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TMI Blog2015 (11) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeals) erred in not considering the fact that the disallowance amounts to change of opinion as the assessing officer u/s 143(3) had already disallowed Rs. 1, 00, 0001-. 2. Repairs & Maintenance Expenses: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeals) erred in upholding the disallowance made on adhoc basis to the extent of 20% of expenses of Rs. 2, 37, 2511- incurred at Farukhabad factory for cold storage repairs and maintenance on the ground that since the expenditure was incurred in cash, it was not verifiable to be wholly and exclusively for the purpose of the business. 3. Bad debts - Rs. 5, 05, 584/-: (a) On the facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeals) erred in upholding the disallowance of bad debts of Rs. 5, 05, 584/- on the ground that interest accrued was assessable as "income from other sources". (b) On the facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeals) erred in not considering the fact that the details of bad debts had been considered and allowed earlier in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for all the AYs. including the AY. under appeal. The additional grounds deal with a jurisdictional issue, therefore, we would deal with the additional grounds first. In the additional grounds, it has been argued that the order passed by the AO was bad in law. During the course of hearing before us, the Authorised Representative(AR) stated that no incriminating material was found during the search regarding the additions made in the assessment order, that the additions were not justified, that the order passed by the AO was non-est, that the AO had not complied with the section 153D of the Act, that in the case of Smt. Shreelekha Damani (ITA No/4061/Mum/2012 AY 2007-08 dt. 19. 8. 2015) the Tribunal had deliberated upon the similar additional ground of appeal and had allowed the appeal filed by the assessee, that the approvals of the additional CIT in both the cases were similarly worded. He referred to the approvals granted by the Addl. CIT on 31. 12. 2010 wherein the additional CIT had observed as under : "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 draf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the provisions of Sec. 153D and hence the assessment made u/s. 153A of the Act is bad in law. 7. At the very outset, the Ld. Departmental Representative furnished the copy of the approval given by Addl. Commissioner of Income tax, Central Range-7, Mumbai which is also filed by the assessee in the paper book and the same is exhibited at page-1 of the paper book. 8. The Ld. Senior Advocate, Shri Jahangir Mistry vehemently submitted that the so called approval brought on record cannot be considered as an approval within the frame work of the provisions of Sec. 153D of the Act. The Ld. Sr. Counsel continued to argue that the approval granted by the Addl CIT is devoid of application of mind and by any stretch of imagination the order made u/s. 143(3) r. w. Sec. 153A of the Act cannot be said to be made after receiving the approval as per the provisions of Sec. 153D of the Act. The entire arguments/submissions of Ld. Shri Mistry revolved around this approval letter dated 31. 12. 2010. 9. Per contra, defending the assessment order, the Ld. Departmental Representative stated that the AO has made the assessment order after getting the approval from the Range Addl. CIT and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA. " 11. 2. The Legislative intent can be gathered from the CBDT Circular No. 3 of 2008 dated 12. 3. 2008 which read as under: "50. Assessment of search cases Orders of assessment and reassessment to be approved by the Joint Commissioner. 50. 1 The existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132A. does not provide for any approval for such assessment. 50. 2 A new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s CIT 169 Taxman 328 wherein at para-6, the Hon'ble Supreme Court observed as under: "A bare perusal of the provisions of sub-section (2A) of the Act would show that the opinion of the Assessing Officer that it is necessary to get the accounts of assessee audited by an Accountant has to be formed only by having regard to: (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the revenue. The word "and" signifies conjunction and not disjunction. In other words, the twin conditions of "nature and complexity of the accounts" and "the interests of the revenue" are the prerequisites for exercise of power under section 142(2A) of the Act. Undoubtedly, the object behind enacting the said provision is to assist the Assessing Officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the revenue, recourse to the said provision can be had. The word "complexity" used in section 142(2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 1 (All. ), it is a neb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore was granted by the Chief Commissioner of Income-tax but merely one G. P. Agarwal was nominated. An argument has been advanced to the effect that by making such a nomination, approval will be deemed to have been granted. The answer to the said contention must be rendered in the negative. The Chief Commissioner of Income-tax before granting such approval must have before him the materials on the basis whereof an opinion had been formed. A prior approval can be granted only when the materials for appointment of the extraordinary procedure is required to be taken by the Assessing Officer. The Assessing Officer, therefore, was required to place all materials before the Commissioner of Income-tax or the Chief Commissioner of Income- tax, as the case may be, to show that he intends to take recourse to the said provision having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue. No such materials had been placed before the Chief Commissioner of Income-tax. It further appears that even no previous approval was sought for but merely a proposal was placed for perusal of the Chief Commissioner of Income-tax and for appointment of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Verma Roadways Vs ACIT 75 ITD 183 wherein also the assessee- appellant has challenged the validity of approval to the assessment order accorded by the CIT Kanpur. The Tribunal at Para-47 has held as under: "Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval pre-supposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas & Co. (supra), the I. T. A. T Madras Bench 'A' has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial dikscretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasi-judicial act, particularly because their Act, function, is likely to affect the rights of affected persons. " 11. 10. Similarly, u/s. 151 of the Act it is provided that no notice shall be issued u/s. 148 unless the Principal Chief Commissioner or Chief Commissioner or Principal Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. 2010 and the approval was granted on the very same day. Considering the factual matrix of the approval letter, we have no hesitation to hold that the approval granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. Commissioner before granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/s. 143(3) of the Act r. w. Sec. 153A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed. 13. The ld. Departmental Representative has strongly relied upon the decision of the Tribunal Mumbai Bench in the case of Rafique Abdul Hamid Kokani Vs DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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