TMI Blog2022 (3) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... ground raised by the assessee in the cross objection is allowed. - ITA No.2399/DEL/2016 And CO No.222/DEL/2016 (Arising out of ITA No.2399/DEL/2016) - - - Dated:- 25-11-2021 - Shri R.K. Panda, Accountant Member And Ms. Suchitra Kamble, Judicial Member For the Revenue : Sh. H.K. Chaudhary CIT-DR For the Assessee : Sh. Mahavir Singh, Advocate ORDER PER R.K. PANDA, AM, This appeal filed by the Revenue is directed against the order dated 22.02.2016 of the Ld. CIT(A)-27, New Delhi, relating to Assessment Year 2009-10. The assessee has filed Cross Objection against the appeal filed by the Revenue. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. Facts of the case, in brief, are that the assessee company is engaged in the business of carrying out work as civil contractor under the proprietary concern M/s Tirupati Construction Co. The assessee is also director in M/s Tirupati Constwell Pvt. Ltd. The original return of income was filed on 30.09.2009 declaring income of ₹ 2,69,85,790/-. A search operation u/s 132 of the Income Tax Act, 1961 (in short the Act ) was undertaken at busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er noted that the assessee is holding more than 10% shares in the company M/s Tirupati Constwell Pvt. Ltd. The company has granted loans and advances to the assessee to the tune of ₹ 24,25,07,712.31/-. The Assessing Officer asked the assessee to explain as to why the loans/advances may not be treated as deemed dividend as per provisions of section 2(22)(e) of the Act. It was explained by the assessee that this company is doing business with the assessee and in order to facilitate payments to the parties and to carryout business for the company, he had transferred the funds to himself and made the payments to various parties. It was explained that there is no payment for individual benefit of the Director. Relying on various decisions, it was submitted that the provisions of deemed dividend are not applicable for commercial transaction. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and held that the submissions of the assessee are baseless and only an afterthought. He noted that in the books of accounts of M/s Triupati Constwell Pvt. Ltd. in the ledger of the assessee, the amount of ₹ 24,25,07,712/- is given as advance to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the loan amount received from Mr. Santosh Singh has been inadvertently treated as addition to capital account instead of loan and has filed confirmation and bank account of the lender. All these evidences were sent to the Assessing Officer for his examination/verification/ enquiry and to send a report on the additional evidences filed by the appellant. On perusal of the remand report of the Assessing Officer on this issue, I find that the Assessing Officer neither examined the additional evidences nor made any verification or enquiry inspite of the fact that all the details necessary for such examination were made available to the Assessing Officer in the form of additional evidence. 9.1 On analysis of documents and facts in entirety, I find that the Appellant has discharged its preliminary onus by providing confirmation and bank account of the lender. Since the said amount has been received by the appellant through account payee cheques and confirmation and bank account of the lender has been provided by the appellant, the contention of the appellant and genuineness of the transaction cannot be doubted. Therefore, the addition made amounting to ₹ 20,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant mentioned above would constitute an acceptable proof or an acceptable explanation by the appellant that would prima facie satisfy the ingredients of section 68. With necessary information on hand the Assessing Officer was unjustified in making the addition by drawing an adverse inference only on the ground that the parties to whom the notices were issued u/s 133(6) did not respond. Section 133(6) does not refer to any enquiry about any particular person, but pertains to information in relation to such points or matters which the Assessing Authority issuing the notices requires. Therefore, the Assessing Officer can make fishing and roving enquiries based on the information available with him. From the remand report, it is seen that the Assessing Officer did not acknowledge the confirmation alongwith the PAN, ITR and bank account of the appellant which are relevant regarding the identity, capacity and genuineness of the unsecured loans available on record. Without considering these documents, simply rejecting the same does not warrant an addition on the ground that the appellant did not submit details to satisfy the provisions laid down u/s 68. These loans were taken throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submissions of the appellant filed during the course of appellate proceedings. I have also perused the case laws relied upon by the appellant in support of his case. I find that the amount of ₹ 1,16,57,861/- given to the appellant by the payer out of which amount of ₹ 56,57,861/- paid to the appellant by the payer company, should only be treated as deemed dividend u/s 2(22)(e) as the payment of ₹ 60.00 Lacs was towards the director s remuneration for services rendered by the appellant to the payer. 15.1 Accordingly, the addition of ₹ 56,57,861/- is sustained as addition u/s 2(22)(e) being deemed dividend and the amount of ₹ 60,00,000/- which was paid as director s remuneration, is directed to be deleted. The ground is partly allowed. 15. So far as, the addition of ₹ 51,750/- made by the Assessing Officer on account of disallowance of expenses for personal expenses is concerned, the Ld. CIT(A) sustained the addition by observing as under:- 17. I have considered the facts, contents of the assessment order and written submissions of the appellant filed during the course of appellate proceedings and considered them judiciously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT Act. 7. That the commissioner of Income Tax (Appeals) has erred in law and on facts of the case in deleting ₹ 5,94,317/-which was added to the income of the assessee u/s 40(a) (ia) of the IT Act. 8. That the commissioner of Income Tax (Appeals) has erred in law and on facts of the case in admitting additional evidences under Rule 46A of Income Tax Rules. 9. That the commissioner of Income Tax (Appeals) has erred in law and on facts by neither conducting her own independent and effective inquiry nor giving a direction as per subsection 4 of section 250, Income Tax Act and ignoring Honble Delhi High Court s judgment in the case of The Commissioner of Income Tax - II Vs M/s Jansampark Advertising and Marketing (P) Ltd. 10. (a) The order of the Ld. CIT(Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 17. The assessee has filed the Cross Objection by raising the following grounds:- 1. That the appeal is not maintainable, particularly in view of Board s Instructions issued fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approving the assessment order vide letter F. No.153D/CC-09/Jagat group/2012-13/988 dt. 28.03.2013. Referring to the approval sought by the DCIT vide his letter dated 28.03.2013, he drew the attention of the Bench to the letter addressed by the Assessing Officer, wherein, he has requested the Addl. CIT to grant necessary approval u/s 153D of the Act, for the cases completed u/s 153A/143(3) of the Act. Referring to the approval given by the Addl. CIT, he submitted that the same was granted on the very same day. Referring to both the letters i.e. letter requesting for granting approval and the letter giving approval by the Addl. CIT, he submitted that only draft assessment orders were sent in 35 cases and no assessment record/appraisal report was sent. He submitted that Dy. Commissioner, who is the Assessing Officer, has sent the final orders for approval and not the draft orders, which is evident from the last lines of the letter seeking approval of the cases. This shows that the assessment was already completed and the letter was written for technical approval only. He submitted that the Addl. CIT has given approval in a mechanical manner without verification of the assessment reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. for ₹ 7,00,000/- which was the opening balance and there was no receipt during this year. Further this credit was added u/s 68 in the immediate preceding year i.e. Assessment Year 2008-09. Approval u/s 153D for both the years were granted simultaneously by the Addl. CIT on the same day. This fact also show that the approval u/s 153D was granted without application of mind and in a mechanical manner without analyzing the basic facts especially when there were only four creditors which were added u/s 68 of the Act. He accordingly submitted that the approval so granted is bad in law and subsequent proceedings are void-ab-initio . For the above proposition, the ld. Counsel for the assessee relied upon the following decisions:- 1. Sanjay Duggal Ors. vs ACIT ITA No.1813/Del/2019 2. M. G.Metalalloys Pvt. Ltd. vs DCIT ITA No.3306/Del/2018 3. AAA Paper marketing Ltd. vs ACIT ITA No.167/lkw/2016 4. Indara bansal and Others vs CIT ITA No.321- 324/JD/2016 5. Smt. Shreelekha Damani vs CIT 173 TTJ 332 6. PCIT vs Shreelekha Damani 307 CIT (Bomb) 218 7. Smt. Geeta Rani Panda vs ACIT 194 TTJ 915 8. Akil Gulamani vs ITO 20 Taxmann.com 380 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(22)(e) are not applicable and needs to be deleted. 28. The Ld. DR on the other hand heavily relied upon the orders of the Assessing Officer. He submitted that the Ld. CIT(A) should not have admitted the additional evidences since the assessee did not file all the requisite details before the Assessing Officer. Further, in view of the decision of the Hon ble Delhi High Court in the case of M/s Jansampark Advertising and Marketing (P) Ltd. reported in 231 Taxman 384 the Ld. CIT(A) should have conducted further independent effective enquiry or could have given direction u/s 250(4) of the Act. Since, the Ld. CIT(A) in the instant case has not done the same, the matter may be restored to the file of the Assessing Officer for fresh adjudication. 29. The Ld. Counsel for the assessee in his rejoinder submitted that the ld. CIT(A) had forwarded the copy of the application filed under Rule 46A along with written submission and additional evidences to the Assessing Officer for his comments. He drew the attention of the Bench to the observation given by the Ld. CIT(A) while admitting the additional evidences, which reads as under:- 6. I have gone through the contents of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g paragraph. 32. Before proceeding to decide the grounds raised by the Revenue, we would first like to decide the additional ground raised by the assessee in the cross objection challenging the validity of approval given by the Ld. Addl. CIT in a mechanical manner and without application of mind, for which the assessment order according to the ld. Counsel for the assessee is void-ab-initio . We find some force in the above argument of the ld. Counsel for the assessee. A perusal of the details received by the assessee from the Department under RTI vide application u/s 6(3) of the R.T.I Act, 2005 shows that the Assessing Officer sought approval of the Addl. CIT on 28.03.2013 in respect of the following cases, the details of which are placed at page no. 6 of the paper book and which are as under:- 33. We find the Addl. CIT vide his approval dated 28.03.2013 has given approval, the copy of which is placed in the paper book at page, 5 which is as under:- 34. We find the Ld. CIT(A) has reproduced the remand report of the Assessing Officer where the Assessing Officer while giving his comments about the addition on account of unsecured loan has given the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er:- 3. Disallowance u/s 40(a)(ia)-Non deduction of TPS on payment of interest During the assessment proceedings it is found that the assessee has claimed payment of interest of ₹ 15,24,125/-. The assessee has been paid interest of ₹ 5,94,317/- to M/s Swan Software Ltd., however, the assessee has not deducted tax at source as provided u/s 194A of the Income Tax Act, 1961. Therefore, payment of interest on which TDS was not deduction amounting to ₹ 5,94,317/- was added back to the income of the assessee. On this issue the assessee submission is as under: total interest payable to M/s Swam Software Ltd. was ₹ 7,48,510/- on which a TDS of ₹ 1,54,193/- has been deducted and duly deposited in Central Govt, account. This is only a matter of accounting presentation, instead of crediting the gross interest first and debiting the TDS amount: the net interest has been directly credited to the party a/ c and the TDS as deducted above, has been shown in the narration. The TDS was deducted and deposited as evident from the bank statement. Additional evidences may be considered on merits subject to recommendation made regarding the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. which are opening balances and the very same amounts were added in the preceding Assessment Year. Even the Assessing Officer in his remand report has also admitted the mistake that the addition of an amount of ₹ 8 Crores, was the opening balance and the mistake is apparent from record and needs to be rectified. 38. We find, the co-ordinate Bench of the Tribunal in the case of Sanjay Duggal vs ACIT vide ITA No.1813/Del/2019, order dated 19.01.2021 and batch of 52 appeals, while adjudicating an identical issue has observed as under:- 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersons searched under section 132 of the I.T. Act, 1961. Further safeguard have been provided for framing the assessments under section 153A that prior approval shall be necessary for assessments in the cases of the search or requisitioned, under section 153D of the I.T. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urring the distinction between Approving Authority and Appellate Authority . 11.5. The Hon ble Gauhati High Court in the case of Dharampal Satyapal Ltd., vs., Union 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 otherwords, grant of approval and application of mind as to whether such approval is to be granted must co-exist 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under. 11.8. Order of ITAT, Delhi Bench, Delhi in the case of M3M India Holdings vs., DCIT [2019] 71 ITR (Trib.) 451 (Del.) in which in paras 11 to 14 it was held as under : 11. On Ground No.1.3, Learned Counsel for the Assessee submitted that no proper sanction as required under section 153D have been received, therefore, assessment order is illegal and bad in Law. Learned Counsel for the Assessee referred to page 46 of the assessment order and submitted that Addl. CIT, Central Range, Chandigarh communicated the sanction under section 153D to the A.O. on 31st January 2014 and the assessing officer on the same day i.e., 31st January 2014 passed the assessment order. He has referred to page-48 of the paper book, which is copy of Fax message dated 5th February 2014 in connection with the communication of sanction/approval of Addl. CIT. PB-31 is the reply filed before A.O. by assessee on 29th January 2014. PB-469 is the reply to the RTI application filed by assessee dated 6th June 2018, in which no specific reply have been given by the Department as to by which mode the assessment record was forwarded by A.O. to Addl. CIT as no such record available and how the sanction/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., vs., DGIT 333 ITR 407 (All.) He has, therefore, submitted that the approval in this case though not conveyed to the Assessing officer on time, but, is also given in a mechanical manner. Learned Counsel for the Assessee relied upon Judgment of the Honorable Bombay High Court in the case of Pr. CIT vs Smt. Shreelekha Damani in Income Tax Appeal No. 668 of 2016 dated 27th November 2018. He has submitted that the draft assessment order was sent from Faridabad to Chandigarh on 30th January 2014 and it is not clarified as to how it was sent, whether through messenger or courier or any other valid mode. Therefore, no time was left to consider the assessment record. Since last reply is filed on 29th January 2014, therefore, there was no application of mind by the assessing officer or the Addl. CIT to pass the assessment order within the time. Learned Counsel for the Assessee also relied upon order of ITAT, Jodhpur Bench in the case of Smt. Indira Bansal vs., ACIT (2018) 192 TTJ 968 (Jodh.). Learned Counsel for the Assessee, in the circumstances, submitted that since last reply was filed on 29th January 2014, which contains more than 500 pages, therefore, it is highly improbable that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of each assessment year referred to in clause (b) of sub-section (1) of Section 153A or assessment year referred to in clause (b) of sub-section (1) of Section 153B except with the prior approval of Joint Commissioner. Therefore, for passing the impugned assessment order, the assessing officer who is in the rank of DCIT shall have to obtain prior approval of JCIT. The Learned Counsel for the Assessee referred to PB-31, which is last reply filed before assessing officer on 29th January 2014. The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under : No.Addl.CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v/s. Smt. Shreelekha Damani. .. Respondent. Mr. A.R. Malhotra a/w Mr. N.A. Kazi for the appellant Mr. Jehangir Mistri, Senior Counsel a/w Mr. Atul Jasani for the respondent CORAM : AKIL KURESHI M.S. SANKLECHA, J.J. DATED : 27th NOVEMBER, 2018. P.C. 1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ( the Tribunal for short) dated 19th August, 2015. 2. Following question was argued before us for our consideration Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval ? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ( the Act for short) for Assessment Year 2007-08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional 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 independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises. 8. Accordingly, the Tax Appeal is dismissed. 13.2. The ITAT, Jodhpur Branch in the case of Smt. Indira Bansal vs., ACIT (supra), he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, before accepting the draft assessment order. Thus, there was no application of mind on the part of the Addl. CIT before granting approval. The Addl. CIT, Chandigarh has merely gone through the draft assessment order as per PB-47. Therefore, the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion, we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. We, accordingly, set aside the orders of the authorities below and quash the assessment order in the matter. Resultantly all additions stand deleted. In the result, Ground No.1.3 of the appeal of Assessee is allowed. 11.9. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prior approval of the Commissioner under sub-section (12) of section 144BA. 23. First of all, we observe that we are in agreement with the contention of ld CIT DR based on the judgment of Karnataka High Court in the case of Gopal S Pandit (supra), wherein, it was held that the provisions of section 153D of the Act do not require that any opportunity of hearing to be given to the assessee by the authority who has to approve the draft assessment order passed by the Assessing Authority. Therefore, there is no requirement of allowing opportunity of hearing to the assessee before granting approval under section 153D of the Act. It is also not a contention of the assessee/appellant that they were not provided due opportunities of hearing before granting approval. 24. On careful consideration rival submissions, we note that the legal contention of the assessees regarding procedure for granting approval order dated 23.11.2017 u/s.153D of the Act can be summarized mainly on two points viz; (i) the approving authority i.e. ld JCIT has granted approval in a mechanical and hasty manner without even perusing the relevant assessment records and draft assessment orders placed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal committed an error in holding that the same is invalid. 26. In almost similar facts and circumstances, the Delhi Bench in M3M India Holdings (supra), the Tribunal in para 14 held thus: 14. Considering the facts of the case in the light of above discussion, it is clear that assessee filed last reply before assessing officer at Faridabad on 29th January 2014 and according to Learned Counsel for the Assessee, it contained more than 500 pages. Therefore, it is difficult for the Assessing Officer at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the Assessing Officer. Similarly, no record is available as to how the draft order and assessment record have been received by Addl. CIT at Chandigarh. The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Supervisory authority had a duty towards both the assessee as well as the revenue which was failed to be performed. The relevant paras 25 26 read as follows: 25. In the instant case, we find that the supervisory authority has himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement was merely a formality. The said supervisory authority had a duty towards both the assessee as well as the Revenue which was failed to be performed in the instant case. 26. Further, we find that the approving authority has required the assessing authority to conduct further enquiry in respect of opening cash in hand. The assessing authority thereafter has never communicated his findings of the further enquiry to the supervisory authority and not taken the approval of justification of his findings. Thus, in our considered opinion, alleged approval letter dated 27.3.2015 of the Addl. CIT, Range-1, Bhubaneswar does not constitute the approval which is envisaged by the provisions of section 153 of the Act. Thus, following the decision of the Hon'ble Bombay High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015-16 16,51,32,390/- u/s.153A/143(3) . 2016-17 14,72,53,800/- u/s.143(3) Sd/- Joint Commissioner of Income Tax (Central), Bhubaneswar End: Record for the AY 2010-11 to 2016-17 (In Seven Folders) The approval granted in the case of Shilpa Seema Constructions Pvt Ltd., available at page 1 of paper book is as under: OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX (CENTRAL), AAYAKAR BHAWAN ANNEXE. 4TH FLOOR. RAJASWA VMAR. BHUBANESWAR-751007 F.No .JCIT(Central) /BBSR/153D CC-1 BBSR/2017-18/ 3137 Date: 23.11.2017 To The Assistant Commissioner of Income Tax, Central Circle-1, Bhubaneswar. Sub: Approval of the Assessment orders u/s 153D of the LT. Act, 1961 in respect to the cases of M/s Shilpa Seema Construction P Ltd- Reg Ref: Your letter no. ACIT/CC-l/BBSR/Report/2017-18/8 dated 17.11.2017 seeking approval of draft assessment orders u/s 153D Approval is hereby accorded as per the provisions of section 153D of the I.T. Act for passing the assessment orders in respect to the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said provisions of the Act. 31. Before we proceed, we find it appropriate to consider the contention of ld CIT DR wherein, he submitted that as per letter dated 19.12.2018, the JCIT, the approving authority had given approval for passing order u/s.153A r.w.s 143(3) in both the cases after satisfying himself with the draft assessment orders. This letter has been written to the JCIT (Central) by approving authority i.e. JCIT (BPU) pertaining to the office communication regarding additional ground of appeal, which are being adjudicated but in view of approval order dated 23.11.2017, thus we are inclined to accept the contention of ld A.R. that this submission of approving authority is mere an attempt to fill the gaps and procedural lacunas occurred in the procedure adopted by JCIT while granting approval under section 153D of the Act and, therefore, the contention of ld A.R. in this regard hold the field. 32. Similarly letter dated 4.1.2019 issued by JCIT (Central), Bhubaneswar to the CIT (Audit ITAT), Bhubaneswar is merely a covering letter supplying copy of the approval dated 23.11.2017, which cannot be treated as an explanation to the approval dated 23.11.2019 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and cautious efforts. We are of the view that the obligation on the approval granting authority is of two folds, one the one hand, he has to apply his mind to secure in-build for the department against any omission or negligence by the AO in taxing right income in the hands of right person in the right assessment year and on the other hand he is also responsible and duty bound to do justice with the taxpayer/assessee by granting protection against arbitrary or unjust or unsustainable exercise and decision by the AO crating baseless tax liability on the assessee and thus he has to discharge his duties as superior authority. Thus, granting approval u/s.153D of the Act is not merely an official formality but it is a supervisory act which requires proper application of administrative and judicial skill by the authority on the application of mind and this exercise should be discernible from the order of approval u/s.153D of the Act. 36. In our humble understanding the provisions of section 153D of the Act has been introduced by the legislature in its cautious wisdom to make it mandatory on the supervisory authority/approving authority to discharge the duty towards both the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval u/s.153D of the Act for passing assessment/reassessment orders in the search cases. 38. Further, in our considered view, the approval u/s.153D of the Act cannot be treated as an official formality but the provision has been inserted by the legislature with some specific and useful purpose. It is apparent that the purpose behind enactment of the said provision in the Statute by the legislature are of two folds viz (i) before approval, the Sr. Authority will ensure that the assessee should be protected against undue or irrelevant addition disallowances in the assessment and (ii) the approving granting authority will also ensure that proper enquiry or investigations are carried out by the Assessing Officer on all the relevant materials including material in hands of the department at the time of initiating search proceedings, material or documents found and seized during search operation and materials found and unearthed during post search investigations and enquiries. Therefore, said provision provides and requires application of mind by the approving authority of the department which, in turn, provides safeguard to the both the parties i.e. revenue and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance and legal objection of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized materials and investigation report and draft assessment/ reassessment orders and this fact should be clearly discernible from the approval order and no other extraneous material/document can be seen in this regard. 40. In view of above, 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 of approval u/s.153D and mandate of enactment by the legislature will be defeated. In the present case, the approving authority, the ld JCIT got five days time but from the order of approval, we are unable to see any exercise by the approving authority and even in the approval orders (supra), he has not mentioned that the relevant appeal folders/files along with assessments/reassessment orders have been perused or any discussion or consultation has been made with the AO prior to granting of approval u/s.153D of the Act. Accordingly, we are compelled to hold that the approval granted by the ld JCIT in the appeals und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case can be treated as valid in view of the mandate of the provisions of Sec. 153-D of the Act vis-a-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 respect of each assessment year referred to in clause (b) of section 153A or the assessment year referred to in clause (b) of sub-section (1) 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 maybe, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of Section 144BA. 12. 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 requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und 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 held to be valid in the eye of law? 15. To decide the above issue, order dated 27.03.2015 passed by the Additional CIT was again carefully perused. The contents of the Approval, as reproduced in Para 4, speak for itself loud and clear. The following inferences are inevitable from the bare reading of the said order. Draft Assessment orders were placed before the Additional CIT, Central, Kanpur on 27.03.2015 at 3.50 PM for the first time and soon on the same day it was granted. As clearly mentioned in the Approval under challenge, that prior to this date the case was never discussed with the authority granting the approval. The Additional CIT has further noted that even the questionnaire as was required to be issued with the approval of Additional CIT, in view of CBDT instruction was not issued with his approval. He f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06-07 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 IT AT 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 Paper Marketing Limited (supra) there may be some justification for the qualified approval in view of the fact that the limitation in that case was getting expired on the day when the draft assessment orders were put up before the Additional CIT, Central Circle, Kanpur for his approval. However, to the disadvantage of the revenue in the case on hands there can be no little justification for qualified approval as the proposal for approval was put up before the Additional CIT on 27.03.2015 at 3.50 PM and at the same time it was granted, without any application of mind on the pretext that limitation is going to get expired on 31.03.2015. Thus, in the case at hand despite availability of time, the Additional CIT has been taking excuse of limitation and has chosen to grant approval without applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 independent application of mind on his part. The Tribunal is , therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statue does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Addl. CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In result, no question of law arises. 20. Similar view has been adopted by the Cuttac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2010, order dt. 30th March, 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 vs. Akil Gulamali Somji in IT Appeal (L) No. 1416 of 2012, order dt. 15th Jan., 2013 concurred with the view of the Tribunal that not following of the provisions of s. 153D of the Act will render the related order of assessment void. 25. In the instant case, we find that the supervisory authority has himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement was merely a formality. The said supervisory aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in jnind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity, (emphasis supplied) In view of these peculiarity of the facts we are of the opinion that second inning cannot be granted to the revenue. 24. In view of the above, we hold that if the approval is granted by the superior authorities in mechanical manner without application of mind then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Another be given to the Assessee by such Authority, namely, Joint Commissioner also even for approving Draft Assessment Order. 4.1. Similarly, Gujrat High Court in the matter of Pr. CIT v. Sunrise Finlease P. Ltd. [2018] 89 taxmann.com 1 (Gujarat)Vin paragraph No. 9 -11 had held as under : 9. As regards proposed questions [B] and [C] viz., whether lack of approval under section 153D would invalidate the assessment order and was not a curable defect, it may be noted that section 153D of the Act mandates that no order of assessment or reassessment 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 subsection (1) of section 153A or the assessment year referred to in clause (b) of subsection (1) of section 153B, except with the prior approval of the Joint Commissioner. In the present case, the assessment order has been passed by an Income Tax Officer, who admittedly is an officer below the rank of Joint Commissioner; therefore, the provisions of section 153D of the Act would be applicable. Section 153D starts with the words No order of assessment or reassessment shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Tribunal had held as under: 11. We have considered the above submissions and have gone through the decisions relied upon by the parties in view of orders of the authorities below and material available on record. The relevant facts are that during the course of search and seizure action on 29.7.2003 at the business and residential premises of Mr. Shriram Soni, certain documents belonging to the assessee were found and seized. Notice u/s. 153C was issued to the assessee and assessment u/s. 153C r.w.s. 144 have been framed for all the 4 A.Ys. under consideration. Before the Ld CIT(A), the assessment orders were questioned both on legal issue and on merits. On legal issue, the validity of assessment orders in absence of approval obtained u/s. 153 D of the Act of Joint Commissioner of Income Tax has been questioned. On merits additions made by the A.O were impugned. Since the assessee could not succeed in its appeal, the present appeals have been preferred in questioning the first appellate orders. 12. On perusal of the provisions laid down u/s. 153C of the Act, it is apparent that after issuance of notice u/s. 153C, the A.O having jurisdiction over such other person ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch further object of enactment, the same will be construed as directory. But all these does not mean that language used is to be ignored, only that the prima facie inference of the intention of the legislature arising from the words used may be displaced by considering the nature of the enactment, its designed consequences flowing from alternative constructions. The wordings and language used in Sec. 153D of the Act and the heading prior approval necessary for assessment in cases of search or requisition under which, Sec. 153D has been provided do not leave an iota of doubt about the very intention of the legislature to make the compliance u/s. 153D a mandatory. There is no dispute that if a provision is mandatory, an act done in breach thereof will be invalid, but, if it is directory, the act will be valid although non-compliance may give rise to some other penalty if provided by the Statute. The general rule that noncompliance of mandatory requirements results in nullification of the Act is subject at least to one exception. If contain requirements or conditions are provided by a statute in the interest of a particular person, the requirements, or conditions although mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment w.e.f. 1.6.2003 by the Finance Act 2003 whereas Sec. 153 D has been inserted to the Chapter w.e.f 1.6.2007 by the Finance Act 2007. These provisions thus also deal with the assessment in case of search or requisition and when the assessment orders in the present case were passed the provisions laid down u/s. 153D were very much in operation. In the present case, assessments in question have been framed on 27.12.2007. 13. In the case of Mrs. Rataabai N.K. Dubhash (Supra), the difference between cancellation and amendment of assessment in view of the provisions of Sections 143, 144B, 153 and 251 of the I.T. Act 1961 has been dealt with. The Hon'ble High Court has been pleased to hold as under : In view of the above discussion, we are of the clear opinion that incases falling under section 144B of the Act, the quasi-judicial function of the Income-tax Officer as an assessing authority comes to an end the moment the assessee files objections to the draft order. The power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te approval of Addl. Commissioner of Income Tax, wh ch is mandatorily required, was not taken. Since 4 years had elapsed from the end of the relevant A.Y, the A.O u/s. 151(1) of the Act was required to take approval of the competent authority. The Hon'ble Delhi High Court after discussing the issue in detail and the case laws cited before it has been pleased to approve the decision of Tribunal. In view of these decisions and the position of law provided u/s . 153D of the Act, we hold that the assessment orders impugned framed in absence of obtaining prior approval of the Joint Commissioner for the A.Ys. under consideration are invalid as null and void and are quashed accordingly. 15. The decisions relied upon by the Ld. D.R are having different facts and issue, hence are not helpful to the revenue. In the case of Guduthur Bros. (Supra) the levy of penalty without affording a hearing to the assessee was questioned before the appellate authority, who set aside that order. The matter ultimately travelled to the Hon'ble Supreme Court and it was held that the ITO was well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (Supra) that requirement u/s. 153 D for obtaining approval of JCIT is not procedural only but a mandatory requirement, hence the cited decision by the Ld. D.R is not applicable in the case of present assessee. Under above circumstances, the issue raised regarding the validity of assessment orders in question without obtaining prior approval u/s. 153D of the Act is decided in favour of the assessee. The assessment orders in question are thus quashed as null and void. Personal hearing to the Assessee before according the approval under section 153D 4.3 From perusal of the above decisions, it is categorically clear The assessee is not entitled to have personal hearing from JCIT before granting approval u/s. 153D, as the assessee had already been heard during the assessment/reassessment proceedings by the Assessing Officer and Therefore, we are in agreement with the submissions of the ld. DR that the assessee is not required to be given any hearing for the purpose of granting any approval. There is inbuilt purpose for seeking approval from an Officer below the rank of JCIT. Whether approval granted by the officer under 153D is administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 158BC, the Joint Commissioner should have given a hearing to the assessee. It is submitted that the power to grant previous approval under section 158BG is an amalgam of appellate and revisional power and therefore, the right to a hearing should be read into section 158BG. It is also contended that the Tribunal failed to consider this ground though specifically urged before it. 4.1 Chapter XIV-B contains a special procedure for assessment of search cases. Section 158BC prescribes the procedure for block assessment. Clause (c) of section 158BC enables the Assessing Officer, on determination of the undisclosed income of the block period, to pass an order of assessment and determine the tax payable by him on the basis of such assessment. Clause (b) requires he Assessing Officer to proceed in the manner laid down in section 158BB and the provisions of sec ion 142 sub-sections (2) and (3) of section 143 and section 144, while determining the undisclosed income of the block period. It is thus evident that the procedure clearly contemplates the Assessing Officer giving a hearing to the assessee before making an assessment order in regard to the block period. 4.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision for opportunity of hearing in section 158BG, there is no need for the Joint Commissioner to give a hearing to the assessee before granting previous approval under section 158BG. The first question is, therefore, answered against the assessee. 4.6. The language used in section 153D and section158BG, are similar in nature and both prohibits passing of the assessment order or reassessment/block assessment without the prior approval of the officers mentioned in the said sections. The language used in these sections are in the mandatory form which prohibits passing of the order by the assessing officer without prior approval. Meaning thereby if an order is passed without any approval from the authorities mentioned in the respective sections then the order shall be bad in law and would be liable to be declared void being passed in contradiction to these provisions. Moreover these 2 provisions were provided by the legislature for the same purposes i.e., to supervise the functioning of the lower authorities by the higher authorities. The comparative chart of these 2 provisions it is as under : [Prior approval necessary for section 153assessment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rically mentioned that if the approval is lacking under section 153D granted by the superior authorities, then the assessment order is liable to be quashed being passed in violation of section 153D. However, if the approval is granted by the superior authority without looking into the material, without application of mind and merely relying upon the understanding of the assessing officer, then in that eventuality the said approval ceases to be approval in the eyes of law. In our view the approval as envisaged under section 153D of the Act is not empty formality and there is a rational and reason for mandating the approval before passing the assessment order under the Act. If it was merely a formality and the superior authority is not required to apply its mind then there was no reason to incorporate even for approval of the superior authority and it would not have been worded in the mandatory manner. Because the language used in the provision is in the form of mandatory direction therefore it cannot be argued that even if the approval is granted without application of mind then also it is valid in the eyes of law. In our opinion, civil and penal consequences would flow from complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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. 4.12. Similarly, in the matter of Sahara India (Firm) vs. CIT, 169 taxman 329 and in paragraph 6 and 21-24 it was held 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to take note of the insertion of proviso to section 142(2D) with effect from 1-6-2007. The proviso provides that the expenses of the auditor appointed in terms of the said provision shall, henceforth, be paid by the Central Government. In view of the said amendment, it can be argued that the main plank of the judgment in Rajesh Kumar's case (supra) to the effect that direction under section 142(2A) entails civil consequences because the assessee has to pay substantial fee to the special auditor is knocked off. True it is that the payment of auditor's fee is a major civil consequence, but it cannot be said to be the sole civil or evil consequence flowing from directions under section 142(2A). We are convinced that special audit has an altogether different connotation and implications from the audit under section 44AB. Unlike the compulsory audit under section 44AB, it is not limited to mere production of the books and vouchers before an auditor and verification thereof. It would involve submission of explanation and clarification which may be required by the special auditor on various issues with relevant data, document etc., which, in the normal course, an assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffects a citizen in his civil life comes under its wide umbrella. Accordingly, we reject the argument and hold that since an order under section 142(2A) does entail civil consequences, the rule audi alteram partem is required to be observed. 23. We are also unable to persuade ourselves to agree with the proposition canvassed by learned counsel for the revenue that since a post-decisional hearing in terms of sub-section (3) of section 142 is contemplated, the requirement of natural justice is fully met. Apart from the fact that ordinarily a post-decisional hearing is no substitute for pre-decisional hearing, even from the language of the said provision it is plain that the opportunity of being heard is only in respect of the material gathered on the basis of the audit report submitted under sub-section (2A) and not on the validity of the original order directing the special audit. It is well-settled that the principle audi alteram partem can be excluded only when a statute contemplates a post decisional hearing amounting to a full review of the original order on merit, which, as explained above, is not the case here. 24. The upshot of the entire discussion is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) which read as under: 'Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. v. CIT258 ITR 317 has held that the proviso to sub-section (1) of section151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment . The Hon'ble High Court further observed that what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all the decisions relied upon by the ld. DR are misplaced inasmuch as all these decisions relate to the issue whether the Joint CIT/CIT has to give an opportunity of being heard to the assessee before granting the approval. This is not the issue before us as the ld. Counsel has never argued that the assessee was not given any opportunity of being heard. These decisions therefore would not do any good to the Revenue. 4.14. In view of the above we are of the considered opinion if the approval is granted by the superior authorities for extraneous reasons, without application of mind or without looking into the record, then the approval loses its character of an approval in the eyes of law. Accordingly we have no hesitation in declaring that the approval granted by the higher authorities on 27 March 2014 is no approval in the eyes of law and accordingly the assessment made by the assessing officer based on such an approval is also declared to be null and void. In fact, the issue of judicial review of the administrative decision were examined by Hon ble Supreme Court in Tata Celular vs. Union of India (1994) 6SCC 651 (Paragraph 77) and also in the matter of West Bengal Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether 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 sustainable in the eyes of law. We had already answered that such an approval is bad in law and cannot be sustained. 4.17 The last submission made by the learned departmental representative was that the matter may be sent back to the assessing officer 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 2nd inning, in the matter as the non grant of approval/grant of approval in a mechanical manner takes out the direction of the assessing officer to pass the assessment order and the same cannot be rectified or improved by the revenue in the 2nd round of litigation. Undoubtedly the assessee is contesting the matter from the date of search before various forms including before the Hon ble High court and the assessee cannot be made to run again for many more years for contesting the litigation. In view of these peculiarity of the facts we are of the opinion that 2nd inning for rectifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Circle, Dehradun Dated : 30.03.2015 To The Addl. Commissioner of Income Tax, Central Range, Meerut Sir, Subject: Submission of Draft Assessment Orders in DBIT Group of cases, Dehradun - Approval thereof - regarding Kindly refer to the subject cited above. 2. In this context, it is submitted that in compliance to your directions the Draft Assessment Orders in the following cases u/s 153A of the I T Act 1961 are being submitted for your kind perusal and necessary approval. Sl.No. Name of the assessee PAN Asstt. Years 1. Sh. Sanjay Bansal ACZPB9725A 2007-08 To 2013-2014 2. Uttarakhand Uthan samiti AAAAU1376N 2007-08 To 2013-2014 3. Wali Gram Udhyog sansthan AAAAW1501B 2007-08 To 2013-2014 ; 4. Shri Krishna Educational Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ABNPM2590F 2007-08 To 2013-2014 08 CKSR Animation pvt ltd AAECC0802F 2011-12 to 2013-14 09 Bharti Water Pvt Ltd AACCB5459M 2007-08 To 2013-2014 10 Chand sons education city pvt ltd AAECC0801G 2011-12 to 2013-14 11 Water wealth infra tech india pvt ltd./ AABCW0319C 2011-12 to 2013-14 12 Sumer chand and sons AACFS6622C 2007-08 To 2013-2014, 13 Sh. Sanjay Bansal ACZPB9725A 2007-08 To 2013-2014 14 Uttarakhand Uthan samiti AAAAU1376N 2007-08 To 2013-2014 15 Wali Gram Udhyog sansthan AAAAW1501B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Range, Meerut. She submitted that it is customary practice that staff go with file and after discussion/approval get it back. The relevant portion of the reply given by the ld. CIT-DR at para 10 of her written synopsis reads as under:- 10. It has been submitted by the Assessing Officer that the there is no separate movement register for the purpose of seeking approval of draft order by the Assessing Officer from the JCIT/Addl. CIT, Central Range Meerut. It is customary practice that staff go with file and after discussion/approval get it back. 17. A perusal of the above clearly shows that the approval was given in a mechanical manner by the Addl.CIT to the draft assessment orders passed by the AO. As mentioned earlier, the AO has submitted the draft assessment orders on 30th March, 2015 as per the order sheet entry which indicated that the AO was very much available in her office at Dehradun on 30th March, 2015. The Office of the Addl.CIT is situated at Meerut which is about 250 Kms from Dehradun. There is no other record to suggest that the files containing the draft orders were, in fact, moved from the office of the AO at Dehradun to the office of the Addl.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 to 2015-16 6 Sh. Chander Mohan Sethi AASPS1246A 2009-10 to 2015-16 7 Sh. Gulshan Sethi AASPS1248Q 2009-10 to 2015-16 8 M/s East View Developers P. Ltd. AABCE5324R 2009-10 to 2015-16 9 Sh. Desh Bhushan Jain AAFPJ6467R 2009 10 to 2015-16 10 M/s Max City Developers Pvt. Ltd. AAECM5401A 2009-10 to 2015-16 11 Sh. Sanjeev Jain ACFPJ3817P 2009-10 to 2015-16 12 M/s Sethi Buildwell Pvt. Ltd. AAICS9/42C 2009-10 to 2015-16 13 Sh. Satpal Nagar AAFPN6467M 2009 10 to 2015-16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the prior approval of Joint Commissioner. 14. When the approval given by the JCIT, Meerut is juxtaposed against the directions and provisions of the Income Tax Act pertaining to completion to assessment u/s 153B(1) of the Act, it can be said that the approval given by the JCIT is invalid. The Act envisages that the JCIT s approval before passing of the final order. There is no provision to alter, change, modify, adjust, amend or rework the order once the approval has been accorded. The approval to be given is statutory in nature and legally binding. In the instant case, the approving authority has clearly mentioned that the approval given is a technical approval. Moreover, he has directed the DCIT to ensure the seized materials and the findings of the appraisal report to be incorporated in the final assessment order. This clearly goes to proves that the approval given by the JCIT is not a final approval as required u/s 153D of the Act but a conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act. It has also been laid down that whenever any stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid. 6. Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks :- To, The DCIT(OSD)-1 Mumbai Subject : Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref : No. DCIT (OSD)-1/CR-7/Appr/2010-11 dt. 31.12.2010 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 draft order has been submitted on 31.12.2010. Hence there is no much time left to analise the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted. Approval to the above said draft order is granted u/s 153D of the I.T. Act, 1961. 7. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Coordinate Benches of Mumbai and Allahabad as afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal issue pertaining to approval of assessment u/s 153D of the Act and hence being admitted. We rely on the judgment of the Hon'ble Supreme Court in the case of NTPC v. CIT (1998) 229 ITR 383 SC wherein it has explained that the power of the Tribunal in dealing with the appeals under Section 254 of the Act is expressed in the widest possible terms . It was further observed as under: 5. .....The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 M/s R.G.V. Fininvest Pvt. Ltd. AAACR4383G 2009-10 to 2015-16 3 M/s Aggarwal Capfin Financial Services P.Ltd. AABCA0925E 2009-10 to 2015-16 4 M/s Arihant Info Solutions P. Ltd AADCA5015H 2009-10 to 2015-16 5 M/s Sethi Estate P. Ltd. AABCS7643B 2009-10 to 2015-16 6 Sh. Chander Mohan Sethi AASPS1246A 2009-10 to 2015-16 7 Sh. Gulshan Sethi AASPS1248Q 2009-10 to 2015-16 8 M/s East View Developers P. Ltd AABCE5324R 2009-10 to 2015-16 9 Sh. Desh Bhushan Jain AAFPJ6467R 2009 10 to 2015-16 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 4. After taking into consideration, the above points, a copy of the final orders passed be sent to the JCIT. 13. The Income Tax Act envisages prior approval of the JCIT before passing the assessment order. The provisions read as under: No order of assessment or reassessment shall be passed by the assessing officer below the rant of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of Section 153A or assessment year referred to in clause (b) of sub-section (1) of Section 153B except with the prior approval of Joint Commissioner. 14. When the approval given by the JCIT, Meerut is juxtaposed against the directions and provisions of the Income Tax Act pertaining to completion to assessment u/s 153B(1) of the Act, it can be said that the approval given by the JCIT is invalid. The Act envisages that the JCIT's approval before passing of the final order. There is no provision to alter, change, modify, adjust, amend or rework the order once the approval has been accorded. The approval to be given is statutory in nature and legally binding. In the instant case, the approving authority has clearly mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record. 5. The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid. 6. Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks :- To, The DCIT(OSD)-1 Mumbai Subject : Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of [ Each ] the assessment year. Therefore, each of the assessment year is required to be verified and approved by the JCIT being Approving Authority that it complies with Law as well as the procedure laid down. The assessee has filed details on record regarding returns filed under section 139 (1) for A.Ys. 2010-2011 to 2015-2016. It is also explained that there are un-abated assessments except A.Y. 2015-2016 in which the assessments have been abated. Therefore, for each un-abated and abated assessments, the authorities below and the Approving Authority [JCIT] shall have to verify the incriminating material found during the course of search or the seized material if pertain to the same assessment year and its basis. The assessee has explained above that these cases are coming up because of the assessments framed in the case of M/s. JIL and others prior to the search in the case of assessee. Therefore, all material was within the knowledge of the Income Tax Authorities prior to the search in the cases of the assessees. Therefore, for granting approval under section 153D of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case the facts stated in the impugned orders are that the sales of liquor are made by M/s. JIL to M/s. MAPSCO and Singla Group of cases and that part of the sale proceeds have been transferred to the account of M/s. Alfa India instead of paying the entire sale consideration to M/s. JIL. Thus, the nature of total receipt/addition is the sale proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale receipts cannot be the income either in the hands of M/s. JIL or M/s. Alfa India or the Assessees who may be the conduit as argued before us. The A.O. has failed to consider the concept of real income for the purpose of determining the correct tax liability and correct determination of income of the assessees. We rely upon the Judgment of the Hon ble Supreme Court in the case of Godhra Electricity Co. Ltd., 225 ITR 746 (SC). This fact is also not verified and considered by the JCIT while granting approval under section 153D of the I.T. Act. It may be noted here that entire sale proceeds when cannot be added in the hands of M/s JIL as income whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted by the A.O. as per Law and records. 16. In some of the cases the approval was granted on the date the request was made for approval by the A.O. In all those cases merely draft assessment order and the assessment folders were available with the A.O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT. It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial/ adverse material was found during the course of search. Further on the basis of some statements made by Shri Sanjay Duggal and Rajnish Talwars, the issue of rebate and discount allowed to the distributors was examined and the A.O. in the case of M/s. JIL made protective disallowances of claim of rebate for A.Ys. 2009-2010 to 2013-2014 in a sum of ₹ 56,57,67,894/-. The A.O. passed the assessment orders under section 15A3 of the I.T. Act and the assessee filed appeal before the Ld. CIT(A) for all these years against this addition which have been deleted by the Ld. CIT(A) in A.Ys. 2009-2010 and 2010-2011 vide Order Dated 02.06.2017. He has submitted that the appeals of the Revenue are pending before the Tribunal for all these years. Learned Counsel for the Assessee, therefore, submitted that since assessee M/s. JIL is already in Departmental Appeal before the Tribunal, therefore, no direction be issued against the assessee as it may be prejudicial to the interests of the assessee. He has submitted that when the issue of rebate is already pending before the Tribunal and no seized material was found during the course of search, therefore, even such addition could not be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders without any assessment records what to say about the search material. Therefore, the approval given in the instant case by the Ld. Addl. CIT is not valid in the eyes of law. We, therefore, hold that the approval u/s 153D has been granted without application of mind and is invalid, bad in law and is liable to be quashed. Since, we have held that the approval u/s 153D is invalid and bad in law, therefore, the Assessing Officer cannot pass the assessment order u/s 153A of the Act against the assessee. Therefore, all assessment orders are vitiated for want of valid approvals u/s 153D of the Act and as such no addition could be made against the assessee. 40. In view of the above, we quash the assessment order passed u/s 153A of the Act. The additional ground raised by the assessee in the cross objection is allowed. 41. Since, the assessee succeeds on this legal ground, the grounds raised by the Revenue challenging the deletion of additions on merit become academic in nature and do not require any adjudication. 42. In the result, the Cross Objection filed by the assessee is allowed and the appeal filed by the Revenue is dismissed. Order was pronounced in the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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