Rajesh Ladhani Vs DCIT (ITAT Agra)
It is evident from the CBDT Circular No. 3 of 2008, dated 12.3.2008 that the legislature in its highest wisdom made it compulsory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority have to approve the Assessment order. Object of entrusting the duty of Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should scrutinize the seized documents and any other material forming the foundation of Assessment. It is an elementary law that whenever any statutory obligation is casted upon any statutory authority such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act should necessary reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending.
In the above background of law and in the light of Order dated 27.03.2015 passed under section 153D of the Act, which gives legality to the impugned Assessment order, question which arises for our consideration is whether the said Approval granted by the Additional CIT, Central, Kanpur vide his order dated 27.03.2015 can be held to be granted after due application of mind and can be held to be valid in the eye of law?
To decide the above issue, order dated 27.03.2015 passed by the Additional CIT was again carefully perused. The contents of the Approval, as reproduced in Para 4, speak for itself loud and clear. The following inferences are inevitable from the bare reading of the said order. Draft Assessment orders were placed before the Additional CIT, Central, Kanpur on 27.03.2015 at 3.50 PM for the first time and soon on the same day it was granted. As clearly mentioned in the Approval under challenge, that prior to this date the case was never discussed with the authority granting the approval. The Additional CIT has further noted that even the questionnaire as was required to be issued with the approval of Additional CIT, in view of CBDT instruction was not issued with his approval. He further observed that since, there was no time left to analyze the issue of draft order on merit, therefore, the said order is approved, as specifically mentioned in the said order, solely relying upon the undertaking obtained from the AO that he has taken due care while framing the assessment that all the observations made in the appraisal report relating to examination/investigation as also the issues identified in the course of examination of seized material have been carefully considered by the authority seeking approval. Thus, the sanctioning authority delegated his statuary duty to grant Approval, after due application of his mind, to the same subordinate AO , whose action the Additional CIT, was supposed to supervise and adopting a short cut in the matter obtained an undertaking from the subordinate AO, accepting it on face value that all the issues have been taken care off while framing the assessment by the AO, and that all the observations made in the appraisal report relating to examination/investigation as also the issues identified in the course of examination of seized material have been carefully considered by the AO, the Additional CIT, granted Approval. Admittedly, the Additional CIT, without any consideration on merit in respect of issues on which addition was made granted the Approval on the undertaking of the AO and in view of stated paucity of time with him for granting Approval. This approach of the Additional CIT, Central has rendered the Approval to be an eyewash and idle formality and such a mechanically granted Approval is no approval in the eyes of law.
From the approval order dated 27.03.2015 of the Addl. CIT, we find that the Ld. AR has rightly pointed out that in the facts of case of AAP Paper Marketing Limited (supra) there may be some justification for the qualified approval in view of the fact that the limitation in that case was getting expired on the day when the draft assessment orders were put up before the Additional CIT, Central Circle, Kanpur for his approval. However, to the disadvantage of the revenue in the case on hands there can be no little justification for qualified approval as the proposal for approval was put up before the Additional CIT on 27.03.2015 at 3.50 PM and at the same time it was granted, without any application of mind on the pretext that limitation is going to get expired on 31.03.2015. Thus, in the case at hand despite availability of time, the Additional CIT has been taking excuse of limitation and has chosen to grant approval without application of his own mind but on the undertaking of the AO that “while completing the assessment as per the draft assessment order, all the observations made in the appraisal report relating to examination/investigation as also the issues identified in the course of examination of seized material have carefully considered.” In our view such a practice is required to be deprecated and we deprecate the same.
ITAT held that If the approval is granted by the superior authorities in mechanical manner without application of mind then the very purpose of obtaining approval is defeated. Moreover, where 4 clear days’ time was available with the administrative authority, it was a half-hearted approval and as such held as no approval in the eyes of law. Accordingly, we have no hesitation in declaring that the Approval granted by the Additional CIT, Central, Kanpur on 27.03.2015 is no approval in the eyes of law and therefore, the assessment made by the AO based on such an approval is also declared to be null and void.
FULL TEXT OF THE ITAT JUDGEMENT
This bunch of appeals are directed by the assessee, against the order dated 27.02.2019 passed by the Ld. CIT(A)-IV, Kanpur for the assessment year 2008-09 and 2011-12.
2. Since common issues are involved in these appeals, therefore, these appeals were heard together and are being disposed of by way of this consolidated order for the sake of consistency in view, convenience of parties and brevity.
3. The facts as per record are taken from ITA No.106/Agra/2019 for A.Y. 2009-10, as a lead and our decision in this appeal would equally apply to ITA No. 107/Agra/2019 for A.Y 2011-12, and with consequential effect in ITA No. 108/Agra/2019. The Grounds raised in this appeal read as under:
1. BECAUSE, the so-called approval as granted by the Learned Additional Commissioner of Income Tax, Central Range, Kanpur under section 153D for passing impugned assessment order dated 31.03.2015 under section 153A of the ‘Act’ is no approval in the eye of law, having been granted without application of mind and such a mechanically granted approval vitiates the assessment order rendering it to be held illegal and void ab-initio.
2. BECAUSE, while sustaining addition the Ld. CIT(A) in para-5.6 has observed that ‘on money’ paid by the appellant in acquisition of property is proved because the entries in relation to cheque amount is reflected in regular books of accounts, whereas consideration paid in cash is not reflected in books of accounts of the appellant’. Such findings recorded by the Ld. CIT(A) forming the basis for confirmation of addition is perverse ,wholly wrong and based on no evidence on records and thus vitiates the appellate order.
3. BECAUSE, Ld. CIT(A) has sustained the addition taking taken aid of deeming provisions under section 132(4) and 292C of the Act holding that ‘appellant’ has not rebutted the presumption of law failing to take note of the fact that under the facts and circumstances of the case no such presumption is available to the AO and furthermore, if any such presumption is available same being rebuttable, stood rebutted by filing Affidavit followed by cross-examination of the ‘appellant’ at the stage of assessment itself.
4. BECAUSE, while sustaining the addition the Ld. CIT(A) omitted to consider that the explanation as was furnished by the ‘appellant’ was further corroborated by the Affidavit of the ‘appellant’ followed by cross-examination by the ‘AO’ in relation to the contents of Affidavit.
5. BECAUSE, the Ld. CIT(A) has acted illegally and arbitrarily, purely motivated by consideration of presumptions, conjectures and surmises in concluding that sum of Rs. 49,00,000 was invested by the ‘appellant’ in property as alleged to be reflected in Page no. 32 and 37 of ‘Matrix Note Book Annexure A -1 and in adding the same to the Income of the ‘appellant’.
6. BECAUSE, while sustaining the addition of Rs. 49,00,000 as unexplained investment, the Ld. CIT(A) grossly erred in not appreciating that no property stated to be referred in seized paper was ever acquired by the ‘appellant’ and also that no cheque amount referred in the said seized paper was paid or received by the ‘appellant’.
7. BECAUSE, onus lays upon the ‘AO’ to prove that ‘appellant’ made the investment of Rs. 49,00,000/- which has not been recorded in books of account. In the entire proceedings commencing at the stage of Investigation Wing, assessment proceedings and upto the stage of appellate proceedings no evidence was brought on records to prove that any Investment was made by the ‘appellant’ or even to corroborate and also covert the jottings/discussion/planning into admissible piece of evidence.
8. BECAUSE, the ‘AO’ has made the addition purely on the basis of ‘Appraisal Report’ without any application of his own mind.
9. BECAUSE, while making the Assessment the authorities below made various observations and conclusions which are contrary to facts available on records. While making the addition submission made and evidences filed have been rejected arbitrarily.
10. BECAUSE, the order appealed against is arbitrary, illegal, contrary to the facts, material on record, law and principles of natural justice.
4. The Ld. Counsel of the assessee Shri Anurag Sinha, Advocate submitted that the so-called approval as granted by the Learned Additional Commissioner of Income Tax, Central Range, Kanpur under section 153D of the Act, which has led the foundation for passing impugned Assessment order dated 31.03.2015 under section 153A of the Act is no Approval in the eye of law as the purported Approval been granted without due application of mind and such a mechanically granted Approval vitiates the Assessment order rendering it to be held illegal and void ab-initio. He invited our attention to section 153D of the I.T Act, 1961, which mandates that no order of Assessment shall be passed except with the prior approval of the Joint Commissioner of Income Tax. It was submitted by the Ld. A.R that in the case at hand the Assessment order, though has apparently been passed after the Approval granted by the Additional CIT, Central Circle, Kanpur but the so-called Approval as granted under section 153D of the Act for passing impugned assessment order dated 31.03.2015 passed under section 153A of the Act is no approval in the eye of law. Assessee has drawn out attention to the copy of Approval order passed under section 153D of the Act by the Additional Commissioner of Income Tax, Central Circle, Kanpur which was obtained by the assessee exercising his right under the Right to Information Act, 2005. (APB, Pg. 63-64)
Most Urgent/Time Barring
Dated: 27/03/2015
F.No. Addl. CIT (CR)/KNP/Draft Asstt/Ladhani Group/2014-15/2581 To,
The Dy. Commissioner of Income Tax, Central Circle, Agra
Sub: Proposal of approval u/s 153D for the assessment proceeding completed completed u/s 153A/153C of the Act in Ladhani Group of cases-regarding
“Please refer to your letter bearing F. No. DCIT/CC/Agra/Approval/2014-15/dated 26.03.2015 alongwith case records pertaining to the said cases as detailed in the said letter seeking approval u/s 153D of the Income Tax Act, 1961 was submitted in this office at 3.50 P.M on 27.03.2015
The approval is accorded in following 34 cases, solely relying on the undertaking given by the AO that while completing the assessment as per the draft assessment order, all the observations made in the appraisal report relating to examination/investigation as also the issues identified in the course of examination of seized material have carefully considered/kept in view as limitation for completion of these assessments are going to be expired on 31.03.2015:
