STEEL SCAFF INDIA PRIVATE LIMITED,NEW DELHI V. DCIT, CENTRAL CIRCLE-2, GURGAON

ITA 3386/DEL/2024

AI Insights

The case involves Steel Scaff India Private Limited appealing against the assessment orders passed by the ACIT, which were upheld by the CIT(A). The assessments were based on a search operation conducted on 19.11.2018 at various premises of the Mainee Group, including the assessee. The main contention was the lack of incriminating material found during the search and the procedural validity of the approval under Section 153D for the assessments. The Tribunal referenced a similar case, Mainee Steel Works Pvt. Ltd., where it was decided in favor of the appellant under comparable circumstances.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312935 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Other Referred Cases: Mainee Steel Works Pvt. Ltd. vs. DCIT, Gurgaon
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYA CHOUDHARY
• Assessee Lawyers: ASHWINI KUMAR
• Keywords: Opportunity of being heard; Document seized; Documents seized; Bogus purchase; Assessment record; Competent authority; Bogus
• Section: 153A; 131

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.3385/Del/2024 Assessment Year: 2014-15 ITA No.3386/Del/2024 Assessment Year: 2015-16 Steel Scaff India Private Limited, M-14 Ground Floor, Greater Kailash, Part-I, New Delhi PIN: 1100 48 PAN No. AALCS4816N Vs . DCIT, Central Circle-2, Gurgaon Haryana (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeals filed by the Appellant/assessee are against orders dated 28.06.2024 passed by Learned Commissioner of Income-Tax(Appeals)-3, Gurgaon (hereinafter referred as ‘Ld. CIT(A)’) under Sections 153A of the Income-Tax Act, 1961 (hereinafter referred as “the Act”) arising out of assessment orders dated 22.06.2021 of the ACIT (hereinafter referred as “Ld. AO”) for assessment years 2014-15 and 2015-16. Assessee by: Shri Ashwini Kumar, CA Department by: Ms. Jaya Choudhary, CIT DR Date of Hearing: 21.04.2025 Date of pronouncement: 30.04.2025 ITA Nos.3385 & 3386/Del/2024 2 2. At the time of hearing, it is stated that issue involved for the assessment years 2014-15 and 2015-1 are common and are interlinked and arising from search action on assessee and other group concerns covering the assessee. 3. Learned Authorized Representative for the appellant/assessee submitted that in search operation dated 19.11.2018, nothing incriminating was recovered. Approval letter dated 10.05.2021 has been examined by ITAT, Delhi in ITA No.3371/Del/2021 titled as “Mainee Steel Works Pvt. Ltd., New Delhi Vs. DCIT, Gurgaon” decided on 24.01.2025 was in favour of the appellant/assessee. 4. Learned Authorized Representative for the Department in written submissions submitted that Ld. CIT(A) vide his order, dated 28.06.2024, has rightly upheld the additions for the year under consideration while holding that the allegations of the assessee with respect to approval under Section 153D of the Act has no legs to stand and that the approval, the Range Head has looked into the records and applied by the assessee concerning the issue of approval of under Section 153D of the Act are without merit and may not be admitted. It is further submitted that Ld. AO requested approval from the Range Head under Section 153D of the Act, in the above mentioned appeals, vide his office letter being F. No. DCIT CC-II(GGN)/153D/2021-22/35 dated 22.04.2021. Ld. AO also proposed to make the assessment and accordingly forwarded the assessment records in the above-captioned appeals. The Range Head has examined the matter in detail and reviewed the assessment records. The Range ITA Nos.3385 & 3386/Del/2024 3 Head also pointed out certain deficiencies in the draft assessment order and communicated the same vide Email dated 22.04.2021 at 08.04 PM. Under such process, Ld. AO revised and resubmitted the draft after incorporating the necessary corrections on 22.04.2021. It is pertinent to mention that the Ld. AO after incorporating the corrections as pointed out in the Range Head’s email dated 22.04.2021 resubmitted the draft assessment order in the matter. Subsequently, after due application of mind and careful consideration of the assessment records and the draft order, the Range Head granted approval under Section 153D of the Act, 5. Further, in view of the CBDT’s guidelines being F. No.286/161/2006/2006-IT (Inv.II) dated 22.12.2006, para 1.7, mandates that assessment in all cases be it searched of a group of a group or an assessee, assessments are framed simultaneously to ensure coordinated decision-making and eliminate the possibility of assessments being made in the wrong hands or for the incorrect assessment year(s). 6. From examination of the entire record, in light of aforesaid rival submission, it is crystal clear that Ld.CIT(A) through common order dated 28.06.2023 upheld assessment order dated 22.06.2021, the assessment orders of Ld. AO were in pursuance to search conducted on 19.11.2018 at various premises of Mainee Group of Cases. Copy of approval letter dated 10.05.2021 is as under: ITA Nos.3385 & 3386/Del/2024 4 ITA Nos.3385 & 3386/Del/2024 5 7. Approval letter dated 10.05.2021 in para no.2 mentions: “2. The approval u/s 153D of the IT Act, 1961, is accorded for the A.Y. 2013-14 to 2019-20 considering the facts as submitted that 1. Proper opportunity of being heard was provided to assessee. 2. All the issues appearing from the material on record were duly examined and 3. Relevant copies of seized documents were verified before passing the draft order.” 8. A Co-ordinate Bench of the ITAT in ITA No.3371/Del/2024 titled as “Mainee Steels Works Pvt. Ltd., New Delhi” decided on 24.01.2025 was settled the issue by observing as under: “13. On nuanced perusal of the assessment orders and the consolidated first appellate order, it is observed that there does not appear to be any reference to any incriminating material found in the course of search of the assessee per se. The alleged incriminating material referred are primarily in the nature of statement of third person prior or subsequent to search/survey proceedings. Guided by the principles laid down by the Abhisar Buildwell (P.) Ltd. (supra), Anand Kumar Jain (HUF) (supra) and Vikram Dhirani (supra), we find force in the legal plea placed on behalf of the assessee. Hence, in the absence of any incriminating material in an unabated assessment, additions/ disallowances made by the AO in all captioned appeals requires to be quashed. 14 We now advert to the other legal challenge vociferously raised on behalf of the assessee towards propriety of approval under s. 153D to the respective draft assessment orders placed before him by the Ld.AO. 14.1 The approval memo under s. 153D has been assailed on behalf the assessee. It would thus be in fitness to extract the copy of approval for ready reference. ITA Nos.3385 & 3386/Del/2024 6 14.2 With reference to the approval memo extracted above, it is the contention on behalf of the assessee that the combined approval granted for various AYs under s. 153D is plagued with substantive infirmities revealing gross non-application of mind and the assessment orders have been granted an omnibus approval on dotted line in a cursory manner. The broad counters of the discrepancies alleged on behalf of the assessee are: (a) The AO forwarded the draft assessment orders for various AYs under appeal to the Addl.CIT on 24.05.2021 purportedly along with the assessment records to seek approval under s. 153D of the Act. The approval sought was accorded in complex search cases of multiple years of the assessee and other group cases on the next day i.e. on 25.05.2021. The so-called approvals were given in a consolidated manner to the ITA Nos.3385 & 3386/Del/2024 7 assessment orders spanning over AYs 2013-14 to 2019-20. Significantly, the Add. CIT recorded considering the facts as submitted that (a) proper opportunities of being heard was provided to the assessee by the AO; (b) All the issues appearing from the material on record were duly examined (naturally by the AO) and (c) relevant copies of seized documents were verified before passing the draft assessment order . The Ld. Counsel contends that on a bare reading of phraseology of para 2 of the approval memo noted above, it would be manifest that combined and consolidated approval has been accorded solely based on the submissions and assurances from the AO that the pre-requisites have been met while preparing draft assessment orders. Delving deeper, the Ld. Counsel for the assessee yet again adverted to para 2 part 3 of the approval memo dated 25-05-2021 ( extracted above) to assert that the Addl. CIT clearly proceeded to accord approval under s. 153D on the presumption that relevant copy of seized documents were verified by the AO before passing respective draft assessment orders. Apparently, riding on the assurances from the AO, the combined approvals have been merrily accorded. The Addl. CIT thus barely acted on the assurance from the AO towards existence of basic requirement of passing the fair and balanced assessment order mandated in law. Such approvals, which do not even remotely indicate independent application of mind, if endorsed would defeat the very purpose of the statutory enactment of s. 153D of the Act meant to act as valuable safeguard against any capricious or unjust or onerous liability on tax payers by the arbitrary exercise of powers of the AO. Evidently, the Addl. CIT himself has not exerted in any manner but rather ascribed to the acts and deeds of the AO as gospel truth. The approval is thus clearly is in the league of being mechanical and ritualistic approval rendering it expropriatory at the threshold. 14.3 The assessee thus contends that it is a gross case of an implied self confession of the Addl. CIT towards complete dependence on the process of assessment carried out by AO rendering it a ‘technical approval’ which in itself is fatal without anything more. 14.4 The assessee further contends that besides gross non application of mind discernible from such combined approval memo itself, assessment orders so approved are also marred by critical lapses and mistakes which remained unnoticed by the Addl. CIT. This shows that the Addl. CIT has not even cared to read the assessment orders but left every act to the wisdom of the AO. The assessee contends that the lapses / omissions committed as noticeable from the assessment orders have direct bearing on the process of reasoning adopted to come to conclusions on the ITA Nos.3385 & 3386/Del/2024 8 ultimate additions/ disallowances. Some of the instances as may be observed are; AY Paragraph and Page No.of the Assessment Order Description and Comments Omission that the Ld. Additional Commissioner could have asked 2013-14 Page 3 para 4.2 Reproduction of the relevant extract of the statement of Sh.Ashok Kumar No Part of the statement has been reproduced Page 8 Para 5.2 Reproduction of the relevant extract of the statement of Sh.Manoj Kumar No Part of the statement has been reproduced. Page 13 Para 6.3 Further, during the post-search enquiries summons u/s 131 of the Act dated 20.02.2018 were issued to certain entities Date mentioned as 20.02.2018 which is prior to search date i.e. 19.11.2018 Page 18 para 7.2. Reproduction of the relevant extract of the statement of Sh.Manoj Kumar Jain No Part of the statement has been reproduced. Page 18 para 7.5 The reply to the above notice was provided by Mainee Steel Works Pvt. Ltd. which is as under:- No Part of the reply reproduced Page 23 Reproduction of the statement of Sh.Surjit Singh No Part of the statement has been reproduced. 2015-16 Page 4 Para 4.2. Reproduction of the relevant No Part of the statement has ITA Nos.3385 & 3386/Del/2024 9 extract of the statement of Sh.Manoj Kumar Jain been reproduced. Page 9 Para 5.2 Reproduction of the relevant extract of the statement of Sh.Ashok Kumar No Part of the statement has been reproduced. Page 13 Para 6.2 Reproduction of the relevant extract of the statement of Sh.Manoj Kumar Jain No Part of the statement has been reproduced. Page 14 Para 6.5 The replies to the notices provided by Mainee Steel Works Private Limited are as under: No replies have been attached. Page 32 Para 7 Reproduction of the statement of Sh Surjit Singh No Part of the statement has been reproduced. 14.4.1 Thus, page 3 para 4.2 (AY 2013-14) of the assessment order inter- alia reads as “the relevant extract of the statement of Shri Ashok Kumar is reproduced as under”. However, no part of the statement has been reproduced. The approval has been accorded on such incomplete assessment order. 14.4.2 Page 8 para 5.1 (AY 2013-14) inter alia reads as ‘the relevant extract of the statement of Sh.Manoj Kumar Jain is reproduced as under’. However, no part of the statement has been reproduced. Despite such lapse, approval has been mechanically granted. 14.4.3 Page 13 para 6.3 (AY 2013-14) reads as “Further, during the post- search enquiries summons u/s 131 of the Act dated 20.02.2018 were issued to certain entities...............’ Date mentioned as 20.02.2018 in the assessment order is prior to search date i.e. 19.11.2018. ITA Nos.3385 & 3386/Del/2024 10 14.4.4 Page 18 para 7.2 (AY 2013-14) read as ‘the relevant extract of statement of Sh.Manoj Kumar Jain is reproduced herewith as under’. However no part of the statement has been reproduced. Such lapse remaining unnoticed yet again shows that the proposed assessment orders were not even read by the Ld.Addl.CIT. 14.4.5 Page 18 para 7.5 of the assessment order (AY 2013-14) reads as ‘the reply of the above notice was provided by Mainee Steel Works Pvt.Ltd. which is as under’ However, no part of the statement has been reproduced. 14.4.6 Page 23 of the of the order (AY 2013-14) reads as ‘the statement of Sh.Surjit Singh in this regard is reproduced herewith as under’. However, no part of statement has been reproduced. 15. The assessee also contends that the order sheet maintained in the assessment order is also relevant to appreciate the sequence of events. The order sheet does not record any movement of files or any correspondence with Addl. CIT in the course of assessment. This shows that the incumbent Addl. CIT was totally kept unaware of the ongoing assessment proceedings. 16. The Ld.CIT DR appearing for revenue has however strongly defended the approval granted under s. 153D of the Act and submitted that as long as the statutory approval has been granted, a presumption would arise that all incidental acts have been performed properly and that due process of law has been followed and with proper application of mind. The Ld.CIT DR also pointed out that prior to approval dated 25.05.2021 accorded under s. 153D, there was another correspondence dated 18.05.2021 by the AO to the Addl. CIT wherein the AO has addressed the Addl. CIT towards mistake committed in the earlier draft order towards bogus purchases mismatch qua appraisal report. This goes to show involvement or application of mind on the part of the Addl. CIT in full earnest to the ongoing assessment. 17. In the re-joinder, the Ld. Counsel adverted the order sheet maintained towards the assessment proceedings yet again wherein date-wise events of the assessment proceedings are noted in seriatim. The Ld. Counsel contends that such order sheets are integral part of the assessment records and thus can not be ignored or brushed aside. The Ld. Counsel pointed out that the order sheet does not reflect any such inter se correspondence between the AO and the Addl. CIT. The so-called draft assessment orders prepared prior to 18.05.2021 is also not produced. Thus, such ITA Nos.3385 & 3386/Del/2024 11 correspondence could thus be make belief to justify some involvement of Addl. CIT. The assessee however contends in the same breath that when the Addl. CIT himself admitted to have proceeded solely on the assurance from the AO in the approval memo which has given rise to the cause of action for passing the assessment orders, nothing else remains to be justified. Furthermore, a consolidated approval for several years involving complex issues of varied nature emanating from search itself smacks of ritualistic practice of omnibus approval. 18. The legal objection of transgression of requirements of approval under s. 153D is in question which has the effect on the very substratum of the various assessment orders which are subject matter of captioned appeals. 18.1 For passing assessment orders in search cases, the Assessing Officer is inter alia governed by the requirement of prior approval under Section 153D of the Act. Hence, the AO should complete the assessment proceedings and prepare a draft assessment order which needs to be placed before the approving authority i.e. Joint / Addl. Commissioner (designated authority giving approval to search assessment under Sect ion 153D of the Act) for his perusal and prior approval. In view of the definitive judicial consensus available on the expectations from Competent Authority, such competent authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/ her diligent satisfaction that the proposed action of AO is in conformity with subsisting law and is also in accord with underlying factual matrix. The requirement of law to grant approval is consistently held to be not a merely as a formality or a symbolic act but a mandatory requirement. The AO is obligated is pass the assessment order exactly, as per approval / directions of the designated authority. It is not open to the AO to modify the assessment order without the knowledge and concurrence of the designated authority. 18.2 At this juncture, it may be relevant to take note of host of judicial precedents governing the field wherein the Courts and various Benches of the Tribunal have uniformly struck a discordant note on mechanical and perfunctory approval in the context of provisions of section 153D of the Act. Such routine approvals have resulted in invalidation of adjustments made in the assessment order. • ACIT vs Serajuddin & Co. Kolkata [2023] 150 taxmann.com 146 (Orissa)-SLP against this order dismissed reported in (2024) 163 taxmann.com 118(SC). Page | 16 • PCIT vs Anuj Bansal 466 ITR 251(Del.) ITA Nos.3371 to 3377/Del/2024 • PCIT vs ITA Nos.3385 & 3386/Del/2024 12 Shiv Kumar Nayyar (2024) 63 taxmann.com 9 (del.); 467 ITR 186 • PCIT vs MDLR Hotels(P)Ltd. (2024) 166 taxmann.com 327 (Del.) • PCT vs. Sapna Gupta(2023) 147 taxmann.com 288(All.) • PCIT vs. Siddarth Gupta (2023) 450 ITR 534 (All.) • PCIT vs. Subodh Agarwal (2023) 149 taxmann.com 373(All.) • Shreelekha Damani vs DCIT [ITA No.4061/Mum/2012] (Bom.High Court) • Chhugamal Rajpal vs. S.P. Chaliha & ors. (1971) 79 ITR 603 (SC)[in the context of s. 157 of the Act] • M3M India Holdings vs DCIT [2019] 71 ITR (Trib.) 451 (Del.) • Vrushali Sanjay Shinde vs DCIT [2023] 154 taxmann.com 324 (Mum.Trib.) • Sanjay Duggal vs ACIT [ITA No.1813/Del/2019] order dated, 19.01.2021 • PCIT vs Subhash Dabas (ITA No.243/2023) order dated 17.05.2024 • Daze Construction Pvt.Ltd. vs ACIT (ITA Nos.594 to 598/Del/2023) order dated 30.09.2024 • Veena Singh vs ACIT (ITA No.294/Del/2022 for AY 2016-17) order dated 24.04.2024 • PCIT vs Tirupati Buildings & Officers Pvt.Ltd. (ITA No.447/2024) order dated 20.08.2024. 18.3 It is axiomatic from the plain reading of approval memo that the Addl. CIT is in complete dark on facts while being called upon to grant his clearance to the draft assessment orders. It is evident from the CBDT Circular No.3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval the respective Assessment order. The solemn object of entrusting the duty of Approval of assessment in search cases is that the Additional/ Joint CIT concerned, with his experience and maturity of understanding, should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act enjoins due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. Long line of judicial precedents which provides guidance in applying the law has been quoted in the preceding para. The courts have repeatedly deprecated the pernicious practice of granting approvals by the supervisory authorities in a nonchalant manner. ITA Nos.3385 & 3386/Del/2024 13 18.4 At the cost of repetition, it may be reiterated that in the instant case, the approving authority has granted a mere 'technical approval' by his own express admission in departure to a substantive approval expected in law. Curiously, the Addl.CIT has recorded that he has granted approval on the basis of submission of the AO that proper opportunity has been provided to the Assessee; all the issues have been examined by him i.e. the AO and relevant copies of seized documents have been verified by him i.e. the AO before passing the draft order. The Addl. CIT thus effectively claimed that he has not pursued the relevant underlying material and proceeded on dotted line. Such an act cannot be regarded as effective discharge of duty of supervisory nature. As discernible from the combined approval memo, the sanctioning authority (Addl CIT) has, in fact, relegated his statutory duty to the subordinate AO, whose action the Adll. CIT, was supposed to supervise as per the scheme of the Act. Manifestly, the Addl. CIT, without any consideration of factual and legal position in proposed additions/disallowances and without the availability of incriminating material collected in search etc. has buckled under statutory compulsion and proceeded to grant a symbolic approval to meet the statutory requirement. This approach of the Addl. CIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and is thus incapable of being sustainable in law. 18.5 Besides, the Assessee has also demonstrated glaring lapses in the respective assessment orders which could easily be detected on a bare reading of such orders. Impliedly, the Addl. CIT has not even cared to read the assessment orders while entrusted with the task of approval of such orders. Furthermore, a common approval for all assessment years in complex matters of search without identifying or discussing any issue in relation to any assessment year further shows no semblance of any application of mind to any aspect of any assessment years. 18.6 The CIT(A) in para 8.2 2 to 8.2.6 of first appellate order has brushed aside the legal objection summarily merely on an inept & indifferent premise that the assessment order makes mention of the approval from Addl. CIT under 153D of the Act and such powers are in the nature of administrative powers and a purely internal matter. The cryptic conclusion drawn by the CIT(A) is bereft of any plausible reasons whatsoever and thus cannot be reckoned to be a judicial finding on the point. The observations so made are not tenable in law. 19. In the light of foregoing discussions, we are unhesitatingly disposed to hold that the integrity and propriety of various assessments under ITA Nos.3385 & 3386/Del/2024 14 captioned appeals based on such combined approval memo under s. 153D in question cannot be countenanced in law. 20. In view of legal objection answered in favour of the Assessee, the aspects of other objections on jurisdiction such as absence of DIN etc. or aspects of merits of additions/ disallowance does not call for separate adjudication. 21. The captioned appeals of the assessee in ITA No.3371 & 3375/Del/2024 [AY2013-14 to 2017-18] are allowed. ITA Nos.3376 to 3377/Del/2024 [Assessment years 2018-19 to 2019-20] [Mainee Steel Works Pvt.Ltd.] 22. One of the grounds in captioned appeals raises challenge to validity of approval under s. 153D. Similar other appeals discussed in preceding paras. 23. The approval memo under s. 153D being common and combined, the delineations noted above in respect of earlier years shall apply mutatis mutandis. As noted in para 14 to para 18 (supra), the Addl.CIT is found to have granted approval under s. 153D based on submissions from AO that draft assessment orders have been framed after giving opportunity and due examinations and verifications have been carried out. Guided by such submissions the approval has been accorded without sharing his own involvement and application of mind. The approval so accorded was thus held to be in the nature of a ‘technical approval’ in symbolic exercise of powers under s. 153D. Hence, the consequential assessment orders based on such repugnant approval under s. 153D is bad in law in tune with earlier years. In this view of the matter, the other legal and factual aspects does not call for separate adjudication. 24. The appeals of the assessee in ITA Nos.3376 & 3377/Del/2024 [AYs 2018-19 to 2019-20] are thus allowed. 25. In the combined result, all the captioned appeals are allowed.” 9. In view of the above material facts and as per judicial precedents, respectfully following the order of the ITAT, the approval dated 10.05.2021 deserves to be held in nature of a technical approval in symbolic exercise of ITA Nos.3385 & 3386/Del/2024 15 powers under Section 153D of the Act. Hence, the assessment orders are bad in law. The other grounds are left open. 10. In the result, both the appeals filed by assessee are allowed. Order pronounced in the open court on 30/04/2025. Sd/- sd/- (PRADIP KUMAR KEDIA) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30/04/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "