M/S SATVIK POLYCHEM PVT. LTD.,KANPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CC-1, KANPUR

ITSSA 149/LKW/2022

AI Insights

The case involves cross-appeals by M/s Satvik Polychem Private Limited and the Revenue against the orders of the Commissioner of Income Tax (Appeals), Kanpur, concerning the assessment years 2015-16, 2016-17, and 2017-18. The primary issue arose from a survey and subsequent search at the assessee's premises, leading to the discovery of unaccounted cash and incriminating documents. The Assessing Officer made substantial additions to the assessee's income, which were largely upheld by the CIT(A). The Tribunal's decision focused on the procedural validity of the approvals under section 153D, which were found to be mechanically granted without proper consideration of the individual cases, leading to the annulment of the assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396726 (ITAT-LUCKNOW)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: Pr. CIT vs. Subodh Agarwal, Pr. CIT vs. Siddarth Gupta, Sapna Gupta vs. DCIT, Navin Jain vs DCIT, Rohit Gupta vs. DCIT, Quality Structure Pvt. Ltd. vs. DIT, Khoday Eshwarsa & Sons vs. DCIT, Sanjay Duggal & Sons vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.K. AGARWAL
• Assessee Lawyers: P.K. KAPOOR
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Unexplained cash credit; Onus to prove; Principle of natural justice; Search and seizure; Bogus loan; Opportunity of cross examination; Bogus
• Section: 142(1); 153A; 68; 131; 37; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “A”, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI NIKHIL CHOUDHARY, ACCOUNTANT MEMBER IT(SS)A Nos.149, 147 & 148/LKW/2022 Assessment Years: 2015-16, 2016-17 & 2017-18 M/s Satvik Polychem Private Limited 203, Charan Paduka Apartments 120/839, Lajpat Nagar Kanpur v. The DCIT Central Circle – 1 Kanpur TAN/PAN:AANCS1781L (Appellant) (Respondent) IT(SS)A Nos.155, 156 & 157/LKW/2022 Assessment Years: 2015-16, 2016-17 & 2017-18 The ACIT Central Circle – 1 Kanpur v. M/s Satvik Polychem Private Limited 203, Charan Paduka Apartments 120/839, Lajpat Nagar Kanpur TAN/PAN:AANCS1781L (Appellant) (Respondent) Assessee by: Shri P. K. Kapoor, C.A. Revenue by: Shri R. K. Agarwal, CIT(DR) Date of hearing: 08 05 2025 Date of pronouncement: 30 05 2025 O R D E R PER BENCH: These are cross-appeals by the assessee as well as the Revenue against the respective orders of the Ld. Commissioner of Income Tax (Appeals), Kanpur - 4 (ld. CIT(A)), vide dated IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 2 of 32 23.05.2022, 19.05.2022 and 23.05.2022 for assessment years 2015-16, 2016-17 & 2017-18 respectively. 2. Since the issues involved in all the appeals are common, the facts are being taken from IT(SS)A No.149/LKW/2022 for assessment year 2015-16. The brief facts of the case are that a Survey under section 133A of the Income Tax Act, 1961 (hereinafter called “the Act’) was conducted at the premises of the assessee on 12.09.2017. During the course of Survey proceedings, cash amounting to Rs.84,04,300/- was found. Later on, the Ld. Principle DIT(Investigation), Kanpur issued warrant of authorization to convert survey proceeding into Search and Seizure action under section 132(1) of the Act. During the course of search, besides cash, various other incriminating documents were found and seized and statements of the Directors and other persons were recorded under oath under section 132(4) of the Act. Thereafter, notice under section 153A of the Act dated 16.05.2019 was issued to the assessee- company, requiring the assessee to file the return of income. In response, the assessee stated that it had already e-filed return of income for the year under consideration on 30.05.2019, declaring a total income of Rs.38,60,720/-. Later on, notices under section 143(2) and 142(1) of the Act were also issued and the Assessing IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 3 of 32 Officer (AO) completed the assessment at a total income of Rs.8,65,93,630/- after making the following additions: Sl. No. Head of addition Amount of addition (Rs.) 1 Addition u/s. 68 of the Act on account of bogus loan. 25,00,000/- 2 Addition u/s. 37 of the Act on interest paid on bogus loan. 34,767/- 3 Addition u/s. 68 of the Act on account of bogus loan. 2,78,00,000/- 4 Addition u/s. 37 of the Act on interest paid on bogus loan. 6,85,489/- 5 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 1,92,93,632/- 6 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 1,29,46,794/- 7 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 66,04,017/- 8 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 55,58,143/- 9 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 23,23,819/- 10 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 34,11,066/- 11 Addition u/s. 68 of the Act on account of bogus loan and addition u/s. 37 of the Act on interest paid on bogus loan. 15,75,452/- IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 4 of 32 2.1 Similar additions were made in assessment years 2016-17 and 2017-18, as under: ADDITIONS MADE IN A.Y. 2016-17: Sl. No. Head of addition Amount of addition (Rs.) 1 Addition u/s. 68 of the Act on account of bogus loan 1,10,00,000/- 2 Addition u/s. 37 of the Act on interest paid on bogus loan. 6,83,087/- 3 Addition u/s. 68 of the Act on account of bogus loan 6,64,00,000/- 4 Addition u/s. 68 of the Act on account of bogus loan 10,00,000/- 5 Addition u/s. 37 of the Act on interest paid on bogus loan. 20,417/- 6 Addition u/s. 68 of the Act on account of bogus loan 1,17,00,000/- 7 Addition u/s. 37 of the Act on interest paid on bogus loan. 15,97,083/- 8 Addition u/s. 68 of the Act on account of bogus loan 25,00,000/- 9 Addition u/s. 37 of the Act on interest paid on bogus loan. 61,583/- ADDITIONS MADE IN A.Y. 2017-18: Sl. No. Head of addition Amount of addition (Rs.) 1 Addition on account of unexplained cash credits. 59,00,400/- 2 Addition u/s. 68 of the Act on account 1,37,00,000/- IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 5 of 32 of bogus loan 3 Addition u/s. 37 of the Act on interest paid on bogus loan. 9,42,907/- 4 Addition u/s. 68 of the Act on account of bogus loan. 6,00,000/- 5 Addition u/s. 37 of the Act on interest paid on bogus loan. 35,951/- 6 Addition u/s. 68 of the Act on account of bogus loan 37,50,000/- 7 Addition u/s. 37 of the Act on interest paid on bogus loan. 6,01,886/- 3. Aggrieved, the assessee approached the Ld. First Appellate Authority, who partly allowed the appeals of the assessee, confirming most of the additions made by the AO. 4. Now, the assessee has approached this Tribunal, challenging the orders of the lower authorities by raising the following grounds of appeal: GROUNDS IN IT(SS)A NO.149/LKW/2022 BY THE ASSESSEE: 1. BECAUSE the Id. CIT(A) has erred in law and on facts in conforming the assessment order passed u/s 153A of the Act, even though the said assessment order as also the additions made therein are not in consonance with the settled position of law viz-a-viz search cases. 2. BECAUSE the approval u/s 153D of the Act granted by the Ld. Joint Commissioner of Income tax is mechanical, without due application of mind, hence violative of the provisions of law and consequently assessment order passed u/s 153A IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 6 of 32 deserved to be quashed being bad in law. 3. BECAUSE the Ld. CIT(A) has erred in law and on facts in confirming the following additions, aggregating Rs.4,89,09,570/-, made by the Assessing Officer by holding the loan transactions as bogus and accommodation entry- S. No. Name of the lender Loan amount Interest Total 1 M/s K.D. Trends wear Limited 15,00,000/- 43,940/- 15,43,940/- 2 M/s Sagittarius Advertising Limited 41,00,000/- 60,657/- 41,60,657/- 3 M/s VKJ Infra Developers Limited 20,00,000/- 57,994/- 20,57,994/- 4 M/s Sulabh Engineering & Services Limited 1,00,00,000/- 3,03,140/- 1,03,03,140/ - 5 Neil Industries Limited 1,25,00,000/- 4,46,794/- 1,29,46,794/ - 6 M/s Success Vyapar Private Limited 64,00,000/- 2,04,017/- 66,04,017/- 7 M/s Bansal Suppliers Pvt. Limited 55,00,000/- 58,143/- 55,58,143/- 8 M/s Nirbhant Management Consultants Pvt. Limited 23,00,000/- 23,819/- 23,23,819/- 9 M/s Samtal financial System Private Limited 34,00,000/- 11,066/- 34,11,066/- Total 4,89,09,570/ - without appreciating the supporting documentary evidences and explanation of the appellant placed on record of the authorities below. 4. BECAUSE while confirming the additions aggregating Rs.4,89,09,570/- the Ld. CIT(A) failed to appreciate that with respect to the unsecured loans obtained by the appellant IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 7 of 32 from the three loan creditors, namely (i) Cityon Infrastructure Pvt. Ltd. (ii) Neil Industries Ltd. (iii) Samtal Finance Ltd., the appellant had duly discharged the onus of proving all the three vital ingredients of Section 68 of the I.T. Act, namely; identity and creditworthiness of the lenders as well as genuineness of the loan transactions and consequently, the entire addition aggregating Rs.4,89,09,570/-deserved to be deleted. 5. BECAUSE while confirming the additions made by the Ld. Assessing Officer u/s 68 and 37 of the Act aggregating Rs.4,89,09,570/-_the Ld. CIT(A) missed to note and appreciate; particularly that- (i) the nature, source, identity, credit worthiness & genuineness relating to such loans were duly explained; (ii)the loans taken from the respective parties stood fully explained with the support of documentary evidences and got verified as per detailed written submission filed before Assessing Officer with supporting evidences which were summarily rejected by the Id. Assessing Officer as not satisfactory, without any reason or justification; (iii) most of the loans were returned back to the lenders and there was no direct/indirect or circumstantial evidence brought on record by the Assessing Officer for treating the loans as bogus or not genuine; and (iv) no specific admission was made by the appellant in respect of the aforesaid loans in the statement recorded during the course of search. 6. BECAUSE no adverse material relating to such loans held in the assessment order as unexplained / bogus was found IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 8 of 32 during the course of search of the appellant or at any other place and none of the lenders or other persons have ever stated that the loans were in the nature of bogus accommodation entry and non-genuine. 7. BECAUSE in the absence of opportunity of cross examination of the persons giving statement of culpable nature, as had been sought by the appellant, the assessment stood wholly vitiated and consequently the addition made deserved to be deleted as per decision of the Apex Court in umpteen number of cases. 8. BECAUSE the addition of the loan amounts along with interest paid there-on, as has been upheld by the Id. CIT(A),is based on irrelevant considerations, surmises and presumption, without rebutting the overwhelming evidences and documents placed by the appellant on the record of the lower authorities. 9. BECAUSE it is settled legal principle that before an addition u/s 68 is made the AO has to conclusively prove that the assessee had failed to discharge his onus to prove the identity and creditworthiness of the loan creditor and genuineness of the loan transaction and in the present case all the three ingredients having been fully satisfied, the Ld. CIT (A) ought to have deleted the additions made by the Ld. Assessing Officer. 10. BECAUSE the additions aggregating Rs.4,89,09,570/- made by the AO and upheld by CIT(A) are based on whims, surmises and conjectures and the cases relied upon by the authorities below are distinguishable from the facts of the present case. IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 9 of 32 11. BECAUSE the lower authorities have failed to consider various case laws relied upon by the appellant as also the guidelines issued by CBDT with regard to the procedure to be adopted by AO before making addition under section 68 of the Act. 12. BECAUSE various adverse observations and allegations made by the lower authorities are contrary to the facts, material &evidences available on record. 13. BECAUSE the order passed by the Ld. CIT(A) is contrary to facts, law and principles of natural justice. 4.1 For the sake of completeness, the grounds taken in assessment years 2016-17 and 2017-18 by the assessee are being reproduced hereunder: GROUNDS IN IT(SS)A NO.147/LKW/2022 BY THE ASSESSEE: 1. BECAUSE the Id. CIT(A) has erred in law and on facts in conforming the assessment order passed u/s 153A of the Act, even though the said assessment order as also the additions made therein are not in consonance with the settled position of law viz-a-viz search cases. 2. BECAUSE the Ld. CIT(A) has erred in law and on facts in confirming the following additions, aggregating Rs.1,68,79,083/-, made by the Assessing Officer by holding the loan transactions as bogus and accommodation entry- IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 10 of 32 S.No. Name of the lender Loan amount added u/s 68 (Rs) Interest added u/s 37 (Rs.) Total additions (Rs.) 1 Cityon Infrastructure Pvt. Ltd. 10,00,000/- 20,417/- 10,20,417/- 2 Neil Industries Ltd. 1,17,00,000/- 15,97,083/- 1,32,97,083/- 3 Samtal Finance Ltd. 25,00,000/- 61,583/- 25,61,583/- Total addition 1,68,79,083/- without appreciating the supporting documentary evidences and explanation of the appellant placed on record of the authorities below. 3. BECAUSE while confirming the additions aggregating Rs.1,68,79,083/- the Ld. CIT(A) failed to appreciate that with respect to the unsecured loans obtained by the appellant from the three loan creditors, namely (i) Cityon Infrastructure Pvt. Ltd. (ii) Neil Industries Ltd. (iii) Samtal Finance Ltd., the appellant had duly discharged the onus of proving all the three vital ingredients of Section 68 of the LT. Act, namely; identity and creditworthiness of the lenders as well as genuineness of the loan transactions and consequently, the entire addition aggregating Rs.1,68,79,083/- deserved to be deleted. 4. BECAUSE while confirming the additions made by the Ld. Assessing Officer u/s 68 and 37 of the Act aggregating Rs.1,68,79,083/- the Ld. CIT(A) missed to note and appreciate; particularly that- (i) the nature, source, identity, credit worthiness & genuineness relating to such loans were duly explained; IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 11 of 32 (ii) the loans taken from the respective parties stood fully explained with the support of documentary evidences and got verified as per detailed written submission filed before Assessing Officer with supporting evidences which were summarily rejected by the Id. Assessing Officer as not satisfactory, without any reason or justification; (iii) most of the loans were returned back to the lenders and there was no direct/indirect or circumstantial evidence brought on record by the Assessing Officer for treating the loans as bogus or not genuine; and (iv) no specific admission was made by the appellant in respect of the aforesaid loans in the statement recorded during the course of search. 5. BECAUSE no adverse material relating to such loans held in the assessment order as unexplained / bogus was found during the course of search of the appellant or at any other place and none of the lenders or other persons have ever stated that the loans were in the nature of bogus accommodation entry and non-genuine. 6. BECAUSE in the absence of opportunity of cross examination of the persons giving statement of culpable nature, as had been sought by the appellant, the assessment stood wholly vitiated and consequently the addition made deserved to be deleted as per decision of the Apex Court in umpteen number of cases. IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 12 of 32 7. ECAUSE the addition of the loan amounts alongwith interest paid there-on, as has been upheld by the Id. CIT(A), is based on irrelevant considerations, surmises and presumption, without rebutting the overwhelming evidences and documents placed by the appellant on the record of the lower authorities. 8. BECAUSE it is settled legal principle that before an addition u/s 68 is made the AO has to conclusively prove that the assessee had failed to discharge his onus to prove the identity and creditworthiness of the loan creditor and genuineness of the loan transaction and in the present case all the three ingredients having been fully satisfied, the Ld. CIT (A) ought to have deleted the additions made by the Ld. Assessing Officer. 9. BECAUSE the additions aggregating Rs.1,68,79,083/- made by the AO and upheld by CIT(A) are based on whims, surmises and conjectures and the cases relied upon by the authorities below are distinguishable from the facts of the present case. 10. BECAUSE the lower authorities have failed to consider various case laws relied upon by the appellant as also the guidelines issued by CBDT with regard to the procedure to be adopted by AO before making addition under section 68 of the Act. 11. BECAUSE various adverse observations and allegations made by the lower authorities are contrary to the facts, IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 13 of 32 material & evidences available on record. 12. BECAUSE the order passed by the Ld. CIT(A) is contrary to facts, law and principles of natural justice. GROUNDS IN IT(SS)A NO.148/LKW/2022 BY THE ASSESSEE: 1. BECAUSE the Id. CIT(A) has erred in law and on facts in conforming the assessment order passed u/s 153A of the Act, even though the said assessment order as also the additions made therein are not in consonance with the settled position of law viz-a-viz search cases. 2. BECAUSE the approval u/s 153D of the Act granted by the Ld. Joint Commissioner of Income tax is mechanical, without due application of mind, hence violative of the provisions of law and consequently assessment order passed u/s 153A deserved to be quashed being bad in law. 3. BECAUSE the Ld. CIT(A) has erred in law and on facts in confirming the following additions, aggregating Rs. 94,30,226/-, made by the Assessing Officer by holding the loan transactions as bogus and accommodation entry- S.No . Name of party Loan amount Interest Total 1 Sagittarius Advertising Ltd. 82,00,000/- 5,94,275/- 87,94,275/- 2 Edynamics Solutions P. Ltd. 6,00,000/- 35,951/- 6,35,951/- Total addition 94,30,226/- IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 14 of 32 without appreciating the supporting documentary evidences and explanation of the appellant placed on record of the authorities below. 4. BECAUSE while confirming the additions aggregating Rs.94,30,226/- the Ld. CIT(A) failed to appreciate that with respect to the unsecured loans obtained by the appellant from the three loan creditors, namely (i) Cityon Infrastructure Pvt. Ltd. (ii) Neil Industries Ltd. (iii) Samtal Finance Ltd., the appellant had duly discharged the onus of proving all the three vital ingredients of Section 68 of the I.T.Act, namely; identity and creditworthiness of the lenders as well as genuineness of the loan transactions and consequently, the entire addition aggregating Rs.94,30,226/-deserved to be deleted. 5. BECAUSE while confirming the additions made by the Ld. Assessing Officer u/s 68 and 37 of the Act aggregating Rs.94,30,226/- the Ld. CIT(A) missed to note and appreciate; particularly that- (i) the nature, source, identity, credit worthiness & genuineness relating to such loans were duly explained; (ii) the loans taken from the respective parties stood fully explained with the support of documentary evidences and got verified as per detailed written submission filed before Assessing Officer with supporting evidences which were summarily rejected by the Id. Assessing Officer as not IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 15 of 32 satisfactory, without any reason or justification; (iii) most of the loans were returned back to the lenders and there was no direct/indirect or circumstantial evidence brought on record by the Assessing Officer for treating the loans as bogus or not genuine; and (iv) no specific admission was made by the appellant in respect of the aforesaid loans in the statement recorded during the course of search. 6. BECAUSE no adverse material relating to such loans held in the assessment order as unexplained / bogus was found during the course of search of the appellant or at any other place and none of the lenders or other persons have ever stated that the loans were in the nature of bogus accommodation entry and non-genuine. 7. BECAUSE in the absence of opportunity of cross examination of the persons giving statement of culpable nature, as had been sought by the appellant, the assessment stood wholly vitiated and consequently the addition made deserved to be deleted as per decision of the Apex Court in umpteen number of cases. 8. BECAUSE the addition of the loan amounts alongwith interest paid there-on, as has been upheld by the Id. CIT(A),is based on irrelevant considerations, surmises and presumption, without rebutting the overwhelming evidences and documents placed by the appellant on the record of the IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 16 of 32 lower authorities. 9. BECAUSE it is settled legal principle that before an addition u/s 68 is made the AO has to conclusively prove that the assessee had failed to discharge his onus to prove the identity and creditworthiness of the loan creditor and genuineness of the loan transaction and in the present case all the three ingredients having been fully satisfied, the Ld. CIT (A) ought to have deleted the additions made by the Ld. Assessing Officer. 10. BECAUSE the additions aggregating Rs.94,30,226/- made by the AO and upheld by CIT(A) are based on whims, surmises and conjectures and the cases relied upon by the authorities below are distinguishable from the facts of the present case. 11. BECAUSE the lower authorities have failed to consider various case laws relied upon by the appellant as also the guidelines issued by CBDT with regard to the procedure to be adopted by AO before making addition under section 68 of the Act. 12. BECAUSE various adverse observations and allegations made by the lower authorities are contrary to the facts, material &evidences available on record. 13. BECAUSE the order passed by the Ld. CIT(A) is contrary to facts, law and principles of natural justice. IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 17 of 32 4.2 In addition to the original grounds, the assessee has also filed additional ground of appeal in assessment year 2016- 17, which reads as under: \"14. BECAUSE the approval u/s 153D of the Act granted by the Ld. Joint Commissioner of Income tax is mechanical, without due application of mind, hence violative of the provisions of law and consequently the assessment order passed u/s 153A deserved to be quashed, being bad in law.\" 4.3 The Department is also in cross-appeal in all the three captioned assessment years agitating the relief allowed to the assessee by the ld. CIT(A). The grounds raised by the Department in respective appeals are as under: GROUNDS IN IT(SS)A NO.155/LKW/2022 BY THE REVENUE: 1. Whether on facts and circumstances of the case and in law, Ld CIT(Appeal)-IV, Kanpur has erred in ignoring that the cogent fact that during the course of survey action at the assessee company excess cash of Rs.71,86,882/- was recovered which implies dubious nature of out of book cash in hand with assessee. 2. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in law in ignoring the factual findings of commission(s) made u/s 131(1)(d) of the Income Tax Act, 1961 which were issued to various authorities holding the territorial jurisdiction over the lenders company, summons issued u/s 131 of the Income Tax Act, IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 18 of 32 1961 to various persons/entities related to lender company and enquiry reports made by Inspector of department at various instances after physical verification of given premises pertaining to lender companies, all action being done for verification of genuineness, creditworthiness and identity of said lender companies. 3. Whether on facts and circumstances of the case and in law, Ld CIT(Appeal)-IV, Kanpur has erred in not appreciating the acceptance statement recorded on oath of Shri Rajesh Agarwal dated 13.09.2017 and Shri Amit Goenka dated 02.01.2018, both key person and director of assessee company, wherein they both have accepted the dubious receipts in form of bogus unsecured loan in assessee company and surrendered Rs.20 Crore on account of that. 4.That the above grounds are without prejudice to each other and appellant craves leave to add or amend any other more ground of appeal as stated above as and when needs for doing so may arise. GROUNDS IN IT(SS)A NO.156/LKW/2022 BY THE REVENUE: 1.Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in ignoring that the cogent fact that during the course of survey action at the assessee company excess cash of Rs.71,86,882/- was recovered which implies dubious nature of out of book cash in hand with assessee. 2. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in law in ignoring the factual findings of commission(s) made u/s 131(1)(d) of the Income Tax Act, 1961 which were issued to various IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 19 of 32 authorities holding the territorial jurisdiction over the lenders company, summons issued u/s 131 of the Income Tax Act, 1961 to various persons/entities related to lender company and enquiry reports made by Inspector of department at various instances after physical verification of given premises pertaining to lender companies, all action being done for verification of genuineness, creditworthiness and identity of said lender companies. 3. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in not appreciating the acceptance statement recorded on oath of Shri Rajesh Agarwal dated 13.09.2017 and Shri Amit Goenka dated 02.01.2018, both key person and director of assessee company, wherein they both have accepted the dubious receipts in form of bogus unsecured loan in assessee company and surrendered Rs.20 Crore on account of that. 4. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in law by not making the matter remand back to A.O. to make afresh enquiry in respect of address(s) of lenders company's/entities which have made allegation that department has not made enquiries on their new/changed addresses due to which their genuineness, identity and creditworthiness remained unverified and also erred in law by not providing of opportunity of being heard to A.O. 5. That the above grounds are without prejudice to each other and appellant craves leave to add or amend any other more ground of appeal as stated above as and when needs for doing so may arise. IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 20 of 32 GROUNDS IN IT(SS)A NO.157/LKW/2022 BY THE REVENUE: 1. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in ignoring that the cogent fact that during the course of survey action at the assessee company excess cash of Rs.71,86,882/- was recovered which implies dubious nature of out of book cash in hand with assessee. 2. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in law in ignoring the factual findings of commission(s) made u/s 131(1)(d) of the Income Tax Act, 1961 which were issued to various authorities holding the territorial jurisdiction over the lenders company, summons issued u/s 131 of the Income Tax Act, 1961 to various persons/entities related to lender company and enquiry reports made by Inspector of department at various instances after physical verification of given premises pertaining to lender companies, all action being done for verification of genuineness, creditworthiness and identity of said lender companies. 3. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in not appreciating the acceptance statement recorded on oath of Shri Rajesh Agarwal dated 13.09.2017 and Shri Amit Goenka dated 02.01.2018, both key person and director of assessee company, wherein they both have accepted the dubious receipts in form of bogus unsecured loan in assessee company and surrendered Rs. 20 Crore on account of that. 4. Whether on facts and circumstances of the case and in law, Ld. CIT (Appeal)-IV, Kanpur has erred in law by not IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 21 of 32 making the matter remand back to A.O. to make afresh enquiry in respect of address(s) of lenders company's/entities which have made allegation that department has not made enquiries on their new/changed addresses due to which their genuineness, identity and creditworthiness remained unverified and also erred in law by not providing of opportunity of being heard to A.O. 5. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in law in ignoring the fact that AO vide para no.5 page no. 06 of relevant assessment order has rejected books of accounts of the assessee company before making addition on account of unexplained cash deposit in the bank account of the assessee. Whereas, Ld. CIT(A)-IV, Kanpur vide his order dated 23.05.2022 para no. 8.5 page no. 48, has mentioned that relevant books of accounts which were produced by assessee company was duly accepted by A.O. without any qualification. 6. Whether on facts and circumstances of the case and in law, Ld. CIT(Appeal)-IV, Kanpur has erred in law in ignoring the facts that in the present case there was unprecedented cash deposit in the bank account of the assessee which was coloured in guise of cash sale by assessee company which was also corroborated from the analysis of data related to cash deposit pattern of last three years as made by assessee company. 7. That the above grounds are without prejudice to each other and appellant craves leave to add or amend any other IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 22 of 32 more ground of appeal as stated above as and when needs for doing so may arise. 5. The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the assessee was challenging the validity of approval granted under section 153D of the Act in all the three appeals and prayed that this ground may be taken up first for hearing. Since the Department did not have any objection to the prayer, the Ld. A.R. proceeded to advance his arguments on the validity of approval under section 153D of the Act. 5.1 The Ld. A.R. invited our attention to the Letter of Approval under section 153D of the Act, dated 27.12.2019 of the Addl. Commissioner of Income Tax, Central Range, Kanpur (copy placed in the paper book) and submitted that the order dated 31.12.2019 passed by the DCIT, Central Circle-1, Kanpur under section 153A of the Act was based on the approval under section 153D of the Act granted by the ACIT, Central Range, Kanpur by a common order dated 27.12.2019 in cases pertaining to different assessees and different assessment years. He further submitted that the order passed by the DCIT within four days of approval granted by the ACIT, i.e. 27.12.2019, was without application of mind and without appreciating the facts and the same did not follow the mandate of section 153A of the Act. The Ld. A.R. in IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 23 of 32 support of his arguments placed reliance on various case laws, which were placed in paper book. 5.2 Inviting our specific attention to order dated 22.11.2024 by the Co-ordinate Bench of ITAT Lucknow in the cases of M/s Standards Frozen Exports Pvt. Ltd., M/s Standard Agro Vet Pvt. Ltd., Shri Kamal Kant Verma and Shri Sachin Verma in IT(SS)A Nos. 41 to 45/LKW/2022, 46 to 49/LKW/2022, 50 to 53/LKW/2022 and 54 to 59/LKW/2022 respectively, the Ld. A.R. submitted that these appeals were decided in favour of the assessee by holding that the approval(s) granted under section 153D of the Act were done in a mechanical manner without application of mind. He submitted that likewise in the present set of appeals, the approval granted by learned Addl. CIT under section 153D of the Act, for passing the assessment orders was done in a mechanical manner without due application of mind. He drew our attention to approval granted by the Addl. CIT vide the communication dated 27.12.2019 and 28.12.2019 in the case of Satvik Polychem Pvt. Ltd. for assessment years 2017-18, 2015- 16 and 2016-17 respectively. He further drew our attention to the contents of the aforesaid approval letters dated 27.12.2019 and 28.12.2019 and submitted that on their perusal, it emerges that the approval was sought by the Assessing Officer on 27.12.2019 and 28.12.2019 itself and the approval was given by the Addl. IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 24 of 32 CIT. He contended that it was humanly impossible for the Addl. CIT to exercise due application of mind before granting approval in such a large number of cases having regard to the enormity of materials for due application of mind on the part of the Addl. CIT within a short span of the same working day. He also contended that the assessments made by the Assessing Officer were vitiated due to approval granted by the Addl. CIT in a mechanical manner without due application of mind. Moreover, he also contended that the absence of due application of mind by the Addl. CIT and the grant of approval in mechanical manner was fatal to the assessments made in pursuance of the approvals so granted by Addl. CIT. 5.3 The Ld. A.R. also submitted a compilation of copies of approval letters dated 27.12.2019 and 2812.2019 issued by the Addl. CIT, Kanpur and submitted that on these two dates approval was granted in as many as 110 cases (including assessee’s) which would indicate that there was complete non- application of mind while according approval under section 153D of the Act. 5.4 Reliance was also placed on the order dated 07.10.2021 of the Lucknow Bench of the Tribunal in the case of Shri Subodh Agarwal vs. DCIT, Kanpur for assessment year 2015-16 in ITA IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 25 of 32 No.674/LKW/2018. The Ld. A.R. submitted that an identical issue had arisen before the Tribunal wherein, the Tribunal had quashed the assessment order based on the 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. 6. Per contra, the ld. CIT (D.R.) submitted that the assessee’s argument that the approval under Section 153D of the Act was granted mechanically without application of mind was not supported by the factual matrix of the case. The Ld. CIT(DR) prayed that the submission of assessee on the ground of mechanical approval under section 153D of the Act by Addl. CIT/ Jt. CIT before the Tribunal may kindly be rejected and the order of the Assessing Officer may kindly be upheld. 7. In his rejoinder, learned Counsel for the assessee again emphasized that there was nothing on record to suggest that there was any application of mind while granting the approvals and that granting of approval in 110 cases in just two days IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 26 of 32 pointed out to complete non-application of mind while granting the approvals. 8. We have heard both sides and we have also perused the materials on record. There is no dispute that approvals were given by the Addl. CIT in a huge number of cases within an extremely short period of time. The requirement of statutory approval of draft assessment order is an inbuilt protection against any unjust, improper, illegal or arbitrary exercise of power of the Assessing Officer. This cannot be done in a mechanical manner, without due application of independent mind by the Addl. CIT. At this juncture, it would be worthwhile to reproduce the two approval letters in the present appeals for the sake of clarity: IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 27 of 32 8.1 As is apparent from the above two communications, 19 approvals were given in one communication dated 27.12.2019 IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 28 of 32 (including two in the appeals before us) and 12 approvals were given in another communication dated 28.12.2019 (including one in the appeal before us). The requirement of prior approval of a superior authority i.e. the AddI. CIT, requires that the Addl. CIT should give due consideration to all relevant materials and appraise them properly in order to appreciate the factual and the legal aspects. It is well settled in law that statutory approval by superior authority must be granted only on the basis of proper consideration of all relevant materials, and further that the approval must reflect the due application of mind to the facts of the case and to the applicable law. 8.2 In the case of Pr. CIT vs. Subodh Agarwal [2023] 149 taxmann.com 373 (Allahabad), it was held by the Hon'ble Jurisdictional High Court that it was humanly impossible to go through the records of 38 cases in one day to apply independent mind to appraise the materials before the approving authority and the Hon'ble Allahabad High Court upheld the conclusion drawn by the Income Tax Appellate Tribunal that it was the mechanical exercise of power. The Hon'ble High Court upheld the order of the Income Tax Appellate Tribunal that the approval given in such a manner vitiated the entire assessment proceedings. Similar view was taken by Hon'ble jurisdictional High Court in the case of Pr. CIT vs. Siddarth Gupta [2023] 147 IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 29 of 32 taxmann.com 305 (Allahabad). In addition to the aforesaid orders of Hon'ble jurisdictional High Court, the issue is also covered in favour of the assessee by the orders of Co-ordinate Bench of the Income Tax Appellate Tribunal, Lucknow in the cases of Sapna Gupta vs. DCIT (order dated 07.10.2021 in I.T.(SS)A.No.424/LKW/2019), Navin Jain vs DCIT (order dated 03.08.2021 in I.T.(SS)A.No.424/Lkw/2019), Rohit Gupta vs. DCIT (order dated 04.07.2022 in I.T.A. No.115/Lkw/2021), M/s Quality Structure Pvt. Ltd. vs. DIT (order dated 30.09.2024 in I.T. (SS)A.No.679 & 680). The SLP filed by Revenue on this issue was dismissed by Hon'ble Supreme Court in [2024] 163 taxmann.com 118 (SC). 8.3 Similar view was taken by ITAT in Kamal Kant Verma vs. DCIT in I.T.(SS)A. No.50 to 53/Lkw/2022, Sachin Verma vs. DCIT in I.T.(SS)A. No.54/Lkw/2022 and Sachin Verma vs DCIT in I.T.A. No.55 to 59/Lkw/2022. In fact, the ITAT allowed relief to the assessee in these group of cases on facts identical to the facts in these present group of appeals. The captioned appeals were part of the 110 approvals granted on 27.12.2019 and 28.12.2019 and so were the Standard Frozen Foods Exports Pvt. Ltd., M/s Standard Agro Vet Pvt. Ltd., Shri Kamal Kanth Verma and Shri Sachin Verma group of cases (supra) which have already been allowed relief by the ITAT by holding that the IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 30 of 32 approvals granted under section 153D of the Act were granted without due application of mind by the Addl. CIT. The ITAT in these group of cases annulled the assessments by placing reliance on number of judicial precedents viz.: (i) Hon'ble Allahabad High Court in the case of Pr. CIT vs. Subodh Agarwal in ITA No.86 of 2022, dated 12.12.2022; (ii) Hon'ble Orissa High Court in the case of ACIT vs. Serajuddin & Co. (2023) 150 taxmann.com 146 (Orissa); (iii) Hon'ble Delhi High Court in the case of Pr. CIT vs. Shiv Kumar Nayyar in ITA No.285/2024. (iv) ITAT Bangalore Bench in the case of Khoday Eshwarsa & Sons vs. DCIT in ITA Nos.1079 & 1080/Bang/2024; (v) ITAT Delhi Bench in the case of Sanjay Duggal & Sons in ITA No.1813/Del/2019; and (vi) ITAT Lucknow Bench in the case of Quality Structure Pvt. Ltd. vs. DCIT in IT(SS)A No.679&680/LKW/2019. 8.4 The Ld. CIT (DR) has not been able to point out any facts in the present appeals which would distinguish the facts in the above mentioned group of appeals. 8.5 Therefore, respectfully following the aforesaid precedents and in view of foregoing discussion, it is held that the assessment orders passed in pursuance of approvals given by AddI. CIT in a IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 31 of 32 mechanical manner without due application of mind, vitiated the entire assessment proceedings, which was fatal to the assessment orders. Accordingly, we set aside the impugned appellate orders of the learned CIT(A) in the present three appeals before us; and the corresponding assessment orders each dated 31.12.2019 (for assessment years 2015-16, 2016-17 and 2017-18) are annulled. 9. As we have already annulled the assessment orders in the foregoing paragraph No.8 of this order, the grounds taken by the assessee in the appeals on remaining disputes become merely academic in nature and need not be decided. Therefore, we decline to express any opinion on the same. 10. Since the assessment orders are annulled, the Departmental appeals become infructuous and are dismissed as such. 11. In the result, all the appeals of the assessee are allowed and all the appeals of the Revenue are dismissed. Order pronounced in the open Court on 30/05/2025. Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:30/05/2025 JJ: IT(SS)A Nos.149, 147 & 148/LKW/2022 IT(SS)A Nos.155, 156 & 157/LKW/2022 Page 32 of 32 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR By order Assistant Registrar/DDO "