INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “E”: NEW DELHI
BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)
ITA No. 3306/Del/2018
(Assessment Year: 2015-16)
MG Metalloy Pvt. Ltd, Vs. DCIT,
B-16, Sector-2, Noida, Central Circle,
PAN: AAGCM5789D Noida
(Appellant) (Respondent)
Assessee by : Shri Amit Goel, CA
Revenue by: Ms. Pramita M. Biswas, CIT DR
Date of Hearing
Date of pronouncement 29/07/2021
23/08/2021
O R D E R
PER PRASHANT MAHARISHI, A. M.
1. This appeal is filed by the assessee against the order of the ld CIT(A)-IV, Kanpur
[ The ld CIT (A)] dated 19.03.2018 for Assessment Year 2015-16, wherein, the
appeal filed by the assessee against the assessment order passed u/s 143(3) of
the Income Tax Act [ The Act] dated 31.12.2016 by Dy. CIT, Noida [ the Ld
AO] determining the total income of the assessee at Rs. 138,22,77,156/-
against the returned income of Rs. 3,14,330/- was dismissed. Therefore,
assessee is aggrieved and has preferred this appeal raising following grounds of
appeal:-
“1a. On the facts and circumstances of the case and in law, the initiation of
assessment proceedings and issue / services of notices are not in
accordance with the provisions of law and accordingly the assessment
order passed on the foundation of such notice(s) is liable to be quashed
and CIT(A) erred in not holding so.
b. On the facts and circumstances of the case and in law, no notice u/s
143(2) was issued within the stipulated statutory time and accordingly the
assessment order passed by the assessing officer is liable to. be quashed
and CIT(A) erred in not holding so.
c. On the facts and circumstances of the case and in law, the assessment
order passed by the assessing officer is without jurisdiction and CIT(A)
erred in not holding so.
2. On the facts and circumstances of the case and in law, the CIT(A) erred in
confirming addition of Share Capital / Share Premium of Rs.1,89,35,760/-
Page | 1
made by the assessing officer as alleged unexplained cash credits u/s 68
of Income Tax Act, 1961.
3. On the facts and circumstances of the case and in law, the CIT(A) has
erred in confirming addition of unsecured loans of Rs. 1,36,30,27,066/-
made by the assessing officer as alleged unexplained cash credits u/s 68
of Income Tax Act, 1961.
4. On the facts and circumstances of the case and in law, the various alleged
adverse inferences drawn / reasons given by the CIT(A) for making /
confirming additions are erroneous and not sustainable in law.
5 On the facts and circumstances of the case and in law, the assessment
order passed by the assessing officer is contrary to the provisions of
section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding
so.
The appellant craves leave to add, alter, modify or delete one or more
ground of appeal before or at the time of hearing of appeal.”
2. Brief facts of the case shows that assessee is a company engaged in the
business of textile and others. It filed its return of income of Rs. 3,14,330/-
dated 06.11.2016. Search and seizure operation u/s 132 of the Act was
conducted on 11.11.2014 in Apple Group of cases. The assessee is one of the
companies. Therefore, the case of the assessee was picked up for scrutiny.
3. Facts also shows that Nine different companies amalgamated in the assessee
company as per Order of the Hon’ble Delhi High court u/s 394 of the companies
act with effect from 1/4/2013. All the assets and liabilities of nine Transferor
companies were incorporated in the balance sheet of the assessee company and
shareholders of those nine companies were issued shares of the assessee
company as per exchange ratio as per scheme of amalgamation u/s 394 of the
Companies Act 1956.
4. Ld AO noted that the assessee has unsecured loan of Rs. 1,36,30,27,066/- and
the share capital of Rs. 1,89,35,760/- during the year. Therefore, the assessee
was asked to justify the amount of unsecured loan as well as share capital. The
assessee submitted in the form of confirmation, audited financial results of
lenders, income tax returns, copies of the accounts of the parties etc showing
that share capital is in exchange of shares of the transferor companies to the
shareholders of the transferor company and no money is received. Same
explanation was also with respect to unsecured loans. The ld AO found that
the person from whom the assessee has taken unsecured loan have shown Nil
or meager income in the profit and loss account. Therefore, he made an
addition of Rs. 1,36,30,27,066/- u/s 68 of the Act. The assessee was also asked
to prove the genuineness of the share capital issued of Rs. 1,89,35,760/-. The
assessee submitted the confirmation, share application forms, income tax
Page | 2
returns of the share depositors. The ld AO held that the assessee has failed to
provide even bank statement, profit and loss account of the investor companies
and therefore, he held that the assessee has failed to discharge its onus,
creditworthiness of the investors, genuineness of the transactions and existence
of the investors. Therefore, the addition of Rs. 1,89,35,760/- was made.
Assessment order passed u/s 143(3) of the Act after taking approval of the Joint
Commissioner of Income Tax on 31.12.2016 u/s 153D of the Act.
5. The assessee is aggrieved with the order of the ld AO preferred an appeal before
the ld CIT(A). The assessee submitted that the addition of Rs. 1,89,35,760/- is
unwarranted as assessee has not received any amount during the year but the
same is on account of merger vide order of the Hon’ble High Court dated
09.09.2014 u/s 394 of the Companies Act, wherein, 9 different companies were
amalgamated with the assessee company and on amalgamation of the aforesaid
company where the effective date is 01.04.2013 the above said share capital
represent shares allowed to the share holders of 9 amalgamated companies.
Therefore, there is no sum received during the year and the share capital has
arisen on account of amalgamation.
6. With respect to the addition of Rs. 1363027068/- it was stated that the above
credit and loans are also on account of above amalgamation order of the Hon’ble
High Court wherein, 9 other companies amalgamated with the assessee. It was
submitted that the assessee has not received any sum during the year except
small amount. The assessee therefore, submitted that the addition made by the
ld AO deserves to be deleted.
7. The ld CIT (A) asked for the remand report, which was submitted on 06.03.2018
wherein the ld AO held that the addition has been made after proper
verification. With respect to the share holders the ld AO submitted that the 19
entities to whom shares were allotted were not in the list of companies
amalgamated w.e.f 01.04.2013. With respect to unsecured loan of Rs.
136,30,27,066/- the ld AO stated that none of the entries is shown as the
sundry creditors or loans are in the list of companies amalgamated. It was
therefore, stated that the addition has been rightly made.
8. The ld CIT(A) confronted remand report to the assessee who submitted a
rejoinder on 14.03.2018 giving the details of share capital of Rs. 1,89,35,760/-
wherein, it was shown that the share holders of those 9 different companies on
existence of their shares in those companies the assessee has allotted these
shares to 19 parties. No sum is received by the assessee from any of these
Page | 3
parties. It was further stated that naturally, shareholders of Transferor
companies cannot appear in the amalgamation scheme order, but only the
names of transferor companies will be mentioned. Therefore, those shareholder
companies of Transferor Company could not have been named in the order of
amalgamation. With respect to the loan of Rs. 136,30,27,066/- he submitted
that most of the above sums are on account of amalgamation and with respect
to other sums; there are repayment of loan given by the assessee in the earlier
years and amount received on the sale of the shares. He submitted that the
assessee has submitted the confirmation and income tax returns of the all the
above parties along with balance sheet. It was therefore, submitted that as no
amount is received during the year. He further submitted that out of above sum
Rs. 135,04,23,341/- are pertaining to earlier period prior to 31.03.2013 and
none of the sum has been received even otherwise during the year. The ld CIT
(A) held that the most of creditors advancing money to the assessee has Nil or
very meager income and therefore, the ld AO has rightly made the addition u/s
68 of the Act. With respect to the claim of the assessee, that most of the credit
does not related to this assessment year as this plea is not raised before the ld
AO. Accordingly, he upheld both the additions. The assessee also raised a
ground before him that no approval u/s 153D has been granted. The ld CIT (A)
held that the detail of approval is mentioned in the last line of the assessment
order and dismissed this ground. Therefore, the assessee is aggrieved with that
order has preferred this appeal before us. Parties were heard on this appeal.
9. Ground No. 1 is general in nature and no arguments were advanced by the
assessee therefore, it is dismissed.
10. Ground No. 2 of appeal is with respect to the addition of Rs. 1363027066/- on
account of unsecured loan. The ld AR argued that share capital of Rs.
189,35,760/- is allotment of shares to the share holders of amalgamated
companies and no sum is received during the year therefore, no addition has
been made u/s 68 could not have been made. He referred to the order of the
Hon'ble Delhi High Court u/s 394 of the Companies Act dated 09.09.2014 and
stated that the scheme of amalgamation of 9 amalgamated companies was
approved by the Hon'ble Delhi High Court. He further stated that even the
return of allotment in the form No 2 of Companies Act filed before the ld AO also
clearly shows that above shares capital represent the share allotted under the
amalgamation scheme. He further referred to detail of 19 parties showing that
how the share capital was issued to them.
Page | 4
11. Ground no 3 with respect to the addition of Rs. 1,36,30,27,066/- with respect to
the unsecured loan he also submitted the details that same is also on account of
liabilities of the amalgamated companies recorded in the books of the assessee
company on account of amalgamation. He further submitted that some of the
entries added by the ld AO are not at all alone but the refund received against
the loans and advanced already given by the assessee in the earlier years. He
also submitted in fact during the year no sum has been actually received. He
further stated that out of above sum Rs. 135 crores with respect to 11 parties
are merely entry companies has been transferred and no sum of money is
received. He referred to several judicial precedents stating that if there is no
sums credited in the books of account the provision of section 68 do not apply.
He otherwise submitted that the assessee submitted in the case of all these
parties the complete names and address, confirmation of the creditors, copy of
the bank statement wherever available added account of the lenders and the
copy of the return of income. He submitted that despite submitting the above
evidence the ld AO has not made any enquiries and merely on the basis of books
of account without verification where any of the sums of money is received or
not has made the addition. He further submitted that the assessee has
submitted the copies of the action of all these parties in the books of account of
the assessee to show that against all these entries have arisen on account of
amalgamation. He further referred to the order of the Hon'ble Delhi High Court
passed u/s 394 of the Act wherein, 9 parties amalgamated with the assessee
company. He referred to para 1 and 2 of that order to show that all the
properties and liabilities etc have been transferred to the assessee company and
the payment date is 01.04.2013. He further referred to clause 9 of the order of
the Hon’ble High Court wherein, the assessee was to issue shares to the
shareholder of the respective companies. He also referred to schedule of the
period of various amalgamated companies. He therefore, submitted that no
addition can be made in the hands of the assessee as no sum is found credited
in the books of account of the assessee.
12. With respect to ground No. 5 he challenged the approval granted by the Joint
Commissioner of Income Tax u/s 153D of the Act and submitted that approval
given by the ld JCIT is without application of mind and is an empty ritual. He
relied on the order of the Hon’ble Bombay High Court in case of Srilekha Damani
11 TMI 1563. He also referred to the decision of the coordinate bench in case of
Rishabh Buildwell Pvt. Ltd 7 TMI 365. He also referred to several other case
Page | 5
laws and submitted that approval u/s 153D is invalid. The facts and
circumstances are identical to the issues decided in the above judicial
precedents stated. He submitted in his synopsis as under :-
“3. Ground no 5
The assessment order passed by the assessing officer is contrary to the provisions of
section 153D of the Act. The provisions of section 153D are as under:-
“no order of assessment or reassessment shall be passed by the assessing
officer below the rank of Joint Commissioner in respect of each assessment
year referred to in clause (b) of sub-section (1) of Section 153A or assessment
year referred to in clause (b) of sub-section (1) of Section 153B except with the
prior approval of Joint Commissioner. ”
3.1 Whenever any statutory obligation is cast upon any authority, such authority
is legally required to discharge the obligation by application of mind. The approval has
to be statutory nature after due application of mind, it should be neither technical nor
proforma approval.
3.2 The letter addressed by the AO to JCIT seeking his approval is reproduced as
under:-
F.No. DCIT/cc/Noida/S&S/153D/2016-17/2623 Dated: 30/12/2016
To,
The Joint Commissioner of Income Tax,
Central Range, Aayakar Bhawan,Bhainsali Ground, Meerut.
Sir,
Sub: Draft assessment orders u/s 153A/153C/143(3) of the I.T. Act, 1961 in
Apple Group (D.O.S 11/11/2014)- Approval u/s 153D of the I.T. Act, 1961-
regarding.
Please find herewith revised list of cases for your kind approval u/s 153D of
the IT Act.
SI. No. Name of the assessee PAN A. Yrs.
2009-10 to 2015-16
1 Sh. Narender Kumar Garg, AEKPG6296A 2009-10 to 2015-16
2 Smt. Shaloo Narender Kumar AADPG1563F 2009-10 to 2015-16
2009-10 to 2015-16
Garg, 2009-10 to 2015-16
2009-10 to 2015-16
3 Sh. Yogender Kumar Garg, ABIPG9791P 2009-10 to 2015-16
2009-10 to 2015-16
4 Smt. Madhu Garg, ABIPG9792Q 2009-10 to 2015-16
2011-12 to 2015-16
5 Sh. Pulkit Garg, AJEPG5760A 2009-10 to 2015-16
2009-10 to 2015-16
6 Smt. Ruchi Garg AAIPG1671M 2009-10 to 2015-16
2009-10 to 2015-16
7 Sh. Pawan Kumar Garg, AAHPG8132G
2009-10 to 2015-16
8 M/s Apple Industries Ltd., AAGCA9960N 2012-13 to 2015-16
9 M/s Nirman Stelco Pvt. Ltd., AACCN4842Q 2010-11 to 2013-14
10 M/s M.G. Mettalloy Pvt. Ltd., AAGCM5789D 2009-10 to 2015-16
11 M/s Promart Retail India Pvt. Ltd. AAFCP8743B Page | 6
12 M/s Apple Sponge & Power Limit. AAFCA1965L
13 M/s Apple Metal Industries Ltd., AAACD7670E
14 M/s Apple Buildtech Ltd., AAFCA8106K
M/s Apple Insurance Brokers
15 Pvt. Ltd., AAECA5320N
16 M/s Zync Global Pvt. Ltd., AAACZ5235H
M/s Apple Iron Enterprises Pvt.
17 Ltd., AAHCA8642G
M/S Mastermind Trade-in-Private
18 Ltd AAECM9435E
Draft assessment order received Late i.e. on 31/12/2016 Yours sincerely
Beyond the time as per internal Action Plan.
And thus having a very little time/ almost no time for proper
Examination of facts of the case/ further enquiries etc.
—sd
Deputy Commissioner of Income Tax
Central Circle Noida
For J.C.I.T., Central Range (Meerut)
3.3 The letter addressed by the JCIT to A.O. granting his approval is reproduced
as under:-
F. No. JCIT/Central Range/Meerut/S&S/153D/2016-17/1477 Dated: 31-12-2016
To,
The Dy. Commissioner of Income Tax.
Central Circle, Noida.
Subject:-Prior approval u/s 153D in the cases of Apple Group cases-regarding.
Please refer to your office letter F. No. DCIT/CC/Noida/S&S/153D/2016-17/2623
dated 30-12-2016 received in this office on 31-12-2016 on the above mentioned
subject.
1. In the following cases of Apple Group, prior approval u/s 153D of the IT Act,
1961 is accorded for passing assessment orders in respect of the assesses for
the assessment years as mentioned below:
SI. No Name of the assessee PAN A. Yrs.
1 Sh. Narender Kumar Garg AEKPG6296A 2009-10 to 2015-16
2 Smt. Shaloo Narender Kumar Garg AADPG1563F 2009-10 to 2015-16
3 Sh. Yogender Kumar Garg ABIPG9791P 2009-10 to 2015-16
4 Smt. Madhu Garg ABIPG9792Q 2009-10 to 2015-16
5 Sh. Pulkit Garg AJEPG5760A 2009-10 to 2015-16
6 Smt. Ruchi Garg AAIPG1671M 2009-10 to 2015-16
7 Sh. Pawan Kumar Garg AAHPG8132G 2009-10 to 2015-16
8 M/S Apple Industries Ltd. AAGCA9960N 2009-10 t0 2015-16
9 M/S Nirman Stelco Pvt. Ltd. AACCN4842Q 2009-10 to 2015-16
10 M/s M. G. Metalloy Pvt. Ltd. AAGCM5789D 2011-12 to 2015-16
11 M/S Promart Retail India Pvt. Ltd. AAFCP8743B 2009-10 to 2015-16
12 M/s Apple Sponge & Power Limit. AAFCA1965L 2009-10 to 2015-16
13 M/S Apple Metal Industries Ltd. AAACD7670E 2009-10 to 2015-16
14 M/S Apple Buildtech Ltd. AAFCA8106K 2009-10 to 2013-14
15 M/S Apple Insurance Brokers Pvt. Ltd AAECA5320N 2009-10 to 2015-16
16 M/S Zync Global Pvt. Ltd. AAACZ5235H 2012-13 to 2015-16
17 M/S Apple Iron Enterprises Pvt. Ltd AAHCA8642G 2010-11 to 2013-14
18 M/S Mastermind Trade-in-Private Ltd AAECM9435E 2009-10 to 2015-16
3. A technical approval is accorded to pass assessment orders in the above
cases on the basis of the drafts assessment orders submitted for the assessment
years in reference years. You are directed to ensure taking into account the seized
documents/papers and comments in the appraisal report pertaining to AYs. The fact
of initiation of penalty proceedings, wherever, applicable, must also be incorporated in
the last para of the order. The initiation of correct penalty provisions of I.T. act u/s
271(1)(c)/ 271AAB per facts of the case must be ensured.
4. This office reference no of approving the draft orders shall invariably be
quoted in the assessment orders to be passed. A copy of final assessment orders
passed in these cases should be sent to this office for record immediately on passing
the assessment orders.
5. It must also be ensured that if any document in this case pertains to any third
party assessed with a different AO, the necessary information for taking necessary
action must be sent to concerned AO immediately.
Page | 7
Encl. : As above
sd
Joint Commissioner of Income
Tax, Central Range, Meerut
3.4 From the above, it is apparent that the JCIT received the draft assessment
order from the AO on 31/12/2016 and he granted the approval on the same day. In
the letter of the AO for seeking approval from JCIT, the JCIT has himself made the
following remarks:-
Draft assessment order received late i.e on 31/12/2016 Beyond the time as
per internal Action Plan And thus having a very little time /almost no time for
proper Examination of the facts of the case/further enquiries etc.
From the above remarks of the JCIT himself, it is evident that he has granted the
approval without examination of the facts of the case. The approval by the JCIT is as
in empty ritual. The approval given by the JCIT is not a statutory approval as is
required under the Act. The approval is not a final approval as required u/s 153D of
the Act but a technical/conditional approval subjected to modifications by the DCIT
after receiving of the approval which makes it an invalid, qualified and uncertain
approval. This is not the mandate of the Act. The action of the JCIT of granting the
approval was a mere mechanical exercise accepting the draft order as it is without
any independent application of mind on his part. Therefore, the approval is invalid in
eye of law.
3.5 The decision of Hon‟ble Bombay High Court in the case of THE PR.
COMMISSIONER OF INCOME TAX VERSUS SMT. SHREELEKHA DAMANI 2018 (11)
TMI 1563 - BOMBAY HIGH COURT is reproduced as under:-
1. This appeal is filed by the Revenue challenging the judgment of
Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August,
2015.
2. Following question was argued before us for our consideration:
“Whether on the facts and circumstances of the case and in law, the
Tribunal was justified in holding that there was no 'application of mind'
on the part of the Authority granting approval?
3. Brief facts are that the Tribunal by the impugned judgment set aside
the order of the Assessing Officer passed under Section 153A of the Income
Tax Act, 1961 (“the Act” for short) for Assessment Year 2007- 08.
This was on the ground that the mandatory statutory requirement of obtaining
an approval of the concerned authority as flowing from Section 153D of the
Act, before passing the order of assessment, was not complied with.
4. This was not a case where no approval was granted at all. However,
the Tribunal was of the opinion that the approval granted by the Additional
Commissioner of Income Tax was without application of mind and, therefore,
not a valid approval in the eye of law. The Tribunal reproduced the
observations made by the Additional CIT while granting approval and came to
the conclusion that the same suffered from lack of application of mind. The
Tribunal referred to various judgments of the Supreme Court and the High
Courts in support of its conclusion that the approval whenever required under
the law, must be preceded by application of mind and consideration of
relevant factors before the same can be granted. The approval should not be
an empty ritual and must be based on consideration of relevant material on
record.
5. The learned Counsel for the Revenue submitted that the question of
legality of the approval was raised by the assessee for the first time before the
Tribunal. He further submitted that the Additional CIT had granted the
approval. The Tribunal committed an error in holding that the same is invalid.
Page | 8
6. Having heard the learned Counsel for the both sides and having
perused the documents on record, we have no hesitation in upholding the
decision of the Tribunal. The Additional CIT while granting an approval for
passing the order of assessment, had made following remarks :
“To,
The DCIT(OSD)1,
Mumbai
Subject: Approval u/s 153D of draft order u/s 143(3) r.w.s.
153A in the case of Smt. Shreelekha Nandan Damani for A.Y.
2007-08 reg.
Ref: No. DCIT (OSD)1/ CR7/Appr/2010-11 dt. 31.12.2010
As per this office letter dated 20.12.2010, the Assessing
Officers were asked to submit the draft orders for approval u/s
153D on or before 24.12.2010. However, this draft order has
been submitted on 31.12.2010. Hence there is no much time
left to analise the issue of draft order on merit. Therefore, the
draft order is being approved as it is submitted.
Approval to the above said draft order is granted u/s 153D of
the I. T. Act, 1961."
7. In plain terms, the Additional CIT recorded that the draft order for approval
under Section 153D of the Act was submitted only on 31st December, 2010.
Hence, there was not enough time left to analyze the issues of draft order on
merit. Therefore, the order was approved as it was submitted. Clearly,
therefore, the Additional CIT for want of time could not examine the issues
arising out of the draft order. His action of granting the approval was thus, a
mere mechanical exercise accepting the draft order as it is without any
independent application of mind on his part. The Tribunal is, therefore,
perfectly justified in coming to the conclusion that the approval was invalid in
eye of law.
We are conscious that the statute does not provide for any format in which the
approval must be granted or the approval granted must be recorded.
Nevertheless, when the Additional CIT while granting the approval recorded
that he did not have enough time to analyze the issues arising out of the draft
order, clearly this was a case in which the higher Authority had granted the
approval without consideration of relevant issues. Question of validity of the
approval goes to the root of the matter and could have been raised at any time.
In the result, no question of law arises.
8. Accordingly, the Tax Appeal is dismissed.
3.6 In the case of RISHABH BUILDWELL P. LTD. and othrs. VERSUS DCIT, 2019
(7) TMI 365 - ITAT DELHI the approval granted by JCIT was identical (in fact,
verbatim). The Hon‟ble ITAT held the assessment order to be null and void. The
relevant part of the appeal order is reproduced as under:-
11. We have heard the arguments of both the parties and gone through the
record and documents filed before us. For ready reference the entire part of the
letter of approval dated 30.12.2016 is reproduced as under:
Subject: Prior approval u/s 153 D in the cases of Cloud-9 & Sethi
Groupregarding.
Please refer to your office letter F. No. DCIT/CC/ GZB/ S&S/153D 2016-
17/2904, 2908 & 2911 dated 28-12-2016 & 30-12-2016 on the above
mentioned subject.
2. In the following cases of Cloud-9 & Sethi Group, prior approval u/s
153D of the IT Act, 1961 accorded for passing assessment orders in respect of
the assesses for the assessment years as mentioned below:
Page | 9
S. No. Name of the assessee PAN A.Yrs.
1 M/s Risabh Buildcon Pvt. Ltd. AACCR7502F 2009-10 to 2015-16
2 M/s R. G. V. Fininvest Pvt. Ltd. AAACR4383G 2009-10 to 2015-16
3 M/s Aggarwal Capfin Financial Services P. AABCA0925E 2009-10 to 2015-16
Ltd.
4 M/s Arihant Info Solutions P. Ltd. AADCA5015H 2009-10 to 2015-16
5 M/s Sethi Estate P. Ltd. AABCS7643B 2009-10 to 2015-16
7 AASPS1248Q 2009-10 to 2015-16
8 Sh. Gulshan Sethi AABCE5324R 2009-10 to 2015-16
9 M/s East View Developers P. Ltd. A AFPJ6467R 2009 10 to 2015-16
10 Sh. Desh Bhushan Jain AAECM5401A 2009-10 to 2015-16
11 M/s Max City Developers Pvt. Ltd. ACFPJ3817P 2009-10 to 2015-16
12 Sh. Sanjeev Jain AAICS9/42C 2009-10 to 2015-16
13 M/s Sethi Buildwell Pvt. Ltd. AAFPN6467M 2009 10 to 2015-16
14 Sh. Satpal Nagar AACCR9776R 2009-iO to 2015-16
15 M/s Risabh Buildwell Pvt. Ltd. AIMPJ8085G 2009-10 to 2015-16
16 Srnt. Magan Jain AAFCAI968H 2009-10 to 2015-16
M/s Angel Buildcon Pvt. Ltd.
2. A technical approval is accorded to pass assessment orders in the
above cases on the basis of the drafts assessment orders submitted for the
assessment years in reference years. You are directed to ensure taking into
account the seized documents/papers and comments in the appraisal report
pertaining to AYs. The fact of initiation of penalty proceedings, wherever,
applicable, must also be incorporated in last para of the order. The initiation of
correct penalty provisions of I.T. Act u/s 271 (1)(c)/ 271AAB, as per facts of
the ease, must be ensured.
3. This office reference no of approving the draft orders shall invariably
be quoted in the assessment orders to be passed. A copy of final assessment
orders passed in these cases should be sent to this office for record
immediately on passing the assessment orders.
4. It must also be ensured that if any document in this case, pertains to
any third party assessed with a different AO, the necessary information for
taking necessary action must be sent to concerned AO immediately.
12. The salient points of the approval letter is as under:
1. It is a technical approval
2. The AO was directed to ensure that the comments in the appraisal report
are duly ensured.
3. The penalty proceedings should be mentioned wherever applicable for the
initiation of correct penalty provisions must be ensured.
4. After taking into consideration, the above points, a copy of the final orders
passed be sent to the JCIT.
13. The Income Tax Act envisages prior approval of the JCIT before passing the
assessment order. The provisions read as under:
“no order of assessment or reassessment shall be passed by the assessing
officer below the rant of Joint Commissioner in respect of each assessment
year referred to in clause (b) of sub-section (1) of Section 153A or assessment
year referred to in clause (b) of sub-section (1) of Section 153B except with the
prior approval of Joint Commissioner. ”
14. When the approval given by the JCIT, Meerut is juxtaposed against the
directions and provisions of the Income Tax Act pertaining to completion to
assessment u/s 153B(1) of the Act, it can be said that the approval given by the JCIT
is invalid. The Act envisages that the JCIT‟s approval before passing of the final order.
There is no provision to alter, change, modify, adjust, amend or rework the order once
the approval has been accorded. The approval to be given is statutory in nature and
legally binding. In the instant case, the approving authority has clearly mentioned
that the approval given is a technical approval. Moreover, he has directed the DCIT to
ensure the seized materials and the findings of the appraisal report to be incorporated
Page | 10
in the final assessment order. This clearly goes to proves that the approval given by
the JCIT is not a final approval as required u/s 153D of the Act but a conditional
approval subjected to modifications by the DCIT after receiving of the approval which
makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act.
It has also been laid down that whenever any statutory obligation is cast upon any
authority, such authority is legally required to discharge the obligation by application
of mind. The approval has to be statutory nature after due application of mind, it
should be neither technical nor proforma approval which is envisaged u/s 153D of the
Act. Reliance is placed the judgment of Coordinate Bench in the case of M3M India
Holdings (ITA 2691/2018). And the judgment of Hon‟ble High Court of Bombay in the
case of Pr CIT vs. Smt. Shreelekha Damani [ ITA no 668 of 2016 Dated: 27th
November, 2018 ] is as under:
“1. This appeal is filed by the Revenue challenging the judgment of Income Tax
Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015.
2. Following question was argued before us for our consideration:-
"Whether on the facts and circumstances of the case and in law, the
Tribunal was justified in holding that there was no 'application of mind'
on the part of the Authority granting approval?
3. Brief facts are that the Tribunal by the impugned judgment set aside
the order of the Assessing Officer passed under Section 153A of the Income
Tax Act, 1961 ("the Act" for short) for Assessment Year 1 of 4 Uday S. Jagtap
668-16-ITXA- 15=.doc 2007-08. This was on the ground that the mandatory
statutory requirement of obtaining an approval of the concerned authority as
flowing from Section 153D of the Act, before passing the order of assessment,
was not complied with.
4. This was not a case where no approval was granted at all. However,
the Tribunal was of the opinion that the approval granted by the Additional
Commissioner of Income Tax was without application of mind and, therefore,
not a valid approval in the eye of law. The Tribunal reproduced the
observations made by the Additional CIT while granting approval and came to
the conclusion that the same suffered from lack of application of mind. The
Tribunal referred to various judgments of the Supreme Court and the High
Courts in support of its conclusion that the approval whenever required under
the law, must be preceded by application of mind and consideration of
relevant factors before the same can be granted. The approval should not be
an empty ritual and must be based on consideration of relevant material on
record.
5. The learned Counsel for the Revenue submitted that the question of
legality of the approval was raised by the assessee for the first time 2 of 4
Uday S. Jagtap 668-16- ITXA-15=.doc before the Tribunal. He further
submitted that the Additional CIT had granted the approval. The Tribunal
committed an error in holding that the same is invalid.
6. Having heard the learned Counsel for the both sides and having
perused the documents on record, we have no hesitation in upholding the
decision of the Tribunal. The Additional CIT while granting an approval for
passing the order of assessment, had made following remarks:-
"To, The DCIT(OSD)-1 Mumbai Subject: Approval u/s 153D of draft
order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan
Damani for A.Y. 2007-08reg.
Ref: No. DCIT (OSD)-1/CR-7/Appr/2010-11 dt. 31.12.2010 As per this
office letter dated 20.12.2010, the Assessing Officers were asked to
submit the draft orders for approval u/s 153D on or before
24.12.2010. However, this draft order has been submitted on
31.12.2010. Hence there is no much time left to analyze the issue of
draft order on merit. Therefore, the draft order is being approved as it
is submitted.
Page | 11
Approval to the above said draft order is granted u/s 153D of the I. T. Act,
1961."
7. In plain terms, the Additional CIT recorded that the draft order for
approval under Section 153D of the Act was submitted only on 31st 3 of 4
Uday S. Jagtap 668-16- ITXA-15=.doc December, 2010. Hence, there was not
enough time left to analyze the issues of draft order on merit. Therefore, the
order was approved as it was submitted. Clearly, therefore, the Additional CIT
for want of time could not examine the issues arising out of the draft order. His
action of granting the approval was thus, a mere mechanical exercise
accepting the draft order as it is without any independent application of mind
on his part. The Tribunal is, therefore, perfectly justified in coming to the
conclusion that the approval was invalid in eye of law. We are conscious that
the statute does not provide for any format in which the approval must be
granted or the approval granted must be recorded. Nevertheless, when the
Additional CIT while granting the approval recorded that he did not have
enough time to analyze the issues arising out of the draft order, clearly this
was a case in which the higher Authority had granted the approval without
consideration of relevant issues. Question of validity of the approval goes to
the root of the matter and could have been raised at any time.
In the result, no question of law arises.
8. Accordingly, the Tax Appeal is dismissed.”
15. Hence, keeping in view the facts and circumstances of the case and
peculiarities of the instant case, owing to the judgment of the Hon‟ble High Court, we
hereby hold that the assessments completed by the DCIT do not stand in the eyes of
law. Since the orders have been treated as null and void, any adjudication on other
issues would be academic in nature only, hence refrained to do so.
16. In the result, the appeals of the assessees are allowed.
3.7 The relevant portion of decision in the case of SH. INDER PAL SINGH ARORA,
SH. SURINDER PAL SINGH KOHLI VERSUS DCIT 2021 (6) TMI933 - ITAT DEHRADUN
is as under -
7.0 Now coming to the merits of the additional grounds, the Ld. Counsel
has vehemently argued that the approval granted by the Addl. CIT was invalid
and same was not in conformity with the provisions of section 153A of the Act.
On careful perusal of the sequence of events, the following facts emerge:
• Date of forwarding draft assessment order to Addl. CIT for
approval u/s 153D 28/03/2013
• Date of approval letter u/s 153D 28/03/2013 • Date of
assessment order 28/03/2013
7.1 It is interesting to note that the entire exercise of grant of approval u/s
153D of the Act and passing of the final assessment order was completed
within a single day, that too when the assessing officer was located in
Dehradun and the sanctioning authority was sitting at Noida. Further, vide
common letter, the approval has been granted to multiple draft assessment
orders passed in 20 odd cases on the very same day of receiving the draft
assessment orders. Another glaring fact noted is that the Addl. CIT granted
the so-called approvals merely on the basis of draft assessment orders
without even examining the assessment record of each case. It is self-evident
that the approval has been accorded without going through the facts of the
individual cases. This position is further corroborated from the contents of the
approval letter itself wherein the approving authority is admitting that due to
limitation of time, only broad issues were discussed. The relevant paragraph
i.e. paragraph 3 in the approval letter is reproduced hereunder:
“3. ...As most of the draft orders have been received at the end of the
limitation period, it is not possible to discuss minute details and only
broad issues have been discussed with you.
Due to limitation involved, approval is being accorded. ”
Page | 12
7.2 We find it difficult to comprehend as to how the approving authority
satisfied itself about the correctness of the search based draft assessment
orders without even looking at the search material. In these circumstances, we
have no doubts in our mind that the approving authority has acted casually
and granted the approval u/s 153D of the Income tax Act, 1961 in a
mechanical manner without judicious exercise of power.
7.3 At this juncture, it is relevant to make a reference to the provisions of
section 153D of the Income tax Act, 1961:
“Prior approval necessary for assessment in cases of search or
requisition 153D. No order of assessment or reassessment shall be
passed by an Assessing Officer below the rank of Joint Commissioner
in respect of each assessment year referred to in clause (b) of sub-
section (1) of section 153A or the assessment year referred to in clause
(b) of sub-section (1) of section 153B, except with the prior approval of
the Joint Commissioner:
Provided that nothing contained in this section shall apply where the
assessment or reassessment order, as the case may be, is required to
be passed by the Assessing Officer with the prior approval of the
Principal Commissioner or Commissioner under sub-section (12) of
section 144BA.”
7.4 From a bare reading of the section, it is clear that the Statute has
placed inbuilt checks and balances so as to ensure that the assessment orders
passed u/s 153A pursuant to search or requisition are passed under the
supervision of superior authority. As the assessments u/s 153A are extra-
ordinary proceeding the purpose behind such approval is to avoid framing of
arbitrary assessments and to make sure that the scheme and spirit of special
provisions are adhered to by the assessing officer.
Further, the Statute mandates approval of assessment order for „each‟
assessment year referred to in section 153A(1)(b) which necessarily means
that independent approval is required for draft assessment order of each
assessment year and it is not open to the approving authority to accord
blanket approval as has been done in the present case. It deserves mention
that the shortcoming in approval u/s 153D of the Act will have fatal
consequence on the validity of the assessment order and the assessment
order would be rendered as null and void in absence of proper approval.
7.5 An identical issue came up for consideration before the Coordinate
bench of this Tribunal in the case of Sanjay Duggal and ors v. ACIT (ITA No.
1813/Del/2019 dated 19/01/2021) (Delhi Bench). The relevant findings are
reproduced hereunder:
“11.6. Therefore, in the cases of search, assessment orders whether
framed under section 153A or 153C, the Joint Commissioner
[Approving Authority] is required to see that whether the additions
have been made in the hands of assessee are based properly on
incriminating material found during the course of search,
observations/comments in the appraisal report, the seized documents
and further enquiries made by the A.O. during the course of
assessment proceedings.
Therefore, necessarily at the time of grant of approval of the
assessment made by the A. O, the Joint Commissioner is required to
verify the above issues, apply his mind that whether they have been
properly appreciated by the A.O. while framing the assessment orders
or not. The JCIT is also required to verify whether the required
procedure have been followed by the A. O. or not at the time of framing
of the assessments. Thus, the approval cannot be a mere discretion or
formality, but, is mandatory being Quasi Judicial function and it
should be based on reasoning. In our view, when the legislature has
enacted some provision to be exercised by the higher Revenue
Authority enabling the A.O. to pass assessment order or reassessment
Page | 13
order in search cases, then, it is the duty of the JCIT to exercise such
powers by applying his judicious mind. We are of the view that the
obligation of the approval of the Approving Authority is of two folds ; on
one hand, he has to apply his mind to secure in build for the
Department against any omission or negligence by the A. O. in taxing
right income in the hands of right person and in right assessment year
and on the other hand, JCIT is also responsible and duty bound to do
justice with the tax payer [Assessee] by granting protection against
arbitrary or unjust or unsustainable exercise and decision by the A. O.
creating baseless tax liability on the assessee and thus, the JCIT has
to discharge his duty as per Law. Thus, granting approval under
section 153D of the I.T. Act is not a mere formality, but, it is a
supervisory act which requires proper application of administrative
and judicial skill by the JCIT on the application of mind and this
exercise should be discernable from the Orders of the approval under
section 153D of the I.T. Act.
12. It may be noted that provisions of Section 153D provides for
approval in case of [“Each”] the assessment year. Therefore, each of
the assessment year is required to be verified and approved by the
JCIT being Approving Authority that it complies with Law as well as
the procedure laid down. The assessee has filed details on record
regarding returns filed under section 139 (1) for A.Ys. 2010- 2011 to
2015-2016. It is also explained that there are unabated assessments
except A. Y. 2015-2016 in which the assessments have been abated.
Therefore, for each unabated and abated assessments, the authorities
below and the Approving Authority [JCIT] shall have to verify the
incriminating material found during the course of search or the seized
material if pertain to the same assessment year and its basis. The
assessee has explained above that these cases are coming up because
of the assessments framed in the case of M/s. JIL and others prior to
the search in the case of assessee.
Therefore, all material was within the knowledge of the Income Tax
Authorities prior to the search in the cases of the assessees.
Therefore, for granting approval under section 153D of the I.T. Act, the
Approving Authority shall have to verify and consider each assessment
year and shall have to apply independent mind to the material on
record to see whether in each assessment year there are un-abated or
abated assessments and their effect, if any. But, in the present case,
the Approving Authority i.e., JCIT has granted common approval for all
the assessment years in respect of the single assessee. Thus, there is
no application of mind on the part of JCIT while granting approval for
all the common years instead of granting approval under section 153D
for each assessment years separately.
16. In some of the cases the approval was granted on the date the
request was made for approval by the A.O. In all those cases merely
draft assessment order and the assessment folders were available
with the A. O. For example in the case of Shri Sanjay Duggal family, in
the case of Ms. Kritika Talwar on the same date the approval was
granted and that too merely on the basis of the assessment records
and draft assessment order and in most of the cases approval has
been granted either on the same day or on the next day. Further, there
is no reference that seized material as well as appraisal report have
been verified by the JCIT. It is not clarified whether assessment record
is also seen by the JCIT.It may also be noted that even in some of the
Talwar group of cases approval is granted prior to 30.12.2017 but in
main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is
granted on 30.12.2017.
Therefore, without granting approval in the main cases how the JCIT
satisfied himself with the assessment orders in group cases which is
Page | 14
also not explained. Therefore, the approval granted by the JCIT in all
the cases are merely technical approval just to complete the formality
and without application of mind as neither there was an examination
of the seized documents and the relevance of various observations
made by the Investigation Wing in appraisal report. Thus, we hold the
approval under section 153D have been granted without application of
mind and is invalid, bad in Law and is liable to be quashed. Since we
have held that approval under section 153D is invalid and bad in law,
therefore, A. O. cannot pass the assessment orders under section 153A
of the I.T Act against all the assessees. Therefore, all assessment
orders are vitiated for want of valid approval under section 153D of the
I.T. Act and as such no addition could be made against all the
assessees. In view of the above, we set aside the Orders of the
authorities below and quash the assessment orders passed under
section 153A of the I. T. Act as well as the impugned appellate Order.
Resultantly, all additions are deleted. The additional grounds are
allowed. ”
7.6 In light of the finding recorded in the aforesaid Para and respectfully
following the order of the Coordinate bench, we are of the considered view that
the approval granted u/s 153D of the Act suffers from various infirmities and
same is not in accordance with the letter and spirit of the law and is liable to
be quashed. As we have negated the approval u/s 153D, the assessment
order passed u/s 153A r.w.s 143(3) of the act stands vitiated for want of
approval u/s 153D of the Income Tax Act, 1961 and is hereby quashed.
Accordingly, the additional grounds are allowed.
7.7 As we have quashed the impugned assessment order for want of
proper approval, other grounds raised by the assessee become academic in
nature and do not require any adjudication.
3.8 Reliance is also placed on the following case laws wherein, on similar
facts as in the case of the assessee, the approval under section 153D was
held to be invalid and consequently the assessment order was held to be null
and void:-
M/S Inder International Versus the A.C.I.T., Central Circle-II 2021 (6) TMI 416 -
ITAT CHANDIGARH
Rajesh Ladhani v. Dy. CIT - Central Circle, Agra - 2019 (11) TMI 920 - ITAT Agra
Uttarakhand Uthan Samiti v. ITO, Ward - 45(5), New Delhi 2020 (4) TMI 878 -
ITAT Delhi
Dilip Constructions Pvt Ltd. Versus ACIT, Circle-1, Bhubaneswar. And (Vice-
Versa) And Shilpa Seema Constructions Pvt Ltd. Versus ACIT, Circle-1,
Bhubaneswar. And (Vice-Versa) 2019 (12)
TMI 311 - ITAT Cuttack
Shri Tarachand Khatri, Ramnath Building, Opp. Bhawartal, Jabalpur. Versus
The Acit, Central Circle, Jabalpur. 2020 (1) TMI 1027 - ITAT Jabalpur
Arch Pharmalabs Ltd. Versus ACIT Cc-32, Mumbai And (Vice-Versa) And M/S
Arch Impex
P. Ltd. Versus ACIT CC- 32, Mumbai 2021 (4) TMI 533 - ITAT Mumbai
Sanjay Duggal, Kritika Talwar, Arun Duggal, Ratna Talwar, C/O Kapil Goel,
Adv, Neha Duggal, Nany Duggal, Poonam Duggal, Neeru Duggal, Rajnish Talwar,
Ratnashri Buildtech Pvt. Ltd, Duggal Estate Pvt. Ltd, Duggal & Sons Buildwell P.
Ltd., Versus ACIT, Central Circle-4, New Delhi 2021 (1) TMI 909 - ITAT Delhi
In view of the above, it is submitted that the approval by JCIT under section 153D of
the Act in this case is invalid and, accordingly, the assessment order passed by the
AO is liable to be quashed. The issue involved in the ground of appeal is covered in
favour of the assessee company by various decisions/ case laws of High court and
tribunals.”
Page | 15
13. The ld DR categorically supported the orders of the lower authorities with
respect to the addition u/s 68 of the Act. He submitted that the ld AO has
correctly made the addition u/s 68 of the Act. With respect to the approval
granted by the ld JCIT, he submitted that there is a proper application of mind
by the ld JCIT. He further submitted that it is not merely a technical approval.
He submitted that the approval is always granted by perusing the seized
documents as well as appraisal report prepared by the Investigating Authority.
He submitted that there is no evidence placed by the ld AR to show that there is
no application of mind by the approving authority. He submitted the case
assigned to the ld AO could always be discussed in detail by the ld JCIT and the
order is always passed under his close monitoring and then it culminates into
approval. He also submitted that the approval granted by ld JCIT on the same
date does not prove anything that the approving authority has not applied his
mind.
14. We have carefully considered the rival contentions and perused the orders of the
lower authorities. The brief facts shows that the assessee company get
amalgamated by the order of the Hon'ble Delhi High Court vide order dated
09.09.2014 passed u/s 394 of the Companies Act 1956 wherein, from
01.04.2013 of the 9 transferor companies namely:-
i. Shubh Sponge Iron Pvt. Ltd.
ii. Apple Iron Enterprises Pvt. Ltd.
iii. Manan Power Pvt. Ltd.
iv. Yuven Steels Pvt. Ltd.
v. Shreem Ispat Pvt. Ltd.
vi. Sanidhya Steels Pvt. Ltd.
vii. Madan Gopal Alloys Pvt. Ltd.
viii. Manohar Metalloys Pvt. Ltd.
ix. Apple Buildtech Ltd.
Were amalgamated with the assessee company. According to terms of the
amalgamation, property of the transferor companies specified in the schedule 2
vested in the assessee company and further according to clause 2 of liabilities
and duties of the transferor became the liabilities and duties of the assessee
company. The shareholders of the transfer companies were to be issued the
shares of the assessee company as per exchange ratio laid down in para 9 of the
order. Accordingly, in the annual accounts of the assessee company for the
year ended on 31.03.2014 note No. 18 details were mentioned as under:-
Page | 16
“NOTE-18 OTHER EXPLANATORY NOTES
a) Revision of Accounts and Amalgamation
Hon‟ble High Court of Judicature at Delhi by their orders dated September
09, 2014 approved the Scheme of amalgamation of Shreem Ispat Private
Limited, Apple (ran Enterprises Private limited, Madan Gopal Alloys
Private Limited, Yuven Steels Private limited, Manohar Mattalloys Private
limited, Apple Buildtech Limited, Manan Power Private Limited, Sanidhya
Steels. Private Limited, Shubh Sponge Iron Private Limited with die
company which has become effective on 29th September, 2014 from the
appointed date 1st April, 2013 In accordance with the provisions of
section 391 & 394 of the Companies Act, 1956.
The scheme of amalgamation became effective on filing of orders with the
respective Registrar of Companies and to give effect the amalgamation in
the books of accounts for the year ended 31st March, 2014, accounts of
the Company have been revised. The present financial statements are
revised for the limited purpose of amalgamation of Shreem Ispat Private
Limited, Apple Iron Enterprises Private Limited, Madan Gopal Alloys
Private Limited, Yuven Steels Private limited, Manohar Matalloys Private
limited, Apple Buildtech limited, Manan Power Private Limited, Sanidhya
Steels Private Limited, Shubh Sponge Iron Private Limited with die
company in accordance with the accounting policies followed by the
Company.
b) salient features of the Scheme of Amalgamation
The appointed date for the purpose of this amalgamation is 1st
April,2014.
In accordance with the scheme approved, the accounting for this
amalgamation has been done in accordance with the „Pooling of
interest Method" referred to in Accounting Standard 14 -
„Accounting for, Amalgamation* of the Companies (Accounting
Standard) Rules 2006.
Accordingly, M G Metalloy Private Limited has accounted for the
Scheme in its books of accounts with effect from the Appointed
Date Le.lst April,2013 as under
i) With effect from the appointed date, all assets and liabilities
appearing in the books of Shreem Ispat Private Limited,
Apple iron Enterprises Private Limited, Madan Gopal Alloys
Private Limited, Yuvea Steels Private Limited, Manohar
Matalloys Private Limited, Apple Buildtech Limited, Manan
Power Private Limited, Sanidhya Steels Private limited Shubh
Sponge iron Private Limited have been transferred to and
vested In MG Metalloy Private Limited and have been
recorded by M G Metalloy Private Limited at their respective
book values.
ii) In consideration of the transfer of the business as a going
concern, the Company shall issue the shares as under:-
a) 5 fully paid-up of .equity shares of Rs. 10/- each of
the Company for every 6 equity shares of Rs.10/- each
Page | 17
fully paid up held in Shubh Sponge Iron Private
Limited.
b) 4 fully paid-up of equity shares of Rs. 10/- each of
the Company for every 5 equity shares of Rs.10/- each
fully paid up held in Apple Iron Enterprises Private
Limited.
c) 3 fully paid-up of equity shares of Rs. 10/- each of
the Company for every 4 equity shares of Rs.10/- each
fully paid up held in Manan Power Private Limited.
d) 7 fully paid-up of equity shares, of Rs. 10/- each of
the Company for every 10 equity shares of Rs.10/-
each fully paid up held in Yuven Steels Private Limited.
e) 2 fully paid-up of equity shares of Rs. 10/- each of
the Company for every 10 equity shares of Rs. 10/-
each fully paid up held in Shreem Ispat Private
Limited.
f) 1 fully paid-up of equity shares of Rs.-10/- each of the
Company for every 2 equity shares of Rs. 10/- each
fully paid up held in Sanidhaya Steels Private Limited.
g) 4 fully paid-up of equity shares of Rs. 10/- each of
the Company for every 5 equity- shares of Rs.10/-
each fully paid up held in Madan Copal Alloys Private
Limited.
h) 1 fully paid-up of equity shares of Rs. 10/-each of the
Company for every 49 equity shares of. Rs.10/- each
fully paid up held In Manohar Metallys Private Limited.'
i) 1 fully paid-up of equity shares of Rs. 10/- each of
the Company to each shareholder irrespective of their
shareholding; in Apple Buildtech Limited.
J) Any fraction of share arising out of the aforesaid share
exchange process, if any, will be rounded off to
nearest whole number.
III) Cross holding of shares between the transferor companies
and/or between the transferor and the transferee companies
on the record date, if any has been cancelled
iv} The difference between the book value of net Identifiable
assets and liabilities of transferor Companies (Shreem Ispat
Private Limited, Apple Iron Enterprises Private Limited,
Madan Gopal Alloys Private Limited," Yuven Steels Private
Limited, Manohar Mata Hoys Private Limited, Apple Buildtech
Limited, Manan Power Private limited, Sanidhya Steels
Private Limited, Shubh Sponge iron Private Limited) pursuant
to scheme .and consideration being the value of new equity-
shares to be issued and allotted by M G Metalloy Private
Limited, amounting to Rs. 1.63 crores has been credited to
general reserve in line with the order of honorable high court
Page | 18
v) Accordingly, 37,87,152 equity shares of Rs. 10/- each fully
paid up of MG Metal Alloys Private Limited are required to
issued to the shareholders of Shreem Ispat Private Limited,
Apple iron Enterprises Private Limited, Madan Gopal Alloys
Private Limited, Yuven Steels Private Limited, Manohar
Matalloys Private Limited, Apple Buildtech Limited, Manan
Power Private Limited, Sanidhya Steels Private Limited,
Shubh Sponge Iron Private limited under this amalgamation.
vi) Alt inter company transactions have been eliminated on
incorporation of the accounting of transferee companies in
the company.
vii) The company shall proceed to issue equity shares in due
course of time.
viii) The expenses towards the execution of amalgamation
Scheme shall be adjusted from the reserves.
In view of the aforesaid amalgamation, the figures of the
current year are not comparable to those of the previous
year.
C. Re-arrangement/Reduction of Capital of the transferee company
i) The company has, in accordance with the scheme, re-
arranged/reduced the post merger - issued and paid up
equity share capital to 50% by transferring the 50% of the
post merger issued and paid up equity share capital to
Securities Premium Account. Accordingly, issued and paid up
value of Equity Shares of the company has been reduced
from Rs. 10/- each to Rs. 3/- each.
ii) Subsequent to reduction in issued and paid up share capital,
every 2 equity shared of Rs. 5/- each has been consolidated
into one equity share of Rs. 10/- each.
To give a full impact of scheme of Amalgamation, we have
considered the fresh issue of shares' under the amalgamation,
subsequent capital reduction and thereafter the consolidation of
shares in the Balance sheet as on 31.03.2014. Accordingly,
company shall Issue fresh shares of 18,93,576 shares to the
shareholders of transferee companies. Further an amount of Rs.
2,15,83,940/- shah be transferred to securities premium on
account of capital reduction (5096).
d) Brief note on the business activity/ operations of the
Company and transferor companies
The company is engaged in trading business, investment in group
companies, providing loans and advances and other related
activities. Whereas prior to the scheme of amalgamation transferor
companies were engaged in same activities as of the company.”
15. Accordingly, the assessee issued share capital to the following shareholders of
the transferor companies, which was added by the ld AO u/s 68 of the Act. :-
Page | 19
Details of addition of share capital by AO.
Name of the share Amount Remarks
holder
1. Amay Garg 1020 Share capital transfer from Manohar
2. Amul Mittal
3. Ankit Garg Mettalloy due to amalgamation
4. Anuj Garg
5. Apple Minerals 717500 Share capital transfer from Yuven Steel
Trade Limited
due to amalgamation
6. Apple Natural
Resources Pvt. Ltd 20830 Share capital transfer from Shubh Sponge
7. Apple Resources due to amalgamation
Limited
8. Ashish Garg 20000 Share capital transfer from Apple Iron
9. Ashutosh Sharma due to amalgamation
10. Babita Garg 11231050 For Shareholding in Shreem A/c
11. Gunjan Garg 245300
12. Narendra Kumar
Garg For Shareholding in AIEPL A/c
13. Nirman Stelco
Pvt. Ltd. 2355525
14. Nishanat Garg
15. Nishu Agrico For Shareholding in MGAPL A/c
Limited
16. Reshma Mittal 865660
17. Ruchi Garg
For Shareholding in MPPL A/c 3539165
18. Shaloo Garg
For Shareholding in SSPL A/c 987400
19. Yogendra
Kumar Garg For Shareholding in Shubh A/c
Total
195030
For Shareholding in Yuveen Steels A/c
3042970
1020 Share capital transfer from Manohar
Mettlloy due to amalgamation
263020 Share Capital transfer from Madan Gopal
Alloys due to amalgamation
662510 For Shareholding in ABL A/c 10.00 For
Shareholding in MGAPL A/c 150000 For
Shareholding in SSPL A/c 512500
153330 Share Capital transfer from Shreem Ispat
133330 and apple iron 20000 due to
amalgamation
300000 Share Capital transfer from Apple Iron
due to amalgamation
1223330 Share Capital transfer from Shreem Ispat
due to amalgamation
750010 For Shareholding in ABL A/c 10 For
Shareholding in MGAPL A/c 150000 For
Shareholding in MPPL A/c 600000
406500 Share Capital transfer from Shubh
Sponge due to amalgamation
300000 Share Capital transfer from Apple Iron
due to amalgamation
1016270 Share Capital transfer from Shubh
Sponge due to amalgamation
735000 Share Capital transfer from Yuven Steels
due to amalgamation
512510 Share Capital transfer from Apple
Buildtech Rs. 10 and Sanidhya Steel
512500/- due to amalgamation
600010 Share Capital transfer from Apple
Buildtech Rs. 10 and Manan Power
600000/- due to amalgamation
21850 Share Capital transfer from Manohar
Metalloy Rs. 1020 and Subh Sponge
20830/- due to amalgamation
18935760
Page | 20
16. Similarly where the loans of the transferor companies are transferred to the
assessee company which were also added u/s 68 of The Act by the lower
authorities in case of following parties:-
Name Amount Remarks
1. Krishnaswami
4000000 No loan amount has been received.
2. Jetspeed
Tradecom Pvt. Krishnaswami has sold Equity Shares of
Ltd.
Apple Commodities Limited to the
3. Apple
Industries Ltd. Company.
50268603 No loan amount has been received during
the year. Previous year balance transferred
from Shreem Ispat Pvt Ltd. Originally
purchase made by Shreem Ispat Pvt Ltd. in
F.Y. 2012-13. Shreem Ispat Pvt Ltd
amalgamated with the assessee company
pursuant to high court order.
152275000 During the year the assessee company paid
Rs 15,50,00,000/- to Apple Industries Ltd.
Amount received during the year from Apple
Industries during the year was Rs.
35,00,000/- and 29,75,000/- only and that
too against the advances made by Manohar
Metalloy Pvt. Ltd in the FY 2013-14. The
company Manohar Metalloy Pvt. Ltd
amalgamated with the assessee company
pursuant to High court order.
These amounts paid by (Not received) M.G
Metalloy Pvt. Ltd. During the period against
the demand of Call Money on partly paid
shares and thereafter transferred to
Investment Account through Journal
Voucher entry as per the normal accounting
practice.
4. Matheysh 15775880 No loan amount received during the year.
Multi Trading 177187342 Intra group company balances transferred
Pvt. Ltd. through joutnal entry. Balance transferred
from Nirajit Trading Pvt Ltd.
5. Milap Trading Amount transferred from account of Nishu
Pvt. Ltd. Agrico Ltd. Intra group company balances
transferred through journal entry. No loan
6. Nishu Agrico 29000000 amount received during the year.
Ltd. 750000 Refund received against amount earlier paid
7. Pradeep
Saraf No loan amount received during the year.
Pradeep Saraf has sold Equity Shares of
8. Reliance 3850000 Apple Commodities Limited to the
Infotek Ltd. Company.
No loan amount received during the year.
9. Reliance 200000 Amount was transferred from Apple Iron
Polycrete Enterprises Pvt Ltd originally received in
F.Y. 2012-13. Apple Iron Enterprises Pvt
Ltd amalgamated with the company
pursuant to high court order.
The amount received during the year
against the Advance made by Apple
Page | 21
Limited Buildtech Limited to Reliance Polycrete
Limited in FY 2011-12.
10. Saccharine 904616516 No loan amount received during the year.
Infrastructure
Pvt. Ltd. The intercompany balance transfers
through journal entries relating to
transaction for purchase of shares of group
company Apple Commodities Ltd. from
following companies :-
Archit Infratech Pvt Ltd 112299950.00
Jainson Derivatives Pvt Ltd 142500000.00
Jainson Futurex Pvt Ltd 142500000.00
Jainson Holdings Pvt Ltd 96453630.00
Jainson Mineral Develpment 48976070.00
Pvt Ltd 111149850.00
Jainson Thermal Energy Pvt 101500000.00
Ltd 149237016.00
Apple Natural Resources Pvt
Ltd Reliance Policrete Limited
Transfer through Journal Voucher as per
the normal accounting practice.
11. Apple 12603725 Total Credits During the period Rs.
12500000
Metal 1363027066 12603725/Total Debits During the period
Industries Pvt. Rs. 19103725/However, AO has added
Ltd. entire Credit amount.
12. Apple Amount received against the advances made
Natural by Shreem Ispat Pvt Ltd (Rs. 2500000/-) and
Resources Pvt. M.G Metalloy Pvt. Ltd (Rs. 10000000/-) In
Ltd. the FY 2012-13.
Total
17. With respect to issue of share capital it is apparent that no share capital has
been received during the year but only in exchange of the shares of the
transferor companies the shares have been allotted to the share holders of the
transferor companies. As there is no sum of money received during the year no
addition u/s 68 on account of the share capital can be made. The assessee has
also shown form No. 2 of the return of allotment filed with the Registrar of
Companies which also clearly shows that the share capital is only on account of
amalgamation approved by the Hon’ble High Court.
18. Similar is the fact with respect to the addition on account of unsecured loan
except in case of
i) Krishna Swamy where a sum of Rs. 40 lakhs was received by the
assessee has shown that the above sum is on account of sale of
shares.
ii) And amount of Rs. 290 lakhs from Nishu Agrico is stated to be refund
of the earlier sums to be paid by the assessee
iii) It is also a fact that in case of Apple Metal industries Pvt. Ltd there are
total credits of Rs. 1,26,00,325/- and total debits of Rs. 1,91,03,725/-
Page | 22
whereas the ignoring the debits the ld AO has made the addition of
only the credit entries. The share capital of the reserve and surplus of
Apple Metal Industries shown that it has own funds of more than Rs. 8
crores and has turnover of almost Rs. 30 crores.
In case of all other creditors the amount has been transferred on account of
amalgamation. The assessee has also submitted the annual audited accounts as
well as confirmation of the parties to show the above fact. Even the copies of
the income tax returns of the parties shown as unsecured loans were also
submitted. Thus, assessee has submitted all these evidence before the ld AO
and before the ld CIT(A). The assessee has submitted the details of the
transaction with the companies also submitting copies of the return of income
as well as the balance sheet of the lenders. However, the fact remains that
most of amount has resulted on account of amalgamation of 9 different
companies with the assessee and no fresh sum was received during the year by
the assessee with respect to all the loans and advances except as stated above
in case of three incidents. Thus addition made by the ld AO and confirmed by
the ld CIT (A) u/s 68 of the Act is despite the facts that no sum are received by
the assessee during the year. Further, the assessee has submitted the copies
of the confirmation, annual audited accounts of those parties, their income
tax return with respect to shareholders to whom shares are allotted in
exchange of shares of transferor companies as well as of the unsecured
lenders who are incorporated in the accounts of the company on account of
amalgamation. Thus , even for outstanding balances assessee has discharged its
onus u/s 68 of the Act. Thus, the addition made by the ld AO on account of
share capital as well as unsecured loan deserves to be deleted. We reverse the
orders of lower authorities. In view of this, we allow ground No. 2, 3 and 4 of
the appeal.
19. Coming to the ground No. 5 of the appeal the assessee has challenged the
approval u/s 153D of the Act. We have perused the arguments of the parties.
The assessee has also relied upon the several judicial precedents stating that
the approval granted u/s 153D is not correct. We find that the issue is squarely
covered in favour of the assessee as the ld JCIT has mentioned at the bottom of
the approval that draft assessment order has been received late by him on
31.12.2016 beyond the time limit as per internal action plan and thus having a
very little period for proper examination of the facts of the case and further
inquiries. The ld JCIT, Central Range, Meerut has mentioned such a fact on the
Page | 23
letter of approval sent by the ld AO. Further, he directed the ld AO to ensure
that seized documents and papers have been taken in account. We find that
this issue with respect to approval is covered in favour of the assessee by
several judicial precedents relied upon by the ld about inappropriate approval
granted by the approving authority. We agree with that. However, as we have
already decided the issue in favour of the assessee deleting the addition made
by the lower authorities, though, issue of approval is covered in favour of the
assessee, does not need any further adjudication.
20. Thus, appeal of the assessee is allowed.
Order pronounced in the open court on 23/08/2021.
-Sd/- -Sd/-
(SUCHITRA KAMBLE) (PRASHANT MAHARISHI)
ACCOUNTANT MEMBER
JUDICIAL MEMBER
Dated: 23/08/2021
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
Page | 24
|
