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TMI Blog2022 (5) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... he root of the case and can vitiate the assessment proceedings itself and therefore the said power vested in the Commissioner to grant or not to grant approval is coupled with a duty and cannot be exercised casually and in a routine manner. 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 has been taken at Rs.Rs.11,00,460/- as against 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. Even the factual situation is much worse than the facts decided in the case of Sanjay Duggal [ 2021 (1) TMI 909 - ITAT DELHI] . In that case, at least the assessment folders were sent whereas in the instant case, as appears from the letter of the Assessing Officer seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account of M/s. Maa& Son through banking channels. 3.1. The AO further noted that a search & seizure action u/s 132 was undertaken by the Income Tax Department at the residence of Sh. AnujBansal at A-108, SwasthayaVihar, Delhi and survey u/s 133A was conducted at the business premises of M/s Maa& Son at KuchaMahajani, Delhi on 22.12.2016. During the course of search, Sh. AnujBansal was asked to provide the KYC of SNRK and contact details of the owners of SNRK. In his statement u/s 132(4) of the Act, Sh. AnujBansal stated that he did not know the owners of SNRK and that all the dealings for the sales transactions of M/s Maa& Son to SNRK were done through one Sh. VipinSoni of M/s Kanishka Jewellers. Sh. VipinSoni was also asked to provide the contact details of the owners of SNRK. In his statement u/s 131(1A) dated 14.03.2017, Sh, VipinSoni stated that one Sh. Ashok Kumar Sharma was the owner of SNRK. However, he was not able to produce the said Sh. Ashok Kumar Sharma despite sufficient opportunities given to him. Further enquiries conducted revealed that the address of Sh. Ashok Kumar Sharma, as provided by Sh. Vipin Soni was non-existent. Further, as per the bank KYC documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... currency deposited in various shell companies and routed through M/s SNRK and (ii) The amount of Rs. 1,54,07,100/- transferred in the bank accounts of M/s Maa& Son from the shell entities of entry operator Sh. VipinGarg. 4. Before the Ld. CIT(A), the Assessee made elaborate arguments based on which the ld. CIT(A) deleted the addition of Rs.15,04,35,000/- made by the AO by observing as under :- "7. Conclusion: 7.1 In view of the facts of the case and the above discussion, following conclusions can be drawn (i) There is no connection established in the search/survey on the appellant, surveys on axis bank and in the assessment order of the appellant, between the appellant and the alleged 11 entities, who deposited cash in their respective bank accounts. The allegation that this cash deposited by these 11 entities in SBNs in their respective accounts after the demonetization belonged to the undisclosed money of the appellant is just on presumption of the AO and had not been established through any evidence on record. There is no evidence on record that this cash belonged to the appellant, had been handed over by the appellant to these entities or was deposited directly or indir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into transactions with the appellant. Further the transactions of M/s SRNK with the appellant were at Rs 15 Cr as against total transactions of Rs 39 Cr done by it during the year under consideration. Thus, the appellant had only part of total transactions done by M/s SNRK, (v) The AO had alleged that: "the appellant could not give any plausible explanation w.r.t identity & creditworthiness of M/s SNRK ,as well as, for the cash deposited in number of bank accounts, which was later transferred to the account of the appellant. The AO concluded that the amounts received by the appellant were accommodation entries in the form of..." (a) It is observed that the appellant had insisted on the prior transfer of money through banking channel, before the delivery of Gold is made. It had obtained valid TIN of M/s SNRK and had also obtained the KYC of the person, Sh. Ashok Kumar Sharma, who was claimed involved in these transactions, In the absence of availability/production of Mr. Ashok Kumar Sharma, it can be alleged that the appellant could have arranged his KYC documents from some other source. However, the KYC documents match with the ITR particulars filed by Mr. Ashok Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or accruing to the company must also be considered from the angle of a prudent businessman. The term ''benefit'1 to a company in relation to its business, it must be remembered, has a very wide connotation and may not necessarily be capable of being accurately measured in terms of pound, shillings and pence in all cases. Both these aspects have to be considered judiciously, dispassionately without any bias of any kind from the viewpoint of a reasonable and honest person in business." (b) The payment had been received through the banking channel, before delivery of goods. The TIN had been quoted on all the bills, with the name & address of M/s SNRK. The signatures of the receiver (although not mandatory in transactions through bank) had also been obtained. The transactions have been done through broker, who had confirmed it and the due payment of brokerage from the appellant had also been confirmed by him. M/s SNRK had also made substantial transactions with other parties before & after 8.11.2016 through its bank account. Most of the credit entries of M/s SNRK had been though banking transfers only. Even the AO of M/s SNRK had assessed its income, after obtaining direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no evidence on record, which establishes any connection with the money deposited by 11 alleged entities. • There is nothing on record which suggests that the appellant had any control over the online bank transactions of 11 alleged entities and M/s SNRK. • There had been transactions of some of the alleged entities with M/s SNRK even before 8.11.2016 to which appellant was not a party and even in the transactions after 8.11.2016, the appellant had received only 11.42 cr out of total amount of Rs 21.70 cr. transferred by these entities to M/s SNRK. • M/s. SNRK had total credits Rs.39 Cr in its bank account, out of which only 15 Cr had been received by the appellant. • The appellant had obtained valid TIN of M/s SNRK and valid PAN of the person, who collected Gold. The money was received by the appellant in advance through online RTGS done by M/s SNRK. The appellant had collected all the mandatory documents required in the ordinary course of business and to protect his financial interest, money had been received before handing over the Gold. • The Axis bank had carried out the field verification of M/s SNRK and the KYC documents of partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been given through a web of entities. He had received cash of SBNs from various beneficiaries or their agents since 09.11.2016 against which he had only given RTGS entries without conducting any actual business transactions. He has charged commission from the beneficiaries @ 0.5% to 2%. The appellant had not submitted any proof of delivery of gold, KYC documents or any other contract of these sales parties and had stated that Sh. VipinGarg is not known to him. During the appellate proceedings, the appellant had submitted that some of these entitles do not belong to ShVipinGarg and in some entities no cash had been deposited before making transfer payments to the appellant. It is observed that the character of these transactions is different from the transactions of m/s SNRK, as there is statement of entry operator controlling these entities that cash had been received in SBN from the entities to whom payments had been made and in the transactions with M/s SRNK even the broker had confirmed the transactions. It is observed that these entry operators transfer the money to beneficiary through various layers of money, so there is possibility that the cash may not be visible in some en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts & circumstances, I do not find any violation of provisions of section 153D. Accordingly, this ground of appeal is dismissed." 7. Aggrieved with such order of the ld. CIT(A), the Assessee is in appeal before the Tribunal by raising the following grounds :- 1. That in the given facts assessment order passed u/s 153A/ 143(3) dated 31.12.2019, being passed without authority of law and is patently ultra vires to the provisions of the Act , and ergo impugned order of Ld C1T-A dated 16.08.2021 in not accepting the appellants jurisdictional plea(s) to quash the said assessment is also not valid on the pleaded jurisdictional counts. 1.1 That since foundational search action u/s 132 of the Act on asses see admittedly was conducted to verify and scrutinize the stated transactions in disclosed bank accounts (which was statedly noted from some prior survey action u/s 133A on axis bank branches) so mechanical use of provisions of sec. 153A where everything was pre-existing as given Assessee's bank account itself was disclosed in regular audited books/ITR etc and admittedly nothing undisclosed/hidden was detected from stated search operation, so use of sec. 153A is itself without authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted sale transactions which recorded/accounted sales on cardinal legal principles cannot be subject matter of such farcical and preposterous taxation which manifestly runs counter to legislative scheme and intent behind sec. 68 and sec. 115BBE of the Act. 4. That the appellant craves leave to add add/alter any/all grounds of appeal before or at the time of hearing of the appeal." 8. The ld. Counsel for the Assessee, at the time of hearing confined his arguments to the ground challenging the validity of approval u/s 153D of the Act. He submitted that the Assessee filed an e-mail dated 23.08.2021 requesting for the certified copy of the order-sheet and approval taken u/s 153D from the appropriate authority before the order u/s 153A is passed. He submitted that in response to the same, the AO had supplied the approval received from Addl. CIT, which is as under:- 9. Referring to the approval given by the Addl. CIT, he submitted that the same has been granted on the very same day and the assessment records were never sent to the Addl. CIT, which is discernable from the said letter. The ld. counsel for the Assessee referring to the errors in the assessment order regarding the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court on validity of approval under section 151 of the Act, which is pari-materia with the provisions of section 153D of the Act, fully cover the issue of validity of impugned approval u/s 153D of the Act. Referring to the above decision, he submitted that since the approval given by the Addl. CIT u/s 153D of the I.T. Act,1961 in the instant case being not in accordance with law, therefore, the assessment order passed u/s 153A r.w.s. 143(3) of the Act stand vitiated since, the said order suffers from various infirmities. He accordingly submitted that the assessment order passed u/s 153A r.w.s. 143(3) of the Act should be quashed. 11. The Ld. DR on the other hand, heavily relied on the order of the Ld. CIT(A) on this issue. He submitted that the ld. CIT(A) while deciding the issue has held that the range head is involved in such assessment right from the date of issuing first questionnaire and there are generally multiple discussions between the AO and the range head on various issues arriving in the assessment before finalization of the said assessment. He had elaborately discussed while dismissing the grounds raised by the Assessee on this issue. Referring to various decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,560/-. This clearly shows that there is complete non-application of mind either by the AO who passed the order u/s 153A r.w.s. 143(3) of the Act and the Addl. CIT who has given his approval u/s 153D of the Act. 16. Therefore the question that arisesis, aswhat to do in case of approval given without application of mind by the Higher Authority. 16.1 The Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. v. CIT258 ITR 317 while considering the identical issue u/s 153D of the Act,has held asunder; " The proviso to sub-section (1) of section151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment. What disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53D of the Act, before passing the order of assessment, was not complied with. 4. This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. The Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record. 5. The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the Assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 19.01.2021) and batch of 52 appeals, while adjudicating an identical issue, has extensively dealt with various judgments of Hon'ble Apex Court, High Courts and Tribunal as well and quashed the assessment orders itself by observing as under :- "11. We have considered the rival submissions and perused the written submissions filed by the parties and ………………………………………………………………………… ………………………………………………………………………… ………………………………………………………………………… Further safeguard have been provided for framing the assessments under section 153A that prior approval shall be necessary for assessments in the cases of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip;…. The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under : "No.Addl.CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated the 31st January, 2014. To Shri Tatung Padi Dy. Commissioner of Income Tax, Central Circle-II, Faridabad. Sub: Approval u/s.153D of the I.T. Act, 1961, in the case of M/s. M3M India Holdings, Formerly M/s.Krishna Flexi Solution, C- 13, SushantLok-I, Gurgaon for the A.Y. 2012-2013 - regarding. Please refer to the Draft Assessment Order U/s. 153B(1)(b) of the I.T. Act, 1961, referred for approval u/s.153D of the I.T. Act, 1961, dated 30.01.2014. The approval u/s. 153D of the I.T. Act, 1961, is accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the Orders of the authorities below and quash the assessment orders passed under section 153A of the I.T. Act as well as the impugned appellate Order. Resultantly, all additions are deleted. The additional grounds are allowed. In view of the above findings, the other issues on merits are left with academic discussion only. Accordingly, all the appeals of the Assessees are allowed. 17. In the result, all the appeals of the Assessees are allowed. 17. From the analyzations made above, it emerges that the function to be performed by the Addl. CIT or CIT in granting previous approvalu/s 153-D of the Act, requires to adopt judicial approach and to apply his mind independently and to conduct the enquiry himself on the entire facts, material, evidence and proposal put up to him for approval in the light of the material placed and relied upon by the Assessing Officer because where any act or function requires application of mind and judicial discretion or approach by any authority it partakes and assumes the character and status of judicial or at least quasi-judicial act, particularly because their Act or function is likely to affect the rights of affected persons. As the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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