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, including the assessee, Shri Ramji Vaish, Allahabad. Pursuant to the search, assessments for Assessment Years 2005-06 to 2011-12 were initiated under section 153A read with section 143(3).

Approval under section 153D was obtained from the Joint Commissioner of Income Tax on 26.03.2013, and all assessment orders were passed on 30.03.2013, i.e., at the end of the limitation period. The Assessing Officer made multiple additions on account of alleged unexplained investments, cash deposits, unsecured loans, gifts, and large additions based on entries recorded in seized diaries marked as Annexure A-4 and A-5.

The Commissioner of Income Tax (Appeals) partly confirmed and partly deleted the additions. Aggrieved by the appellate orders, the assessee filed multiple appeals before the Tribunal for different assessment years.

Issues Involved

  1. Whether approval granted under section 153D in a mechanical manner vitiates the assessments framed under section 153A.
  2. Whether completed assessments can 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 dumb documents, are legally sustainable.
  4. Whether large additions for cash deposits, investments, gifts, and loans could be sustained without corroborative evidence.

Petitioner’s (Assessee’s) Arguments

The assessee contended that the approval under section 153D was granted mechanically on a single day for more than 45 group cases covering multiple assessment years, without due application of mind or examination of seized material, rendering the entire assessment proceedings void ab initio.

It was further argued that for several assessment years, the original assessments had already attained finality on the date of search and no incriminating material was found during the search. Therefore, additions under section 153A were impermissible in law.

The assessee submitted that the diaries marked as Annexure A-4 and A-5 were rough notings, imaginary entries, and dumb documents without any corroborative evidence. It was also contended that affidavits filed before the lower authorities were ignored and no statements were recorded to rebut the same. Consequently, additions made solely on the basis of such documents were unsustainable.

Respondent’s (Revenue’s) Arguments

The Revenue relied upon the assessment orders and the orders of the CIT(A), contending that the seized diaries and loose papers revealed undisclosed income of the assessee. It was argued that approval under section 153D was valid and that the additions made on account of unexplained investments, cash deposits, and diary entries were justified on facts and in law.

Court Order / Findings

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

The Tribunal further held that in respect of completed assessments, additions under section 153A cannot 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 across various assessment years were deleted or set aside. The appeals filed by the assessee were allowed to the extent indicated, and the assessments were held to be vitiated on legal grounds.

Important Clarification

The Tribunal clarified that approval under section 153D is not an empty formality and mechanical approval strikes at the root of jurisdiction. Further, additions under section 153A must be based on incriminating material found during search, and rough diaries or loose papers without corroborative evidence cannot form the sole basis for making additions in search assessments.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770633241_RAMJIVAISHALLAHABADVS.DCITCCALLAHABAD.pdf

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