Vrushali Sanjay Shinde Vs DCIT (ITAT Mumbai)
Introduction: In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai has addressed the issue of mechanical approvals under Section 153D of the Income Tax Act and its impact on assessments. This landmark decision has far-reaching implications for taxpayers and tax authorities alike.
Detailed Analysis:
The case in question revolves around the approval process under Section 153D, which mandates that assessments in search cases must receive prior approval from a superior authority. The primary purpose of this requirement is to ensure that the assessing officer (AO) conducts a thorough examination of the materials and circumstances before finalizing the assessment.
In this particular case, it was observed that the Additional Commissioner of Income Tax (ACIT) had granted approval mechanically, without a diligent review of the assessment order. The approval form lacked any indication of a considered evaluation of the materials involved.
Furthermore, it was noted that the draft assessment order made substantial additions, and these additions were approved without a comprehensive examination or sharing of the basis for such additions with the assessee. This lack of transparency and the absence of due application of mind by the approving authority raised critical concerns.
The ITAT’s decision draws heavily from a prior ruling in the case of Arch Pharmalabs Ltd. vs. ACIT (ITA.No. 6656/Mum/2017). In this earlier case, it was established that the approval granted under Section 153D must reflect a genuine and conscientious assessment of the assessment order, seized materials, and other related aspects. The responsibility of the Additional Commissioner is not merely procedural but substantial, ensuring that the AO’s actions are scrutinized effectively.
The ITAT’s observations highlight the necessity for the approving authority to fulfill their statutory obligation diligently, applying their expertise and understanding to assess the assessment order comprehensively. It is crucial that this process is not reduced to a mere formality, as it serves as a critical safeguard against arbitrary or unjust actions by the AO.
The decision also emphasizes that mechanical approvals undermine the very purpose of obtaining approval under Section 153D. Such perfunctory approvals lack legal sanctity and are deemed illegitimate in the eyes of the law.
The ITAT cited several other decisions that support the view that mechanical approvals defeat the purpose of the law. Notably, the decision in Shreelekha Damani vs. DCIT (173 TTJ 332) and the subsequent approval by the jurisdictional High Court (as reported in 307 CTR 218) affirm this standpoint.
Additionally, a recent decision in the case of Sanjay Duggal & Ors (ITA 1813/Del/2019) reiterated this view, echoing concerns about mechanical exercises of responsibility under Section 153D.
Conclusion:
The ITAT Mumbai’s verdict in the case of Vrushali Sanjay Shinde vs. DCIT highlights the critical importance of meaningful and considered approvals under Section 153D of the Income Tax Act. Mechanical approvals that lack due application of mind are deemed illegitimate and render the corresponding assessments non est and null.
This decision serves as a significant legal precedent, ensuring that the approval process is not reduced to a mere formality and providing a robust safeguard against arbitrary or unjust exercise of discretion by the assessing officers. It underscores the need for meticulous and thorough evaluations before granting approvals, reinforcing the principle of fairness and due process in tax assessments.
In summary, the ITAT’s ruling sets a strong precedent for the proper application of Section 153D, ensuring that assessments are conducted with the utmost diligence and integrity, ultimately upholding the rights and interests of taxpayers.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), Pune-11[hereinafter in short “Ld.CIT(A)”] dated 12.01.2022 for the A.Y.2008-09.
2. Brief facts of the case are, in the course of police action it was found that Shri Mukesh Surajprakash Gupta, residing at 101, Shiv Darshan Apartments, Chandanwadi, Thane(W) was in the possession of huge cash. The information was given to the Income-tax Department. Consequent to this, search action u/s 132 of Income-tax Act, 1961 (in short “Act”) was conducted on 22.08.2007 at the residence of Shri Mukesh Gupta. During the course of search, cash to the tune of ₹.4,66,73,200/- was found. When questioned about the source of the said cash, Shri Mukesh Gupta stated that cash lying at his residence had been given to him by Shri Premchand Ashok Kamble. It was stated by Shri Mukesh Gupta that Shri Premchand Ashok Kamble is the Proprietor of ‘Unique Finance’ and he was an employee of ‘Unique Finance. It was also stated by Shri Gupta that Shri Kamble was involved in various business activities but the exact details of the business activity from which the cash had come from where not known to him. It was also stated that the details of transactions/receipts of Unique Finance were being maintained on computers in Tally Package. It was also informed by Shri Mukesh Gupta that the office of the Unique Finance is at 306, Anant Lakshmi Chambers, Opp Waman Hari Pethe, Thane(W). It was stated that Shri Mukesh Gupta that his nature of duties includes looking after the cash and bank transactions of Unique Finance under the instructions of Shri Premchand Kamble.
3. Consequent to the information given by Shri Mukesh Gupta as stated above, a survey was immediately initiated at the office of Unique Finance at the above said address and later was converted into search action u/s 132 of the Act. During the course of search Shri Premchand Kamble was not present. None of the employees present at the premises could give any information neither about his residential address, nor about his whereabouts on the day of search. Cash to the tune of ₹.45,15,615/-was found at the office of M/s Unique Finance. None of the employees could satisfactorily explain about the cash and hence an amount of ₹.43,00,000/- was seized.
4. During the course of search action at the office of ‘Unique Finance’ certain documents relating to Smt Vrushali S. Shinde, Proprietor, Unique Finance Services & Trushna Enterprises at E-47, Sant Mira Society. Kopri Colony, Thane (E) were found which had shown that cash to the tune of ₹.10.91 crores was deposited in the bank accounts of these concerns, which are associate concerns of the Unique Group. Hence the case of the assessee had been covered u/s 153C of the Act.
5. During the course of search/survey operations incriminating documents, diaries, CDs etc. were found and seized/impounded. Cash of ₹.4.65 crores was seized from the residential premises of Mr. Mukesh Gupta. Consequent to the search and based on the seized material notices u/s.153A and u/s 142(1) were issued but there was no response to such notices. Since there is no compliance and based on the materials found during search which showed that huge deposits and withdrawal were made in the bank accounts. Some of the bank accounts were in the names of trusted employees also. The turnover of the various concerns was running in crores of rupees and no tax audit was carried out for any of the assessment years. As a result, there were multiple transactions of the same entry which led to complexity in the matter to arrive at correct profit. Investments were made by the assessee or his employees and associate concerns of the Unique Group in various assets. From the residential premises of Mr. Mukesh Gupta, a trusted employee of Mr.Premchand Kamble, diaries and other documents were found and seized The entries in these diaries and documents were stated to be related to the business of Mr. Premchand Kamble. The contents of the diaries and materials seized from the various premises need to be co-related with the business activities of each of the associated concerns which involved complexity. Accordingly, a special audit u/s.142(2A) of the Act was proposed in order to arrive at the correct book results and the profit of the assessee.
6. It was noticed that Shri Premchand Ashok Kamble has not cooperated with the audit and has not furnished any information sought for by the auditor. Hence the audit in this case was completed on the basis of seized/impounded material containing Books of Accounts, documents, various bank accounts and tally data and M.S. Excel file and CDs.
7. As stated above the case of the assessee was covered under 133A of the Act. The return of income filed by the assessee on 09.04.2009 declaring total income of ₹.3,02,100/-. Subsequently, notice u/s 143(2) and 142(1) were issued and served on the assessee. The case of the assessee also covered under the special audit and accordingly the audit report was shared with the assessee on 10.06.2010. Based on the above 142(1) notice was issued on 21.07.2010 to the assessee and to her authorised representative, since there was no response from the assessee, Assessing Officer proceeded to complete the assessment based on the material available on record and special audit report u/s.142(2A) of the Act. Accordingly, Assessing Officer proceeded to make the following additions: –
8. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions. After considering the submissions of the assessee Ld.CIT(A) deleted the additions made on the protective basis and rest of the additions were confirmed by him with the following observations: –
“11.8 A perusal of special audit report suggest that the said amount of Rs. 60,362/- pertains to petty expenses relating to eatables, repair maintenance, conveyance, petrol, etc. Considering that the appellant is in the business of providing catering services and has declared a receipt of Rs. 6,16,145/- during the year in her P & L account, the appellant might have incurred expenditure on the items mentioned above. Therefore, the additions merely in the absence of vouchers is not justified. However, the fact remains that the appellant could not produce vouchers to the extent of Rs. 60,362/- therefore, in order to plug the leakage of revenue, the disallowance is restricted to Rs. 25,000/-. Thus the appellant gets a relief of Rs. 35,362/-. Accordingly, the third ground of appeal of the appellant is PARTLY ALLOWED.
…
14.4. As mentioned above, the appellant herself has accepted that the said amount of Rs. 4,50,000/- was paid in cash and has accepted that the same may be added to assessee’s income. It may also be mentioned that this payment of Rs. 4,50,000/- is nothing to do with the loan taken from Tata Motor Finance Limited because as per the documents furnished by Tata Motor Finance, the loan of Rs. 4,00,000/- was sanctioned on 24/04/2007 and a net loan amount of Rs. 3,85,870/- was disbursed on 16/07/2007. Moreover, a perusal of bank account of the appellant maintained with Thane JantaSahkari Bank suggests that the loan amount of Rs. 3,85,870/- was credited on 21/07/2007 and immediately after that from this bank account, a payment of Rs. 4,00,000/- was made on 24/07/2007. However, this cash payment of Rs. 4,50,000/- stated to be made in the month of November, 2007. Thus, this payment is not out of the loan received from M/s Tata Motors Finance Limited. As the appellant has failed to explain the source of this amount, the addition of Rs.4,50,000/-made by the Assessing Officer is hereby upheld. This ground of appeal raised by the appellant is DISMISSED.
15.2 During the appellate proceedings, vide its reply dated 30/10/2012, the appellant submitted that an amount of Rs. 47,210/-was shown as commission in the ROI as per the certificate available to the appellant and that the certificate for Rs. 1,05,212/- was not available to the appellant at the time of filing ROI. Therefore, the commission of Rs. 1,05,212/- was not considered in the ROI. It is claimed that the commission of Rs. 1,05,212/- was received from Reliance Life Insurance Company Ltd. towards Life Insurance and General Insurance Agency which the appellant held with the company. To substantiate the point that the omission of the commission of Rs. 1,05,212/- was not intentional, it is claimed that the TDS on the commission had also not be claimed in the ROI The appellant has also stated that she accept the addition of Rs.1,05,212/- to her income. Vide her rejoinder filed on 16/3/2020, the appellant has further stated that she accept the addition and give consent to add the same in the total income of the assessee.
15.3 I have perused the assessment order and the submission made on behalf of the appellant. As the addition on account of the omission of the commission of Rs. 1,05,212/- from Reliance Life Insurance Company Ltd. has been accepted, the action of the AO in making an addition of Rs. 1,05,212/- is upheld. The AO is directed accordingly. Ground 7 of the appeal is hereby DISMISSED.
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16.5 I have examined the facts of the case and submissions made by the assessee. An addition of Rs. 9,00,000/- was made on account of unexplained investment in Reliance Life Insurance Company Limited which was not declared in the return of income and balance sheet. No submission was filed by the appellant before the AO in response to the show cause issued by him. During the appellate proceedings, the appellant has accepted that she had made investment of Rs. 9,00,000/- in Reliance Life Insurance Company Limited. However, it is claimed that she received a loan of Rs. 9,00,000/- in last assessment year i.e. A.Y. 2007-08. In the rejoinder, the appellant has stated that since the said amount of Rs. 9,00,000/-has been added in her income, no further addition is required to be made during this year. Before me, the appellant has neither filed any confirmation from Shri Premchand Kamble nor has she filed any evidence suggesting that a loan was raised from Shri Kamble during F.Y. 2006-07 and the said amount was used for making investment in Reliance Life Insurance Limited. In the absence of any documentary evidence, it cannot be accepted that the amount claimed was received in F.Y. 2007-08 and the same amount was used for investment made during F.Y. 2007-08. Accordingly, the submission made by the appellant is rejected and the addition of Rs. 9,00,000/- made by the Assessing Officer is upheld. The ground of the appeal raised by the appellant is DISMISSED.
17.4. I have examined the facts of the case and submission of the appellant. It has been claimed that the said amount of Rs.2,00,000/-was received from Shri Prathmesh P Bhange. However, the confirmation filed by the appellant does not carry complete address of the creditor. Also, no document substantiating the creditworthiness of Shri Bhange has been filed. Even after these shortcomings were pointed out by the Assessing Officer in his remand report, these details have not been furnished in the rejoinder filed by the appellant. It is a well settled law that in order to discharge his onus u/s 68 of the Act, the assessee is required to substantiate the identity of creditor, the creditworthiness of the creditor and the genuineness of the transaction. It is also a well settled law that filing of mere confirmation from the creditor is not sufficient to discharge onus casted on the assessee u/s 68 of the Act. As the appellant has failed to discharge its onus of prima facie substantiating the identity of the creditor, and the creditworthiness of the creditor, the addition of Rs.2,00,000/- made by the Assessing Officer u/s 68 of the Act is confirmed. This ground raised by the appellant is hereby DISMISSED.
19.5 I have examined the facts of the case and submissions made by the appellant. Brief facts of the issue are that during the Specia l Audit proceedings, the auditor vide a questionnaire dated 12/03/2010, asked the assessee to inform whether she has taken or given any cash loan during F.Y. 2007-08. In response to this, the appellant assessee vide her letter dated 27/03/2010, stated that during the year she has not received any loan by cash. However, she has given a loan of Rs. 6,25,000/- to Unique Finance by cash withdrawing from my TJS Bank account. During the assessment proceedings, the Assessing Officer noticed that the said loan is not appearing in the balance sheet filed along with the return of income. Accordingly, the AO asked the assessee to show cause as to why the said amount of Rs.6,25,000/- should not be assessed as income from undisclosed sources. As no response was filed, the Assessing Officer considered this amount of Rs. 6,25,000/- as income of the assessee. During the appellate proceedings also, the assessee has admitted that the said amount was withdrawn from her bank account maintained with Thane Janata Sahakari Bank. However, she has failed to substantiate the source of this amount. The appellant has also not filed any explanation as to why this loan is not appearing in the balance sheet filed along with the income tax return. As the appellant has accepted that a loan was given but failed to furnish the explanation regarding source of Rs. 6,25,000/- during the assessment proceedings as well as during the appellate proceedings, the action of AO of making addition of Rs. 6,25,000/- is hereby upheld. This ground of appeal raised by the appellant is DISMISSED.
21.6 Thus, during the Special Audit proceedings, the appellant has categorically admitted of giving a loan of Rs.10,62,70,163/- to Shri Premchand Kamble. During the appellate proceedings, the assessee has filed an affidavit dated 29/10/2012, which is in complete contradiction to the above submission. The affidavit filed by the assessee is a self-serving document which is filed after more than 30 months of filing reply during the Special Audit. If the correct fact was that the appellant has not given any loan to Shri Premchand Kamble and the reply filed before Special Auditor was under any wrong impression, the appellant had full opportunity of explaining the same to the Assessing Officer during the assessment proceedings, when she was specifically asked to explain this issue. But the assessee conveniently chose to remain silent during the assessment proceedings. Even now, the appellant has not given any reason for which the reply filed before the Special Auditor should be considered as incorrect. Her affidavit is a bald denial of submissions made by her during the Special Audit without giving any reason for retracting the same. It is a well settled law that a bald denial of any statement made by an assessee cannot be accepted. Moreover, the appellant has also not filed any confirmation from Shri Premchand Kamble denying any loan transaction with the appellant. The appellant has taken a flip-flop position at various stages of proceedings and also chose to remain silent at her convenience. In view of these facts, the affidavit now filed by the appellant cannot be relied upon. As the appellant had earlier accepted that she has given loan amounting to Rs. 10,62,70,163/- to Shri Premchand Kamble and has failed to file any explanation regarding the source of this loan, the addition made by the Assessing Officer on account of unexplained loan given to Shri Premchand Kamble is therefore upheld.
21.7 Regarding the loan given to Shri Sanjay Shinde, the appellant has stated that confirmation has been filed along with written submission. However, no such confirmation is found enclosed. This fact was confirmed by the Assessing Officer in his remand report. Even after that along with her rejoinder, no such confirmation has been filed. The appellant has accepted that she has given an loan of Rs.2,25,000/- to Shri Sanjay Shinde which is not appearing in the balance sheet filed along with the return of income. No explanation regarding the source of this amount has been explained either during the assessment proceedings or in the appellate proceedings. Therefore, this addition of Rs.2,25,000/- on account of loan given to Shri Sanjay Shinde is upheld. To summarize, the addition of Rs.10,64,95,163/- made by the Assessing Officer on account of loans given to Shri Premchand Kamble and Shri Sanjay Shinde is confirmed. This ground of appeal raised by the appellant is DISMISSED.
22.5 The issue of transactions made by Shri Premchand Kamble through assessee’s bank account has been discussed in the appeal order of Shri Premchand Kamble for AY 2008-09, wherein, the deposits made in the assessee’s bank account has been held as income of Shri Premchand Kamble. Accordingly, the total deposits of Rs. 10,91,50,000/- in two bank accounts of the appellant has been held as income of Shri Premchand Kamble. However, the issue at hand is somewhat different because here not only during the assessment proceedings but also during the appeal proceedings, the appellant has accepted that she has given a loan of Rs. 15,00,000/-to M/s Unique Finance. Neither before the Assessing Officer nor before the undersigned, the appellant has taken a plea that the said amount of Rs. 15,00,000/- is included in the amount of Rs. 10,91,50,000/-. Also, the appellant has not filed copy of relevant bank account indicating that the said amount of Rs. 15,00,000/- was given to M/s Unique Finance out of the deposits made by Shri Premchand Kamble. In view of these facts, since the appellant has accepted that a loan of Rs. 15,00,000/- was given to M/s Unique Finance and on the other hand she has failed to furnish any explanation regarding the source of this loan coupled with the fact that said loan is not appearing in the balance sheet as noted by the Assessing Officer, the addition made by the Assessing Officer is hereby upheld. The ground raised by the appellant is DISMISSED.
23.2 During the appellate proceedings, the appellant has simply stated that this addition is of undisclosed income (cash in hand) Rs.32,900/-, the same may not be added to the assessee’s income. No explanation as to why the said addition should be deleted has been made during the appeal proceedings. In view of this, the addition made by the Assessing Officer is hereby confirmed. The ground raised by the appellant is DISMISSED.
26.4 I have considered the facts of the case and submissions made by the appellant. It is an admitted fact that there is a difference of Rs. 1,59,183/- in the capital account appearing in the balance sheet filed along with return of income and the balance sheet filed with the Special Auditor. The appellant did not furnish any explanation on this discrepancy before the Assessing Officer. In the appellate proceedings, the appellant claims that this amount pertains to profit earned in her proprietorship concerns viz M/s Prime Motors and Prime Holidays in earlier assessment year and accordingly, requested to delete the same. It may however be mentioned that no documentary evidence in support of this claim has been filed before me. Accordingly, the claim of the appellant that this amount corresponds to income earned during the last year cannot be accepted. In view of this, the addition of Rs. 1,59,183/- made by the Assessing Officer is upheld. The ground raised by the appellant is DISMISSED.
27.6 Another part of this ground relates to addition of Rs.9,00,000/- on the basis of deposits made in the bank account of the appellant maintained with Thane Janata Sahakari Bank. This bank account maintained with M/s Janata Sahakari Bank is different than the bank accounts numbering 30099 and 30100 maintained with UBI. The deposits made in these two bank accounts with UBI were held to be belonging to Shri Premchand Kamble. It has never been a claim of the appellant that the account maintained with M/s Janata Sahakari Bank was also being operated by Shri Premchand Kamble. It is also important to note that additions which were discussed in ground no2 raised by the appellant pertain to deposits made with the account no 30099 and 30100 maintained with UBI. Nowhere, in the assessment, the Assessing Officer has added the amount deposited in the bank account maintained with the Thane Janata Sahakari Bank. Accordingly, this addition of Rs. 9,00,000/- is not a double addition as claimed by the appellant. As the appellant has not explained the source of this amount either before the AO or before me therefore, the action of the Assessing Officer for making addition of Rs. 9,00,000/- on account of deposits in Janata Sahakari Bank is hereby upheld.
27.7 To sum up the addition of Rs. 5,59,50,000/- made on account of deposits in the bank account maintained with UBI is deleted and the addition of Rs. 9,00,000/- on account of deposits made in the bank account maintained with Thane Janata Sahakari Bank is upheld. The ground of appeal raised by the appellant is PARTLY ALLOWED. ”
9. And finally he gave a passing comments on the telescopic benefit and general submissions made by the assessee in the following observations: –
“29. In the written submission dated 30/10/2012, the appellant has taken a general argument that certain additions are made on the basis of diary entries. Except the diary, AO has failed to make any other evidence which shows the transactions actually took place and represent income of the assesse. This general ground of the appellant is not acceptable because the section 292C of the Act provides that contents of the documents seized during the search or survey operation, shall be presumed to be correct. During the assessment proceedings or appellate proceedings, the appellant has not file any submission or explanation as to why the notings made on these papers are incorrect. Since, the appellant has failed to rebut the presumption; the general ground raised by the appellant is hereby REJECTED.
30. Before parting with the matter, it is important to mention that some of the additions confirmed by me are on the assets/receipt side of the balance sheet/P&L account and some of the additions are on the liability/payment side. One may argue here that ‘telescoping benefit’should be given for arriving at the real income earned by the appellant. However, during the appellate proceedings, the appellant has neither made any claim for such telescoping benefit nor she has filed the date wise cash flow statement in order to correctly arrive at the figure of telescoping benefit. In view of this, it is not possible for me to set off some of the undisclosed income earned by the assessee against the investment made or loan given during the year. Hence, no telescoping benefit is being given to the appellant.”
10. Aggrieved with the above order assessee is in appeal before us raising following grounds in its appeal: –
“1. On facts in circumstances of the case and in law the Ld. ACIT has erred in making addition of Rs. 60,362/- by way of addition of business expenses not related to business and CIT(A) is not justified to confirm the addition upto Rs. 25,000/-.
2. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 9,50,000/- towards income from undisclosed sources. The CIT(A) allowed is in error confirm the addition.
3. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 4,50,000/- by way of addition as unexplained purchased of motor car for non production of bill and source. The CIT(A) is in error to confirm the addition.
4. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 1,05,212/- by way of undisclosed commission received. The CIT(A) is in error to confirm.
5. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 9,00,000/- towards undisclosed investment through Reliance Life Insurance Co. and same being not disclosed in Balance Sheet and Books of Account. The CIT(A) is in error to confirm.
6. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 2,00,000/- towards received from one Mr. Bhange. The CIT(A) is in error to confirm.
7. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 6,25,000/- towards income from undisclosed source, being loan given to M/s. Unique Finance the same being not appearing in the Balance Sheet. The CIT(A) in in error to confirm.
8. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 10,64,95,163/- + (22,500) i.e., Rs. 10,14,95163/- and Prem Chand Kambley and 2,25,000/- to Sanjay Sindhey loan given from undisclosed source the same being not reflected in the Balance Sheet. The CIT(A) is in error to confirm.
9. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 15,00,000/- towards loan given to Unique Finace Prop. Premchand Kamble, same being not seen the Balance Sheet of the Appellant. The CIT(A) is in error to confirm.
10. On facts and in circumstances of the case and in law the Ld.ACIT has erred in making addition of Rs. 32,900/- towards difference between the cash in the Balance Sheet and cash mentioned in the special audit report. The CIT(A) is in error to confirm.
11. On facts and in circumstances of the case and in law the Ld. ACIT has erred in making addition of Rs. 1,59,183/- by way o f undisclosed income shown as amounts received from Prime Motors, Prime holidays and CIT(A) has not justified to confirm.
12. That the AO in report accept that Rs. 9,00,000/- is double addition even The CIT (A) confirmed the addition is against the facts and law.
13. That the assessee has right to add, delete or modify any grounds of appeal during the proceedings.”
11. At the time of hearing, Ld. AR of the assessee submitted that assessee is not in a position to argue the case ground wise i.e. ground Nos. 1-13 on merits in absence of requisite and vital documents for which RTI has been filed and rejected. Further, he submitted that against the denial of information, assessee filed an appeal before First Appellate Authority and then second appeal before Central Information Commission which is still pending. With the above information on record assessee has filed additional ground on the jurisdictional issues of incriminating material which is a legal ground which goes to the root of the matter. After considering the submissions of the Ld. AR we proceed to admit the additional grounds for adjudication.
12. Assessee has filed following additional grounds: –
“14. Because the assumption of jurisdiction u/s 153C is not in accordance with the law and without complying with the various conditions laid down under the law.
15. Because the ld. CIT(A) ought to have quashed the impugned order passed by the Ld. AO u/s 153C and various additions/disallowances made therein as the same have been made only on the basis of the Special Audit Report, without there being any material, much less incriminating material found during the course of search and that too for the year under consideration.
16. Because the Ld. CIT(A) ought to have quashed the impugned assessment order passed by the Ld. AO on the ground that the Ld. AO did not take a valid approval u/s 153D in accordance with the law.
16.1 The Ld. CIT(A) ought to have quashed the impugned assessment order as the same was passed on the basis of a non-speaking, mechanical Approval, which is not sustainable in the eyes of law.
17. Because the Assessee denies its liability to be assessed an to pay tax, interest or penalty thereon.
Since the above ground does not require fresh facts to be investigated and goes to the root of the matter, it is prayed that it may please be admitted in view of the Hon’ble Supreme Court decision in the case of NTPC Limited 229 ITR 383.”
13. With regard to additional ground, Ld. AR of the assessee submitted as under: –
A. At the very outset, it is submitted that the Appellant is not in a position to argue the case ground-wise, Ground Nos. 1- 13 (merits) in absence of the requisite and vital documents for which RTI had been filed and rejected.
B. It is further brought to the attention of this Hon’ble Bench that against the denial of information, the Appellant, filed an Appeal before the First Appellate Authority (FAA), which also came to be denied and currently, the Second Appeal before the Central Information Commission (CIC) is pending (copy of the RTI application, Order u/s 7(1) of the RTI Act, Order of the First Appellate Authority & Appeal before the Hon’ble Central- Information Commission along with its acknowledgement is enclosed herewith).
C. Therefore, it is prayed that the Appellant be allowed to argue legal grounds (which go to the root of the matter) raised by way of additional grounds and the matter be decided accordingly, or, that the Ld. DR be directed to provide complete mirror file of the proceedings.
D. However, it is prayed that the legal grounds go to the root of the matter be heard and disposed off, in the interest of justice, equity and good-conscience.
Without prejudice to the same, ground-wise submission of legal grounds are as under:
Ground No. 14 & 15: The Assessment Order is liable to be quashed as all the additions so made by the Ld. AO and the ones sustained by the Ld. CIT(A) are based solely on the Special Audit Report, without any material. let alone any “incriminating material found during the course of search. Therefore, in absence of any incriminating material, the assumption of jurisdiction u/s 153C is wholly illegal and liable to be quashed.
1. It is submitted that the instant proceedings have been initiated by assuming jurisdiction u/s 153C of the Act. In this regard, it is submitted that in order to assume valid jurisdiction there is a requirement that there should be incriminating material found during the course of search and only then can any addition be made. However, in the instant case, all the additions in the instant case, are made solely on the basis of the Special Audit Report, without there being any other material, whatsoever. The said fact unequivocally proves that the very assumption of jurisdiction is bad-in-law and the proceedings, thus, are liable to be quashed.
For ready reference and the convenience of this Hon’ble bench, a tabular chart is as under:
