2020 (1) TMI 1027 - AT - Income Tax

Assessment u/s 153A - Addition being amount disclosed before ADIT and not shown in return of income - whether the addition made is null and void as it is not arising out of any seized material - approval given by JCIT u/s.153D is without application of mind ? - HELD THAT - Since in the present case the letter Dated 05.01.2016 was qualified and subject to documents to be supplied by the A.O, it is clear that admission of the assessee in the said letter was not correct and true because it was not based on any evidence or material if found during search. Thus, the Board Circular Dated 10.03.2003 (supra) would apply to the case of the assessee that the Department should concentrate of collection of evidence of income and should not based on addition merely on the basis of confession obtained from assessee through the letter Dated 05.01.2016. Thus, there is no evidence on record or statement of assessee recorded during the course of search so as to prove that assessee has earned undisclosed income of ₹ 2.50 crores. Since no corroborate evidence have been brought on record or brought in the Orders of the authorities below, therefore, there was no justification for the authorities below to make the addition of ₹ 2.50 crores against the assessee. We set aside the Orders of the authorities below and delete the addition - Appeal of the assessee is allowed. Approval granted by JCIT under section 153D without application of mind - In identical issue have been considered in the light of Judgment of Pr. CIT vs., Smt. Shreelekha Damani 2018 (11) TMI 1563 - BOMBAY HIGH COURT and it was held that requirement of Section 153D of the I.T. Act are not satisfied in the case. It was, therefore, held that entire assessment order is vitiated and is null and void. Therefore, it was set aside and quashed. In the present case, it is clear that A.O. did not refer to the seized material or the assessment record to the JCIT for his approval. It is not verified as to how the draft have been sent on the same day i.e., on 22.12.2017 to the JCIT from Jabalpur to Bhopal and as to how the approval have been received back on the same day i.e., on 22.12.2017 from Bhopal to Jabalpur. In the absence of any perusal of the record by the JCIT, it is clear that JCIT granted approval without application of mind and as such necessary conditions of Section 153D of the I.T. Act are not satisfied and as such the approval is invalid and bad in law. Consequently, the entire assessment order is vitiated and is liable to be quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of addition of ?2,50,00,000/- disclosed before ADIT but not shown in the return of income.
2. Validity of the addition made without any seized material.
3. Validity of the approval given by JCIT under section 153D without application of mind.

Detailed Analysis:

1. Confirmation of Addition of ?2,50,00,000/-:
The assessee challenged the addition of ?2.50 crores on merit, arguing that the addition was based solely on a letter dated 05.01.2016, which was conditional and not corroborated by any evidence or material found during the search. The letter mentioned that the assessee believed he and his family had undisclosed income of ?2.50 crores recorded in loose papers, but these papers were not available to the assessee at the time. The Tribunal noted that the letter was qualified and subject to the production of documents, which were not provided to the assessee. Consequently, the addition was deemed unjustified as it was not based on any concrete evidence. The Tribunal cited various judgments, including those of the Hon’ble Allahabad High Court and the Hon’ble Supreme Court, which held that an admission could be retracted if proven incorrect or not based on facts. The addition of ?2.50 crores was deleted, and the ground was allowed in favor of the assessee.

2. Validity of the Addition Made Without Any Seized Material:
The Tribunal observed that the addition was made based on the letter dated 05.01.2016, without any seized material or corroborative evidence. The Board Circular dated 10.03.2003 emphasized the need for evidence collection rather than obtaining confessions. The Tribunal found that no incriminating material was found during the search to justify the addition. The assessee's retraction from the letter in his return of income was considered valid, as no evidence was found during the search to support the addition of ?2.50 crores. This ground was also allowed in favor of the assessee.

3. Validity of the Approval Given by JCIT Under Section 153D Without Application of Mind:
The assessee contended that the approval given by JCIT under section 153D was without application of mind, as the JCIT did not examine any material or assessment records before granting approval. The Tribunal noted that the approval letter dated 22.12.2017 from JCIT merely mentioned that the A.O. had verified the material and provided an opportunity to the assessee. There was no indication that the JCIT had reviewed the assessment records or any material before granting approval. The Tribunal cited judgments from the Hon’ble Supreme Court and various High Courts, emphasizing that approval under section 153D must reflect the application of mind and consideration of relevant material. The Tribunal concluded that the JCIT granted approval mechanically without reviewing the records, making the approval invalid and the assessment order null and void. This ground was allowed, and the assessment order was quashed.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the addition of ?2.50 crores and quashing the assessment order due to the invalid approval under section 153D. The decision emphasized the need for evidence-based additions and proper application of mind in granting approvals under section 153D.