Facts of the Case

A search and seizure operation under section 132(1) of the Income-tax Act, 1961 was conducted on 03.02.2011 in the Ramji Vaish Group, which included Vijay Stone Product, M/s Subhash Stone Product (P) Ltd., M/s Jai Maa Sharda Service Station and other connected assessees at Sonebhadra and Allahabad.

Pursuant to the search, assessments for Assessment Years 2005-06 to 2011-12 were framed under section 153A read with section 143(3) and in certain cases under section 153C. Approval under section 153D was obtained from the Joint Commissioner of Income Tax on 26.03.2013, and all assessments were completed on 30.03.2013, i.e., at the fag end of the limitation period.

Multiple additions were made on account of alleged unexplained investments, cash deposits, estimated profits, unsecured loans, gifts, and entries recorded in diaries seized during the search. The Commissioner of Income Tax (Appeals) partly confirmed and partly deleted the additions. Both the assessees and the Revenue filed cross-appeals and cross-objections before the Tribunal.

Issues Involved

  1. Whether approval granted under section 153D in a mechanical manner, on a single day for numerous assessees and assessment years, was valid in law.
  2. Whether completed assessments could be disturbed under section 153A in the absence of incriminating material found during search.
  3. Whether additions based on seized diaries and loose papers, alleged to be rough and dumb documents, could be sustained without corroborative evidence.
  4. Whether estimation of income and profit without rejection of books of account was justified.

Petitioners’ (Assessees’) Arguments

The assessees contended that approval under section 153D was granted mechanically without due application of mind, as approvals for more than 45 cases covering several years were granted on a single day, which was humanly impossible. It was argued that such approval vitiated the entire assessment proceedings.

It was further submitted that for years where assessments had already attained finality on the date of search, no additions could be made under section 153A in the absence of incriminating material. The assessees emphasized that the seized diaries and loose papers were rough notings, unsigned and uncorroborated, and therefore constituted dumb documents having no evidentiary value. Reliance was placed on binding High Court and Tribunal precedents.

Respondent’s (Revenue’s) Arguments

The Revenue supported the assessment orders and the appellate orders, contending that the seized material, including diaries and loose sheets, clearly reflected undisclosed income. It was argued that section 153D does not prescribe any specific format for approval and that the approval granted by the Joint Commissioner was sufficient compliance with statutory requirements. The Revenue also justified estimation of income and profit rates applied by the Assessing Officer.

Court Order / Findings

The Tribunal held that approval under section 153D is a mandatory jurisdictional requirement and must demonstrate due application of mind. Grant of approval for dozens of assessments on a single day, without examination of seized material and draft assessment orders, was held to be mechanical and invalid in law.

The Tribunal further held that in respect of completed assessments, additions under section 153A could not be sustained in the absence of incriminating material found during the search. The diaries and loose papers relied upon by the Assessing Officer were held to be dumb documents, as they were uncorroborated and unsupported by independent evidence.

Accordingly, substantial additions made and sustained by the lower authorities were deleted or set aside, and the Revenue’s appeals were dismissed. Assessees’ appeals and cross-objections were allowed to the extent indicated in the order.

Important Clarification

The Tribunal clarified that statutory safeguards such as approval under section 153D are not empty formalities. Mechanical approval strikes at the root of jurisdiction and renders the assessment void. Further, rough notings or diaries found during search, without corroborative evidence, cannot by themselves justify additions under search assessment provisions.

 Link to download the order - https://www.mytaxexpert.co.in/uploads/1770633067_ASSTT.COMMISSIONEROFINCOMETAXCENTRALCIRCLEALLAHABADVS.VIJAYSTONEPRODUCTSONEBHADRA.pdf

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