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TMI Blog2019 (11) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Commissioner of Income Tax, Central Range, Kanpur under section 153D for passing impugned assessment order dated 31.03.2015 under section 153A of the 'Act' is no approval in the eye of law, having been granted without application of mind and such a mechanically granted approval vitiates the assessment order rendering it to be held illegal and void ab-initio. 2. BECAUSE, while sustaining addition the Ld. CIT(A) in para-5.6 has observed that 'on money' paid by the appellant in acquisition of property is proved because the entries in relation to cheque amount is reflected in regular books of accounts, whereas consideration paid in cash is not reflected in books of accounts of the appellant'. Such findings recorded by the Ld. CIT(A) forming the basis for confirmation of addition is perverse ,wholly wrong and based on no evidence on records and thus vitiates the appellate order. 3. BECAUSE, Ld. CIT(A) has sustained the addition taking taken aid of deeming provisions under section 132(4) and 292C of the Act holding that 'appellant' has not rebutted the presumption of law failing to take note of the fact that under the facts and circumstances of the case no such presumption is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge, Kanpur under section 153D of the Act, which has led the foundation for passing impugned Assessment order dated 31.03.2015 under section 153A of the Act is no Approval in the eye of law as the purported Approval been granted without due application of mind and such a mechanically granted Approval vitiates the Assessment order rendering it to be held illegal and void ab-initio. He invited our attention to section 153D of the I.T Act, 1961, which mandates that no order of Assessment shall be passed except with the prior approval of the Joint Commissioner of Income Tax. It was submitted by the Ld. A.R that in the case at hand the Assessment order, though has apparently been passed after the Approval granted by the Additional CIT, Central Circle, Kanpur but the so-called Approval as granted under section 153D of the Act for passing impugned assessment order dated 31.03.2015 passed under section 153A of the Act is no approval in the eye of law. Assessee has drawn out attention to the copy of Approval order passed under section 153D of the Act by the Additional Commissioner of Income Tax, Central Circle, Kanpur which was obtained by the assessee exercising his right under the Right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018) 194 TTJ (Ctk) 915 (Cuttack) (e) Shri Saurabh Agarwal Vs DCIT (2019) (9) TMI 866-Agra Bench (f) Shri. Ghanshyam Vs ITO (2018) 194 TTJ UO (Agra) 25 (g) State Bank of India Vs ACIT in W.P No. 53 of 2018 (Bom.) (h) Sabh Infrastructure Ltd Vs ACIT in W.P No. (C) 1357/2016 (Del) (i) Sahara India (Firm) Vs CIT (2008) 300 ITR 403 (SC) 6. On the other hand, the Department represented by Ld. CIT D.R Shri Sunil Bajpayee and Sr. D.R Shri. Waseem Arshad who both have argued the matter from the side of Department submitted that the order passed under section 153D of the Act by the Additional CIT was merely an Administrative order and no civil or penalty consequences would flow from such an order against the assessee. Further, it was submitted that there is no requirement under the law for granting the hearing to the assessee by the Additional CIT/Joint CIT prior to giving Approval under section 153D of the Act for assessment or reassessment under section 153A of the Act. 6.1 The Ld. D.R.'s has also relied upon the definition of Approval and sanction given in Black's law dictionary. It was further submitted by the Ld. DR's that approval of Additional CIT is totally distinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the jurisdictional fact is the existence of Approval, therefore, the Approval itself cannot be the subject matter of adjudication. It was submitted by the DR's that once the superior authority is agreeing to the finding of the lower authority then it is not required to record the reasons for so agreeing. It was further submitted that the recording of sanction or Approval is not required to be made in a particular manner. The same is discernible from the reasons recorded in the Assessment order. It was submitted by the DR's that what could be challenged before the Tribunal is want of sanction and for that the Ld. DR's relies upon the decision of the Mumbai Tribunal in the matter of 'Pratibha Pipes & Structural Ltd DCIT', 3874/Mum/2015 for the proposition that the Approval under section 153D of the Act has been held to be an Administrative procedure which requires to be complied with by the officers, who are discharging the Assessment functions. The Administration action of the Department is not very much relevant for the assessee to justify its case, on merits. 6.3. The Ld. DR's further submitted that it is not within the sphere of the jurisdiction of the Tribunal to adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue deserves to be rejected. Revenue has placed reliance upon K.M Bansal (supra) wherein the Hon'ble Jurisdictional High Court after being duly apprised of view held in the cases of S. Narayanappa (supra) & Presidency Talkies Ltd. (supra) has held that before the Notice is issued under section 148 of the Act the proceedings are Administrative proceedings but once such a Notice is served upon the assessee such Administrative proceedings becomes quasi-judicial in nature and assessee has a right to challenge such proceedings since the stage of its initiation. Further, In the case of 'Sahara India (Firm) Vs CIT', 300 ITR 403 (SC) (APB 284-289) Hon'ble Apex Court has ruled "that it is the civil consequence which obliterates the distinction between quasijudicial and administrative function. Moreover, with the growth of the administrative law, the old distinction between a judicial act and an administrative act has withered away." The contention raised by the DR's that all proceedings prior to issuance of Notice under section 148 are administrative proceedings immune from challenge is a statement based on complete misreading and misunderstanding of law, because 'Reasons Recorded' and Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma Roadways delivered on 11.01.2018. We found that though vide Ground No.8 the Department had raised a specific ground challenging the order passed by the ITAT on the issue of grant of Approval by the CIT, in that case. However, the Hon'ble High Court through a detailed Judgment decided the Ground regarding validity of search and held proceedings under section 158BC of the Act to be validly initiated. In the referred case no argument was advanced by either party regarding validity of approval accorded by the Ld. CIT and no such issue was decided by a speaking order therefore, to our understanding such an order is subsilento which is not binding. Therefore, no fault can be found in the order passed in the case of Saurabh Agarwal (supra). 11. Having held as above, the issue which now requires to be adjudicated is whether the Approval so granted in this case can be treated as valid in view of the mandate of the provisions of Sec. 153-D of the Act vis-à-vis the legislative intent of inserting the said section in the statute. Section 153-D read as under: "No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should scrutinize the seized documents and any other material forming the foundation of Assessment. It is an elementary law that whenever any statutory obligation is casted 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 should necessary reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. 14. In the above background of law and in the light of Order dated 27.03.2015 passed under section 153D of the Act, which gives legality to the impugned Assessment order, question which arises for our consideration is whether the said Approval granted by the Additional CIT, Central, Kanpur vide his order dated 27.03.2015 can be held to be granted after due application of mind and can be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no approval in the eyes of law. 16. The Lucknow Bench of the ITAT in the case of "AAP Paper Marketing Limited Vs ACIT", (2017) (4) TMI 1371-ITAT Lucknow, (APB-122-129) coincidentally where the ITAT had the occasion to consider the validity of approval granted by the same Additional CIT, Central Circle, Kanpur while quashing the assessments vide Para-14 held as under: "In the present case ACIT has granted impugned approval halfheartedly without application of mind and without considering and perusing the material on record. Thus, we are inclined to hold that there has been no application of mind by the ACIT before granting the approval. Consequently, we hold that the assessment orders made u/s 143(3) of the Act r.w.s 153A of the Act in the case of M/s Siddhbhumi Alloys Ltd. for Assessment Year 2006-07 is bad in law and deserve to be annulled, thus, we ordered accordingly. Finally additional ground of appeal raised by the assessee by way of Rule 27 of the ITAT Rules in ITA No. 321/Lkw/2016 for the Assessment Year 2006-07 is allowed." 17. From the approval order dated 27.03.2015 of the Addl. CIT, we find that the Ld. AR has rightly pointed out that in the facts of case of AAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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." 19. The above order so passed by the ITAT, Mumbai Bench was subjected to judicial scrutiny in appeal before the Hon'ble Bombay High Court and the Hon'ble High Court approved the order passed by the Mumbai Bench of the ITAT which is found reported as "PCIT Vs Smt. Shreelekha Damani", (2019) 307 CTR (Bom.) 218(APB- 138-139) wherein in Para-7 the Hon'ble High Court held as under: 7. In plain terms, the Addl. CIT recorded that the draft order for approval under s. 153D of the Act was submitted only on 31st Dec. 2010. Hence, there was not enough time left to analyze the issue of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Addl. 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 independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken. However, despite all this, I have gone through the material available on records and some of the observations, in respect of the following cases are given in subsequent paras." 24. In our considered view, the provisions contained in s. 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. It is apparent that the purpose behind the enactment of the above provision in the statute by the Parliament is two-folds. Firstly, the approval of the senior authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by senior authority will also ensure that proper enquiry or investigations are carried out by the assessing authority. Thus, the above provision provides for mental application of a senior officer of the Department, which in turn, provides safeguard to both i.e., Revenue as well as the assessee. Therefore, this important provision laid down by the legislature cannot be treated as a mere empty formality. The same view was expressed by the Pune Benches of the Tribunal in the case of Akil Gulamali Somji vs. ITO in ITA Nos. 455 to 458 (Pune) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or representation at the time of Approval but whether the Approval can be granted by the superior authority without application of mind without looking into seized material, investigation report, the draft assessment order etc can be held sustainable in the eyes of law. We had already answered that such an approval is bad in law and cannot be sustained. 23. The last submission made by the Ld. DR's was that the matter may be sent back to the AO to pass a fresh assessment order after seeking the approval from the competent authority. In this regard we are of the opinion that the Revenue is not entitled to second inning, for correction of its own mistake. Assessee cannot be made to run again for many more years for contesting the litigation. Hon'ble Supreme Court also in the case of Parashuram Pottery Works Co. Ltd. v. ITO 106 ITR 1 observed that "It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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