TaxTMI 
TaxTMI 
2024 (4) TMI 1339
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 65 cross appeals of the rival parties, involving similar issues, common grounds, common arguments and identical facts and circumstances, therefore, all these appeals are disposed of by this common order. 02. At the request of the parties ITA number 1275/M/2022 filed by SVP Southwest industries Ltd (formerly Platinum textiles Ltd) (the assessee/appellant) and ITA number 1595/M/2022 filed by the Deputy Commissioner of Income Tax, Central Circle - 8 (2), Mumbai (the learned assessing officer/AO) for assessment year 2016 - 17 filed against the appellate order passed by The Commissioner of Income Tax (A) - 54, Mumbai (the learned CIT - A) dated 31/3/2022 wherein appeal filed by the assessee against the assessment order passed by The Deputy Commissioner Of Income Tax, Central Circle - 6 (1), Mumbai passed under section 144 section 153A of The Income Tax Act, 1961 (The Act) dated 26/2/2021 was partly allowed by consolidated appellate order passed for assessment year 2012 - 13 to 2018 - 19, Therefore, both the parties are aggrieved and are in appeal before us, so is taken as lead appeal. 03. All these appellant group companies are engaged in manufacturing of yarn and trading in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....limit, the learned AO held that there is no legal requirement to issue notice under section 143 (2) in case of assessment under section 153A of the act. Thus, all the objections were disposed of by order dated 25 February 2021. 06. Thereafter the learned AO noted the fact that during the course of search and based on the statement recorded of directors of Subhkanchi trading private limited [ STPL] proved to be a mere paper entity and was being controlled and managed by Mr. Chirag Pittie the main promoter of SVP group of companies. During the course of search on SVP group all the documents pertaining to that company were found at the premises of the assessee and not at the premises of that company at 301 Golden Rock Cross Road, Bandra West, Mumbai which is the residence of friend of the promoter of the company MS Mrinal Chablani. She stated in a statement recorded under section 131 that she is appointed to be a director of that company by the promoter of SVP group from number 2011 to February 2012 and since then all the correspondence relating to that company received at this residential address used to be handed over to the promoters of the SVP group. The learned AO reproduced h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oker entities. The funds so received were eventually transferred back to SVP group companies. Additionally, AO also computed 0.5% on these accommodation sales as additional income offered before the settlement commission on bogus sales. Therefore, it was clear that as STPL as an integral part of the SVP group of companies by its own admission before the settlement commission. 07. Thereafter the learned assessing officer extracted the statement of various persons recorded and held that it is now conclusively proved that the sale and purchase of the STPL are nothing but accommodation entries on behalf of SVP group including the assessee. Thereafter the learned assessing officer held that there is an addition under section 69C of the act being unexplained expenditure on account of commission paid on accommodation entries of sales and purchases is taxable in the hands of the assessee. The learned assessing officer noted that as the assessee has disclosed an amount of Rs. 6,125,446/- as additional income on account of commission on accommodation entries, the learned AO noted that the total of accommodation sales and purchases in the hands of the assessee is Rs. 23,778,802,359/- and R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umber 5.2 of the order holding that the assessment order under section 153A read with section 144 of the act has been passed by the assessing officer by taking approval from authority competent to grant such approval under section 153D of the act. Thus, this ground was dismissed. The assessee also contested that the assessment order has been passed without issuance of notice under section 143 (2) of the act within the prescribed time limit. The learned CIT - A after considering the explanation of the assessee decided this issue as per paragraph number 6 of the order holding that assessment order is passed without issuing notice under section 143 (2) of the act in case of assessment order under section 153A of the act is not at all required before completing the assessment and therefore this ground has no legs to stand in view of the decision of the Honourable Delhi High Court in case of 20 taxmann.com 387 in case of Ashok Chadha versus ITO. He also upheld that as the return of income is not filed by the assessee in time in conformity with the time provided under the notice under section 153A of the act, the return was correctly treated as not valid i.e. 'non est'.. With res....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2) of the act within the time limit prescribed therein, is bad in law. iv. The learned CIT - A erred in law and on facts in confirming the addition under section 69C of the act of Rs. 16,630,722/- on account of alleged commission paid at the rate of 0.07% on alleged accommodation entries of purchase and sales transaction. v. The learned CIT - A ought to have held that the learned AO has wrongly applied the provisions of section 115BBE of the act in respect of the addition made on account of alleged commission paid on alleged accommodation entries of purchases and sales. vi. The learned CIT - A erred in law and on facts in holding that the addition in the assessment order under section 144 read with section 153A of the act cannot be sustained in absence of any incriminating material found in the search. vii. The learned CIT - A erred t in law and on facts in not holding that the assessment order under section 144 read with section 153A is passed without following the principles of natural justice, and hence, deserves to be quashed. 010. The learned AO is aggrieved challenging the appellate order raising following grounds in ITA number 1595/M/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....78 78 5. 25.02.2021 26.02.2021 65 65 6. 25.02.2021 27.02.2021 70 70 7. 25.02.2021 26.02.2021 64 64 2. Approval granted and Assessment Order passed on 26.02.2021 8. SVP Southwest Ind Ltd. (Formerly Platinum Textiles Ltd.) 2012-13 26.02.2021 26.02.2021 58 58 9. 2013-14 26.02.2021 26.02.2021 64 65 10 2014-15 26.02.2021 26.02.2021 58 59 11 2015-16 26.02.2021 26.02.2021 59 60 12 2016-17 26.02.2021 26.02.2021 48 53 13 2017-18 26.02.2021 26.02.2021 99 102 14 2018-19 26.02.2021 26.02.2021 88 90 15 Helios Exports Ltd. 2014-15 26.02.2021 26.02.2021 23 23 16 2015-16 26.02.2021 26.02.2021 76 77 17 2016-17 26.02.2021 26.02.2021 60 60 18 2017-18 26.02.2021 26.02.2021 88 81 19 2018-19 26.02.2021 26.02.2021 56 51 20 Helio Mercantile Ltd. 2012-13 26.02.2021 26.02.2021 72 72 21 2013-14 26.02.2021 26.02.2021 75 75 22 2014-15 26.02.2021 26.02.2021 74 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il in the Assessment Order which Order itself is passed on 26.02.2021. Hence, it is apparent that the Assessment Order itself was finalized after 5.02 PM in the evening on 26.02.2021, thereafter, having proper approval of the competent authority on the orders and computation annexed thereto after due perusal of seized material, application of mind on the additions made, is not only unrealistic but clearly mechanical. Therefore, according to him, the above factual positions clearly show that the ld. Additional Commissioner granted approval is mechanical and final order passed on the basis of mechanical approval is bad in law. v. On mistakes committed by the A.O approved by Additional Commissioner, he submits that there were several mistakes committed by the Ld. AO while passing the Assessment Orders, which clearly points out that the assessment was framed in haste and the approval on the same was merely mechanical: a. Section 115BBE was invoked in the assessment orders of A.Y. 2012-13 on various additions. However, the section itself came into existence from A.Y. 2013-14 onwards. b. The tax rate applied while computing the demand on total income for A.Y. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Jambo Trading. The notice was issued on 23.02.2021 in response to which the appellant made a request for adjournment on 25.02.2021. The Assessing Officer ignored the request of the appellant and vide Page 61 of the Assessment Order, the assessing officer has stated that the appellant did not respond to the notice and subsequently the assessing officer made the addition. i. In the case of Shrivallabh Pittie Southwest Industries, for AY 2013-14, vide notice dated 12.02.2021, the assessing officer enquired about payment made to Arson Trading Co. and Jeevan Impex. The appellant furnished a reply to the same on 24.02.2021, requesting the assessing officer to specify the section under which the addition was proposed. No other opportunity was provided to the appellant and the addition was made u/s 69C of the Income Tax Act, 1961 when the payment was made to the above-mentioned parties through proper banking channels. j. In the case of Shrivallabh Pittie Southwest Industries, for AY 2018-19, addition u/s 69C on account of disallowance of expenditure incurred on booking bogus capital expenditure was discussed about and eventually made in the Assessment Order. However, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her submits that in the below mentioned cases, the Draft Assessment Order already contains the approval number and the date when the approval was granted by the Addl. CIT. A.Y. Platinum Textiles Limited Shrivallabh Pittie Industries Limited Helios Exports Limited Helios Mercantile Limited SVP Global Textiles Limited 2012-13 (nonexistent) (nonexistent) 2013-14 ✓ ✓ (nonexistent) ✓ 2014-15 ✓ ✓ ✓ 2015-16 ✓ ✓ ✓ ✓ 2016-17 ✓ ✓ 2017-18 ✓ ✓ ✓ ✓ 2018-19 ✓ ✓ ✓ t. He further submits that even in a case where assessee was not in existence and return was not filed, the assessment proceedings were carried out, letter and orders were passed treating the return as non-est and approvals were granted by the Addl. CIT. Summary of approval granted by the Addl. CIT as under: A.Y. Citron Infraprojec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e approval was granted without examining the assessment record or the search material. The Tribunal was right that there was absence of application of mind by ACIT in granting approval under Section 153D. It is not an exercise dealing with an immaterial matter which could be corrected by taking recourse to Section 292B of the Act. iii. Decision in case of coordinate bench of Lucknow bench Naveen Jain and Others ITA number 639 - 641/ LKW/2019 dated 3/8/21 where the approval was granted on the same day was held to be invalid. iv. Decision of the Honourable allowable High Court in case of PCIT versus Sidharth Gupta 450 ITR 534 v. Decision of coordinate bench in case of Inder international versus ACIT 213 TTJ 251 vi. Decision of Delhi bench of the ITAT in case of MDLR hotels private limited ITA number 3076/del/2016 dated 8/2/2023. vii. Decision of Delhi bench in case of Subhash Dabas ITA number 2399/del/2016 dated 25/11/2021 holding that there is no application of mind by the approving authority because the addition has been approved which are opening balances for the year and same were added in the preceding assessment years also. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....person and not the same additional CIT who granted the approval. Therefore, the argument that the approving authority was aware about all the issues which were before the settlement commission is devoid of merit. He submits that the challenges to the application of mind by the approving authority of the assessment order and not to the officer who submitted report under rule 9 before the settlement commission. He submits that rule 9 report was sent by Mr. Ashwin Sopra. whereas the approval is granted by Mr. R Senthil Kumar. 018. He otherwise submitted that assuming while denying that assessment procedure is carried out properly, The process of approval is altogether different from the assessment order. Here the issue is approval of order under section 153D of the act. He submits that all errors are pointed out in assessment order which are not looked into by the additional Commissioner of income tax at the time of approval of the order therefore assessee challenges that the approval is granted without application of mind. 019. He submits that application of mind cannot be presumed but it has to be demonstrated. If such demonstration is missing but nonapplication of mind is evi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pproval can be granted in case of an assessee who is not at all in existence. In this case such approval is granted by the approving authority. The companies which are not in existence, which are not even formed, where assessments are passed and such assessment orders are approved by the approving authority, this if does not demonstrate the extreme standard of non-application of mind then what it can be. 024. He also stated that in many cases the approval is granted on the draft assessment order but the assessment order itself are not passed. Then what for the approval is obtained on the draft assessment order. There is no answer from the departmental representative. 025. We have carefully considered the rival contentions and perused the orders of the lower authorities. Before the learned CIT - A, assessee challenged that there is no valid approval granted by the approving authority of all these assessment orders. The learned CIT - A held as under:- "5.2 the facts recorded in the assessment order and the submission made by the appellant has been considered. The appellant has challenged the assessment order under section 153D read with section 144 of the act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act defines the word "Joint Commissioner" and explains it means a person appointed to be a Joint Commissioner of Income Tax or an Additional Commissioner of Income Tax under subsection (1) of Section 117. 16. Thus, the Joint Commissioner includes an Additional Commissioner as well. The issue is otherwise covered by the judgments of various High Courts, which are as follow:- Dharam Pal Singh Rao v. ITO [2004] 271 ITR 223 (All); I. Arun Kumar Maheshwari v. ITO [2006] 285 ITR 179 (All); and II. Smt. Maya Rastogi v. CIT [2010] 8 taxmann.com 253/[2011] 196 Taxman 283/331 ITR 116 (All.) 17. In view of the aforesaid discussions, we find no merit in this appeal and other connected appeals which are, thus, dismissed." An SLP filed by the assessee against the judgment of the Honourable allowable High Court has been dismissed by the Honourable Supreme Court, which is reported in Vikram Singh V CIT (2019) and 111 taxmann.com 120 (SC) Further clause 9 of manual of office procedure, volume II (technical) February 2003 issue by the directorate of income tax on behalf of central board of direct taxes, Department of revenue, government....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n provides that:- "Prior approval necessary for assessment in cases of search or requisition. 153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of 47[subsection (1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner:] ^48[Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the ^49[Principal Commissioner or] Commissioner under sub-section (12) of section 144BA.] [extracted from taxmann.com] 028. The above provisions came to be examined by the Honourable Orissa High Court in ACIT V Serajuddin & Co.[2023] 150 taxmann.com 146 (Orissa) where the question of law for consideration was:- "Whether on the facts and circumstances of the case, the ITAT was correct in holding that the approving authority has not applied his mind for giving approval under section 153D?" ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h cases" and section 153D is part of chapter XIV. The Honourable High Court in paragraph number 13 also looked at Manual of office procedure (February 2003) in exercise of powers under section 119 of the act wherein in paragraph number 9 of chapter 3 of volume II (Technical) of the manual was stated to be as under:- "9. Approval for assessment-An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.). The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 section 158BG of the Act, it would equally apply to section 153D of the Act. There are three or four requirements that are mandated therein, (i) the AO should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order. 23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in Para 9 of the Manua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iven mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves." 033. Thus, it is apparent that approval under section 153D should be granted by the authority after showing the thought process involved in such approval. Though it is not required that elaborate reasons are to be given but there has to be some indication that the approving authority has examined the draft order and finds that it meets the requirement of the law. It is based on a manual of office procedure which is as good as instruction under section 119 of the act and therefore is binding. It cannot be merely a mechanical exercise. In the appeal before the Honourable High Court there was no mention that draft orders are perused and then approved. Thus, there has to be some indication from the approval that approving authority has applied his mind to the order. Even if that is missing, the approval cannot be said to be with application of mind. 034. Honourable Allahabad High Court in case of Principal Commissioner of Income-tax V Subod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....serves two purposes: (i) On the one hand, he has to apply his mind to ensure the interest of the revenue against any omission or negligence by the Assessing Officer in taxing right income in the hands of right person and in right assessment year. (ii) On the other hand, superior authority is also responsible and dutybound to do justice with the tax-payer by granting protection against arbitrary or creating baseless tax liability on the assessee. "16. The approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3D may kindly be given. Thanking you. Yours faithfully, Sd/- (PRIYANKA THOMAS) Dy. Commissioner of Income Tax, Central Circle-6(1), Mumbai Encl: Draft Assessment Order On the basis of above request, the learned Additional Commissioner of Income Tax granted approval as under:- No. Addl.CIT-CR-6/Approval U/s 153D/2020-21 Date 26.02.2021 To The DCIT-Central Circle-6(1) Mumbai Sub: Approval of draft assessment orders u/s 153D of the I.T. Act, 1961 in the case of M/s Platinum Textiles Ltd. (PAN: AABCN1537H)-reg. Ref: No. DCIT-Central Circle-6(1)/Platinum Textiles Ltd./ 153D/2020-21 Dated 26.02.2021 Please refer to the above. 2. The draft assessment order, submitted by you in the following case of M/s Platinum Textiles Ltd. for Assessment Year as mentioned below, is approved u/s 153D of the Income Tax Act, 1961 based on the perusal of records submitted along with the submissions of the assessee. Sr. Name of the Assessee A.Y. Order Approval given vide Sr. No. 1. Platinum Textiles Ltd. 2016-17 144 40 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Non application of mind is that in case of Platinum textiles limited for assessment year 2016 - 17 to assessment year 2018 - 19 and in case of Helios mercantile Limited for assessment year 2017 - 18 and assessment year 2018 - 19 some information is received from The Deputy Director Of Income Tax (investigation) regarding transaction with 'one-word group' through email on 26/2/2021 at 5.02 PM, the email is also referred to in the assessment order which was passed on 26/2/2021. Thus, natural corollary is that such assessment order is passed after 5.0 2 PM on 26/2/2021 and approval is also granted on 26/2/2021 in that case. This itself shows that approval so granted is without application of mind. 042. In most of the cases for assessment year 2012 - 13 provisions of section 115BBE was invoked whereas such section was inserted by The Finance Act 2012 with effect from 1/4/2013. Further for assessment year 2013 - 14 to assessment year 2016 - 17 the normal tax rate would have been charged for this assessment year but the learned assessing officer in the draft assessment order applied tax rate at the rate of 60%. Therefore, for assessment year 2012 - 13 such provisions could no....