Ashok and Sons, (HUF) vs DCIT

1.

That the notice issued and the assessment order passed under Section 153C of the Income Tax Act, 1961 ('the Act') by the Assessing Officer ('AO') are fundamentally flawed, being without jurisdiction, barred by limitation, and passed in violation of the statutory framework governing such proceedings, thereby rendering them legally unsustainable.

2 The notice issued under Section 153C of the Act and the consequent assessment proceedings are illegal, void ab initio, and without jurisdiction, as the statutory preconditions for invoking Section 153C of the Act were not satisfied, rendering the proceedings bad in law and liable to be quashed.

3.

That on the facts and in the circumstances of the case, the AO has erred in failing to record the requisite satisfaction as mandated under law, thereby rendering the impugned proceedings invalid, bad in law, and without jurisdiction.

4.

That the approval granted under Section 153D of the Act for passing the assessment order under Section 153C is invalid, as it has been granted in a mechanical manner, without independent application of mind, rendering the assessment order bad in law.

5.

That on the facts and in law, the approval under section 153D stands vitiated due to non-application of mind, as both the proposal and the approval are mere carbon copies across years and group entities, issued in the fag end, in breach of the statutory mandate.

6.

That the approval under Section 153D of the Act is bad in law as both the proposal and the approval under Section 153D were invalid being issued without a Document Identification Number (DIN) in violation of CBDT Circular No. 19/2019 dated 14.08.2019.

7.

On the facts and in law, the AO/CIT(A) failed to appreciate that, in the absence of incriminating material found during the search, the interference with a completed assessment and additions under Section 153C of the Act are unsustainable and without jurisdiction.

8.

On the facts and in law, excel sheets and tally data retrieved from electronic devices are inadmissible as evidence due to non-compliance with Section 65B of the Indian Evidence Act, 1872 and the CBDT Manual, rendering the additions made by the AO liable to be deleted.

9.

On the facts and circumstances of the case and in law, the AO has erred in relying upon the retracted statements and material seized from the residential premises of Mr. Sunil Kumar Gupta without providing an opportunity to cross-examine despite specific request.

10.

On the facts and circumstances of the case and in law, the AO erred in passing the assessment order under Section 153C of the Act without generating, allotting, quoting, and communicating a valid DIN, in contravention of Circular No. 19 of 2019 dated 14.08.2019, rendering the entire proceedings and assessment order invalid.

11.

That the CIT(A) erred in upholding the validity of the notice and assessment under Section 153C and in sustaining the additions, without independent application of mind and without properly considering the detailed submissions filed, rendering the order arbitrary and legally unsustainable.

12.

On the facts and circumstances of the case, the CIT(A) failed to appreciate the fact that the additions/disallowances made by the AO are beyond the scope of the satisfaction note.

13.

On the facts and circumstances of the case and in law, the AO erred in making illegal additions and completing the assessment at income of Rs. 16,64,736/-.

14.

On the facts and circumstances of the case, AO has wrongly made addition of Rs. 11,56,530/- under Section 69A of the Act and CIT(A) has erred in upholding the same.

15.

On the facts and circumstances of the case, AO has wrongly made addition of Rs. 34,696/- under Section 69C of the Act and CIT(A) has erred in upholding the same.

16.

On the facts and circumstances of the case, AO has wrongly invoked the provisions of Section 69A and Section 69C of the Act, and the CIT(A) has erred in upholding the

17 On the facts and circumstances of the case and in law, the AO erred in charging interest and initiating penalty proceedings under Section 271AAC of the Act.

That in view of the facts and circumstances of the case, the appellant craves leave to add, amend alter any of the grounds of appeal.

‘8.1 It is seen from the facts emanating from the assessment order that during a search and seizure operation carried out u/s 132 of the Act on the Alankit group [stated to be a conglomerate of several group companies and entities with diversified activities] comprising of key persons/entities, viz., Shri Alok Kumar Agarwal, Shri Ankit Agarwal, M/s Alankit Limited, M/s Alankit Assignments Limited on 18.10.2019, some incriminating documents were found in the name of the appellant, whose case was centralized and proceedings u/s 153C of the Act was carried out after recording of satisfaction notes by the Officers concerned. The appellant, in response to notice issued u/s 153C on 15.11.2022 filed Return of Income (Rol) on 06.12.2022 declaring total income of Rs. 4,73,510/-. The AO completed the assessment assessing the total income of the appellant for the year at Rs. 16,64,736/- as against the returned income. Against the assessment order the appellant has filed this appeal raising as many as 26 (twenty-six) grounds of appeal, most of which are repetitive and argumentative in nature. Clubbing these grounds of appeal (supra) raised by the appellant [and the submissions filed] in the instant appeal on the basis of their content for the sake of brevity and clarity, the same are adjudicated …’

“8.

I have perused the observations of the AO in the assessment order, the statement of facts and grounds of appeal raised by the appellant (supra), the additional evidence sought to be filed (discussed in subsequent paras in this order) and the submission filed. 8.1 It is seen from the facts emanating from the assessment order that during a search and seizure operation carried out u/s 132 of the Act on the Alankit group [stated to be a conglomerate of several group companies and entities with diversified activities] comprising of key persons/entities, viz., Shri Alok Kumar Agarwal, Shri Ankit Agarwal, M/s Alankit Limited, M/s Alankit Assignments Limited on 18.10.2019, some incriminating documents were found in the name of the appellant, whose case was centralized and proceedings u/s 153C of the Act carried out after recording of satisfaction notes by the Officers concerned. The appellant, in response to notice issued u/s 153C of the Act on 15.11.2022 filed Return of Income (Rol) on 06.12.2022 declaring total income of Rs. 4,73,510/-. The AO completed the assessment assessing the total income of the appellant for the year at Rs. 16,64,736/- as against the returned income. Against the assessment order the appellant has filed this appeal raising as many as 26 (twenty-six) grounds of appeal, most of which are repetitive and argumentative in nature. Clubbing these grounds of appeal (supra) raised by the appellant [and the submissions filed] in the instant appeal on the basis of their content for the sake of brevity and clarity, the same are adjudicated in the paras that follow:

9.

Grounds no. 1, 2, 3, 4, 5, 8, 9, 14, 15, 16, 17, 20, 21 and 22: In these repetitive grounds of appeal, the appellant has raised various general and legal grounds, more in the form of statements, against the assessment made in its case. For instance, the appellant has contended that the initiation of assessment proceedings and the issue of notice u/s 153C of the Act are bad in law, without jurisdiction and barred by limitation; that the additions are beyond the scope of the satisfaction note; that there was no material pertaining to the appellant or incriminating material found against the appellant during search; that the addition/s made are beyond the scope of provisions of section 153C of the Act; that the satisfaction note drawn was mechanical; that the invocation of sections 69A and 69C was wrong; thatthe books of accounts/documents relied upon by the AO for making the additions do not relate to the appellant; that affidavit filed by the appellant during the course of assessment proceedings was not considered; that opportunity for personal hearing was not accorded by the AO. However, during the course of appellate proceedings, the appellant has failed to bring on record any cogent and substantive details or evidence in respect of the averments made by it. The judgements cited by the appellant in the submission filed by it during appellate proceedings are distinguishable on facts and hence not applicable to the facts of the appellant's case under consideration. The proceedings initiated and carried out by the AO are as per provisions of the statute and no infirmity is found in the same. Even by the reckoning of the appellant, as per provisions of statute and prevailing judicial decisions rendered by Hon'ble Courts of the land in the matter, the impugned AY 2019-20 falls within the period bracket that is liable to be assessed u/s 153C of the Act. Incriminating material and information pertaining to the appellant were found during the search and seizure action on the Alankit group and the case of the appellant was subjected to proceedings u/s 153C of the Act after following due procedure laid out as per statute. As found clearly mentioned in para 6.1 of the order, during search and seizure operation, the premise of Shri Sunil Kumar Gupta, key employee and accountant of the group who served as director in several group companies controlled by Shri Alok Kumar Agarwal, key promoter of the group was also covered, from whose possession incriminating material in the form of laptop was found and seized which entailed the key circumstantial evidences reflecting the true and correct modus operandi of the Alankit group of companies showing parallel books of account maintained. The statement on oath of Shri Sunil Kumar Gupta was also recorded. As seen from the assessment order, the appellant was provided due opportunity by means of issuance of notices and being confronted with information gathered and proposed additions - before completing the assessment. The submissions and replies of the appellant were examined, taken on record and considered before finalizing the assessment order. As mentioned in paras 3 and 5 of the assessment order, the appellant, on 06.10.2023, was duly provided copies of the Satisfaction Notes drawn by the AOs concerned. The appellant was also provided copy of the incriminating seized documents. The submissions filed bythe appellant were examined and taken on record. Enquiries were made with banks u/s 133(6) of the Act. The tenets of natural justice were duly observed. As for the appellant's contention that no material was found against it during the search action and that the AO did not consider an affidavit/document filed by it during assessment proceedings refuting and denying allegations of cash transactions; these can, at best, be seen as self-serving arguments and document. In his statement recorded on oath u/s 132(4A) ofthe Act, Shri Sunil Kumar Gupta, key employee of Shri Alok Kumar Agarwal, explained the contents of the incriminating material seized. Shri Gupta had recorded all the bank and cash entries done by Shri Alok Kumar Agarwal for himself, his family, the companies owned by him or his family members and the companies/entities controlled and influenced by him and used for the purpose of channelizing unaccounted money into the bank account byproviding and taking accommodation entries, as elucidated in the impugned assessment order. As regards the appellant's objection regarding mechanical recording of satisfaction note, it is seen that the satisfaction notes were drawn as per provisions of the statute, duly incorporating the basis of the satisfaction and the incriminating material seized. In any case, the AO is not mandated to record entire findings in the satisfaction note to the subjective satisfaction of the appellant. In fact, it may be pertinent here to advert to the recent judgement of the Hon'ble Delhi High Court in the case of Pr. CIT-Central I v. Ojjus Medicare Pvt. Ltd. [2024 SCC On Line Del 2439], wherein, in reference to thresholds put in place by fourth proviso to section 153A of the Act, the Hon'ble Court observed in the concluding part that-

‘...proceedings for search assessment commence upon the issuance of a notice and the AO at that stage having really not had the occasion to undertake a detailed or in depth examination of the evidence collected or come to a definitive opinion with respect to the total income which may have escaped assessment...’.

9.1

The appellant has also contended that its submissions were not properly considered by the AO. However, this contention is not borne out from facts on record. The process of enquiry and application of mind by taxing authorities cannot be to the subjective satisfaction of the appellant. As seen from the assessment order, statutory notices, show cause notices, questionnaires were issued and the appellant was provided due opportunity by means of being confronted with information gathered before completing the assessment. The AO was bound by time barring dates for completing the assessment. In any case, statutory proceedings cannot be kept pending indefinitely. No violation of the tenets of natural justice is seen in the assessment procedure in the instant case under consideration. Accordingly, in view of the discussion in the aforesaid paras, no merit is found in the contentions and averments made by the appellant.

9.2

Without prejudice to these facts, one may venture to mention here that principles of natural justice, while being universal in applicability, cannot be straitjacketed into a one-sized formula. In this regard, it would be relevant to advert here to the judgement of the Hon'ble Supreme Court Chairman, Board of Mining Examination v Ramjee AIR 1977 SC 965, wherein it was held as follows:-

'Natural justice is no unruly horse, no lurking land mine, nor a judicial cure all. If fairness is shown by the decision maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditional by the facts and circumstances of such situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor financial but should be flexible yet firm in this jurisdiction.’

9.3

It appears that the appellant has merely resorted to raising these grounds in a routine manner without having any corroborative basis to the same. No merit is found in these grounds of appeal raised by the appellant.”

“11.

Grounds no. 10 to 13: In these grounds, the appellant has disputed the addition made in the assessment order. To reiterate the background of the case, it is seen from record that the Alankit group was involved in providing accommodation entries to various persons/entities in lieu of cash payments which was done through the various companies owned/controlled by Shri Alok Kumar Agarwal. From the possession of Shri Sunil Kumar Gupta, key employee and close accomplice of Shri Alok Agarwal, incriminating material in the form oftally data and excel sheets were found and seized which contained the key circumstantial evidences reflecting the modus operandi of the Alankit group of companies. In his statement recorded on oath, Shri Sunil Gupta admitted that Shri Alok Agarwal had been engaged in taking unaccounted cash and providing corresponding RTGS in the form of unsecured loans/capital gains to the beneficiaries through paper companies or group entities. The following additions have been made in the impugned assessment order:A

•

Addition of Rs. 11,56,530/- as unexplained money on account of accommodation entry taken as unsecured loan in lieu of unaccounted cash, as discussed in detail in paras 14 to 22.1 of the impugned assessment order.

•

Addition of Rs. 34,696/- as undisclosed commission paid @ 3% from unaccounted sources for being facilitated for the accommodation entry against unaccounted cash, as discussed in para 23 of the order.

11.1

During appellate proceedings in the instant appeal, the unsubstantiated arguments of the appellant have been considered but are not found tenable. The detailed findings of the AO in the aforesaid paras of the assessment order and the addition made based on the same are relied upon. During appellate proceedings, the appellant merely contested the additions without any corroborative evidence and details. The documents/arguments relied upon by the appellant for its denial of thetransactions during appellate proceedings have already been examined at the assessment stage, as elaborated by the AO in the aforementioned paras of the impugned assessment order, and cannot be termed as corroborative and independent details having the mettle to alter the fact-based conclusions arrived at by the AO against the background of the modus operandi adopted in accommodation entry/ money routing activities in lieu of cash. As evidenced in the case of the appellant and the Alankit group, there exists a complex web of transactions undertaken through various group and family entities/persons/companies used to provide layers so as to facilitate accommodation entries to beneficiaries and colour the unaccounted income. The contentions of the appellant thus fail to negate the reasons for the additions made in the assessment order.

11.2

Without prejudice to the specific findings in the assessment order, it may be pertinent to mention here that while assessing the total income of an assessee, especially in a case that has undergone the rigours ofsearch and seizure action, apart from the factual matrix involved, surrounding circumstances, human conduct and preponderance of probabilities ought to be collated and necessary conclusion needs to be drawn therefrom, which the AO has rightly done while making the impugned additions. In the decision of the Hon'ble ITAT, Delhi in Hersh Win Chadha vs. DCIT (ITA No. 3088 to 3098 and 3107/Del./2005), the Hon'ble Delhi Tribunal, has observed that - 'There is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. This is why Hon'ble courts by way of catena of binding judicial pronouncements, have held that-tax-liabilities can be assessed by Revenue Authorities on consideration of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information / evidence available on record. In such clandestine operations and transactions, it is impossible to have direct evidence or demonstrative proof of every move. The incoте tax liability is to be assessed on the basis of the above parameters...

11.3

As stated earlier, against the background of the discussion in the aforesaid paras and the factual matrix of the case under consideration, I have no reason to disagree/ interfere with the findings of the AO elucidated in the aforesaid paras of the impugned assessment order while making the addition/s that has been disputed by the appellant in the present appeal. Thus, the addition is upheld and the ground of appeal raised by the appellant is dismissed.”