SHRI SUBODH AGARWAL,KANPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1, KANPUR
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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY
PER SUDHANSHU SRIVASTAVA, J.M.:
These appeals are preferred by the assessee against the separate orders, both dated 27.09.2018 passed by the Ld. Commissioner of Income Tax (Appeals), Lucknow (hereinafter called ‘the ld. CIT(A)’) for assessment years 2013-14 and 2016- 17.
The brief facts of the case for assessment year 2013-14 in ITA No.667/LKW/2018 are that a search and seizure operation under section 132 of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was conducted at the premises of the assessee and notice under section 153A of the Act was issued to
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the assessee on 1.6.2016. In response, the assessee filed his return of income showing income of Rs.12,78,090/-. Later on, notices under section 143(2) and 143(1) of the Act were also issued and the Assessing Officer completed the assessment at Rs.32,08,950/- by making addition of Rs.15,76,541/- on account of Long/Short Term Capital Gain, Rs.78,827/- on account of commission @ 5% on the capital gains and Rs.2,75,488/- being difference in Valuation Report of the District Valuation Officer on immovable property.
Aggrieved, the assessee approached the ld. First Appellate Authority. However, the appeal before the ld. First Appellate Authority came to be dismissed.
Now, the assessee has approached this Tribunal, challenging the dismissal of its appeal by the ld. CIT(A) by raising the following grounds of appeal:
Because the CIT(A) has erred on facts and in law in upholding the AO's action in denying the appellant's claim for exemption under section 10(38) of the I.T. Act, 1961 and Special rate of taxation under section 111 in relation to the surplus realized on sale of shares held by him and holding the same as unexplained investment in cash and in making the addition of Rs.15,76,541/- (Rs.6,42,879/- and Rs.9,33,662/-) to taxable income under section 69 of the Act. 02. Because on a due and proper consideration of the facts and circumstances of the case, particularly that, a) the appellant had acquired shares and held the same in demat account.
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b) the sale of shares was also reflected in the demat account. c) verifiability of contract notes (for sale of shares) was not in dispute. d) the consideration had been realized after the same was subjected to STT and all such charges as were levied/leviable by the market regulator/government authorities; and e) the rate on which shares were sold was verifiable from the stock market quotation and other attendant facts and circumstances of the case it could not have been said or held that nature and source of credits appearing in the bank account of the appellant remained unexplained and in treating the same as undisclosed income/investment under section 69 of the Act. 03. Because the appellant has complied with all the ingredients of section 10(38) and 111 of the Act, the CIT(A) has erred on facts and in law in upholding the action of the AO, thereby grossly erred in denying such benefit of exemption under section 10(38) and 111 of the Act. 04. Because the exemption as claimed under section 10(38) of the Act, by the assessee stood supported by a large number of case laws which are squarely applicable to the facts of the present case, the view taken by the AO and upheld by the CIT(A) is totally erroneous and untenable both in facts as well as in law. 05. Because the adverse inference drawn by the AO and upheld by the CIT(A) is based on mere surmises and conjectures, in violation of principle of natural justice in as much as the appellant has not been given an opportunity to cross examine the persons (whose statements had been referred to and relied upon for the purpose of making impugned addition) which being of culpable nature, the addition made by the AO and upheld by the CIT(A) is bad in law and be deleted. 06. Because the AO as well as the CIT(A) have erred on facts and in law in upholding the fact that the appellant had paid
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commission @ 5% on capital gains realized, thereby the addition of Rs.78,827/- made by the AO and upheld by the CIT(A) is without any basis, bad in law and be deleted. 07. Because there existed no material on the basis of which reference could have been made by the AO to the DVO for estimating the investment by the appellant in construction of the residential house, the addition of Rs.2,75,488/- made on the basis of DVO's report is wholly illegal, the action of the CIT(A) upholding the same is bad in law and be deleted. 08. Because on a proper consideration of facts and circumstances of the case, the CIT(A) has failed to appreciate that the District Valuation Officer has estimated the cost of construction as per CPWD rates as against PWD rates, the difference in the estimate made by the Distt. Valuation Officer is contrary to the provisions of law and be deleted. 09. Because the Distt. Valuation Officer has failed to consider the objections filed by the assessee as provided by the approved valuer, the valuation report prepared by the Distt. Valuation Officer being bad in law, the addition made and upheld by the CIT(A) be deleted.
The assessee has also raised the following Additional Ground of appeal: 1. Because the approval given by the JCIT u/s 153D of the Act, 1961 to the order passed, u/s 153A is without application of mind, purely in a mechanical manner, without appreciating the facts and not following the provisions/mandate of the section, which makes the order passed u/s 153A non est, void ab initio bad in law, the same be quashed.
At the time of hearing before us, the ld. authorized representative for the assessee submitted that the additional ground taken by the assessee is purely a legal ground and goes
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to the very root of the matter, and prayed that the same be admitted. Reliance in this respect was placed on the judgment of the Hon'ble Supreme Court in the case of NTPC Ltd. Vs. CIT, 229 ITR 383(SC).
The ld. CIT(D.R.) objected to the admission of the additional ground raised by the assessee and submitted that the assessee should not be permitted to raise the additional ground at this stage.
Having heard both the parties on the issue of admission of the additional ground being raised by the assessee, we are of the considered view that the additional ground raised by the assessee is a purely legal ground which is germane to the issues involved in this appeal. As per the direction of the Hon'ble Apex Court in the case of NTPC Ltd. Vs. CIT (supra), we are bound to admit the additional ground. Accordingly, we admit the legal ground.
The ld. Authorized Representative (AR) for the assessee, inviting our attention to the order dated 31.12.2017 of ACIT, Central Range, Kanpur (copy placed at pages 4 & 5 of the paper book), submitted that the order dated 31.12.2017 passed by the DCIT, Central Circle-1, Kanpur under section 153A of the Act is based on the approval under section 153D of the Act granted by
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the ACIT, Central Range, Kanpur by a common order dated 31.12.2017 in cases pertaining to different assessees and different assessment years. He further submitted that the order passed by the DCIT on the same day of order of approval granted by the ACIT, i.e. 31.12.2017, is without application of mind and without appreciating the facts and does not follow the mandate of section 153A of the Act. He submitted that an identical issue had arisen before the Lucknow Bench of the Tribunal in assessee’s own case for assessment year 2015-16 in ITA No.674/LKW/2018, vide order dated 07.10.2021 wherein, the Tribunal had quashed the assessment order based on the same common approval dated 31.12.2017 granted by ACIT, Central Range, Kanpur under section 153D of the Act. He further submitted that against the said order dated 07.10.2021 (supra) of the Tribunal, the Department had filed an appeal before the Hon'ble Allahabad High Court, vide ITA No.86 of 2022, which was dismissed by the Hon'ble Court vide order dated 12.12.2022. He prayed that the same view, as taken by the Tribunal in assessment year 2015-16, be taken in the assessment year under consideration too.
The ld. CIT(D.R.) expressed his inability to argue the matter and submitted that he was on rotational duty and that the appeal under consideration was related to search and that
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further CIT on rotation duty as DRs were not authorized to argue search related cases before the Tribunal in view of the internal guidelines issued by the Department.
Having duly considered the submissions of the ld. CIT(DR) and his inability to argue the appeal before us on the ground that he was on rotational duty, we deem it appropriate to proceed with the adjudication of the appeal without the assistance of the ld. CIT(DR) for the simple reason that the claim of the ld. AR is that the appeal of the assessee is covered by an earlier order of the ITAT in assessee’s own case.
We have heard the contentions of the ld. AR and have also perused the records. We have also perused the order of this Bench of the Tribunal in the assessee’s own case for assessment year 2015-16 wherein, the Tribunal had decided an identical issue on identical facts & circumstances and the same approval dated 31.12.2017 under section 153D of the Act, in favour of the assessee, against which the Department had preferred an appeal before the Hon'ble Allahabad High Court, vide ITA No. 86 of 2022, which was dismissed by the Hon'ble Court vide order dated 12.12.2022.
It will be relevant to reproduce the approval letter under section 153D of the Act at this juncture:
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As is seen, the above approval letter has been issued in respect of 38 cases and apparently it does not even mention that ‘approval’ has been granted. Thus, it is seen that the issue raised by the assessee in the additional ground of appeal is squarely covered in favour of the assessee by the order of this Bench of the Tribunal in assessee’s own case for assessment year 2015-16 in ITA No.674/LKW/2018 wherein, the Tribunal held as under:
“9. Thus, in Navin Jain & Others (supra) and Naresh Kumar Jain & Others (supra), wherein, Navin Jain & Others (supra) has been followed, the Tribunal has held to the effect that granting of a mechanical approval u/s 153D of the Act vitiates the entire proceedings. It is on this basis that the issue was decided in favour of the assessee in both these
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cases, under facts and circumstances exactly similar to those present herein.
Respectfully following the view taken in the above appeals, we allow additional ground of appeal and quash the assessment order. As the assessment order has been quashed, the consequent order of learned CIT(A) is also quashed. Rest of the grounds do not survive for adjudication.”
In the light of aforesaid order of the Tribunal and respectfully following the same, we hold that granting of mechanical approval under section 153D of the Act vitiates the entire proceedings. Accordingly, we allow the additional ground of appeal and quash the assessment order passed by the DCIT under section 153A of the Act.
Since the Additional Ground taken by the assessee has been accepted, as above, nothing further survives for adjudication, nor was anything else argued. Accordingly, the Appeal of the assessee in ITA No.667/LKW/2018 is allowed.
The grounds raised by the assessee in ITA No.669/LKW/2018 for assessment year 2016-17 are as under:
Because the CIT(A) has erred on facts and in law in upholding the addition of Rs.10,95,000/- on account of cash found during the course of search & seizure operation on 31.08.2015, which addition is contrary to facts, bad in law and be deleted.
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Because the cash found at the time of search was made up of the following: (a) Cash belonged to Kanpur Organics Pvt. Ltd. Rs.9,00,000/- (b) Other sums with household. Rs.1,95,000/- The explanation being fully verifiable, no such addition as having been made by the AO and upheld by the CIT(A), could have been made either on facts and in law, the same be deleted. 03. Because the CIT(A) has erred on facts and in law in not appreciating the facts, the explanation, submissions and evidences filed by the assessee and has thereby erred in upholding the addition, the addition made be deleted.
In this appeal also, the assessee has raised similar additional ground, as raised in ITA No.667/LKW/2018, which is reproduced hereinabove in para 5 of this order.
Since issue and the facts involved in ITA No.669/LKW/2018 for assessment year 2016-17 are the same as in ITA No.667/LKW/2018, our above observations and findings with regard to ITA No.667/LKW/2018 shall apply mutatis mutandis to ITA No.669/LKW/2018 and accordingly the additional ground raised by the assessee for assessment year 2016-17 is also allowed.
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In the result, both the appeals of the assessee are allowed.
Order pronounced in the open Court on 30/09/2024.
Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:30/09/2024 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar
