TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 1636
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....nder 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.12,00,000 - Interest on unsecured loans disallowed by AO and added as undisclosed income Rs. 3,99,600 Rs. 4,4....
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....t 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 Rs. 27,17,190. The assessee, in response to the notice issued by the Assessing Officer under section 142(1) of the Act, filed detailed submissions/reply along ....
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....ing 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 section 153A for the assessment year 2014-15 to 2016-17 are given as under: - A.Y. ROI filed under section 139(1) on Income returned under section 139(1) (in Rs.) ROI filed under section 153A on Income returned under section 153A (in Rs.) Due date for issue of noti....
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....ar. 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 placed on the decision of the Hon'ble Supreme Court in PCIT v/s Abhisar Buildwell (P) Ltd., [2023] 149 taxmann.com 399 (SC). 14. Further, the learned A.R. submitted that the addition of Rs. 12 lakh and Rs. 3,99,600, have been made under section 68, only on the basis of statement of one Suresh Agrawal, Kolkata, dire....
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.... 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 preceding year (i.e., from the assessment year 2013-14) and thus, it is not a fresh cash credit as appearing in the books of the assessee in the assessment year 2014-15. Thus, it cannot be added in the assessment year under consideration under section 68 of the Act. For such arguments, the learned A.R. relied on the following case laws: - *CIT v/s Usha Stud Agricultural Farms Ltd. (2008) 183 taxmann.c....
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....riminating 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 assessment procedure and was taxable at normal rate. Therefore, sec 153A came to be inserted and brought on the statute. U/s 153A regime, the intention of the legislation was to do away with the scheme of 2 parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of sec 153A and in case of search, there shall be block assessment for 6 years. Search assessments/ block assessments u/s 153A a....
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....ch 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 fulfillment of the conditions mentioned in sec 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment u/s 153A and in case of unabated/ completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment u/s 147/ 148 has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating materi....
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....sideration 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 accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." 21. Further, we find that the Assessing Officer has used this statement (i.e., pre-search statement recorded on 22/01/2019 at third party premises at Kolkata) of Suresh Agrawal, Kolkata, director of M/s. Rashi Steel & Power P Ltd, Kolkata on oath recorded on 14/03/2019 in the course of a separate search conducted in the case of a third party (i.e., search of Suresh Agrawal, Kolkata, director of M/s. Rashi Steel & Power P Ltd, Kolkata on 22/01/2019 which is a pre-search stat....
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....1 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 assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the assessees clearly stated that they did not know, could not have been shifted to the assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement. 38. Fifthly, statements recorded u/s 132(4) do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal. Lastly, as already pointed out hereinbefore, the facts in the present ....
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....as 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 the AY12-13 and Rs. 3.06 crores through banking channels for the AY13-14. The fact that the Investigating Officer (IO) examined the Directors of the UAPL was also not in dispute. The both the loans were disclosed by the Assessee in the returns filed in the books of account produced before the AO. 8. For AY12-13 the ITAT noted that the time limit for issuance of notice u/s 143(2) with reference to the original return filed by the Assessee on 30-9-12 expired on 30-9-13 and by that date, no notice was issued to the Assessee. Thus, the original ROI became final on 30-9-13 i.e., before the date of search. In other words, the assessment of AY12-13 had not abated. During the course of searc....
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.... 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 principles of natural justice because of which the assessee was adversely affected." 13. This Court has in Smt Jami Nirmala [2021] (Ori HC) and Smt Smrutisudha Nayak [2022] (Ori HC) relied on Kabul Chawla [2015] (Del HC) where inter alia it was observed as under: "...(iv) Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material. (vii) Completed assessments can be in....
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.... 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 from assessee's own premises during search u/s 132 no incriminating material was found and no adverse statement is there on record of the assessee u/s 132(4) and it is an admitted fact before us that mere basis of un-confronted statement of Shri Pradeep Kumar Jindal recorded u/s 132(4) in his own separate search action and on the basis of un-confronted material for the said search u/s 132(4), which in our considered opinion, cannot be made as a sole basis for making the additions u/s 153A without recourse of mandatory and exclusive provisions under the Act like u/s 153C which specifically covered the extant situation. In our opinion, the decision of the Hon'ble SC, Hon'ble HCs and the various Benches of the Trib are directly applicable in the present case wherein they have adjudicated and decided the similar issue in favour of the....
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....e 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 discovered during the search action. This statement certainly has the evidentiary value and relevance as contemplated under the explanation to sec 132(4). However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment. Best Infrastructure (I) (P) Ltd (2017) (Del HC) has inter alia held that: "38. Fifthly, statements recorded u/s 132(4) do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (2016) (Del HC)." 9. In Harjeev Aggarwal (2016) (Del HC), this Court had held as follows: "23. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded u/s 132(4) would by itself be sufficient to assess the income, as disclosed by....
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....ation 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 undisclosed income to the evidence found during search, the statement recorded u/s 132(4) can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 28. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded u/s 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted sub....
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....remises 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 Revenue is entitled to interfere with unabated assessment which stood concluded either u/s 143(1) or u/s 143(3) and not pending at the time of search in the absence of any incriminating material unearthed as a result of search in the case of assessee. 8. As pointed out on behalf of the assessee, there is a total absence of reference to any incriminating material which may have any bearing to the impugned additions/ disallowances except some statement of witness Mr. Pradeep Kumar Jindal adverse to assessee in an all together different search proceedings. The Hon'ble Del HC has observed in identical fact situation that statement of Pradeep K. Jindal extracted in his search cannot be construed to be incriminating material in the case of assessee herein. As a corollary, it is manifest that additions/ disallowances have been made without reference to any specific incriminating material/ document found as a result of search and seizure action u/s 132 ....
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....urvey, 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 addition of Rs. 75 lakhs in respect of the share capital/ share premium received by the assessee from the aforesaid company. 7. The Revenue, therefore, has come in appeal before us contesting the action of the ld CIT(A) in deleting the addition in respect of the remaining 3 parties amounting to Rs. 4,75,00,000 and whereas the assessee has come in appeal contesting the confirmation of addition of Rs. 75 lakhs in respect of share premium/ share capital received from M/s. Aachman Vanijya (P) Ltd. 8. We have heard. Admittedly, the original assessment in this case was already completed and not abated as on the date of search. It is also an admitted fact that no incriminating material was found in the premises of the assessee during the search action relating to the aforesaid share capital/ share premium received by the assessee. Now, the ld CIT(A) while deleting the addition in respect of the 3 parties has relied upon Kabul Chawla (2015) (Del HC) and other HCs, wherein, it ....
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....rried 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 respect has relied upon Andaman Timber Industries (2015) (SC) dt. 2-9-15, wherein, the Hon'ble SC has held that where the assessee had not been given an opportunity to cross examine the witness, who made statement such bald statement, cannot be made the sole basis to make addition. Since, the words "and such other materials or information as are available with the AO and relatable to such evidence" do not find mention under the sec 153A and further it has been held time and again by the various HC that addition can be made in case of completed assessment as on the date of search only on the basis of incriminating material found during the search action, hence, in our view, the action of the ld CIT(A) in confirming the addition of Rs. 75 lakhs on the basis of sole statement of one dummy director, recorded during the survey action in case of that company, without confronting the same to the assessee, cannot be held to be justified. The impugned addition is, therefore, ordered to be deleted. In view of ....
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.... respect to the genuineness of the transaction and creditworthiness of Shri Ishwar Adwani and, therefore, deleted the addition of Rs. 145 lakhs made by the AO. It is required to be noted that as such an amount of Rs. 100 lakhs vide Che. No. 102110 and an amount of Rs. 60 lakh vide Che. No. 102111 was given to the assessee and out of the total loan of Rs. 160 lakhs Rs. 15 lakh vide Che. No. 196107 was repaid and, therefore, an amount of Rs. 145 lakhs remained outstanding to be paid to Shri Ishwar Adwani. It has also come on record that the said loan amount has been repaid by the assessee to Shri Ishwar Adwani in the immediate next FY and the Deptt has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, we see no reason to interfere with the impugned order passed by the Tribunal. No que of law, much less substantial que of law arises in the present TA. Hence, the present TA deserves to be dismissed and is accordingly dismissed." ii) Shri Krishnabhagwan R Sharma v. ACIT, ITA No. 73, 82/Rjt/2015, dt. 20-7-22 (Rajkot-T....
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....sessee, proprietor of Pooja Construction, was one of the beneficiaries of accommodation entries from M/s. Daksh Diamonds operated by Shri Jain and Group. Based on the said information, the AO reopened the assessment by issuing notice u/s 148 on 28-3-14. On the basis of the statement recorded u/s 132(4)/131 during the course of search, the AO made an addition of Rs. 50 lakhs of ULs shown by the assessee during the impugned AY and an amount of Rs. 4,50,000 towards intt payment. 4. Aggrieved by the order of the AO, the assessee filed an appeal before the ld CIT(A). The ld CIT(A) held that (i) the AO has solely relied upon the statement of Shri Bhawarlal Jain and did not carry out any worthwhile independent inquiry in the matter, (ii) the AO has totally ignored the documentary evidence submitted by the assessee, (iii) even if some of the transactions entered into by the above parties are found to be not genuine, it does not lead to the conclusion that all the transactions entered into by these parties were bogus or non-genuine including the transactions related to the assessee. With the above reasons, the ld CIT(A) held that merely based on the statement of a third person without an....
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....essee received Rs. 30 lakhs vide che. No. 812561 and Rs. 20 lakhs vide che. No. 812562- being amounts received towards loan from Daksh Diamonds (Indusland Bank Ltd, Opera House Branch, Indusland House, 425 Mumbai-04). On 6-5-10 the assessee issued che. No. 265949 amounting to Rs. 20 lakhs being cheque to Daksh Diamonds towards refund of loans. Further, on 22-610 the assessee issued che. No. 263943 amounting to Rs. 30 lakhs being cheque to Daksh Diamonds towards refund of loans. The transactions were routed through Vijay Bank. The ledger confirmation by Daksh Diamonds tell the same facts. The search and seizure action conducted by the Deptt in Bhanwarlal Jain Group took place on 3-10-13. The loans taken by the assessee from Daksh Diamonds in the year 2006 was refunded in the year 2010. One has to respect the transactions which occurred more than 3 years before the search and seizure action by the Deptt. Thus, the addition made by the AO without any documents is devoid of merit. Accordingly, we uphold the order of the ld CIT(A)." iv) CIT v. Usha Stud Agricultural Farms Ltd. (2008) 183 taxmann.com 277 (Del HC) held as under: "2. Brief facts of the case are that the assessee f....
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.... that all these credits were brought forward from earlier FYs for which necessary evidences has been placed on record. On perusal of evidences filed by the assessee, we find that the credits in the name of S/Shri ARKA. Karutha Pandian, KA Sekar and K. Sivasundarapappa and Late ARK Arunachala Nadar, was received in FY07-08. Similarly, credit in the name of Smt. Swarnalatha was received in the FY06-07, likewise credit on account of land advance from Shri Kumar was received in the FY05-06. From the above, it is very clear that none of the credits were received during the current FY. Therefore, in our considered view these credits cannot be brought to tax as unexplained cash credits u/s 68, because in order to bring any credits within the ambit of sec 68, said credits should be found in the books of accounts of the assessee maintained for any PY and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee in the hands of the AO is not satisfactory. In this case, none of the credits were received during the current FY and further, the assessee has offered explanation about source and nature of credits and further proved the identi....
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....High Court in Usha Stud Agricultural Farms Ltd, (2008) 183 taxmann.com 277 (Del HC) and the judgment of the Hon'ble High Court of Gujarat in Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251(Guj.). 25. In the assessment year 2015-16 and 2016-17, being ITA no. 114/Nag./ 2024, A.Y. 2015-16 and ITA no. 115/Nag./2024, A.Y. 2016-17, similar issue in respect of of interest paid on unsecured loan has been raised in ground no. 3 and 4, in both the appeals. The grounds no. 3 and 4, raised in ITA no. 114/Nag./2024 and ITA no. 115/Nag./2024, are reproduced below: - A.Y. 2015-16 "3. On the facts and circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs .4,42,757 on the count of interest on unsecured loan treating it as bogus, when, on the date of search (i.e., 11-7-19), AY15-16 had already been completed, since scrutiny assessment u/s 143(3) had been completed on 22-12-17; no assessment was pending for AY15-16; 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 addition of Rs. 4,42,757 for AY15-16; in absence of this, addition is ....
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....nt with the view taken by us, similar additions are deleted in these years also. Consequently, the grounds no. 3 and 4, are decided in favour of the assessee by setting aside the impugned order passed by the learned CIT(A) for the assessment year 2015-16 and 2016-17 on grounds no. 3 and 4 as well. 27. In the result, appeals for assessment year 2014-15, 2015-16 and 2016-17 are allowed. ITA no. 116/Nag./2024 Assessment Year -2017-18 28. Following grounds have been raised by the assessee: - "Ground no. 3: "On the facts and circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs. 7,59,397 on the count of interest treating it as bogus, when TDS has been deducted on such interest expenses claimed; 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. 7,59,397 is not justified, is liable to be deleted." 29. The Assessing Officer has made following additions: - Loan creditors Opening bal. as on 1-4-16 Interest credited during the year Best Advisory P Ltd 0 2,87,405 Gazal Textiles 0 1,00,684 Lily Abasan P Ltd 0 1,25,855 Origin Deal Trade P Ltd 0 2,03,502 ....
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....rest paid on unsecured loan which has been re-paid in subsequent year, therefore, applying the same ratio as aforesaid in the assessment year 2017-18, the impugned additions made in these years are directed to be deleted. 35. Additionally, we proceed to deal with the issue of validity of the approval granted under section 153D of the Act by the Addl. CIT. 36. This issue is involved in Ground no. 1, in all the assessment year i.e., 2014- 15, 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 is reproduced herein below: - "1. On the facts and circumstances of the case and in law, approval u/s 153D dt.29-9-21 is invalid as granted for making assessment u/s 143(3) rws. 153C, while assessee was the searched person u/s 132 on 11-7-19; AY14-15 is not the searched year; approval ought to have been made for making assessment u/s 153A which has wrongly been made by Addl. CIT in mechanical manner without application of mind by Addl. CIT; granted on same day itself on the letter dt. 29-9-21 by the AO; in absence of a valid approval as mandated by law u/s 153D, impugned assessment made would be invalid, bad in law and is liable to be quashed." 37. Ground no. 1, in the assessment year 2020-21,....
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....3D/MCBIPL/2021-22 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. 2019- 20 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. 2019-20 in respect of the following case: Sr. no. Name of the Assessee Section A.Y. 1. M/s. Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. U/s 143(3) r.w.s. 153C of the I.T. Act 1961 2019-20 Sd/- (MILIND V. PATIL) Addl. Commissioner of Income-Tax Central Range-1, Nagpur 41. The learned A.R. submitted that the Addl. CIT has granted approval under section 153D for the assessment year 2014-15 to 2019-20 separately on 29/09/2021 (i.e., on the same day itself in total 12 cases i.e., 7 cases in case of the assessee for the assessment year 2014-15 to 2020-21 and in 5 cases in case in respect of Shri Anil Mundra, director of the assessee for the A.Y. 2016-17 to 2020-21) for making assessment under section 143(3) r/w section 153C, which is invalid, bad in law....
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....s, reliance is placed on the judgment of the Hon'ble Jurisdictional High Court in Smt. Kalpana Shantilal Haria v/s ACIT, W.P (L) no. 3063/2017, dated 22/12/2017, and the Co-ordinate Bench decision of the Tribunal, Gauhati Bench, in Sushanta Saha v/s ACIT, ITA no. 159, 212, 213/Gty./2018 (Gau-Trib). 44. The second contention of the learned A.R. is that the Addl. CIT has granted approval even separately for each year under section 153D dated 29/09/2021 for the assessment year 2014-15 to 2020-21 without even perusing / verifying the facts / assessment records / files of the assessee. The Addl. CIT has not recorded any satisfaction on his own for approving the draft assessment order. The Addl. CIT has failed to satisfactorily record its concurrence with the contents of the draft order that how he was satisfied with. The Addl. CIT has only stated in the approval order passed under section 153D dated 29/09/2021 that he had perused the 'draft assessment order' which means, he is clearly saying rather 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 Assessi....
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....ccounts 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 cared by the Addl. CIT while granting such mechanical approval on the same day itself (i.e., in 12 cases) on 29/09/2021. iii)there is more glaring mistake by the Addl. CIT is that the approval has been granted for assessment under section 143(3) r/w section 153C, while, assessee is a searched person and it has to be assessed only under section 153A for the assessment year 2014-15 to 2019-20 and certainly not under the section 143(3) in any condition. The scheme of section 153A and section 153C is on completely different fields and they are separate provisions of law & procedure are also completely different, however, ignoring all these things, the Addl. CIT granted such mechanical approval for section 143(3) r/w section 153C, without even seeing the files / records and even without perusing / reading the draft assessment order also. Because this type of mistake would only be possible when such high ranking officer granted such approval without even perusing / reading the draft assessment order / records / files etc., thus, it shows com....
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....Mum-Trib), *Inder International v/s ACIT (2021) 213 TTJ 251(Chd-Trib); *Sanjay Duggal v. ACIT ITA No. 1813/Del/2019 dt. 19-1-21 (Del-Trib); and * SMW Ispat (P) Ltd v. ACIT (2024) 163 taxmann.com 119 (Pune-Trib). A.Y. 2018-19 TO 2020-21 46. The learned A.R. submitted that the Addl. CIT has granted approval under section 153D dated 29/09/2021 for A.Y. 2018-19 to 2020-21 without even perusing/verifying the facts/ assessment records/files of the assessee. Approval under section 153D dated 29/09/2021 is in mechanical/routine manner without application of mind by the Addl. CIT, merely a formality, an empty ritual. The Addl. CIT has not cared that assessment made under section 143(3) for A.Y. 2018-19 and the Assessing Officer has made huge presumptive addition of Rs. 8,55,87,852 which is 40% GP estimation on extrapolated unaccounted sale of coal dust of Rs. 21,39,69,630 for A.Y. 2018-19, which is again based on extrapolated sale of succeeding years i.e., A.Y. 2019-20 and 2020-21, which is not permissible in the eyes of law. This vital fact has not been cared by such high ranking officer, i.e., the Addl. CIT, while granting such mechanical approval on the same day itself with a....
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....ared by the Addl. CIT while granting such mechanical approval on the same day itself (i.e., in 12 cases), on 29/09/2021. 50. It is submitted that the Addl. CIT has only said in the approval letter under section 153D dated 29/09/2021 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. 51. It is submitted that there is one more glaring mistake by the Addl. CIT is that the approval has been granted for assessment u/s 143(3) r.w.s. 153C, while, assessee is a searched person and it has to be assessed only under section 153A for A.Y. 2018-19 and certainly not under the section 143(3) in any condition. The scheme of section 153A & section 153C is completely on different fields and they are separate provisions of law and procedure is also completely different. However, ignoring all these things, he granted such mechanical approval for section 143(3) r.w.s. 153C, without even seeing/ perusing the files/ records and even without per....
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....-21, which is not permissible in the eyes of law. This fact has not been cared by Addl. CIT while granting such mechanical approval on the same day itself i.e., 29/09/2021. Such presumptive addition of Rs. 10,69,84,815 has no legal/ valid basis in search assessment made under section 143(3) rws 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 for A.Y. 2019-20. 54. The learned A.R. submitted that in the A.Y. 2019-20, 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. 2019-20, 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. 10,69,84,815 which is unsustainable in the eyes of law, addition made on estimation of income is not valid, addition is not su....
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.... has not recorded any satisfaction on his own for approving the draft assessment order. The Addl. CIT has failed to satisfactorily record its concurrence with the contents of the draft order that how he was satisfied with. He has only said in the approval order passed under section 153D dated 29/09/2021 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. Approval under section 153D dated 29/09/2021 for A.Y. 2020-21 is in mechanical/ routine manner without application of mind by Addl. CIT, merely a formality, an empty ritual. 60. Thereafter, it is the second contention of the learned A.R. that the Addl. CIT has not cared that assessment made under section 143(3) for A.Y. 2020-21 and the Assessing Officer has made huge presumptive addition of Rs. 13,37,31,019 which is 40% of the gross profit estimation on extrapolated unaccounted sale of coal dust of Rs. 33,43,27,548 for A.Y. 2020-21, which is based on 2 month's extrapolation....
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.... to 15/06/2019 on screen shot of mobile of Sandeep Agrawal, Nagpur, director of M/s. Swami Fuels, i.e., third party) which is not even pertain to the assessee. The third party Sandeep Agrawal, has not been examined by the Assessing Officer for verifying the facts. This presumptive addition is not permissible in the eyes of law. This fact has not been cared by the Add. CIT, while granting such mechanical approval under section 153D for A.Y. 2020-21 on the same day itself (i.e., 29/09/2021). The Addl. CIT has only said in the approval letter under section 153D dated 29/09/2021 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. 63. We have carefully considered the rival contentions, perused the orders of the authorities below and the material placed on record. In the present case before us, we noted that the Addl. CIT did not mention anything in the separate approval order passed under section 153D dated 29/09/2021 for A.Y. 2....
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....essments, the Assessing Officer can pass the search assessment order under section 153A or under section 153C only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the Addl. CIT in terms of section 153D. This is a mandatory requirement of law. The said approval granting proceedings by the Addl. CIT is a quasi judicial proceeding requiring application of mind by the Addl. 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 Assessing Officer to seek to place the draft assessment order together with copies of the seized documents along with assessment records/ files before the Addl. CIT well in time much before the due date of completion of search assessment. In the present case, approval under section 153D granted on the same day on 29/09/2021 on the basis of letter dated 29/09/2021 by the Assessing Officer for seeking approval, and thus, proper procedure has not been followed by the Assessing Officer as well as the Addl. CIT. 67. The Addl. CIT is supposed to examine the assessment records/ files/ seized documen....
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....pposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. In our considered opinion, if the arguments of the learned Departmental Representative are to be appreciated that the Addl. CIT need not apply his mind while granting approval of the draft assessment orders under section 153D as it is not provided in section 153D, then it would make the entire approval proceedings contemplated under section 153D otiose. The law provides only the Assessing Officer to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the Addl. CIT to grant judicious approval under section 153D to the draft assessment orders placed by the Assessing Officer. 71. We have gone through the approval granted by the Addl. CIT on the date mentioned in the table hereinabove under section 153D i.e., on 29/09/2021. The said approval letter clearly states that a letter dated 29/09/2021 was filed by the Assessing Officer before the Addl. CIT seeking approval of draft assessment order under section 153D. The Addl. CIT has accorded approval for the said draft asse....
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....case." (ii) Dharampal Satyapal Ltd (2019) (Gau HC) Manu/GH/07070/2018, the Court has held as under: "28. When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must coexist and, therefore, where an Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements." (iii) Kalpana Shantilal Haria v. ACIT (2017) (Bom HC) dt. 22-12-17; WP No. 3063 of 2017, held as under: "5. Our attention is invited to the sanction given by the Jt. CIT on the application by the AO seeking his approval in the prescribed form. The prescribed form filled by the AO indicated that the notice has been issued u/s 147(b). The Jt. CIT has while granting the sanction has recorded the word "satisfied". 6. The grievance of the petitioner is that there is no proper sanction in....
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....be treated as fulfilling the mandate of sec 153D vis-a-vis legislative intent of the said sec in the statute. sec 153D reads as under: 16. The Legislative intent is clear from the above, in as much as, prior to the insertion of sec 153D, there was no provision for taking approval in cases of assessment and reassessment in cases where search has been conducted. Thus, the legislature wanted the assessments/ reassessments of search and seizure cases should be made with the prior approval of superior authorities which also means that the superior authorities should apply their minds on the material on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authorities have to approve the assessment order. 19. Thus, the worthy Addl. CIT, Cen-Range-2, New Delhi gave approval To 246 assessment order by a single approval letter u/s 153D by mentioning as under: "The above draft orders, as proposed, are hereby accorded approval with the direction to ensure that the orders are passed well before limitation period. Further, copies of final orders so passed be sent to this office for record." 20.....
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.... with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the court is satisfied that the findings by the ITAT cannot be disturbed." 18. Further, this Court in Central India Electric Supply Co Ltd [2011] has taken a view that merely rubber stamping of "Yes" would suggest that the decision was taken in a mechanical manner. Paragraph 19 of the said decision is reproduced as under: - "19. In respect of the first plea, if the judgments in Chhugamal Rajpal (1971) (SC), Chanchal Kumar Chatterjee (1974) (Cal) and Govinda Choudhury and Sons (1977) (Orissa) are examined, the absence of reasons by the AO does not exist. This is so as along with the proforma, reasons set out by the AO were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed....
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.... foregoing discussion is that the satisfaction arrived at by the prescribed authority u/s 151 must be clearly discernible from the expression used at the time of affixing its signature while according approval for reassessment u/s 148. The said approval cannot be granted in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase "Yes" does not appropriately align with the mandate of sec 151 as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. 22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas P Ltd is concerned, the same was a case where the satisfaction was specifically appended in the proforma in terms of the phrase- "Yes, I am satisfied". Moreover, paragraph 16 of the said decision distinguishes the approval granted using the expression "Yes" by citing Central India Electric Supply (2011) (Del HC), which has already been discussed above. The decision in the case of Experion Developers P Ltd would also not come to the rescue of the Revenue as the same does not deal with the expression used in the....
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....in the impugned order. The Trib, thus, concluded there was a complete lack of application of mind, inasmuch as the ACIT, who granted approval, failed to notice the said error. 12.1. More particularly, the Tribunal notes that all that was looked at by the ACIT, was the draft assessment order. 13. In another words, it was emphasised that the approval was granted without examining the assessment record or the search material. The relevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: "17.1. However, in the present case, we have no hesitation in stating that there is complete non-application of mind by the ld Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs. 87,20,580. Similarly, when the total assessed income as per the AO comes to Rs. 16,69,42,560, the Addl. CIT could not have approved the assessed income at Rs. 1,65,07,560 had he applied his mind. The addition of Rs. 15,04,35,000 made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. 17.2. Even the factual s....
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.... 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 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,....
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....However, in the present case, we have no hesitation in stating that there is complete non-application of mind by the ld Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the addition of Rs. 8 crores in respect of M/s. Tirupati Real Tech Pvt Ltd and Rs. 7 lakhs in respect of M/s. Golden Buildmart P Ltd which are opening balances and the very same amounts were added in the preceding AY. Even the AO in his remand report has also admitted the mistake that the addition of an amount of Rs. 8 crores, was the opening balance and the mistake is apparent from record and needs to be rectified." 14. It is, therefore, discernible from the impugned order of the ITAT which reckons a categorical finding, and rightly so, that the approval u/s 153D has been granted without due application of mind in the present case. Admittedly, the ITAT notes that the Addl. CIT has approved the draft assessment order without verifying the record which was made available before the said authority. It is further seen that the approval in the present case was accorded on the same day when it was sent to the concerned authority. It is also noteworthy that 35 draft....
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....echanically. 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. 16. In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under: - "10. We have gone through the approval granted by the ld Addl. CIT on 30-12-18 u/s 153D which is enclosed at page 36 of the PB of the assessee. The said letter clearly states that a letter dt. 30-12-18 was filed by the ld AO before the ld Addl. CIT seeking approval of draft assessment order u/s 153D. The ld Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30-12-18 for 7 AYs in the case of the assessee and for 7 AYs in the case of Smt Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the PB which contains information obtained by Smt. Neetu Nayyar from Central Public Information Officer who is none other than the ld Addl. CIT, Central Range-S, New Delhi, under RTI Act, whe....
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....the prior approval was held to be mandatory. Rajesh Kumar (2007) 2 SCC 181 (SC) observed as under: "58. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the AO if he was found to have adopted a wrong approach or posed a wrong que unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/ or the entries made therein. While exercising its power, the AO has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief CIT or the CIT, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given." 17. It is therefore, not correct on the part of ....
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....rely administrative order which entails civil consequences, must be consistent with the rules of natural justice. (Also see: Maneka Gandhi (1978) 1 SCC 248 and SL Kapoor v. Jagmohan (1980) 4 SCC 379). 30. As already noted above, the expression "civil consequences" encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. Anything which affects a citizen in his civil life comes under its wide umbrella. Accordingly, we reject the argument and hold that since an order u/s 142(2A) does entail civil consequences, the rule audi alteram partem is required to be observed." 20. The non-compliance of the requirement was held to have vitiated the notice for reopening of the assessment. Likewise, in Syfonia Tradelinks P Ltd (2021) (Del HC) the Del HC disapproved of the rubber stamping by the superior officer of the reasons furnished by the AO for issuance of the sanction. 22. As rightly pointed out by ld counsel for the assessee there is not even a token mention of the draft orders having been perused by the Addl. CIT. The letter simply grants an approval. In other words, even the bare minimum requirement o....
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....orded as approval considered by Seerajuddin & Co (2023) 150 taxmann.com 146 (Ori HC) as per para No. 22 of that decision, where there was not even a token mention of the draft orders having been pursued by the Addl. CIT. The letter simply grants approval. The bare minimum requirement of the approving authority having to indicate what thought process involved is also missing in the aforementioned approval order. 47. We are not on the issue that how the ld approving authority would approve all such orders on one day on 26-2-21 because it may be possible for a person to approve all such orders if he is in know of things since the stage of commencement of the assessment proceedings. However, we are unable to understand and appreciate the situation where the glaring mistakes in the assessment order as stated above and also fact of approval with approval No. and date of approval is mentioned in the draft assessment order itself which is sent for approval of the approving authority. This itself forces us to state that all such approval granted u/s 153D by the approving authority in all these appeals are without application of mind. Neither the interest of revenue, nor the principle of ....
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....fore granting approval u/s 153D. We also notice that in the assessment order there is no mention about the approval, if any, received by the AO u/s 153D. Before us, ld counsel for the assessee has indicated various mistakes, mis-match, anomalies and wrong figures in the assessment order which shows that when such draft assessment orders were sent to the Addl. CIT, same have not been examined by him at all and only mechanical approval was given for the sake of formality. Some of such mistakes referred by the ld counsel for the assessee in the written submission are stated below: *** 11. All the above mistakes/ inconsistencies/ mismatch of figures indicate that the approving authority has not even read the draft assessment order and has not applied mind to the facts and assessment records and, therefore, the approval u/s 153D clearly seems to be given in a mechanical and casual manner. Under these given facts and circumstances, when there is no proper approval u/s 153D the assessment proceeding are illegal, bad in law and deserves to be quashed. We take note of few of such decisions referred by the ld counsel for the assessee which are as follows: Smt. Moumita Saha Vs. ACIT, ....
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....r any incriminating documents or other connected documents and papers/ various statements recorded u/s 132(4) and sec 131(1A) of the assessee or any other person/ appraisal report of the Investigation Wing of the Department/ materials on hand with the Department at the time of initiation of search or material evidences gathered were placed for its verification and the same were duly verified and/or examined by him as mandated u/s 153D. In the absence of compliance of the above mandate, the approval order dt. 25-12-18 passed u/s 153D becomes an empty formality without due process of law and, thus, not sustainable. The ld Addl. CIT, in fact, abdicated his statutory functions and delightfully relegated the statutory duty to his subordinate being the Dy. CIT, Central-1, Bhopal adopting a shortcut method. Merely, an undertaking given by the ld AO was considered to be adequate by the Addl. CIT to accord approval in all assessments involved without considering any merit in the proposed adjustments with reference to appraisal report, incriminating material collected in search etc.; this is nothing but an approval by way of mere mechanical exercise accepting the draft assessment-order wi....
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....ies filed by the assessee and drawing conclusions thereon. Hence, it is very easy for the Jt. CIT to grant approval of the draft assessment order on the same day since he is involved with the assessment proceedings right from the inception. Accordingly, he argued that the objection raised by the ld AR has no force. Further, the ld DR vehemently argued that bare reading of sec 153D talks only about existence of approval from the Jt. CIT. There is no mention of application of mind on the part of the Jt. CIT or the approving authority in the said sec. The expression 'application of mind' is only provided by the Judicial decisions and not provided in the statute. Hence, the ld DR argued that literal interpretation is to be given to the sec 153D which does not provide for application of mind of the approving authority and hence, any other interpretation contrary to the same would only result in re-writing the law. 9. We find, as per the scheme, for framing search assessments, the ld AO can pass the search assessment order u/s 153A or u/s 153C only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the Jt. CIT in terms of sec 153D. Th....
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....getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the ld DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the Investigation Wing, both the AO and the Jt. CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. In our considered opinion, if the arguments of the ld DR are to be appreciated that the Jt. CIT need not apply his mind while granting approval of the draft assessment orders u/s 153D as it is not provided in sec 153D, then it would make the entire approval proceedings contemplated u/s 153D otiose. The law provides only the AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the Jt. CIT to grant judicious approval u/s 153D to the draft assessment orders placed by the ld AO. 10. Let us now examine whether in the aforesaid background of the scheme, whether the approval in terms of sec 153D has been granted by the Jt. CIT in a judicious way after due application of mind or not, ....
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....as. We noted that the relevant para of the above approval letter merely says that "Necessary statutory approval u/s 153D is given to pass the above assessment order as such. Assessment record in this case is returned herewith..." which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at 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. From the said approval, it can be easily inferred that the said order was approved solely relying upon the implied undertaking obtained from the AO in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination/ investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his statutory functions and delightf....
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....d delightfully relegated his/ her 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/ her to accord approval in all assessments involved. Manifestly, the Addl. CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Addl. CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. 11.6. There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D. Such perfunctory approval has no legal sanctity in the eyes of the law. Shreelekha Damani (Mum-Trib) approved by jurisdictional HC subsequently as reported in 307 CTR 218 affirms the plea of the assessee. 11.7. Very recently, Sanjay Duggal (Del-Trib) dt. 19-1-21 has also echoed the same view after a detailed analysis of similar facts and also expressed ....
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.... being Quasi Judicial function and it should be based on reasoning. In our view, when the legislature has enacted some provision to be exercised by the higher Revenue Authority enabling the AO to pass assessment order or reassessment order in search cases, then, it is the duty of the Jt. CIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of 2 folds; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the AO in taxing right income in the hands of right person and in right AY and on the other hand, Jt. CIT is also responsible and duty bound to do justice with the tax payer (Assessee) by granting protection against arbitrary or unjust or unsustainable exercise and decision by the AO creating baseless tax liability on the assessee and thus, the Jt. CIT has to discharge his duty as per Law. Thus, granting approval u/s 153D is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the Jt. CIT on the application of mind and this exercise should be discernable from....
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.... by M/s. JIL to M/s. MAPSCO and Singla Group of cases and that part of the sale proceeds have been transferred to the account of M/s .Alfa India instead of paying the entire sale consideration to M/s. JIL. Thus, the nature of total receipt/ addition is the sale proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale receipts cannot be the income either in the hands of M/s. JIL or M/s. Alfa India or the assessees who may be the conduit as argued before us. The AO has failed to consider the concept of real income for the purpose of determining the correct tax liability and correct determination of income of the assessees. We rely upon Godhra Electricity Co Ltd (SC). This fact is also not verified and considered by the Jt. CIT while granting approval u/s 153D. It may be noted here that entire sale proceeds when cannot be added in the hands of M/s JIL as income which is also not done in the case of M/s. JIL, rightly so, how the same sale proceeds could be added as income in the hands of assessees u/s 68 is not understandable. Thus, the Appro....
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.... Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the Jt.CIT. It is not clarified whether assessment record is also seen by the Jt. CIT. It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30-12-17 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30-12-17. Therefore, without granting approval in the main cases how the Jt. CIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the Jt. CIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in appraisal report. Thus, we hold the approval u/s 153D have been granted without application of mind and is invalid, bad in Law....
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....t. CIT granted approval on 21-3-16 and the final assessment order u/s 143(3) rws. 153A was passed on 30-3-16 which clearly indicates that the approving authority granted approval in one day mechanically without examining the relevant material. According to the AO, the case of the assessee was covered by search action u/s 132 conducted at Bhilwara concerning Mantri-Soni Group of Jalna/ Bhilwara and their family members and business concerns at the business and resi-premises of different members/ associate which is evident from para 1 of the assessment order. Admittedly, the AO sought approval u/s 153D in 49 assessment orders vide letter dt. 18-3-16 which is on record placed on by the ld DR on 9-10-23. The approving authority has to examine number of evidences, documents, statements of various persons etc. recorded which were necessarily to be taken into consideration while granting approval u/s 153D by the Jt. CIT. On an examination of the approval dt. 21-3-16 which is on record placed by the ld DR on 9-10-23, we find 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 aut....
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....laid down: - "The CIT acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the CIT did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material." 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Jt. CIT, which accords sanction for issuing notice u/s 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9.As far as explanation to sec 151, brought into force 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 th....
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....ntire materials before approving the draft assessment order and the authority is legally required to ensure due application of mind. 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, we hold that the approval so granted is violative of the mandate of section 153D and, therefore, not sustainable at all. Consequently, the assessment made for the A.Y. 2014-15 to 2020-21, is held to be invalid and hence the same is hereby quashed for want of valid assumption of jurisdiction in the absence of valid and proper statutory approval under section 153D by the Addl. CIT. ITA no.117/Nag./2024 A.Y. 2018-19 ITA no.118/Nag./2024 A.Y. 2019-20 ITA no.119/Nag./2024 A.Y. 2020-21 73. In Addl. Ground no. 1, in all these three 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 e....
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....ional Ground no. 2: - "On the facts and circumstances of the case and in law, addition made of Rs. 8,55,87,852 is invalid; made for AY18-19 on 40% GP estimation on backward extrapolation of 'suppressed sales', when there is no incriminating material/ evidence was found/ seized which pertain/ relate to AY18-19; addition is not permissible in the eyes of law; is liable to be deleted." 74. For the A.Y. 2018-19, the learned A.R. of the assessee submitted that the addition of Rs. 8,55,87,852 made on 40% gross profit estimation on extrapolated/ estimated unaccounted sale of coal dust of Rs. 21,39,69,630 for A.Y. 2018-19, which is again based on extrapolated/ estimated unaccounted sale of Rs. 26,74,62,038 for A.Y. 2019-20 (i.e., 80% of Rs. 33,43,27,548, extrapolated sale for A.Y. 2020-21) which is again based on extrapolated sale of Rs. 33,43,27,548 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 i....
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....160 taxmann.com 93 (Del HC); (ii)PCIT v. Marg Ltd (2017) 396 ITR 580 (Mad HC); (iii)CIT v. Anil Kumar & Co (2016) 67 taxmann.com 278 (Kar HC); (iv)Subhendu Kumar Subudhi v. CIT (2022) 136 taxmann.com 87 (Ori HC); and (v)ACIT v. Intermedia Cable Communication P Ltd (2012) 19 taxmann.com 190 (Pune-Trib). 77. It is submitted that addition made of Rs. 8,55,87,852 for A.Y. 2018-19 on 40% estimation on backward extrapolation of suppressed/ unaccounted sales (i.e., unaccounted cash sale of coal dust'), when there is no incriminating material/ evidence was found/ seized which pertain/ relate to A.Y. 2018-19, the year under consideration the addition is not permissible in the eyes of law. In support of these arguments the learned A.R. relied on the following case laws: - (i)PCIT v. Pilot Industries 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 la....
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....addition is not permissible in the eyes of law; is liable to be deleted." 78. The learned A.R. of the assessee submitted that the addition of Rs. 10,69,84,815 made on 40% gross profit estimation on extrapolated/ estimated unaccounted sale of coal dust of Rs. 26,74,62,038 for A.Y. 2019-20, which is again based on extrapolated/ estimated 'unaccounted sale of coal dust of Rs. 33,43,27,548 for A.Y. 2020-21, which is based on 2 month's 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, 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. 26,74,6....
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....ld CIT(A) has erred in sustaining the addition of Rs. 13,37,31,019, on account of hypothetical gross profit estimation of 40% on hypothetically estimated sales of Rs. 33,43,27,548, for A.Y. 2020-21, which is against based on two months' estimate of Rs. 5,57,21,258 on dumbed documents (i.e., 15/04/2019 to 15/06/2019) which has no relevance and not pertained to the assessee, addition made is merely on presumption, surmises and mathematical calculations is not justified in search assessment made without having any corroborative material evidence brought on record for assessment year 2020-21, is liable to be deleted. Ground no. 3: - "On the facts and circumstances of the case and in law, 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 ....
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....r MT in the regular books of account (allegation of AO); Alleged that Rs. 5,57,21,258 is 'unaccounted cash sale of coal dust' which is not recorded in the books of account for 2 months period (i.e., 16/04/2019 to 15/06/2019); AO has extrapolated the unaccounted cash sale of coal dust for whole year at Rs. 33,43,27,548, thereafter, the Assessing Officer applied/ presumed 40% gross profit on such 'extrapolated' cash sale of Rs. 33,43,27,548 and made addition of Rs. 13,37,31,019 as undisclosed profit earned by the assessee; The Assessing Officer has not given any working of Rs. 5,57,21,258 that how he arrived at on this figure; there is no mention 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 (audi....
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....sible, because, no transaction has been done/occurred with M/s. Swami Fuels from January 2020 to March 2020. Further, work has been continuously reduced as 77,936 MT in the month of June 2019 was reduced to 30,375 MT in August 2019 and 11,962 MT in December 2019 and thereafter, no work done with M/s. Swami Fuels. It is submitted that the Assessing Officer alleged in the assessment order dated 29/09/2021 at Page-16, Para-9.4) that - "an excel sheet found in the data backup of PC at the "MCBIPL" office located at its railway siding 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....
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.... 9,267 MT of 'Coal dust supply' sold to M/s. Swami Fules 78,76,950 Total 3,02,50,174 (AO taken at Rs. 5,57,21,258 without any justification) the AO has extrapolated for whole year 91. It is submitted that the allegation of the Assessing Officer is unsupportable on 2 counts that - (i) the assessee has understated the coal service charges (i.e., coal benefication and loading & unloading 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....
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....ntion of the learned A.R. on the issue that without rejecting books of account and without framing assessment under section 144, gross profit estimation made in search assessment is not permissible in accordance with law. 97 Thus, we are in complete agreement with the first contention of the learned A.R. that the adhoc/estimated/ presumptive/ arbitrary addition of Rs. 8,55,87,852 made by 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 h....
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....or the A.Y. 2018-19 is hereby deleted. Similar is the position for the addition of Rs. 10,69,84,815, in A.Y. 2019-20, and the same is also hereby deleted. For such analysis, we rely on the following case laws: - i) PCIT v. Forum Sales (P) Ltd (2024) 160 taxmann.com 93 (Del HC) held as under: - "19. A plain reading of the aforementioned provisions would indicate that the 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 ....
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....e DB of the Mad HC has held that the rejection of books of account is sine qua non before the AO proceeds to make his own assessment. Para 4(c) of the said decision is reproduced as under: "4(c). Therefore, it is sine qua non that the AO to come to a conclusion that the books of account maintained by the 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 incomp....
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....t to the rejection of books of account itself. 29. Admittedly, the addition of income as discussed in ques (B), (C) and (D) on estimate basis has been done without rejecting the books of account. In view of the aforesaid, we find that 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....
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....t having not been framed u/s 144 the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable. 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 soun....
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....of subscriber base by the assessee at 10% of the connections shown by the assessee. 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).....
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.... or failure of the assessee 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 a....
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....e 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. They were unaccounted money transactions pertaining to the p....
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....venue 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 was no material which could lead to the conclusion that the assessee was in practice of charging on-money for sale o....
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....thod 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 under: "9. So far as the next submission on behalf of the Revenue viz., of extrapolation of evidence found during search is concerned, this Court in All Cargo Global Logistics Ltd (Bom HC) ....
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.... 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 is presented for our consideration; "Whether, the Hon'ble ITAT was justified in deleting the addition on account of cash payment for purchase of shops by holding that the seized papers were not found from the premises of the....
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....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 had not done any business during the year u/c. With such a small corpus and no business activity, nor any has been brought on record by the Revenue, it is not acceptable that the company may have incurred such huge expenditure outside its books of accounts. Further in his entire assessment order, the AO ....
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....shben 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 the basis of uncorroborated noting in loose papers found during search because addition on account of alleged on-money receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, was unsustainable and bad in law. 12.10. In this....
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.... 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 appreciating these facts has simply confirmed additions made by the AO towards undisclosed income on the basis of scribbling pad found during search. We, therefore, for above reasons reverse the findings of the ld CIT(A) and direct the AO to delete additions made towards undisclosed income on the basis of scribbling pad for the AY14-15 to 17-18. iv) ACI....
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....d 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 Connections on 23-12-15. Further, impounded cash book from the search of M/s. Polisetty Somasundaram has been confronted to Shri S. Mahalingam, managing partner of the assessee's firm during the course of search and a statement u/s 132(4), was recorded on 5-3-20, in which, the managing partner of the assessee's firm has denied receipt of any on-money for sale of property at Bang. The AO mad....
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....rence 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 in cash from M/s. Polisetty Somasundaram in respect of the property transaction dt. 23-12-15. From the above, it is evident that the sworn statement recorded during the course of search also do not reveal receipt of on-money of the assessee and they do not facilitate drawing any adverse inference against the assessee. Despite, absence of any incriminating evidences in the seized materi....
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.... 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 on-money. In our considered view, the AO is clearly erred in coming to the conclusion that there is a possibility of receipt of on-money on the basis of recorded sale consideration as per sale deed and guideline value by the SRO, even though, the facts are contrary to the observations of the AO. Had it been the case of the AO that recorded sale consideration was lesser than the SRO guideline....
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....upled 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 that the alleged document have materialized into transaction giving rise to income cannot be used as evidence for making addition to the income. This legal position is further fortified by Umesh Ishrani (2019) (Bom HC). A similar view has been taken by A Johnkumar (2022) (Chen-Trib). Therefore, we are of the considered view that additions made by the AO u/s 69A, on the basis of 'dumb document' cannot be sustained....