TMI Blog2021 (9) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... in one day how another ACIT can express his opinion in 67 cases in a single day.- Approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case Hon'ble Supreme Court in the case of Sahara India vs. CIT Others [ 2008 (4) TMI 4 - SUPREME COURT] while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said highranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. - Decided in favour of assessee. - I.T.(SS)A. Nos.639 to 641,642 ,651 ,649/Lkw/2019 - - - Dated:- 3-8-2021 - SHRI A. D. JAIN, VICE PRESIDENT AND S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer during the assessment proceedings and the replies submitted by the assessee and after due application of mind and after ascertaining that the Assessing Officer has appreciated the search material and other evidences in proper perspective has to give approval to the draft assessment order and only after that Assessing Officer can pass the assessment order. 4. Learned counsel for the assessee submitted that in these cases admittedly, the Assessing Officer is below the rank of Jt. CIT and therefore, approval was a prerequisite before passing the final assessment order. It was submitted that the Assessing Officer passed the draft assessment orders on 30/12/2018 and on the same day approval u/s 153D was granted and final assessment order was also passed by the Assessing Officer on the same day. In this respect our attention was invited to copy of approval letter dated 30/12/2018 placed at pages 550 to 552 of the paper book. Learned counsel for the assessee submitted that as per this approval letter the Addl. CIT granted approval u/s 153D in 67 assessees which included the present assessees listed at Sr.No.23,25,26,27,28 and 67. Learned counsel for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing knowledge and then exercise of discretion after knowledge. Learned counsel for the assessee also invited our attention to a judgment of Hon'ble Supreme Court in the case of Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer [2003] 5 SCC 83 where again word approval has been defined. 6. Learned counsel for the assessee further invited our attention to a judgment of Hon'ble Gauhati High Court in the case of Dharampal Satyapal Ltd. vs. Union of India [2019] 365 ELT 253 (Gau) wherein at para 28 it has been held that when an Authority is required to give approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of law or procedure to which it may be subjected. 6.1 It was argued that in the case of search, assessment orders whether framed under section 153A or 153C of the Act, the Joint Commissioner i.e. 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 and further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer should submit the draft assessment order for approval from the approving authority well in time. Such manual says that the Assessing Officer should seek approval from the approving authority at least one month before the time barring date. While going through CBDT manual placed at paper book pages 995 996, it was observed that this manual was printed in February 2003 and therefore, Learned counsel for the assessee was asked as to how it is applicable to the provisions of section 153D of the Act which came into existence w.e.f. 01/06/2007. Learned counsel for the assessee in this respect submitted that this manual is applicable to the provisions of section 158BG of the Act and which are para materia to the provisions of section 153D of the Act. It was further submitted that Mumbai Tribunal in the case of Shreelekha Damani, vide order dated 19/08/2015, while deciding similar issue u/s 153D, has relied on the case laws relied for deciding the issue of approval u/s 158BG of the Act and therefore this manual is applicable to provisions of Section 153D also. Learned counsel for the assessee further placed reliance on Circular No. 3 of 2008 dated 12/03/2008 issued by CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on an order of Mumbai Bench of the Tribunal in I.T.A. No.4916 in the case of Sumer Associates wherein under similar circumstances, vide order dated 26/12/2018 the issue was decided in favour of the assessee. Reliance was also placed on the judgment of Tribunal in the case of Indra Bansal decided by Jodhpur Bench in I.T.A. No.321 to 324 vide order dated 23/02/2018. Reliance was also placed on the judgment of Cuttack Bench of Tribunal in I.T.A. No.01 and 02 in the case of Geeta Rani Poddar and Manju Simite Dash where vide order dated 05/07/2018 similar issue has been decided in favour of assessee. 7.1 In view of these facts and circumstances and judicial precedents, it was argued that the assessment orders passed in these cases are illegal and need to be quashed. 8. Learned CIT, D.R., on the other hand argued that proper approval, as required under the provisions of section 153D, has been obtained by the Assessing Officer. It was submitted that the approval was taken well within the time before limitation and the higher authority has fully applied his mind to grant approval. It was submitted that though the Jt. CIT has not written in so many words about his satisfaction for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of superior authority. The word approval has not been defined in the Income Tax Act but the general meaning of word approval can be understood from Black Law of Dictionary which defines approval as: The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or 'consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with. 9.2 The Hon'ble Supreme Court of South Carolina in State vs. Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that approval implies knowledge and, the exercise or discretion after knowledge. 9.3 Further Hon'ble Supreme Court in the case of Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer [2003] 5 SCC 83 has held as under: Whenever there is an administrative approval given by higher authority, higher authority applies its mind to see whether the proposed Award is acceptable to the Government or not ? Such Authority may satisfy itself as to the material relied upon by the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Secondly, the Assessing Officer also keeps in mind the interest of Revenue. Therefore, the said provision provides application of mind by the approving authority of the Department. Therefore, the provision of section 153D of the Act cannot be treated as mere formality and mandate therein is required to be followed by the approving authority in a judicious manner by due application of mind in a manner of a quasi judicial authority. We are cautious about the fact that reasons for granting approval may not be a subject matter of challenge or not required to be mentioned in the order of approval but the manner and material on the basis of which approval has been granted can be challenged by the assessee. The scope and issue agitated by the assessee by way of legal ground in the present cases is not that of granting of approval but the main grievance of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized material. We are inclined to hold that if an approval has been granted by the approving authority in a mechanical manner without application of mind then the very purpose of obtaining approval u/s 153D o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic fundamental features of Section 153A, if Section 153D is scrutinized, then, it would become manifest that very important phrase as deployed in text of Section 153D, is Each assessment year. The word Each has been used extensively and this word needs to be given due weightage and adequate meaning and as such for each year separate approval is to be given under section 153D of the I.T. Act which is lacking in the present cases. There are many other provisions where statutory approval is required from higher authorities. Few of them are noted like in Section 151 and Section 274 etc., respectively dealing with the approvals on reopening cases and penalty cases. When Section 153D is juxtaposed with Section 151 and Section 274, most important differences which is peculiar to Section 153D is the word Each . Word each is not used in Section 151 and Section 274 and the word Each is specially and consciously referred to in Section 153D so that assessee-wise and year-wise application of mind on the part of the approving authority is there which is in accordance with the overall scheme of Section 153A to Section 153D of the I.T. Act. Hon'ble Allahabad High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. 50.3 Applicability-These amendments will take effect from the 1st day of June, 2007. 9.5 It is evident from the CBDT Circular that the legislature in its highest wisdom made it compulsory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority could apply his mind on the materials and other circumstances on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority have to approve the assessment order. The object of entrusting the duty of approval of assessment in search cases is that the Jt. CIT, with his experience and understanding could 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Others wherein the Hon'ble Bench vide order dated 19/01/2021 has quashed the assessment orders by holding that the approval granted u/s 153D of the Act was in a mechanical manner and thus cannot be held to be an approval as required u/s 153D of the Act. The relevant findings of the Tribunal are contained in para 11 onwards, which for the sake of completeness are reproduced below: 11. We have considered the rival submissions and perused the written submissions filed by the parties and considered the material on record. It is an admitted fact that search and seizure action were carried-out in the cases of the assessees on 29.12.2015. Section 153A have been inserted into the Income Tax Act w.e.f. 01.06.2003. Prior to that there were provisions contained under section 158BC being the special procedure for assessment of search cases. Thus, the provisions of Section 153A to 153D are applicable in the case of assessees. According to Section 153A of the I.T. Act, there should be a search initiated under section 132 of the I.T. Act and panchanama drawn, the A.O. shall have to issue notice to the assessee requiring him to furnish the return of income within the specified time in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be necessary for assessments in the cases of the search or requisitioned, under section 153D of the IT. Act. Section 153D of the I.T. Act is reproduced as under : 153D - No Order of assessment or re-assessment 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 (ii) 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 Commissioner under sub-section (12) of section 144BA. . 11.1. It is an admitted fact that in all the above appeals assessments under section 153A have been framed by ACIT, Central Circle, New Delhi, therefore, prior approval of the JCIT in respect of each assessment year referred to under section 153A or 153B shall have to be obtained. Thus, no order of assessment or re-assessment shall be passed by the A.O. in the present cases in respect of each as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India [2019] 366 ELT 253 (Gau.) Manu/GH/07070/2018 in para-28 has held as under : When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must coexist and, therefore, where an Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Authority will also ensure that proper enquiry or investigation 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 IT Appeal Nos .455 to 458 ( Pune ) of 2010 order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. The Hon'ble Bombay High Court in the case of CIT-II Vs Shri Akil Gulamali Somji , in Income Tax Appeal (L) No.1416 of 2012 order dated 15.1.2013 concurred with the view of the Tribunal that not following of the provisions of section 153D of the Act will render the related order of assessment void. 9.8 Further we find that I.T.A.T. Mumbai Bench in the case of Shreelekha Dammani vs. DCIT in I.T.A. No.4061/Mum/2012 vide order dated 19/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good to the Revenue. 14. Since we have annulled the assessment order, we do not find it necessary to decide the issues raised on merits of the case. 9.9 In this case, the Addl. Commissioner has showed his inability to analyze the issues of draft order clearly stating that no much time was left as the draft order was placed before him on 31/12/2010 and approval was granted on the same day. In the case before us the Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible. If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day. 9.10 The Hon'ble Bombay High Court has dismissed the appeal of the Department filed against the above order of the Mumbai Tribunal in the case of Shreelekha Damani vide judgment dated 27/11/2018. The findings of Hon'ble Bombay High Court are reproduced below: 7. In plain terms, the Additional CIT recorded that the draft order for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is prior to the office hours and, thus, it brings out a reasonable doubt that the approval was granted even before the letter requesting the approval was received in the office of the Joint Commissioner. Further, the response received by the assessee in response to his application under Right to Information Act, 2005 also establishes the correctness of the claim of the assessee that the assessment records were not before the Joint Commissioner when the approval was granted as the records were with the Range Office in Jodhpur whereas the approval was sent by fax on the morning of 31-3-2013 from Udaipur . Thus, it is our considered opinion that the Joint Commissioner had granted approval in a mechanical manner without examining the case records because the approval has been granted at 6.56 a.m. on 31-3-2013 from Udaipur wherein it has already been mentioned that the assessment records were being returned whereas the draft assessment order along with the assessment records were handed over to the office of the Joint Commissioner on 31-3-2013 and as such it was physically impossible that all the case records along with the draft assessment order were received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high-ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur . The entire exercise of seeking and granting of approval in all the 2 cases was completed in one single day itself i.e., 31-3-2013. Thus, it is apparent that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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