in the hands of assessee(s). The statement of third person thus has no nexus whatsoever with any material of incriminating material found in the course of search at the premises of the assessee which is the genesis of proceedings u/s 153A as held in Abhisar Buildwell (SC). 7.2. The appeal of the assessee thus, hinges around one pertinent legal point as to whether, while making assessment u/s 153A, the Reve....
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....n this respect relied upon Kabul Chawla (2015) (Del HC) and Jaipuria Infrastructure Developers (P) Ltd (Del-Trib) ITA No. 5522 & 5523/Del/2015, wherein, it has been held that in case of completed assessments, no addition can be made in the absence of any incriminating material. 6. However, in the case of share capital/ share premium received from M/s. Aachman Vanijya (P) Ltd., the ld CIT(A) referred to the statement recorded of Sh. Kashi Prasad Chotia, director of M/s. Aachman Vanijya (P) Ltd during the survey action carried out at the premises of the said company, wherein, he had stated that he was only dummy director of the company and that M/s. Aachman Vanijya (P) Ltd was a paper concern and no genuine business activities were carried out by the said company. Further that the said company used to provide accommodation entries. The ld CIT(A) relied upon S Ajit Kumar (2018) 302 CTR 177 (SC), wherein it has been held that any material or evidence found/ collected in survey, which has been simultaneously made at the premises of a connected person, can be utilised while making the Block Assessment in respect of an assessee u/s 158BB rws. 158BH. He, therefore, confirmed the a....
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.... we find that the statement relied upon by the ld CIT(A) of one Sh. Kashi Prasad Chotia, dummy director of the M/s. Aachman Vanijya (P) Ltd. is otherwise not trustworthy and is not enough to make addition based solely on the said statement. Mr. Kashi Prasad Chotia in the survey action had stated that he was dummy director only, which means, he was not aware of the actual activity of the said company i.e., M/s. Aachman Vanijya (P) Ltd. He had further stated that he was not aware about the commission paid but the details of the commission earned could be furnished by the Sh. Pramod Baid, who was the key person in the company. When he was asked as to what was the nature of business of M/s Aachman Vanijya (P) Ltd, he replied that all such information in respect of M/s Aachman Vanijya (P) Ltd could be given by Sh. Pramod Baid only. Except the aforesaid statement of Sh. Kashi Prasad Chotia, no other incriminating material or evidence has been referred in the assessment order, in respect of survey action carried out in the case of M/s. Aachman Vanijya (P) Ltd. The statement of said Sh. Kashi Prasad Chotia has not been confronted to the assessee. The ld counsel for the assessee in this res....
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.... the additions made by the AO. 4. the Tribunal dismissed the appeal preferred by the revenue confirming the order passed by the CIT(A) deleting the aforesaid addition...the revenue has preferred the present TA with the aforesaid substantial que of law. 5. The only contention on behalf of the revenue is that on the last day of passing the order, communication dt. 22-12-08 of the assessee along with the confirmation letter of Shri Ishwar Adwani confirming the loan/ advance of Rs. 145 lakhs given to the assessee, was produced before the AO i.e., on the day, the AO passed the order and thereafter, the same was reproduced before the CIT(A) and the CIT(A) considered the same, the CIT(A) ought to have remanded the matter to enable the AO to hold further inquiry and, therefore, it is requested to admit/ allow the present TA. 6. Having heard Shri Pranav Desai, ld counsel appearing on behalf of the revenue and on perusal of the order passed by the CIT(A) confirmed by the Tribunal, it appears that CIT(A) was satisfied with respect to the genuineness of the transaction and creditworthiness of Shri Ishwar Adwani and, therefore, deleted the addition of Rs. 145 lakhs ma....
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.... in the subsequent year, no addition on account of the same could be made in the preceding year on account of unexplained cash credit. Respectfully following the said decision of the Hon'ble jurisdictional HC, the ld CIT(A) deleted the addition made by the AO u/s 68; and, keeping in view all the facts of the case, we find no infirmity in the impugned order of the ld CIT(A) on this issue warranting any interference. The same is accordingly upheld and the Gr. No. 6 of the Revenue's appeal is dismissed." iii) ACIT v. Vashu Bhagnani ITA No. 5648/Mum/2016; dt. 30-5-18, (Mum-Trib), held as under: "3. Briefly stated, the facts of the case are that the AO received information from the Inv. Wing of the IT Deptt, that a search and seizure operation was carried out in Shri Bhanwarlal Jain Group on 3-10-13, wherein it was found that Shri Jain along with his associates had provided accommodation entries in the form of ULs/ deposits/ purchase entries to a large number of parties through various benami concerns controlled by them, by taking equivalent amount of cash. The assessee, proprietor of Pooja Construction, was one of the beneficiaries of accommodation entries fr....
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....ties and payment of interest by the assessee. It is finally stated that the AO has made the addition based on the ground that the lender belonged to so-called Shri Bhanwarlal Jain and Group and the transaction was a bogus one, without giving any opportunity to the assessee to cross-examine the party in spite of repeated requests made. Also the assessee provided to the AO all the documents which can prove that the transaction was genuine which was ignored. The ld counsel of the assessee files a PB containing (i) Ledger Confirmation, (ii) Bank Statement of Daksh Diamonds, (iii) IT return copy of Mr. Ritesh Siraya (Prop. Daksh Diamonds) for AY07-08, (iv) Financial of M/s Daksh Diamonds for AY07-08 (v) Ledger account of M/s Daksh Diamonds for the period 3-7-06 to 6-9-10 and (vi) P&L account, balance sheet and IT return of the appellant for AY07-08. It is clarified by him that the above documents were filed before the AO and CIT(A). 7. Here is a case, clearly defined by the accounts. The ledger account of Daksh Diamonds appearing in the books of accounts of the assessee shows that on 3-7-06, the assessee received Rs. 30 lakhs vide che. No. 812561 and Rs. 20 lakhs vide che. No. ....
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.... 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." v) Ravindra Arunachala Nadar v. ACIT (2021) 129 taxmann.com 275 (ChenTrib) wherein speaking through one of us Judicial Member, held as under: "9. Coming to invocation of sec 68, the AO has simultaneously invoked sec 68 in addition to sec 41(1), to bring into tax, said credit for the impugned AYs, but fact remains is that all these cred....
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....y 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." 24. Thus, we find on merits also and addition of Rs. 12 lakh for the assessment year 2014-15 on account of unsecured loan treating it as unexplained under section 68, when it is opening balance as on 01/04/2023 brought forward from earlier year and no fresh cash credit received during the assessment year 201415, it had already accepted in scrutiny assessment completed under section 143(3) dt. 18/08/2016/ Moreso, it had already been repaid on 04/10/2018 which is prior to the search conducted on 11/07/2019, addition of Rs. 12 lakh is not justified hence deleted and consequently, the interest of Rs. 3,99,600, on such unsecured loans is also deleted. For coming to such conclusion, we rely on the judgment of the Hon'ble ....
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....e premises of the assessee which is linked with the addition of Rs. 2,68,490 for AY16-17; in absence of this, addition is not sustainable in the eyes of law while making assessment for an unabated AY; addition is liable to be deleted; relied on Abhisar Buildwell (P) Ltd (2023) (SC). 4. On the facts and circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs. 2,68,490 on the count of interest treating it as bogus, when TDS has been deducted on such interest expenses claimed; it had already been accepted in scrutiny assessment completed u/s 143(3) dt. 28-12-18; more so, the alleged sum had already been repaid on 4-10-18 prior to the search conducted on 11-7-19; the addition of Rs. 2,68,490 is not justified, is liable to be deleted." 26. The issue of no incriminating material found in the course of serarch for an unabated assessment on the date of search and the issue on merit i.e., addition on account of unexplained cash credit under section 68 of the Act and interest paid on such credits have already been decided by us vide Para-20 to 25, of this order, wherein we have decided this issue in favour of the assessee and against the Revenue for....
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....f interest paid on unsecured loans for Rs. 7,59,397, is as under: - Loan creditors Opening bal. as on 1-4-16 Interest credited during the year Paid during the year Closing bal. as on 31-3-17 (repaid prior to the date of search, i.e., on 11-7-19) Best Advisory P Ltd 39,39,974 2,87,405 4,39,974 37,87,405 repaid on 4-10-18 Gazal Textiles 15,92,526 1,00,684 3,92,526 13,00,684 repaid on 4-10-18 Lily Abasan P Ltd 19,90,657 1,25,855 4,90,657 16,25,855 repaid on 4-10-18 Origin Deal Trade P Ltd 26,12,869 2,03,502 1,12,869 27,03,502 repaid on 4-10-18 Total 7,17,446 7,59,397 addition made by AO 33. It is to be noted here that the issue relates to interest paid on unsecured loans for Rs. 7,59,397, for the assessment year 2017-18, is exactly similar to the issue decided by us in the assessment year 2014-15 to 2016-17, vide Para-22 to 25 above. Hence, consistent with the view taken therein, similar directions are issued to the Assessing Officer to delete such addition. Thus, ground no. 3, is allowed. 34.....
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....only under section 153A by the Addl. CIT. 39. In the present case, the Assessing Officer wrote a letter dated 29/09/2021 seeking approval under section 153D for the assessment year 2014-15 to 202021 (i.e., for 7 years) to the Addl. CIT for making assessment under section 143(3) r/w section 153A of the Act as under: - It is manifest that concomitant records lead culminating to the framing of the orders were never transmitted while granting approval under section 153D for the assessment year 2014-15 to 2020-21. 40. The Addl. CIT, thereafter, has granted approval under section 153D dated 29/09/2021 for the assessment year 2014-15 to 2019-20 which is a separately issued for each assessment year for making assessment under section 143(3) r/w section 153C is reproduced as under: - F. no. Addl. CIT/CR-1/NGP/153D/MCBIPL/2021-22 Date: 29.09.2021 To The Asstt. Commissioner of Income Tax Central ....
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....r mere incorrect mentioning of section 153C in place of correct section 153A in the impugned approval order made under section 153D dated 29/09/2021 on account of the mistake by the Addl. CIT. 43. Per-contra, the learned A.R. for the assessee vehemently averted that there can be no dispute with regard to the application of section 292B to sustain a notice from being declared invalid merely on the ground of mistake committed by the Assessing Officer in the notice, however, the issue here is not with regard to the mistake / error committed by the Assessing Officer while seeking an approval from the Addl. CIT, but, whether there was due application of mind by the Addl. CIT while giving the necessary approval under section 153D for making assessment under section 153C in place of the correct section 153A. It is submitted that it is a settled principle of law that approval granted by such higher ranking officer for making assessment has to be on due application of mind on the material placed before him and it should be reflected in the approval granted. It cannot be a mechanical approval without examining the assessment records sent by the Assessing Officer. It is submitted that wron....
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....013-14; and in such a situation, it cannot be added under section 68 in as mistakenly proposed by the Assessing Officer and this mistake of the Assessing Officer has not been cared by the Addl. CIT. More particularly, the impugned loan amount had already been repaid on 04/10/2018 i.e., prior to date of search on 11/07/2019 which has been accepted by the Revenue and thus, it cannot be added under section 68 on this count also. However, this vital fact has also not been cared by the Addl. CIT and granted approval without even reading the draft assessment order and without perusing the assessment records and facts of the assessee. ii)The Addl. CIT has also not cared that addition of Rs. 3,99,600 made on interest expenses paid on such unsecured loans which has been brought forward from earlier years. The Addl. CIT has not cared that the assessee is a searched person and the assessment year 2014-15 is an unabated year on the date of search on 11/07/2019 and addition cannot be made without there being any incriminating material found during the course of search from the premises of the assessee-company which is linked with the addition of Rs. 12 lakh and Rs. 3,99,600. Addl. CIT ....
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....der section 143(3) and thus, the Addl. CIT has made assessment under section 143(3) i.e., a regular assessment only which is not the requirement of law as mandated by section 153A. This glaring mistake of the Assessing Officer has not been cared by the Addl. CIT while granting such mechanical approval without even seeing/ reading/ perusing the draft order, as it reflects, thus, approval granted under section 153D is without application of mind, is invalid; and thus, assessment made under section 143(3) r/w section 153A dated 29/09/2021 would also be invalid. For such arguments, the learned A.R. made reliance on the following case laws: - *Kalpana Shantilal Haria v. ACIT (2017) WP No. 3063 of 2017 (Bom HC) dt. 22-12-17; *PCIT v. MDLR Hotels P Ltd (2024) 166 taxmann.com 327 (Del HC); *PCIT v. Anuj Bansal (2024) 165 taxmann.com 2 (Del HC); *PCIT v. Subash Dabas (2024) ITA No. 243/2023 dt. 17-5-24 (Del HC); *PCIT v. Shiv Kumar Nayyar (2024) 163 taxmann.com 9 (Del HC); *PCIT v. Dilip Construction P Ltd (2023) 7 NYPCTR 892 (Ori HC) dt. 28-6-23; *ACIT v. Serajuddin & Co (2023) 150 taxmann.com 146 (Ori HC); *SVP Southw....
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.... books of accounts maintained by the assessee for A.Y. 2018-19 to 2020-21, thereafter also, without rejecting books of account and without applying section 145(3), estimation of gross profit has been made and made addition of Rs. 8,55,87,852 in the A.Y. 2018-19, which is unsustainable in the eyes of law. The addition made on estimation of income is not valid which is not sustainable in the eyes of law. This fact has also not been cared by Addl. CIT while granting such approval dt. 29/09/2021 under section 153D for A.Y. 2018-19 to 2020-21. 48. It is submitted that the Addl. CIT has also not cared that addition of Rs. 8,55,87,852 for A.Y. 2018-19 on 40% gross profit estimation on backward extrapolation of suppressed/ unaccounted sales (i.e., unaccounted cash sale of coal dust), when there is no material/ evidence was found/ seized which pertain/ relate to A.Y. 2018-19, the year under consideration. The addition is not sustainable in the eyes of law. This fact has also not been cared by Addl. CIT while granting such approval for A.Y. 2018-19. 49. It is submitted that the Addl. CIT has not cared that addition of Rs. 7,62,813 made on interest exp. paid on unsecured loans which has....
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.... 271AAB(1A) which only be applicable for a searched person under section 132 for initiation of penalty where search has been initiated on or after the date 15/12/2016. Search has been conducted on 11/07/2019 and the only section would be applicable for initiating penalty would be section 271AAB(1A), which is absent in the draft order and not applied by the Assessing Officer. It means, as per the mind of the Assessing Officer that he was making regular assessment under section 143(3) and thus, has made assessment under section 143(3) i.e., a regular assessment only which is not the requirement of law as mandated by section 153A. This glaring mistake of the Assessing Officer has not been cared by the Addl. CIT while granting such mechanical approval without even seeing/ reading/ perusing the draft order, as it reflects, thus, approval granted under section 153D is without application of mind, is invalid and thus, assessment made under section 143(3) r.w.s. 153A dated 29/09/2021 would also be invalid and is liable to be quashed. 53. The learned A.R. submitted that the The Addl. CIT has granted approval under section 153D dated 29/09/2021 for A.Y. 2019-20 without even perusing/ veri....
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....t addition of Rs. 4,13,429 made on interest paid on unsecured loans which has been brought forward from earlier years. Rs. 4,13,429 as interest paid on unsecured loans from 4 loan creditors and all the 4 loan accounts had repaid on 04/10/2018 i.e., prior to the date of search on 11/07/2019 and it had accepted by the revenue. This vital fact has not been corrected by the Addl. CIT while granting such mechanical approval on the same day itself, i.e., on 29/09/2021. 57 .The learned A.R. submitted that the Addl. CIT has only said in the approval letter under section 153D dated 29/09/2021 for A.Y. 2019-20 that he had perused the draft assessment order which means, he is clearly saying/ admitting in clear terms that he has not perused the assessment records before granting such mechanical approval on 29/09/2021, as only on the basis of letter dated 29/09/2021 by the Assessing Officer for seeking approval from him. 58. The learned A.R. submitted that these glaring mistakes committed of the Assessing Officer in the draft assessment order have not been corrected by the Addl. CIT while granting such mechanical approval without even seeing/ reading/ perusing the draft assessment order, ....
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....under section 143(3) r.w.s. 153A in absence of any corroborative material/ evidence brought on record by the Assessing Officer and thus, this addition is unsustainable in the eyes of law; this fact has not been cared by the Addl. CIT while granting such approval under section 153D dated 29/09/2021 for A.Y. 2020-21. 61. It is submission of the learned A.R. that in the A.Y. 2020-21, the Addl. CIT has not cared that books of account has not been rejected section 145(3) has not been applied. No assessment has been made under section 144, there is no mention in the assessment order about any defect found in the books of accounts maintained by the assessee for A.Y. 2020-21, thereafter also, without rejecting books of account and without applying section 145(3), estimation of has been made and made addition of Rs. 13,37,31,019 in A.Y. 2020-21 in the regular assessment made under section 143(3) dated 29/09/2021 which is unsustainable in the eyes of law, hence, the addition made on estimation of income is invalid and not sustainable in the eyes of law. This fact has also not been cared by Addl. CIT while granting such approval dated 29/09/2021 under section 153D for A.Y. 2020-21. 62. ....
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....essment order submitted by you in the case M/s. Maheshwari Coal for A.Y. 2014-15 vide above referred letter. Accordingly, an approval under section 153D is hereby accorded to pass the assessment order under section 143(3) r.w.s. 153A for A.Y. 2014-15 in respect of the following case: Section: U/s 143(3) r.w.s. 153C; AY2014-15" which clearly proves that the Addl. CIT had routinely given approval to the Assessing Officer to pass the order only on the basis of contents mentioned/ dotted lines in the draft assessment order without any application of mind and seized materials were not looked at because that was not available before him at the time of granting of approval to the draft assessment order and other enquiry and examination was never carried out as it is issued for making assessment under section 143(3) r.w.s. 153C for A.Y. 2014-15, which clearly proves non application of mind by the Addl. CIT as he has not even cared that it is a case of section 153A. Similar is the position for the A.Y. 2015-16 to 2019-20. 65. From the said approval granted on the same day itself on 29/09/2021, it can be easily inferred that the said order was approved solely relying upon the dotted lines....
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....till 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 Addl. CIT is merely guidance to the Assessing Officer and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the Assessing Officer to frame the assessment after getting prior approval from Addl. CIT under section 153D. The Addl. CIT getting involved in the search assessment proceedings right from inception does not have any support from the provisions, as nowhere the Act mandates so. The scheme mandates due application of mind by the Assessing Officer to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/ clarifications from the assessee on the contents of the seized documents. 69. When the scheme provides for a leeway to both the Assessing Officer as well as the Addl. CIT to even ignore the conclusions drawn in t....
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....he 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 passed under section 153D dated 29/09/2021 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. We rely on the following legal precedents to buttress our line of thinking: - (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. Similarly, the requirement of previous approval of the Chief CIT or the CIT in terms of the said provision being an inbuilt protection against any arbitrary or unjust ....
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....take. 8. There can be no dispute with regard to the application of sec 292B to sustain a notice from being declared invalid merely on the ground of mistake in the notice. However, the issue here is not with regard to the mistake/ error committed by the AO while taking a sanction from the Jt. CIT but whether there was due application of mind by the Jt. CIT while giving the necessary sanction for issuing the impugned notice. It is a settled principle of law that sanction granted by the higher Authority for issuing of a reopening notice has to be on due application of mind. It cannot be an mechanical approval without examining the proposal sent by the AO. Prima facie, it appears to us that if the Jt. CIT would have applied his mind to the application made by the AO, then the very first thing which would arise is the basis of the notice, as the law on which it is based is no longer in the statute. Non pointing out the mistake/ error by the Jt. CIT on the part of the AO is prima facie evidence of non-application of mind on the part of the sanctioning authority while granting the sanction." (iv) PCIT v. MDLR Hotels P Ltd (2024) 166 taxmann.com 327 (Del HC) dt. 30-7-24, ....
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....without due application of mind had arisen for our consideration in Pioneer Town Planners (P) Ltd [2024] 160 taxmann.com 652 (Del HC) and where we had held as follows: 13. The primary grievance raised in the instant appeal relates to the manner of recording the approval granted by the prescribed authority u/s 151 for reopening of assessment proceedings as per sec 148. 15. A plain reading of the aforesaid provision would indicate that sec 151 stipulates that the PCCIT or CCIT or PCIT or CIT must be "satisfied", on the reasons recorded by the AO, that it is a fit case for the issuance of such notice. Thus, the satisfaction of the prescribed authority is a sine qua non for a valid approval as per the said Sec. 16. A perusal of the proforma attached as Annex-II in the instant appeal would suggest that though the ACIT has appended his signatures by writing in his hand- "Yes, I am satisfied", however, the PCIT has merely written "Yes" without specifically noting his approval, while recording the satisfaction that it is a fit case for issuance of notice u/s 148. 17. Thus, the incidental que which emanates at this juncture is whether simply penning down ....
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....nd the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority." 19. In the case of Chhugamal Rajpal, the Hon'ble SC refused to consider the affixing of signature alongwith the noting "Yes" as valid approval and had held as under: - "5. Further the report submitted by him u/s 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice u/s 148. We are also of the opinion that the CIT has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice u/s 148. To Que 8 in the report which reads "whether the CIT is satisfied that it is a fit case for the issue of notice u/s 148", he just noted the word "yes" and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice u/s 148. The important safeguards provided in secs 147 and 151 were lightly treated by the ITO as well as by the CIT. Both of th....
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....No substantial que of law arises. The appeals fail and shall stand dismissed. 6. While disposing of these set of appeals, we take note of the following observations that were made in ITA 8/2024: - "4. Accordingly, while we dismiss the instant appeal following the reasons assigned in the earlier case of Anuj Bansal, we leave the que pertaining to the effect and impact of sec 144A as well as of the provisions contained in the Search and Seizure Manual, 2007, open to be addressed in appropriate proceedings." 7. In the facts of the present case and those which have come to be recorded by the Tribunal, we find that there arises no occasion for us to examine the said issue. The same be accordingly kept open to be addressed in appropriate proceedings." (v) PCIT v. Anuj Bansal (2024) 165 taxmann.com 2 (Del HC) dt. 13-7-23, concluded that- "7. The Tribunal has via the impugned order set aside the additions made qua the income of the assessee inter alia, on the Gr. that there was no application of mind by the Addl. CIT in granting approval u/s 153D. 8. To be noted, an assessment order was framed qua the assessee u/s 153A, rws. 143(3). ....
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.... as well as total assessed income and the Addl. CIT while giving his approval has not applied his mind to the figures mentioned by the AO. Therefore, approval given in the instant case by the Addl. CIT, in our opinion, is not valid in the eyes of law. We, therefore, hold that approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus, it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D. In view of the above discussion, we hold that the order passed u/s 153A rws. 43(3) has to be quashed, thus ordered accordingly. The Gr. raised by the Assessee is accordingly allowed". 14. In this appeal, we are required to examine whether any substantial que of law arises for our consideration. 15. Having regard to the findings returned by the Trib, which are findings of fact, in our view, no substantial que of law arises for our consideration. The Tribunal was right that there was absence of application of mind by the ACIT in granting approval u/s 153D. It is not an exercise dealing with a immaterial matter which could be corrected by taking recourse to sec 292B. 16. ....
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....t was reiterated that the exercise of powers u/s 153D cannot be done mechanically. Thus, the salient aspect which emerges from the abovementioned decisions is that grant of approval u/s 153D cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind." 12. A perusal of the discussion extracted hereinabove would lead us to safely conclude that after placing reliance on various judicial pronouncements, this Court was of the opinion that approval u/s 153D cannot be accorded in a casual or mechanical manner. Rather, the said exercise involves due application of mind which must be reflected in the order of approval passed by the concerned statutory authority. 13. In the instant case, with respect to the inappropriate approval accorded by the relevant authority, the Tribunal has made a categorical finding, which reads as under: - "36. A perusal of the approval sought by the AO shows that he has requested to grant necessary approval u/s 153D for the cases completed u/s 153A/143(3). A combined perusal of the approval sought by the AO, the approval given by the Addl. CIT and the copy of re....
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....d of. (vii) PCIT v. Shiv Kumar Nayyar (2024) 163 taxmann.com 9 (Del HC) dt. 15-5-24, concluded that- "13. Reliance can also be placed upon Serajuddin and Co (2023) (Ori HC) to understand the exposition of law on the issue at hand. Para no. 22 of the said decision reads as under: - "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. This is where the Technical Mannual of Office Procedure becomes important. Although, it was in the con....
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....remaining cases may belong to some other assessees, which information is not available before us. In any event, whether it is humanly possible for an approving authority like ld Addl. CIT to grant judicious approval u/s 153D for 43 cases on a single day is the subject matter of dispute before us. Further, sec 153D provides that approval has to be granted for each of the AY whereas, in the instant case, the ld Addl. CIT has granted a single approval for all AYs put together." 17. Notably, the order of approval dt. 30-12-20 which was produced before us by the ld counsel for the assessee clearly signifies that a single approval has been granted for AYs 11-12 to 17-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above. 18. Therefore, under the facts of the present case, cons....
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....aying 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. Similarly, the requirement of previous approval of the Chief CIT or the CIT in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the AO, casts a very heavy duty on the said high ranking authority to see to it that the requirement of the previous approval, envisaged in the sec is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief CIT or the CIT, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the AO. The approval must reflect the application of mind to the facts of the case." 18. The contention of the Revenue in those cases that the non-compliance of the said requirement does not entail civil consequences was negatived. Reiterating the view expressed in Rajesh Kumar, the SC in Sahara India (Firm) Luck held as under: "29. In Rajesh Kumar (2007) 2 SCC 181 it has been held that in view of sec 136, proceedings....
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....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 sec 158BG, it would equally apply to sec 153D. 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. 23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Addl. CIT seeking his approval or of the Addl. CIT having granted such approval. I....
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....fully following the decision of the Hon'ble Orissa and Allahabad HC as well as the decision of the coordinate benches placed in PB No. 4, we hold that the approval granted u/s 153D in assessment orders in all such appeals are without application of mind and therefore, the assessment made by the ld AO are quashed. 49. Thus, Gr. No. 1 in appeal of the assessee is allowed in all these 34 appeals filed by the assessee holding that approval granted u/s 153D is without application of mind and hence, the assessment orders are annulled." (xi) Sushanta Saha v. ACIT (2024) (Gau-Trib) dt. 18-7-24, ITA No. 159, 212, 213, 256 to 267/GTY/ 2018, held as under: "9. We have heard rival contentions and perused the records placed before us. We first take up the issue as to whether proper approval was granted u/s 153D. On going through the sec 153D, we observe that prior approval is necessary for assessment in case of search or requisition. Sec 153D provides that no order or reassessment order shall be passed by an officer below the rank of JCIT referred to in sec 153A(1)(b) for the AY referred in 153B(1)(b) except with the prior approval of Jt. CIT. In the instant case, out....
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....021) 91 ITR 682 (Lucknow Trib.,) Sahara India (2008) 300 ITR 403 (SC) Kirtilal Klidas & Co 67 ITD 573 (Mad) Arch Pharmalabs Ltd ITA No. 6656/Mum/2017 dt. 07.04.2021 11(a). We reproduce below the decision of this Trib in Smt Moumita Saha (Gau-Trib) and the same reads as follows: "9. In view of the above mentioned case laws, the issue has been settled holding that the approval of the 153D cannot be granted in the mechanical manner rather the approving authority has to apply his mind by way of a speaking order showing that the concerned officer has gone through the contents of the assessment and he has satisfied himself with the draft assessment framed by the AO. However, as reproduced above, the approval in this case seems to be an empty ritual as the approval letter does not speak of any application of mind by the concerned Addl. CIT/ Approving Authority. Therefore, in view of the settled legal proposition, the said approval granted by the ld Addl. CIT, in this case, is not a valid approval. Therefore, the assessment framed, in this case, becomes bad in law and the same is accordingly quashed. Since, we have quashed the assessment on the ....
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....lication of mind by Addl. CIT. Ld AR submitted that the power to grant approval u/s 153D 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 sec 153D and therefore not sustainable at all. Ld AR argued that the case of assessee is fully covered by the decision of Hon'ble Coordinate 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....
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....a mandatory requirement of law. The said approval granting proceedings by the Jt. CIT is a quasi judicial proceeding 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, t....
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....in the instant case. 11. We have gone through the approval granted by the Jt. CIT on the date mentioned in the table 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, sec 153D 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 ....
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....d his statutory functions and delightfully relegated his statutory duty to the subordinate AO, whose action the Addl. 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 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." (xv) 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....
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....me view after a detailed analysis of similar facts and also expressed a discordant note on such mechanical exercise of responsibility placed on designated authority 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 sec 153D, 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." (xvi) Sanjay Duggal v. ACIT (2021) (Del-Trib), ITA No. 1813/Del/2019, dated 19/01/2021 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....
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.... judicial skill by the Jt. CIT on the application of mind and this exercise should be discernable from the Orders of the approval u/s 153D. 11.7. In the following Orders of various 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....
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....e sale proceeds could be added as income in the hands of assessees u/s 68 is not understandable. Thus, the Approving Authority without application of mind and in a most mechanical and technical 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 assessme....
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....tion Wing in appraisal report. Thus, we hold the approval u/s 153D have been granted without application of mind and is invalid, bad in Law and is liable to be quashed." (xvii) SMW Ispat (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 cas....
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....nd no such indication of examination of evidences, documents, statements of various persons etc. at least, no reference whatsoever made by the Jt. CIT i.e., approving authority. Thus, we find the facts and circumstances 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....
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....ce by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue. 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 a....
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....ee years relates to the issue that without rejecting the books of account and without framing assessment under section 144, gross profit estimation made; and in Addl. Ground no. 2, involved in the assessment year 2018-19 and 2019-20, the issue relates to addition made on gross profit estimation on backward extrapolation of suppressed sales, when there is no material/ evidence found/ seized. ITA no.117/Nag./ 2024, A.Y. 2018-19 Ground no. 4: - "On the facts and circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs. 8,55,87,852 on the count of hypothetical GP estimation of 40% on hypothetically estimated sales of Rs. 21,39,69,630 for AY18-19, which is again based on hypothetically estimated sales of Rs. 26,74,62,038 for AY19-20, which is again based on hypothetically estimated sales of Rs. 33,43,27,548 for AY20-21 which is again based on 2 months estimates of Rs. 5,57,21,258 on dumb documents (i.e., 15-4-19 to 15-6-19) which has no relevance & not pertained to the assessee-Co; addition is merely on presumption, surmises & mathematical calculations is not justified in search assessment made without having any corrobor....
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....48 for A.Y. 2020-21, which is also based on 2 months' extrapolation/ estimation of Rs. 5,57,21,258 (working not given by the Assessing Officer that how he arrived on this figure) on dumb material (i.e., screen shot of mobile of Sandeep Agrawal, Nagpur, director of M/s. Swami Fuels, from 15/04/2019 to 15/06/2019 i.e., in A.Y. 2020-21) which is not even pertained to the assessee, addition made is merely on presumption, surmises, mathematical calculation and extrapolation is not justified in search assessment made under section 153A r.w.s. 143(3) for A.Y. 2018-19, without having any corroborative material evidence brought on record by Assessing Officer. 75. It is submitted that the AO has made addition of Rs. 8,55,87,852 on the count of unaccounted sale of coal dust at Rs. 21,39,69,630 for A.Y. 2018-19 (i.e., 80% of Rs. 26,74,62,038, i.e., extrapolated sale of coal dust for A.Y. 2019-20); thereafter, he estimated 40% gross profit on such extrapolated/estimated sale of coal dust at Rs. 21,39,69,630, that would come to Rs. 8,55,87,852; the Assessing Officer has made addition on the basis of addition made in A.Y. 2019-20 of Rs. 10,69,84,815, by making gross profit estimation on....
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....es Ltd (2023) 146 taxmann.com 233 (Del HC); (ii)PCIT v. Shri Pushkar Construction Co (2023) 154 taxmann.com 22 (Guj HC); (iii)CIT v. CJ Shah & Co (2000) 246 ITR 671 (Bom HC); (iv)Thakkar Popatlal Velji Sales Ltd. (2016) ITA No.2266 of 2013 dt.29-3-16 (Bom HC). ITA no.118/Nag./2024 A.Y. 2019-20 Ground no. 4: - "On the facts and circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs. 10,69,84,815 on the count of hypothetical GP estimation of 40% on hypothetically estimated sales of Rs. 26,74,62,038 for AY19-20, which is again based on hypothetically estimated sales of Rs. 33,43,27,548 for AY20-21 which is again based on 2 months estimates of Rs. 5,57,21,258 on dumb documents (i.e., 15-4-19 to 15-6-19) which has no relevance & not pertained to the assessee Co; addition is merely on presumption, surmises & mathematical calculations is not justified in search assessment made without having any corroborative material evidence brought on record for AY19-20; is liable to be deleted." Ground no. 5: - "On the facts and circumstances of the case and in law, the ld CIT(A....
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....tained to the assessee, the addition made is merely on presumption, surmises, mathematical calculation and extrapolation is not justified in search assessment made under section 153A rws 143(3) for A.Y. 2019-20, without having any corroborative material evidence brought on record by the Assessing Officer. 79. It is submitted that the Assessing Officer has made addition of Rs. 10,69,84,815 on the count of unaccounted sale of coal dust at Rs. 26,74,62,038 for A.Y. 2019-20 (i.e., 80% of Rs. 33,43,27,548, i.e., extrapolated sale of coal dust for A.Y. 2020-21). Thereafter, he estimated 40% gross profit on such extrapolated/estimated sale of coal dust at Rs. 26,74,62,038, that would come to Rs. 10,69,84,815; the Assessing Officer has made addition on the basis of addition made in A.Y. 2020-21 of Rs. 13,37,31,019 by making GP estimation on extrapolated/ estimated sale of coal dust and nothing else has been brought on record for the impugned presumptive addition of Rs. 10,69,84,815, which had no valid/ admissible basis in search assessment made under section 153A r.w.s. 143(3), and hence the learned A.R. prayed for deletion of the addition. 80. It is submitted that the Assessm....
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....the ld CIT(A) has erred in sustaining addition of Rs. 13,37,31,019 only on the basis of 'screen shot' of mobile of third party (Sandip Agrawal) and wrong inference drawn on the statement recorded of third party (Sandip Agrawal) u/s 131 dt. 13-8-19; while, the alleged 'third party statement' recorded at back of the assessee not confronted to the assessee & the person (Sandip Agrawal) has not been cross examined with the assessee, which is against the 'principle of natural justice' which makes the order nullity as held in Andaman Timber Industries (2015) (SC), Kishinchand Chellaram (1980) (SC), and hence, the addition is liable to be deleted." Additional Ground no. 1: - "On the facts and circumstances of the case and in law, addition made of Rs. 13,37,31,019 on the count of 40% GP estimation on estimated unaccounted sale of Rs. 33,43,27,548, is invalid; books of account not rejected; sec 145(3) not been applied; assessment made u/s 143(3); without rejecting books of account & framing assessment u/s 144, which is sine qua non for making 'best judgment assessment', any estimation of profit is not permissible in the eyes of law; addition is liable to be deleted, relied....
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....ntion about any working of Rs. 5,57,21,258 for 2 months period; Search has been conducted on 11/07/2019, while the Assessing Officer has thereafter, extrapolated for whole year which is quite impossible because, no transaction has been done/occurred with M/s. Swami Fuels from Jan, 2020 to Mar, 2020; more so, 77,936 MT in the month of June, 2019 was reduced to 30,375 MT in Aug, 2019 & 11,962 MT in Dec, 2019; thus, it was continuously reduced to 11,962 MT in Dec, 2019 and thereafter, no work done with M/s. Swami Fuels. Total 11,08,35,787 (audited turnover) 86. The learned A.R. submitted that the whole dispute and allegation of the Assessing Officer is about unaccounted cash sale of coal dust of Rs. 33,43,27,548 for whole year, which is extrapolated on the estimates made by the Assessing Officer for 2 months period at Rs. 5,57,21,258 (working is not provided by the Assessing Officer). Service sales/ charges to M/s. Swami Fuels of Rs. 2,90,34,541 in A.Y. 2020-21 i.e., for 9 months only because in January 2020 to March 2020, no work has been done. 87. Details of coal service charges (i.e., coal benefication charges and loading & unloading charges of coal handling) from....
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....near Sirgitti, Bilaspur, this excel sheet contains the details of labour charges payable by Swami Fuels P Ltd to "MCIPL" for the services provided by MCBIPL for the period 1-5-19 to 15-5-19." 89. It is submitted that the Assessing Officer has found the documents (i.e., excel sheet printed from computer) from 15/04/2019 to 16/06/2019, which has been show caused first time on 25/03/2021 to the assessee and the assessee has made reply on 21/06/2021, and denied about any such transaction and also requested for cross examine the person Sandeep Agrawal, Nagpur, director of M/s. Swami Fuels P Ltd., but, the Assessing Officer has not considered the replies/ requests, which is reproduced as under:- "reply in Pt. No. 13, our reply with respect to the notice No. ITBA/AST/F/ 142(1)/2020-21/1031769742(1) dt. 25-3-21 vide AY19-20 as follows: a. for the images that are referred in the given notice, we had like to bring your attention to the fact that we are unaware of any such reconciliation accounts, that were made by us or on our behalf. We deny any such transaction being made. b. We have not undergone any such arrangements mentioned in here. Our work ....
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....ng of coal) by Rs. 90 per MT (i.e., assessee has charged at Rs. 70 per MT as per the work contract made with M/s. Swami Fuels, while the Assessing Officer assumed that it should be Rs. 160 per MT); and (ii) the assessee has sold coal dust to M/s. Swami Fuels P. Ltd. in cash, which is unaccounted. 92. The learned A.R. submitted that both the allegations of the Assessing Officer are only based on presumption and surmises without having any basis for such bald estimation/ presumption. There is no corroborative material evidence found in the search premises of the assessee and/or no material/ evidence brought on record by the Assessing Officer from anywhere/ any information gathered/received from third party that the assessee has made any cash sales. 93. The learned A.R. further submitted that the assessment made for A.Y. 2020-21 under section 143(3) r.w.s. 153A on 29/09/2021 by ACIT, Central Circle-1(1), Nagpur, wherein, he has made addition of Rs. 13,37,31,019 on account of 40% gross profit estimation on extrapolated presumed unaccounted sales of coal dust & rack loading of Rs. 33,43,27,548 for whole year made to M/s. Swami Fuels P. Ltd. ("SFPL") on the basis of images....
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....the Assessing Officer for A.Y. 2018-19 is based on one mathematical calculation of 40% gross profit estimation basis based on extrapolated/ estimated/ presumptive unaccounted sale of coal dust of Rs. 21,39,69,630, for A.Y. 2018-19, which is itself again based on immediately preceding year's extrapolated/ estimated/ presumptive unaccounted sale of Coal dust of Rs. 26,74,62,038 for A.Y. 2019-20, i.e., also 80% of Rs. 33,43,27,548, extrapolated sale for A.Y. 2020-21, which is again based on preceding year's extrapolated/ sale of Coal dust of Rs. 33,43,27,548 for A.Y. 2020-21, which is also based on 2 month's extrapolation/ estimation of Rs. 5,57,21,258 for which working has not been given by the Assessing Officer in the assessment order that how he arrived on this figure what corroborative material he has brought on record for his unsubstantiated action of presumptive addition in absence of any legally admissible material/documents having possessed by him, In our view, it is based on dumb documents found at the third party premises as claimed by the learned A.R. of the assessee that it is on dumb material (i.e., screen shot of mobile of one Sandeep Agrawal, Nagpur, director of M/s. Sw....
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....he AO wields an authority to make additions on the basis of estimation of income upon fulfillment of the conditions mentioned in sec 145(3). Once the AO is satisfied about the existence of irregularities in the books of account as per sec 145(3), it shall proceed in the manner provided u/s 144. At this juncture, what needs consideration is the que whether such an addition must be made only after the rejection of the books of account by the AO. 20. Swananda Properties (P) Ltd (2019) (Bom HC) had an occasion to consider the said que and the same was accordingly answered as under: "11. We note that the books of account of the respondent were rejected by the CIT(A) u/s 145(3). However, the Trib found in the impugned order that the invocation of sec 145(3) is unjustified as no defect was noted in the books of account to disregard the same. We note that the CIT(A) in his order while rejecting the books of account does not specify the defect in the record. The basis of the rejection appears to be best judgment of assessment done by him. The rejection of the books should precede the BJA. On facts, the Revenue has not been able to show any defect in the respondent....
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.... assessee are incorrect, incomplete or unreliable and reject the books of account before the proceeding to make his own assessment. In the instant case, there is no reference in the assessment order of the AO regarding rejection of books of account." 24. The series of judgments referred to hereinabove clearly allude to the settled position of law that the books of account have to be necessarily rejected before the AO proceeds to the BJA upon fulfilment of conditions mentioned in the Act. The underlying rationale (fundamental basis) behind such an action is to meet the standards of correct computation of accounts for the purpose of a more transparent and precise assessment of income. Therefore, any pick and choose method of rejecting certain entries from the books of account while accepting other, without an appropriate justification, is arbitrary and may lead to an incomplete, unreasonable and erroneous computation of income of an assessee. 25. In the present case, the Trib has made a categorical finding that despite the fact that the AO was provided with the requisite bills, vouchers and addresses of the transacting parties, it did not make any ....
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....at no substantial que of law arises in the present appeals." ii) PCIT v. Marg Ltd (2017) 396 ITR 580 (Mad HC), held as under: - "4(a) As stated supra, the assessee is a Public Ltd. Co. engaged in the business of civil construction and related services. 4(b). AO had made addition to the income returned by the assessee by estimating gross profit. The power to make such addition on estimate basis is available to the AO u/s 144. Sec 145 enables the AO to invoke the power u/s 144 when certain conditions adumbrated in sec 145(3) are satisfied. Therefore, it becomes necessary and useful to extract sec 145(3), which reads as follows: "Sec 145(3) Where the AO is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sec 145(1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified u/s 145(2), the AO may make an assessment in the manner provided in sec 144." 4(c). Therefore, it is sine qua non that the AO to come to a conclusion that the Books of Accounts maintained by the assessee are incorrect, incomplet....
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....stainable. Sec 145(3) lays down that the AO can proceed to make assessment to the best of his judgment u/s 144 only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the AO has not rejected the books of account of the assessee. To put it differently the AO has not made out a case that conditions laid down in sec 145(3) are satisfied for rejection of the books of account. Thus, when the books of account are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the AO nor CIT(A) have rejected the books of account maintained by the assessee in the course of the business. As such Trib has rightly rejected or set aside the partial addition made by AO for arriving at GP and sustained by the CIT(A) and rightly held that entire addition made by the AO was liable to be deleted. The said finding is based on sound appreciation of facts and it does not give rise for framing substantial que of law." iv) Subhendu Kumar Subudhi v. CIT (2022) 136 ta....
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.... On cross appeals, the assessee raised addl. grounds that the CIT(A) erred in confirming the estimation of the suppressed receipts without rejecting books of account in compliance with requirements of sec 145(3) and that CIT(A) erred in confirming the estimation of the suppressed receipts in the completed assessment without any evidence in the search material. 25. .........It is the settled law that the books cannot be rejected u/s 145 and resort to BJA, unless the AO record any finding that the books of account maintained by the assessee are incorrect rendering it impossible to deduce the profits. AO needs to indicate that he noticed any inconsistency or infirmity in the audit report- Madnani Construction Corpn P Ltd (2008) (Gauhati HC). Thus, when no discrepancy is noticed in the accounts maintained by the assessee, AO cannot assume jurisdiction u/s 145(3) as held by Anand Kumar Deepak Kumar (Del HC). It is also relevant to mention that without enlisting the defects, incompletion and inaccuracies in the accounts of the assessee, AO cannot expressively or otherwise, invoke the sec 145(3). In Paras Dyeing & Printing Mills P Ltd (2011) (Ahd-Tr....
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....e in maintaining some requisite books in the order before the books are rejected u/s 145(3). The AO might not have mentioned expressively the sec 145(3) in the order but the requirement is, AO must enlist the defects or discrepancies or incompletion or inaccuracies of the accounts of the assessee. AO might not have mentioned expressively the sec 145(3) in the order but the requirement is, AO must enlist the defects or discrepancies or incompletion or inaccuracies of the accounts of the assessee. In the instant case, AO did not bother to honour the law in its true spirit. How AO can resort to estimation of income without rejection of accounts systematically maintained by the assessee for all the years u/c and also without invoking the sec 145 after duly complying with the conditions specified in them? Should we encourage such callous approach of the AO, who did not bother to read the said provisions and conditions specified therein? AO's order does not contain a whisper about the sec 145, while he proceeded to make BJA. This is not done. Therefore, in our considered opinion, the AO made a BJA in this case assuming jurisdiction u/s 145(3) invalidly. Such assessments are unsu....
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....fferent AYs. 13. The appellate authorities below also noted that for the AY05-06 to AY0809, there is no evidence available with respect to suppression of the GP by obtaining bogus purchase bills by the assessee and that the AO has merely relied upon the documents seized during the course of search for FY10-11 and 11-12 even when the present batch of cases pertains to the AY05-06 to 09-10." ii) PCIT v. Shri Pushkar Construction Co (2023) 154 taxmann.com 22 (Guj HC) held as under: - "3. The facts are that a search was conducted u/s 132 against one Ashit Haribhai Vora, who was active partner of the assessee-firm of Batter Group. When the search was conducted on 4-12-14 at the residence, according to the Deptt, certain documents containing 37 pages were found and seized, which were incriminating documents relating to the project called PushkarIII and Pushkar-IV developed by the assessee. According to the Deptt, the documents reflected that the said documents contained certain details, including the details of cash as well as cheque received by the assessee firm in relation to the sale of the units in the project Pushkar-III and Pushkar-IV. ....
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....quired to confine himself on the incriminating material found during the course of search and that the Revenue could not have extrapolated the amount of on-money merely on presumption based on the instances which too did not relate to the year u/c. The reliance on the loose papers to treat the amounts as undisclosed income in absence of any other evidence supporting it for the relevant AY, was not justified and the addition in that regard deserve to be deleted. The Trib dismissed the appeal on merits. 6. The Trib confirmed the decision of the CIT by firstly observing that statement of buyers whose sales had been recognised in all the years were not recorded by the AO. Secondly it found that there was dearth (lack) of evidence about the receipt of on-money on the until as well as made by the assessee and in absence of any clinching evidence additions were not sustainable. It was also observed by the Trib that no material was found in the possession of the assessee which would closely demonstrate that the assessee in respect of the flats/ units other than those recorded in the seized documents were also charged on money from the customers. It was observed that there....
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....ularly when relevant documents are not forthcoming. However, it does not mean that the AO can arrive at any figure without any basis by adopting an arbitrary method of calculation. In the present matter, A3, A4 and A6 nowhere records the turnover of the assessee as found by the Trib and yet on the wrong basis of the incoming and outgoing cash transactions, the AO has arrived at the turnover. Moreover, the peak investment was Rs. 40,14,806 for 3 months. However, there is no material seized to justify any figure to be included for a period earlier to the said period of 3 months. In the circumstances, the Trib has recorded a finding of fact and has held that the addition of Rs. 3.40 crores was totally unjustified. The entire finding of the Trib is based on the facts. No substantial que of law arises. Hence, the appeal is dismissed." iv) Thakkar Popatlal Velji Sales Ltd (2016) (Bom HC) ITA No. 2266 of 2013, judgment dated 29/03/2016; held as under: - "Where the register evidencing the sales were found for certain period, the Revenue was entitled to extrapolate the sales recorded therein for the entire AY. The Hon'ble HC vide para 9 held as u....
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....954] 26 ITR 775 (SC) has held that although strict rules of Evidence Act do not apply to income tax proceedings, still assessment cannot be made on the basis of imagination and guess work. It has been held in the case of Umacharan Saha & Bros. Co. v/s CIT, 37 ITR 21 (SC) that suspicion, however strong cannot take place of evidence. 102. Further, we find that the assessment made under section 143(3) for the A.Y. 2020-21 by making 40% gross profit estimation on extrapolation of unaccounted sale of coal dust, books of account has not been rejected and section 145(3) has not been applied, no assessment has been made under section 144, no defect has been found in the books of accounts maintained by the assessee for A.Y. 2020-21. Therefore, in such a situation, any estimation of income is not permissible in the eyes of law in search assessment made under section 143(3) and thus, the presumptive addition of Rs. 13,37,31,019 for A.Y. 2020-21 is hereby deleted. We rely on the following case laws: - i) PCIT v. Umesh Ishrani [2019] 108 taxmann.com 437 (Bom HC) held as under: - "1. This Appeal is filed by the revenue to challenge the judgment of Trib. Following que ....
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....Dherai, the additions could not have been made. The concurrent findings of fact would demonstrate that the essential ingredients of sec 69C enabling the additions were not satisfied. This is not a case of 'no explanation'. Rather, the Trib concluded that the allegations made by the authorities are not supported by actual cash passing hands. The entire decision is based on the seized documents and no material has been referred which would conclusively show that huge amounts revealed from the seized documents are transferred from one side to another. In that regard, the Trib found that the Revenue did not bring on record a single statement of the vendors of the land in different villages. None of the sellers has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. It is in these circumstances that the Trib found that on both counts, namely, the legal issue, as also merits, the additions cannot be sustained. Eventually, the Trib held in para 25 as under: "25. A perusal of the balance-sheet of the assessee show that the authorized, issued and subscribed paid-up capital is at Rs. 1 lakh and the assessee ha....
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....e of and considered that in a case where there was a search operation, no assets or cash was recovered from the assessee in that situation which had permitted the assessee to make declaration of undisclosed income of Rs. 31 crores for 3 AYs. This principle is supported by Shree Ganesh Trading Co (2013) (Jhar HC). Kailashben Manharlal Chokshi (Guj) had considered an identical issue and held that statement recorded at odd hours cannot be considered to be voluntary statement, if it is subsequently retracted and necessary evidence is laid contrary to said admission and therefore, admission on the basis of retracted statement u/s 132(4) was not called for. PV Kalyanasundaram (SC) held that que as to what is the actual sale price of the property, the implication of the contradictory statements made by the seller and whether reliance could be placed on the loose sheets recovered in the course of search are all ques of fact and not substantial ques of law. Layers Exports (P) Ltd (2017) (Mum-Trib) had considered a similar issue in the light of loose papers found during the course of search and after considering relevant facts held that no addition could be made simply on t....
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.... undisclosed income cannot be sustained, more particularly when said statement is no longer in operation. 12.11.As regards the argument of the ld DR that although Shri SN Jayamurugan, MD had retracted his statement, but other 2 statements recorded during the course of search is still in force and the persons who gave the statements have never retracted from the earlier statement recorded during the course of search, we find that when a statement were recorded from employee of assessee which were further vetted by the MD, then the earlier statement given by the employees are merged with the subsequent statement of a MD, because the person in charge of the affairs of the company is always MD, who is having knowledge of affairs of the company. Therefore, even though the employees statement were not retracted, the same cannot be considered as an evidence which can be used against the assessee when the MD of the assessee-Co has retracted his statement along with sworn affidavit explaining the reasons. Therefore, the arguments that the other 2 statements are sufficient enough to draw an adverse inference against the assessee cannot be accepted. 12.12. The CIT(A) without....
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.... has denied receipt of on-money towards sale of property to M/s. Polisetty Somasundaram on 23-12-15. 10. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We have also carefully considered the purported cash book found and seized in the premise of M/s. Polisetty Somasundaram, which has been extracted in the assessment order. The seized excel sheet cash book contained certain cash transactions and as per said cash book on 31-12-15, it was mentioned as 'cash carrying charges to Bang' Rs. 10,75,000 and 'Bang' Rs. 51,53,55,000. During the course of search, in the case of M/s. Polisetty Somasundaram on 28-1-20, a statement on oath u/s 132(4), was recorded from Shri Yeluri Chandrasekhar Rao, AR of M/s. Polisetty Somasundaram and confronted with seized document. He was specifically queed about seized cash book and contents recorded therein and in response, he stated that on 31-12-15, a sum of Rs. 51,53,55,000 has been sent to Bang for purchase of tobacco from farmers at Mysore region. He further stated that said cash payment at Bang is nothing to do with purchase of property from M/s. Vibgyor Net Connection....
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....sent to Bang and the person to whom the cash was subsequently paid. In our considered view, although, circumstantial evidences can lead to draw an adverse inference against any person, but in absence of any corroborative evidences or admission of the person from whose possession such document was found, it is difficult to draw an adverse inference based on such document without any reference to name of the person and purpose for which said payment was made. In the present case, there is no admission of the transaction of on-money payment in the statement recorded u/s 132(4), either in the case of M/s. Polisetty Somasundaram or in the case of the assessee. Shri Yeluri Chandrasekhar Rao, AR of M/s. Polisetty Somasundaram, has denied the payment of on-money by M/s. Polisetty Somasundaram in a statement recorded on 5-3-20. He further stated that cash of Rs. 51,53,55,000 has been sent to Bang on 31-12-15 for the purpose of purchase of tobacco in Mysore region and that the said cash is not connected in any way to the immovable property transactions dt. 23-1215 with the assessee. Further, Shri S Mahalingam, the Managing Partner of the assessee's firm had also denied receiving any on-money....
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....without revealing the purpose. If the purpose as explained by Shri YC Rao of M/s. Polisetty Somasundaram is not substantiated by proper evidences, cannot be viewed adversely against the assessee unless there is an evidence to show that the cash carried to Bang on 31-12-15, was paid to the assessee. In our considered view, the contentions of the Revenue on the basis of statement of Shri YC Rao amounts to a clear misleading or misinterpretation of the said statement going by the contents of answer given by him in response to a specific que. If you go by relevant part of the statement, more particularly, que No. 9 and answer given by him, it is very clear that, he has admitted to have paid on-money over and above registered value in respect of some property transactions made at Bang, but he has categorically denied making any on-money payment to the assessee. This is further fortified by the findings of the AO that the recorded sale consideration in the registered document at Rs. 99 crores is much more than the guideline value of the property at Rs. 43.31 crores and this position has indirectly confirmed or indicated the stand of the assessee that there is no possibility of receipt of....
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....ts partners nor reference to the property transaction between the assessee and M/s Polisetty Somasundaram. We have gone through the purported cash book relied upon by the AO which has been extracted in the assessment order. The relevant entry in the seized material contained the narration Bang against the date 31-12-15 and the amount of Rs. 51,53,55,000 was noted against the same. The AO based on said entry coupled with date of transfer of property presumed that the assessee has received on-money for sale of property. In our considered view, the conclusion arrived at by the AO is purely on suspicion and surmise manner, because, said document does not contain the nature of transaction nor the purpose, for which, money has been sent to Bang. Therefore, we are of the considered view that no arbitrary addition to the income can be made by the AO based on a 'dumb document' or a vague notings unless any other corroborative evidences which shows that the entries contained in 'dumb document' are true and correct. This legal position is supported by DK Gupta (2008) 174 Taxman 476 (Del HC), wherein, it was held that a 'dumb document' without any corroborative evidence or finding tha....
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....eference to the name of the assessee or the concerned property at Bang in the relevant entry in the seized cash book. Therefore, we are of the considered view that sec 132(4A) and 292C, at best lead to a rebuttal presumption that carrying of cash to the said extent by M/s Polisetty Somasundaram is true and correct. But, the rebuttal presumption cannot extend to the receipt of such cash by the assessee in absence of any reference to the name of the assessee or the concerned property at Bang in the relevant document. Thus, we reject the ground taken by the Revenue. 17. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the AO is erred in making addition towards alleged on-money received by the assessee towards transfer of property as unexplained money u/s 69A. The ld CIT(A) after considering relevant facts has rightly deleted the additions made by the AO, and thus, we are inclined to uphold the findings of the ld CIT(A), and dismiss the appeal filed by the Revenue." 103. Insofar as ground no. 2, for A.Y. 2014-15 to 2019-20 and ground no. 7 in A.Y. 2014-15, ground no. 6 in A.Y. 2018-19 and 2019-20 are conc....
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....sioner of Income Tax Central Circle-1(1), Nagpur 29 SEP 2021 R Document 2 (2)-after) and-1(1), Farm 2 9 SEP 2021 865 OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME TAX CENTRAL RANGE -1, NAGPUR Aayakar Bhavan, R.No.206, Telangkhedi Road, Civil Lines, Nagpur - 440001 Date: 29.09.2021 F.No. Addl. CIT/CR-1/NGP/153D/MCBIPL/2021-22 To, The Asstt. Commissioner of Income-Tax Central Circle -1(1), Nagpur Approval U/s 153D of I.T. Act in the case of M/s Maheshwari Coal Sub .: Benefication & infrastructure Pvt. Ltd., PAN: AAECM9298D for A.Y. 2014-15 - reg. Letter F.No. ACIT CC-1(1)/ Approval U/S 153D/MCBIPL/2021-22 Ref .: dated 29.09.2021 Please refer to the above. 2. I have perused the draft assessment order submitted by you in the case M/s Maheshwari Coal Benefication & infrastructure Pvt. Ltd. PAN: AAECM9298D for A.Y. 2014-15 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. 153A for A.Y. 2014-15 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: AA....
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....infrastructure Pvt. Ltd. PAN: AAECM9298D for A.Y. 2016-17 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. 153A for A.Y. 2016-17 in respect of the following case: Sr.No Name of the Assessee Section A.Y. 1. Coal M/s Maheshwari Benefication & infrastructure Pvt. Ltd. PAN: AAECM9298D U/s 143(3) r.w.s. 153C of the I.T. Act. 1961 2016-17 Coal M/s Maheshwari Benefication & infrastructure Pvt. Ltd. PAN: AAECM9298D mulatu (MILIND V. PATIL) Addl. Commissioner of Income-tax Central Range-1, Nagpur Document 5 (केनà¥à¤¦à¥à¤°à¥€à¤¯) सरà¥à¤•à¤²-1(1), मास 2 9 SEP 2021 868 OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME TAX CENTRAL RANGE -1, NAGPUR Aayakar Bhavan, R.No.206, Telangkhedi Road, Civil Lines, Nagpur - 440001 F.No. Addl. CIT/CR-1/NGP/153D/MCBIPL/2021-22 Date: 29.09.2021 To, The Asstt. 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. 20....