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TMI Blog2025 (1) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... ere conducted on 23.03.2021 and ON subsequent date in the case of assessee along with the other cases of KK Spun and other group of cases at various residential and business premises. The cases were centralised in Central Circle- 02, New Delhi. 4. A notice under section 153A of the Act was issued on 10.11.2021 requiring the assessee to file its return of income. In response the assessee filed its return of income for the year under consideration declaring total income as disclosed in the original return of income. The Assessing Officer issued notice under section 143 (2) and 142 (1) of the Act. The assessing officer observed that several notices were issued to the assessee but due to partial compliance on the part of the assessee, he has no option but to complete the assessment on the basis of material evidences gathered during the post assessment proceedings. 5. Based on the above observation, Assessing Officer considered the documents found during the course of search proceedings and on examination of Annexure-A12, various incriminating evidences were found, this is the printout from the pen drive found during the search at the premises which contained various excel sheet showi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer rejected the submissions of the assessee and observed that the details contained in annexures A-12 are relating to cash flow against the ingenuine sales and purchases. The cheque transactions contained in the annexures are tallying with the books of accounts maintained by the assessee. Further he observed that the movement of cash is also evidenced by the WhatsApp chats found in the mobile phones of Shri Shailendra Goyal and Shri Himanshu Gupta. The above said employees not only accepted the ingenuine transactions but also explained the modus operandi thereof. He rejected the contention of the assessee that all the transactions are GST compliant and no evasions were reported. The mismatch between the sales \ purchases reported in show cause notice and the cash trial found during the search and the purchases constituted major raw material consumed by assessee. In this regard, AO referred to the alternate submissions made by assessee, accordingly, the Assessing Officer reproduced the same in the order at para number 5.8.4. For the sake of clarity it is reproduced below :- "5.8.4 ALTERNATIVE SUBMISSIONS REGARDING 1SSUES MENTIONED ABOVE AND RELATING TO ALLEGED BOGUS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SCN, figures being corrected along with corroborating documents). h. If bogus sale is alleged, then it is not possible to make the sale without any purchase. The purchase in such a case should also be bogus to balance the figures since there can be no bogus purchase against actual sale in the given circumstances of the case as explained below. i. Thus, the real picture would then be obtained only after exclusion of both sale and purchase. 3.2 If the alleged excel sheets print outs and the inferences of the department in that regard are assumed to be correct, then it would transpire that the alleged cash received from alleged bogus purchases has moved to the alleged bogus sales either directly or through various other means like Aditya or Anand. This would also establish a correlation between such purchases and sale." 8. After considering the above submissions, the Assessing Officer observed that from the records, it is clearly established that the assessee has engaged in ingenuine sales and purchases during the year. The Annexure A-12 established that the cash generated from purchases has gone to various parties, majorly to those where ingenuine sales are alleged. And ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion received and paid by them are proved beyond doubt. Accordingly, he dismissed the grounds raised by the assessee. Further, he dismissed all the grounds raised by the assessee including the issue of approval granted under section 153D of the Act. 11. Aggrieved with the above order, Assessee is in appeal before us raising following grounds of appeal: "1. INVALID APPROVAL U/S 153D: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto because they are founded and based on invalid and unlawful so called "approval" u/s 153D of 1 961 Act (dated 23.05.2022); 2. INADMISSIBLE ELECTRONIC EVIDENCE (SEC 65B) AND CBDT DIGITAL EVIDENCE MANUAL VIOLATED: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto because entire assessment /additions admittedly being based on purported "electronic" evidence but there is no valid /adequate compliance to sec 65B of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sec 145(3) (book results never doubted) sans which entire asst. is jurisdictionally flawed; 8. PERVERSE CIT-A REASONING: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto in so far impugned additions are concerned which are Sustained by ld cit-a on basis of totally perverse "reasoning" 9. SEC 28 AND SEC 69C MECHANICALLY INVOKED FOR IMPUGNED ADDITIONS: That impugned assessment order passed u/s 153A/143(3) of 1961 Act (dated 23.05.2022) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 05.01.2024) are both invalid and deserve to be quashed in toto as provisions of sec 28 and sec 69C have been perfunctorily and mechanically invoked without any application of mind vis a vis respective /impugned additions; so impugned assessment /first appeal order are to be quashed /set aside; PRAYER (RELIEF SOUGHT): A) TO QUASH THE IMPUGNED ASSESSMENT FRAMED BY LD AO U/S 153A/143(3) FOR WANT OF VALID APPROVAL U/S 153D; AND SO HELD IMPUGNED FIRST APPEAL /CIT-A ORDER U/S 250 IS ALSO INVALID B) TO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant factual position of dates of 153D forwarding and final approval and final impugned asst order passed u/s 153A/143(3) with corresponding position in CIT -A impugned order is as below: CHART 3 AY DATE OF FORWARDING OF DRAFT ORDERS (LETTER OF AO SEEKING APPROVAL U/S 153D) FINAL APPROVAL U/S 153D IMPUGNED ASST. ORDER CIT-A order 2018-2019 23.05.2022 23.05.2022 23.05.2022 sec 153a/143(3) 05.01.2024 (PARA 30 TO 36 PAGE 10/11) 2019-2020 23.05.2022 23.05.2022 23.05.2022 Sec 153A/143(3) 05.01.2024 PARA 30 TO 36 PAGE 9/10 2020-2021 23.052022 23.05.2022 23.05.2022 Sec 153A/143(3) 05.01.2024 PARA 30 TO 36 PAGE 10/11) 2021-2022 26.09.2022 30.09.2022 30.09.2022 Sec 153A/143(3) 05.01.2024 PARA 34 TO 39 PAGE 12/13 7. Striking aspects of impugned asst u/s 153A/first appeal order(s): 7.1 That Ld AO has inferred that assessee is INFLATING his BOOKS by ingenuine sales and purchases (sustained/upheld by ld cita); 7.2 That Ld AO has no where doubted much less rejected assessee audited trading results that is never sec 145(3) is invoked by ld AO/CITA (also not invoked by ld cita vide his coterminous powers) 7.3 That Ld AO has accepted returned income which in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, when taxes are to be levied upon a valuation, is obviously indispensable. It is required as the first step in the proceedings against individual subjects of taxation, and is the foundation of all which follow it. Without an assessment they have no support, and are nullities. The assessment is, therefore, the most important of all the proceedings in taxation, and the provisions to insure its accomplishing its office are commonly very full and particular. If there is no valid assessment, a tax on sale of lands is a nullity. A want of assessment is not a mere irregularity remedied by a curative statute. On the other hand, no assessment is necessary where the statute itself prescribes the amount to be paid, and this can be recovered by suit. For instance, where a statute imposes a tax at a specified rate upon bank deposits, no other assessment other than that made by the statute itself is necessary." 9. Short issue which arises is whether impugned asst and ld cit-a orders can be sustained in given /admitted facts? 10. Our submissions in brief: 10.1 APPARENT AND SERIOUS CONTRADICTION IN APPROACH OF LD AO/CIT-A:That firstly there is serious and fundamental CONTRADICTION in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoying the fruits. One cannot take advantage of one part while rejecting the rest. A person cannot be allowed to have the benefit of an instrument while questioning the same. Such a party either has to affirm or disaffirm the transaction. This principle has to be applied with more vigour as a common law principle, if such a party actually enjoys the one part fully and on near completion of the said enjoyment, thereafter questions the other part. An element of fair play is inbuilt in this principle. It is also a species of estoppel dealing with the conduct of a party. We have already dealt with the provisions of the Contract Act concerning the conduct of a party, and his presumption of knowledge while confirming an offer through his acceptance unconditionally. 27. We would like to quote the following judgments for better appreciation and understanding of the said principle: * Nagubai Ammal v. B. Shama Rao, 1956 SCR 451: "But it is argued by Sri Krishnaswami Ayyangar that as the proceedings in OS. No. 92 of 1938-39 are relied on as barring the plea that the decree and sale in OS. No. 100 of 1919-20 are not collusive, not on the ground of res judicata or estoppel but on the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. 464, para 512: "On the principle that a person may not approbate and reprobate, a species of estoppel has arisen which seems to be intermediate between estoppel by record and estoppel in pais, and may conveniently be referred to here. Thus a party cannot, after taking advantage under an order (e.g. payment of costs), be heard to say that it is invalid and ask to set it aside, or to set up to the prejudice of persons who have relied upon it a case inconsistent with that upon which it was founded; nor will he be allowed to go behind an order made in ignorance of the true facts to the prejudice of third parties who have acted on it". * State of Punjab v. Dhanjit Singh Sandhu, (2014) 15 SCC 144: "22. The doctrine of "approbate and reprobate" is only a species of estoppel, it implies only to the conduct of parties. As in the case of estoppel it cannot operate against the provisions of a statute. (Vide CIT v. V. MR. P. Firm Muar [CIT v. V. MR. P. Firm Muar, AIR 1965 SC 1216]). 23. It is settled proposition of law that once an order has been passed, it is complied with, accepted by the other party and derived the benefit out of it, he cannot challenge it on any ground. (Vide Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e equity, however, it must not be applied in such a manner so as to violate the principles of what is right and of good conscience. [Vide Nagubai Ammal v. B. Shama Rao [AIR 1956 SC 593], CIT v. V. MR. P. Firm Muar [AIR 1965 SC 1216], Ramesh Chandra Sankla v. Vikram Cement [(2008) 14 SCC 58 : (2009) 1 SCC (L&S) 706 : AIR 2009 SC 713], Pradeep Oil Corpn. v. MCD [(2011) 5 SCC 270 : (2011) 2 SCC (Civ) 712 : AIR 2011 SC 1869], Cauvery Coffee Traders v. Hornor Resources (International) Co. Ltd. [(2011) 10 SCC 420 : (2012) 3 SCC (Civ) 685] and V. Chandrasekaran v. Administrative Officer [(2012) 12 SCC 133 : (2013) 2 SCC (Civ) 136 : JT (2012) 9 SC 260]. ] 16. Thus, it is evident that the doctrine of election is based on the rule of estoppel-the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when it is his duty to speak, from asserting a right which he would have otherwise had."" 10.3 NETTING BENEFIT: That thirdly even benefit of netting inter se be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to i) hon'ble apex court in case of hon'ble apex court three judge bench in epochal case of Dr. Premachandran Keezhoth and Another ... Appellant(s); Versus Chancellor Kannur University and Others ... Respondent(s).2023 SCC OnLine SC 1592 ii) HON'BLE DELHI HIGH COURT IN CASE OF ACME HEERGARH POWERTECH PRIVATE LIMITED VS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS & ANR Judgment pronounced on: 06 May 2024 "ON ISSUE OF ABIDCATION AS PER ADMINISTRATIVE LAW; "118. We find ourselves unable to uphold the validity of the impugned Instruction bearing in mind the well settled precepts of administrative law and which abhor abdication of an independent decision making power as well as a quasi-judicial authority being compelled to act under the dictates of a superior authority. Wade and Forsyth in their seminal work on Administrative Law38 explain the legal position as follows: - "Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of discretion was succinctly explained by the Supreme Court in AnirudhsinghjiKaransinhji Jadeja in the following terms: - "11. The case against the appellants originally was registered on 19-3-1995 under the Arms Act. The DSP did not give any prior approval on his own to record any information about the commission of an offence under TADA. On the contrary, he made a report to the Additional Chief Secretary and asked for permission to proceed under TADA. Why? Was it because he was reluctant to exercise jurisdiction vested in him by the provision of Section 20-A(1)? This is a case of power conferred upon one authority being really exercised by another. If a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If the discretion is exercised under the direction or in compliance with some higher authority's instruction, then it will be a case of failure to exercise discretion altogether. In other words, the discretion vested in the DSP in this case by Section 20-A(1) was not exercised by the DSP at all. 12. Reference may be made in this connection to Commr. of Police v. Gordhandas Bhanji [1951 SCC 1088 : 1952 SCR 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay); Hon'ble BOMBAY HIGH COURT DECISION IN CASE OF GAURAV TRIYUGI SINGH VS ITO (2020) 423 ITR 531; refer fatal impact of "admitted" not making independent inquiry u/s 133(6)/131: ; Hon'ble Allahabad high court decision in case of Kehsarwanisheetalya vs CIT (2020) 315 CTR 815; Hon'ble Allahabad high court decision in case of CIT vs jauharimalgoel (2008) 296 ITR 263; Hon'ble Calcutta high court decision in case of CIT vs Chandela trading co ltd (2015) 372 ITR 232; Hon'ble rajasthan high court decision in case of cit vs jai kumarbakliwal (2015) 372 ITR 232; Hon'ble P&H high court decision in case of CIT vs Varinder Rawlley (2014) 366 ITR 232; Hon'ble Gujarat high court decision in case of CIT vs Chankaya developers 2013 SCC OnLine Guj 4036); also refer:PCIT (Central)-1 vs. Adamine Constructions P. Ltd., [2018] 99 taxmann.com 44 (Delhi)for A.Y. 2009-10 - SLP filed by the Revenue was dismissed by the Hon'ble SC in PCIT (Central)-1 vs. Adamine Constructions P. Ltd., [2018] 99 taxmann.com 45 (SC); PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 4 ( Delhi) (HC) Editorial: SLP of revenue is dismissed ;PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 3 (SC) 10.7 DUTY TO MAKE JUST ASSESSMEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not entitled to exemption as a Trust under Sections 11, 12 and 12A of the Act in absence of registration under the Act as it stood Section 12AA of the Act, the benefit of other deductions under the Act ought to have been given. The Assessing Officer is not expected to act mechanically to confirm the liability to fasten an unjust tax liability on an assessee." 11. Hon'ble Madras high court in case of M.Kumarasamy vs ITO 03.09.2024 T.C.A.No.998 of 2015 At the time of admission of this Tax Case Appeal, the following substantial questions of law was framed for being answered:- "Whether the Tribunal is correct in law in sustaining the assessment of agricultural income reported as unexplained income based on the enquiry report of the Income Tax Inspector which report was not provided to the appellant for rebuttal, proving and establishing the gross violation of the principles of natural justice as well as the perversity/misdirection in the decision rendered in relation thereto?" 11. We have considered the submissions made by the learned counsel for the appellant and the learned counsel for the respondent. In this case, the Department has disbelieved the letter of the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 143(3) of the Income Tax Act, 1961 and by the Commissioner of Income Tax (Appeals) vide order dated 12.11.2013 and by the Income Tax Appellate Tribunal vide order dated 20.06.2014 are liable to be interfered as unsustainable. 19. We are therefore of the view, the succeeding orders passed against the appellant in so far as the addition of Rs. 22,00,000 under Section 69A of the Income Tax Act, 1961 as unexplained credit/unexplained money of the appellant are incorrect and are liable to the set aside. the substantial questions of law framed by us is answered in favour of the appellant assessee and against the Income Tax Appellate Tribunal. 9.8 ON TELESCOPING BENEFIT: The benefit of telescoping has been approved in Principal Commissioner of Income-tax v. AliasgarAnvaraliVarteji reported in [2018] 96 taxmann.com 231 (Gujarat) wherein it was held that, when the entire unaccounted income discovered during the search was included in the overall disclosure, and the negative balance in the books of account was due to payments made from this unaccounted income, the assessee should not be denied the benefit of telescoping of the initial disclosure. It was held : 3. We have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st cause or excuse or for one of the reasonable or probable causes. The term 'malice on fact' would come within the purview of such a definition. Even, however, in the absence of any malicious intention, the principle of malice in law can be invoked as has been described by Viscount Haldane in Shearer Vs Shields in the following terms:- "A person who inflicts in injury upon another person in contravention of the law is not allowed to say that he did so with an innocent mind; he is taken to know the law, and he must act within the law. He may, therefore, be guilty of malice in law, although, so far as the state of his mind is concerned, he acts ignorantly, and in that sense innocently." 40. The principle has also been narrated briefly in S RVentakram Vs Union of India7 in the following terms:- "Thus malice in its legal sense means malice such as may be assumed from the doing of a wrongful act intentionally but without just cause or excuse, or for want of reasonable or probable cause." 41. The impugned assessment order is vitiated by legal malafides. Though the interest of revenue is vital, such interest cannot override considerations of probity and fairness in tax governance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h proceedings, assessee has denied the same, the Assessing Officer came to the conclusion that the purchases and sales recorded in the books are ingenuine. After carefully considering the facts on record, we observed that assessee has declared and filed its return of income by declaring total sales and relevant purchases declared the gross profit in the years under consideration in the range of 28% to 31%. Taking que from the findings of the assessing officer, he gave a clear finding that the purchases and sales declared by assessee to the extent of information found in the annexure A-2 are non-genuine and with that finding, he proceeded to add only the commission income presumed to have been paid and received by the assessee without disturbing the financial results declared by the assessee. In our considered view, the Assessing Officer should have either rejected the books of account and determined the actual profit earned by the assessee. He chose to proceed with the result declared by the assessee in their return of income and also proceeded to make the presumed commission income which assessee must have paid and received. It is quite contradicting to the detailed findings made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties thereto. The law is thus stated in Halsbury's Laws of England, Vol. XIII, p. 464, para 512: "On the principle that a person may not approbate and reprobate, a species of estoppel has arisen which seems to be intermediate between estoppel by record and estoppel in pais, and may conveniently be referred to here. Thus a party cannot, after taking advantage under an order (e.g. payment of costs), be heard to say that it is invalid and ask to set it aside, or to set up to the prejudice of persons who have relied upon it a case inconsistent with that upon which it was founded; nor will he be allowed to go behind an order made in ignorance of the true facts to the prejudice of third parties who have acted on it". State of Punjab v. Dhanjit Singh Sandhu, (2014) 15 SCC 144: "22. The doctrine of "approbate and reprobate" is only a species of estoppel, it implies only to the conduct of parties. As in the case of estoppel it cannot operate against the provisions of a statute. (Vide CIT v. V. MR. P. Firm Muar [CIT v. V. MR. P. Firm Muar, AIR 1965 SC 1216]). 23. It is settled proposition of law that once an order has been passed, it is complied with, accepted by the other party an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such contract, or conveyance, or order upon himself. This rule is applied to ensure equity, however, it must not be applied in such a manner so as to violate the principles of what is right and of good conscience. [Vide Nagubai Ammal v. B. Shama Rao [AIR 1956 SC 593], CIT v. V. MR. P. Firm Muar [AIR 1965 SC 1216], Ramesh Chandra Sankla v. Vikram Cement [(2008) 14 SCC 58 : (2009) 1 SCC (L&S) 706 : AIR 2009 SC 713], Pradeep Oil Corpn. v. MCD [(2011) 5 SCC 270 : (2011) 2 SCC (Civ) 712 : AIR 2011 SC 1869], Cauvery Coffee Traders v. Hornor Resources (International) Co. Ltd. [(2011) 10 SCC 420 : (2012) 3 SCC (Civ) 685] and V. Chandrasekaran v. Administrative Officer [(2012) 12 SCC 133 : (2013) 2 SCC (Civ) 136 : JT (2012) 9 SC 260]. ] 16. Thus, it is evident that the doctrine of election is based on the rule of estoppel-the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when it is his duty to speak, from asserting a right which he would have otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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