9911796707
TMI Blog2021 (8) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... annual audited accounts as well as confirmation of the parties to show the above fact. Even the copies of the income tax returns of the parties shown as unsecured loans were also submitted. Thus, assessee has submitted all these evidence before the ld AO and before the ld CIT(A). The assessee has submitted the details of the transaction with the companies also submitting copies of the return of income as well as the balance sheet of the lenders - most of amount has resulted on account of amalgamation of 9 different companies with the assessee and no fresh sum was received during the year by the assessee with respect to all the loans and advances except as stated above in case of three incidents. Thus addition made by the AO and confirmed by the ld CIT (A) u/s 68 of the Act is despite the facts that no sum are received by the assessee during the year. - Additions deleted - Decided in favour of assessee. Approval of JCIT u/s 153D - Period of limitation - HELD THAT:- We find that the issue is squarely covered in favour of the assessee as the ld JCIT has mentioned at the bottom of the approval that draft assessment order has been received late by him on 31.12.2016 beyond the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of Share Capital / Share Premium of ₹ 1,89,35,760/- made by the assessing officer as alleged unexplained cash credits u/s 68 of Income Tax Act, 1961. 3. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming addition of unsecured loans of ₹ 1,36,30,27,066/- made by the assessing officer as alleged unexplained cash credits u/s 68 of Income Tax Act, 1961. 4. On the facts and circumstances of the case and in law, the various alleged adverse inferences drawn / reasons given by the CIT(A) for making / confirming additions are erroneous and not sustainable in law. 5 On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding so. The appellant craves leave to add, alter, modify or delete one or more ground of appeal before or at the time of hearing of appeal. 2. Brief facts of the case shows that assessee is a company engaged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld AO preferred an appeal before the ld CIT(A). The assessee submitted that the addition of ₹ 1,89,35,760/- is unwarranted as assessee has not received any amount during the year but the same is on account of merger vide order of the Hon ble High Court dated 09.09.2014 u/s 394 of the Companies Act, wherein, 9 different companies were amalgamated with the assessee company and on amalgamation of the aforesaid company where the effective date is 01.04.2013 the above said share capital represent shares allowed to the share holders of 9 amalgamated companies. Therefore, there is no sum received during the year and the share capital has arisen on account of amalgamation. 6. With respect to the addition of ₹ 1363027068/- it was stated that the above credit and loans are also on account of above amalgamation order of the Hon ble High Court wherein, 9 other companies amalgamated with the assessee. It was submitted that the assessee has not received any sum during the year except small amount. The assessee therefore, submitted that the addition made by the ld AO deserves to be deleted. 7. The ld CIT (A) asked for the remand report, which was submitted on 06.03.2018 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioned in the last line of the assessment order and dismissed this ground. Therefore, the assessee is aggrieved with that order has preferred this appeal before us. Parties were heard on this appeal. 9. Ground No. 1 is general in nature and no arguments were advanced by the assessee therefore, it is dismissed. 10. Ground No. 2 of appeal is with respect to the addition of ₹ 1363027066/- on account of unsecured loan. The ld AR argued that share capital of ₹ 189,35,760/- is allotment of shares to the share holders of amalgamated companies and no sum is received during the year therefore, no addition has been made u/s 68 could not have been made. He referred to the order of the Hon'ble Delhi High Court u/s 394 of the Companies Act dated 09.09.2014 and stated that the scheme of amalgamation of 9 amalgamated companies was approved by the Hon'ble Delhi High Court. He further stated that even the return of allotment in the form No 2 of Companies Act filed before the ld AO also clearly shows that above shares capital represent the share allotted under the amalgamation scheme. He further referred to detail of 19 parties showing that how the share capital wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Joint Commissioner of Income Tax u/s 153D of the Act and submitted that approval given by the ld JCIT is without application of mind and is an empty ritual. He relied on the order of the Hon ble Bombay High Court in case of Srilekha Damani 11 TMI 1563. He also referred to the decision of the coordinate bench in case of Rishabh Buildwell Pvt. Ltd 7 TMI 365. He also referred to several other case laws and submitted that approval u/s 153D is invalid. The facts and circumstances are identical to the issues decided in the above judicial precedents stated. He submitted in his synopsis as under :- 3. Ground no 5 The assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Act. The provisions of section 153D are as under:- no order of assessment or reassessment shall be passed by the assessing officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of Section 153A or assessment year referred to in clause (b) of sub-section (1) of Section 153B except with the prior approval of Joint Commissioner. 3.1 Whenever any statutory obligation is cast upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Promart Retail India Pvt. Ltd. AAFCP8743B 2009-10 to 2015-16 12 M/s Apple Sponge Power Limit. AAFCA1965L 2009-10 to 2015-16 13 M/s Apple Metal Industries Ltd., AAACD7670E 2009-10 to 2015-16 14 M/s Apple Buildtech Ltd., AAFCA8106K 2009-10 to 2015-16 15 M/s Apple Insurance Brokers Pvt. Ltd., AAECA5320N 2009-10 to 2015-16 16 M/s Zync Global Pvt. Ltd., AAACZ5235H 2012-13 to 2015-16 17 M/s Apple Iron Enterprises Pvt. Ltd., AAHCA8642G 2010-11 to 2013-14 18 M/S Mastermind Trade-in-Private Ltd AAECM9435E 2009-10 to 2015-16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/S Nirman Stelco Pvt. Ltd. AACCN4842Q 2009-10 to 2015-16 10 M/s M. G. Metalloy Pvt. Ltd. AAGCM5789D 2011-12 to 2015-16 11 M/S Promart Retail India Pvt. Ltd. AAFCP8743B 2009-10 to 2015-16 12 M/s Apple Sponge Power Limit. AAFCA1965L 2009-10 to 2015-16 13 M/S Apple Metal Industries Ltd. AAACD7670E 2009-10 to 2015-16 14 M/S Apple Buildtech Ltd. AAFCA8106K 2009-10 to 2013-14 15 M/S Apple Insurance Brokers Pvt. Ltd AAECA5320N 2009-10 to 2015-16 16 M/S Zync Global Pvt. Ltd. AAACZ5235H 2012-13 to 2015-16 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he approval which makes it an invalid, qualified and uncertain approval. This is not the mandate of the Act. The action of the JCIT of granting the approval was a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. Therefore, the approval is invalid in eye of law. 3.5 The decision of Hon‟ble Bombay High Court in the case of THE PR. COMMISSIONER OF INCOME TAX VERSUS SMT. SHREELEKHA DAMANI 2018 (11) TMI 1563 - BOMBAY HIGH COURT is reproduced as under:- 1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ( the Tribunal for short) dated 19th August, 2015. 2. Following question was argued before us for our consideration: Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ( the Act for short) for Assessment Year 2007- 08. This was on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 M/s Max City Developers Pvt. Ltd. AAECM5401A 2009-10 to 2015-16 11 Sh. Sanjeev Jain ACFPJ3817P 2009-10 to 2015-16 12 M/s Sethi Buildwell Pvt. Ltd. AAICS9/42C 2009-10 to 2015-16 13 Sh. Satpal Nagar AAFPN6467M 2009 10 to 2015-16 14 M/s Risabh Buildwell Pvt. Ltd. AACCR9776R 2009-iO to 2015-16 15 Srnt. Magan Jain AIMPJ8085G 2009-10 to 2015-16 16 M/s Angel Buildcon Pvt. Ltd. AAFCAI968H 2009-10 to 2015-16 2. A technical approval is accorded to pass assessment orders in the above cases on the basis of the drafts assessment orders submitted for the assessment years in reference years. You ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly mentioned that the approval given is a technical approval. Moreover, he has directed the DCIT to ensure the seized materials and the findings of the appraisal report to be incorporated in the final assessment order. This clearly goes to proves that the approval given by the JCIT is not a final approval as required u/s 153D of the Act but a conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval has to be statutory nature after due application of mind, it should be neither technical nor proforma approval which is envisaged u/s 153D of the Act. Reliance is placed the judgment of Coordinate Bench in the case of M3M India Holdings (ITA 2691/2018). And the judgment of Hon‟ble High Court of Bombay in the case of Pr CIT vs. Smt. Shreelekha Damani [ ITA no 668 of 2016 Dated: 27th November, 2018 ] is as under: 1. This appeal is filed by the Revenue challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08reg. Ref: No. DCIT (OSD)-1/CR-7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analyze the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted. Approval to the above said draft order is granted u/s 153D of the I. T. Act, 1961. 7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st 3 of 4 Uday S. Jagtap 668-16- ITXA-15=.doc December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent orders. Another glaring fact noted is that the Addl. CIT granted the so-called approvals merely on the basis of draft assessment orders without even examining the assessment record of each case. It is self-evident that the approval has been accorded without going through the facts of the individual cases. This position is further corroborated from the contents of the approval letter itself wherein the approving authority is admitting that due to limitation of time, only broad issues were discussed. The relevant paragraph i.e. paragraph 3 in the approval letter is reproduced hereunder: 3. ...As most of the draft orders have been received at the end of the limitation period, it is not possible to discuss minute details and only broad issues have been discussed with you. Due to limitation involved, approval is being accorded. 7.2 We find it difficult to comprehend as to how the approving authority satisfied itself about the correctness of the search based draft assessment orders without even looking at the search material. In these circumstances, we have no doubts in our mind that the approving authority has acted casually and granted the approval u/s 153D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C, the Joint Commissioner [Approving Authority] is required to see that whether the additions have been made in the hands of assessee are based properly on incriminating material found during the course of search, observations/comments in the appraisal report, the seized documents and further enquiries made by the A.O. during the course of assessment proceedings. Therefore, necessarily at the time of grant of approval of the assessment made by the A. O, the Joint Commissioner is required to verify the above issues, apply his mind that whether they have been properly appreciated by the A.O. while framing the assessment orders or not. The JCIT is also required to verify whether the required procedure have been followed by the A. O. or not at the time of framing of the assessments. Thus, the approval cannot be a mere discretion or formality, but, is mandatory 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 A.O. to pass assessment order or reassessment order in search cases, then, it is the duty of the JCIT to exercise such powers by ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments and their effect, if any. But, in the present case, the Approving Authority i.e., JCIT has granted common approval for all the assessment years in respect of the single assessee. Thus, there is no application of mind on the part of JCIT while granting approval for all the common years instead of granting approval under section 153D for each assessment years separately. 16. In some of the cases the approval was granted on the date the request was made for approval by the A.O. In all those cases merely draft assessment order and the assessment folders were available with the A. O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT.It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Versus the A.C.I.T., Central Circle-II 2021 (6) TMI 416 - ITAT CHANDIGARH Rajesh Ladhani v. Dy. CIT - Central Circle, Agra - 2019 (11) TMI 920 - ITAT Agra Uttarakhand Uthan Samiti v. ITO, Ward - 45(5), New Delhi 2020 (4) TMI 878 - ITAT Delhi Dilip Constructions Pvt Ltd. Versus ACIT, Circle-1, Bhubaneswar. And (Vice-Versa) And Shilpa Seema Constructions Pvt Ltd. Versus ACIT, Circle-1, Bhubaneswar. And (Vice-Versa) 2019 (12) TMI 311 - ITAT Cuttack Shri Tarachand Khatri, Ramnath Building, Opp. Bhawartal, Jabalpur. Versus The Acit, Central Circle, Jabalpur. 2020 (1) TMI 1027 - ITAT Jabalpur Arch Pharmalabs Ltd. Versus ACIT Cc-32, Mumbai And (Vice-Versa) And M/S Arch Impex P. Ltd. Versus ACIT CC- 32, Mumbai 2021 (4) TMI 533 - ITAT Mumbai Sanjay Duggal, Kritika Talwar, Arun Duggal, Ratna Talwar, C/O Kapil Goel, Adv, Neha Duggal, Nany Duggal, Poonam Duggal, Neeru Duggal, Rajnish Talwar, Ratnashri Buildtech Pvt. Ltd, Duggal Estate Pvt. Ltd, Duggal Sons Buildwell P. Ltd., Versus ACIT, Central Circle-4, New Delhi 2021 (1) TMI 909 - ITAT Delhi In view of the above, it is submitted that the approval by JCIT under section 153D of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 9 of the order. Accordingly, in the annual accounts of the assessee company for the year ended on 31.03.2014 note No. 18 details were mentioned as under:- NOTE-18 OTHER EXPLANATORY NOTES a) Revision of Accounts and Amalgamation Hon‟ble High Court of Judicature at Delhi by their orders dated September 09, 2014 approved the Scheme of amalgamation of Shreem Ispat Private Limited, Apple (ran Enterprises Private limited, Madan Gopal Alloys Private Limited, Yuven Steels Private limited, Manohar Mattalloys Private limited, Apple Buildtech Limited, Manan Power Private Limited, Sanidhya Steels. Private Limited, Shubh Sponge Iron Private Limited with die company which has become effective on 29th September, 2014 from the appointed date 1st April, 2013 In accordance with the provisions of section 391 394 of the Companies Act, 1956. The scheme of amalgamation became effective on filing of orders with the respective Registrar of Companies and to give effect the amalgamation in the books of accounts for the year ended 31st March, 2014, accounts of the Company have been revised. The present financial statements are revised for the limited purpose of amalg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shares of ₹ 10/- each of the Company for every 10 equity shares of ₹ 10/- each fully paid up held in Shreem Ispat Private Limited. f) 1 fully paid-up of equity shares of Rs.-10/- each of the Company for every 2 equity shares of ₹ 10/- each fully paid up held in Sanidhaya Steels Private Limited. g) 4 fully paid-up of equity shares of ₹ 10/- each of the Company for every 5 equity- shares of ₹ 10/- each fully paid up held in Madan Copal Alloys Private Limited. h) 1 fully paid-up of equity shares of ₹ 10/-each of the Company for every 49 equity shares of. ₹ 10/- each fully paid up held In Manohar Metallys Private Limited.' i) 1 fully paid-up of equity shares of ₹ 10/- each of the Company to each shareholder irrespective of their shareholding; in Apple Buildtech Limited. J) Any fraction of share arising out of the aforesaid share exchange process, if any, will be rounded off to nearest whole number. III) Cross holding of shares between the transferor companies and/or between the transferor and the transferee companies on the record date, if any has been cancelled iv} The difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares in the Balance sheet as on 31.03.2014. Accordingly, company shall Issue fresh shares of 18,93,576 shares to the shareholders of transferee companies. Further an amount of ₹ 2,15,83,940/- shah be transferred to securities premium on account of capital reduction (5096). d) Brief note on the business activity/ operations of the Company and transferor companies The company is engaged in trading business, investment in group companies, providing loans and advances and other related activities. Whereas prior to the scheme of amalgamation transferor companies were engaged in same activities as of the company. 15. Accordingly, the assessee issued share capital to the following shareholders of the transferor companies, which was added by the ld AO u/s 68 of the Act. :- Details of addition of share capital by AO. S. No. Name of the share holder Amount Remarks 1. Amay Garg 1020 Share capital transfer from Manohar Mettalloy due to amalgamation 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share Capital transfer from Shubh Sponge due to amalgamation 14. Nishanat Garg 300000 Share Capital transfer from Apple Iron due to amalgamation 15. Nishu Agrico Limited 1016270 Share Capital transfer from Shubh Sponge due to amalgamation 16. Reshma Mittal 735000 Share Capital transfer from Yuven Steels due to amalgamation 17. Ruchi Garg 512510 Share Capital transfer from Apple Buildtech ₹ 10 and Sanidhya Steel 512500/- due to amalgamation 18. Shaloo Garg 600010 Share Capital transfer from Apple Buildtech ₹ 10 and Manan Power 600000/- due to amalgamation 19. Yogendra Kumar Garg 21850 Share Capital transfer from Manohar Metalloy ₹ 1020 and Subh Spon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst amount earlier paid 7. Pradeep Saraf 750000 No loan amount received during the year. Pradeep Saraf has sold Equity Shares of Apple Commodities Limited to the Company. 8. Reliance Infotek Ltd. 3850000 No loan amount received during the year. Amount was transferred from Apple Iron Enterprises Pvt Ltd originally received in F.Y. 2012-13. Apple Iron Enterprises Pvt Ltd amalgamated with the company pursuant to high court order. 9. Reliance Polycrete 200000 The amount received during the year against the Advance made by Apple Limited Buildtech Limited to Reliance Polycrete Limited in FY 2011-12. 10. Saccharine Infrastructure Pvt. Ltd. 904616516 No loan amount received during the year. The intercompany balance transfers through journal entries relating to transaction for purchase of shares of group company Apple Commodities Ltd. from following companies :- Archit Infratech Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in case of Apple Metal industries Pvt. Ltd there are total credits of ₹ 1,26,00,325/- and total debits of ₹ 1,91,03,725/- whereas the ignoring the debits the ld AO has made the addition of only the credit entries. The share capital of the reserve and surplus of Apple Metal Industries shown that it has own funds of more than ₹ 8 crores and has turnover of almost ₹ 30 crores. In case of all other creditors the amount has been transferred on account of amalgamation. The assessee has also submitted the annual audited accounts as well as confirmation of the parties to show the above fact. Even the copies of the income tax returns of the parties shown as unsecured loans were also submitted. Thus, assessee has submitted all these evidence before the ld AO and before the ld CIT(A). The assessee has submitted the details of the transaction with the companies also submitting copies of the return of income as well as the balance sheet of the lenders. However, the fact remains that most of amount has resulted on account of amalgamation of 9 different companies with the assessee and no fresh sum was received during the year by the assessee with respect to all t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
