Case Law Details
Sanjay Duggal Vs ACIT (ITAT Delhi)
Victory for Sanjay Duggal as ITAT Delhi quashes assessments under 153A, nullifying penalties. Learn why the penalty orders couldn’t survive. Decided in favor of the assessee.
The assesse was subject to assessment u/s 153A of the Act and additions u/s 68 were made. The first appellate authority ie Ld CIT(A) further made the enhancements along with initiated the penalty proceedings. Penalty @ 125% of the tax sought to be evaded have been levied. The Hon’ble ITAT Delhi deleted all the additions for want of valid approval u/s 153D of the Act. However, DR stated since the Assessment Order has been quashed for want of valid approval u/s 153D, the penalty has been levied on the enhancement made by Ld CIT(A) for which no approval is required. The Hon’ble ITAT held since the Quantum has been deleted and all the orders of authorities below are set aside and all the assessment orders u/s 153A are quashed as well as the impugned appellate orders, the penalty orders can’t survive, as the very basis of imposing the penalty. Decided in favor of Assesse
FULL TEXT OF THE ORDER OF ITAT DELHI
Captioned appeals by four different assessees arise out of a consolidated order dated 07.06.2019 of learned Commissioner of Income-Tax (Appeals)-23, New Delhi, confirming penalty imposed under Section 271(1)(c) of the Income-Tax Act, 1961 for the assessment years mentioned above.
2. Briefly, the facts are, pursuant to a search and seizure operation conducted in case of the first name assessee, family members as well as group entities, assessment proceedings under Section 153A of the Act, were initiated and ultimately assessments were completed making certain additions. In course of proceeding before learned Commissioner (Appeals), the additions made by the assessing officer was further enhanced. Based on the additions made, proceedings for imposition of penalty under Section 271(1)(c) of the Act was initiated and ultimately penalty orders were passed in respect of all the assessees levying penalty @ 125% of the tax sought to be evaded on the enhanced income. Against the penalty order so passed, assessee preferred appeals before learned Commissioner (Appeals). However, by the impugned order, learned Commissioner (Appeals) confirmed the penalty imposed.
3. Before us, learned counsel for the assessee submitted, while deciding the appeals arising out of the quantum proceedings, the Tribunal has quashed the assessment orders due to invalid approval granted under Section 153D of the Act. As a result, he submitted, orders passed by the departmental authorities in quantum proceedings, were set aside and all the additions Were deleted. Thus, he submitted, due to deletion of the additions made in the quantum proceedings, the penalty imposed cannot survive.
4. Learned Departmental Representative, though, agreed that the assessment orders have been quashed by the Tribunal for want of valid approval under Section 153D of the Act, however, he attempted to make out a case for the Revenue by submitting that since the penalty has been imposed by learned Commissioner (Appeals) on the income enhanced by him, it will survive.
5. Having considered rival submissions and perused the material on record, we find, while deciding the quantum appeals, the Tribunal has held as under:
“12. It may be noted that provisions of Section 153D provides for approval in case of [“Each”] the assessment year. Therefore, each of the assessment year is required to be verified and approved by the JCIT being Approving Authority that it complies with Law as well as the procedure laid down. The assessee has filed details on record regarding returns filed under section 139 (1) for A.Ys. 2010- 2011 to 2015-2016. It is also explained that there are unabated assessments except A.Y. 2015-2016 in which the assessments have been abated. Therefore, for each unabated an, abated assessments, the authorities below and the Approving Authority [JCIT] shall have to verify the incriminating material found during the Course of search or the seized material if pertain to the same assessment year and its basis. The assessee has explained above that these cases are coming up because of the assessments framed in the case of M/s. JIL and others prior to the search in the case of assessee. Therefore, all material was within the knowledge of the Income Tax Authorities prior to the search in the cases of the assessees. Therefore, for granting 255 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51batch appeals approval under section 153D of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments 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.
13. In the present cases various approvals were granted by the JCIT, Central Range-1, New Delhi, and forwarding letter of the A.O. are placed on record in all the cases. In all the cases as per the forwarding letter of the A.O. only assessment records were forwarded to the JCIT, Range-1, New Delhi at the time of granting approval. Therefore, it is evident that the JCIT being the Approving Authority was neither having seized material nor the 256 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51batch appeals appraisal report or other material at the time of granting approval. In the approval under section 153D there is a reference to the A.O. letter only. There is no reference to the seized material or record or notice under section 142 and reply of the assessee and if procedure for its inspection or perusal is there. There is no material considered by the JCIT. Learned Counsel for the Assessee has pointed out that assessee has suffered serious prejudice because of non-application of mind on the part of the JCIT while granting approval under section 153D of the I.T. Act because the A.O. has made several double or triple additions on account of share capital, investments, FDRs purchased, loans, capital gains because these were created out of bank deposits made in the bank accounts of the assessees after the money transferred from the account of M/s. Alfa India. No telescopic benefit have been given as it was out of the source deposited in the bank accounts of the assessees. Netting of the money left have also not been considered and even the Ld. CIT(A) without considering the same has enhanced the assessments in some of the cases of 257 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51batch appeals the assessee. No steps have been taken by the A.O. for rectifying their mistakes when assessee filed petition for rectification under section 154 of the I.T. Act. Thus, there was inconsistencies and double additions made by the A.O. in various assessment years. It may also be noted that in the present case the facts stated in the impugned orders are that the sales of liquor are made by M/s. JIL to M/s. MAPSCO and Singla Group of cases and that part of the sale proceeds have been transferred to the account of M/s. Alfa India instead of paying the entire sale consideration to M/s. JIL. Thus, the nature of total receipt/addition is the sale proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale receipts cannot be the income either in the hands of M/s. JIL or M/s. Alfa India or the Assessees who may be the conduit as argued before us. The A.O. has failed to consider the concept of real income for the purpose of determining the correct tax liability and correct determination of income of the assessees. We rely 258 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51batch appeals upon the Judgment of the Hon’ble Supreme Court in the case of Godhra Electricity Co. Ltd., 225 ITR 746 (SC). This fact is also not verified and considered by the JCIT while granting approval under section 153D of the I.T. Act. IT may be noted here that entire sale proceeds when cannot be added in the hands of M/s JIL as income while is also not done u the4ase of M/s. JIL, rightly so, how the same sale proceeds could be added as income in the hands of assessees under section 68 of the I.T. Act is not understandable. Thus, the Approving Authority without application of mind and in a most mechanical and technical manner granted approval under section 153D even without reference to any reason in the Order under section 153D of the I.T. Act. We, even, otherwise failed to understand that in search cases how an approval can be granted to an assessment year which is required to be based only on incriminating material without verification of those material and its reference in the appraisal report. The JCIT even in approval did not mention if assessment record is seen by him.
14. Another interesting aspect that has come to the notice on the basis of various documents submitted for approval as well as request for approval by the A.O. to the JCIT. We make a specific reference to letter dated 29.12.2017 written by ACIT, Central Circle-4, New Delhi, which is placed at page-144 of the PB. This letter Dated 29.12.2017 is a request for obtaining approval under section 153D of the I.T. Act in the case of Shri Rajnish Talwar and family wherein the approval in the case of Shri Rajnish Talwar for A.Ys. 2010-2011 to 2016-2017 is sought for. The A.O. send the draft assessment order along with assessment records of the above named assessee. In paragraph-4 of the letter, A.O. stated as under:
“It is certified that all issues raised in the appraisal reports have been duly examined with reference to the seized impounded material.”
15. Thus, the JCIT acted on certificate given by the A.O. without satisfying himself to the record/seized material etc., The A.O. sent only assessment records to the JCIT for 260 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51 batch appeals his approval made by the A.O. but factual position noted above established that even assessment records have not been seen by the JCIT. The A.O. sent draft assessment orders for 07 assessment years on 29.12.2017 which were got approved on 30.12.2017 merely on the basis of draft assessment order. The JCIT in the approval Order Dated 30.12.2017 also mentioned that A.O. to ensure all the assessment proceedings are conducted as per procedure and Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O. as per Law and records.
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 261 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51batch appeals 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 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in appraisal report. Thus, we hold the approval under section 153D have been grafted without application of mind and is invalid, bad in law and is liable to be quashed. Since we have held that approval under section 153D is 262 ITAT. No. 1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., 51 batch appeals invalid and bad in law, therefore, A.O. cannot pass the assessment orders under section 153A of the I.T Act against all the assessees. Therefore, all assessment orders are vitiated for want of valid approval under section 153D of the I.T. Act and as such no addition could be made against all the assessees. In view of the above, we set 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.”
6. On a careful reading of the operative part of Tribunal’s observations in paragraph 16 of the order, as reproduced hereinabove, it is to be noted that the Tribunal while holding that the assessment orders are vitiated for want of valid approval under Section 153D of the Act has set aside the orders of the departmental authorities including the orders passed by learned Commissioner (Appeals).
7. Further, while doing so, the Tribunal has specifically observed that all additions are deleted. In view of the aforesaid observations of the Tribunal while deciding the quantum appeals, we cannot accept the contention of learned Departmental Representative that the orders passed imposing penalty under section 271(1)(c) of the Act will survive, even after, the assessment orders quashed and respective orders of learned Commissioner (Appeals) have been set aside. Thus, considering the fact that while deciding the quantum appeals, the Tribunal has not only quashed the assessment orders but has set aside the orders of learned Commissioner (Appeals) and deleted all the additions, penalty imposed under Section 271(1)(c) of the Act, based on such additions, cannot survive. Accordingly, we have no hesitation in deleting the penalty imposed under Section 271(1)(c) of the Act in respect of all the assessees in the present appeals. Grounds are allowed.
8. In the result, all the appeals are allowed.
Order pronounced in the open court on 29 June, 2022.
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