TMI Blog2022 (6) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... nd others [ 2021 (9) TMI 1068 - ITAT LUCKNOW] wherein also, the approval under section 153D was given through the same letter by the ACIT, Central, Kanpur and the Ground raised in this regard by the assessee was allowed, and the assessment orders were annulled by us. While allowing the Ground raised by the assessee, the Tribunal had also considered various cases laws, including that of the Hon'ble Supreme Court. In view of these facts and circumstances and in view of the unrebutted judicial precedents relied on by the ld. Counsel for the assessee, the grievance of the assessee by way of Ground no.6 is allowed and the assessment order is annulled. - IT(SS)A No.632/LKW/2019 And IT(SS)A No.635 & 636/LKW/2019 - - - Dated:- 18-5-2022 - Shri. A. D. Jain, Vice President And Shri T. S. Kapoor, Accountant Member For the Appellant : Shri Swaran Singh, C.A And Smt. Jasleen Seth, C.A. For the Respondent : Smt. Sheela Chopra, CIT (DR) ORDER PER A.D. JAIN, V.P.: These are appeals preferred by two different assessees against the respective orders of the ld. CIT(A)-IV, Kanpur, dated 14.10.2019 for Assessment Year 2016-17 in the case of M/s Kundan Casting Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment of profit in wholesale trading in cloth, as unexplained cash credit by the Ld. A.O., are illegal, void-ab-initio, bad in law and liable to be quashed/deleted. 4. That the Ld. Commissioner of Income Tax (Appeals)-4, Kanpur, has erred in law and on facts in sustaining the arbitrary addition of Rs.21,34,759/- made by the A.O., being the alleged commission paid @ 2% on the gross profit from wholesale trading of cloth treated as unexplained expenditure under section 69C of the I.T. Act, 1961, merely on surmises and conjectures, without appreciating that no incriminating document(s)/ evidence was found in the course of search relating to the above addition in the assessment passed u/s 153A of the Income Tax Act,1961. 5. That the Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur has erred in law and on facts in rejecting the ground of appeal no. 9 raised by the appellant, challenging the validity of assumption of jurisdiction by the Ld. A.O. and validity of impugned assessment order pursuant to an illegal order passed u/s 127 of the Income Tax Act,1961, dated 18.11.2016. 6. That the Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur has erred in law and on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income tax Act,1961, without any incriminating documents found during the course of search. 10. That Ld. Commissioner of Income Tax (Appeals)-IV, Kanpur has erred in law and on facts in sustaining the arbitrary additions made by the Ld. A.O. in the income of the appellant which are contrary to the principles of natural justice and equity, unsustainable and deserve to be deleted. 3. The assessee has also raised the following additional grounds: 1. That assessment framed by the Learned Assessing Officer u/s 153A of the Income Tax Act, 1961 is bad in law and deserves to be quashed in as much as the same has been framed on the basis of alleged diary seized from the possession of a third party during the course of search u/s 132 in April 2015. 2. That any assessment on the basis of documents seized during the course of search at third party without resorting to mandatory procedure provided in Section 153C of the Income Tax Act, 1961 is bad in law and any assessment framed without following the procedure, deserves to be quashed. 4. At the outset, the ld. Counsel for the assessee has stated at Bar that he does not wish to press the Additional Grounds. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to copy of approval letter dated 30.12.2018 placed at pages 1 to 3 of the assessee s Paper Book-2. The ld. Counsel for the assessee has submitted that as per this approval letter, the Addl. CIT granted approval under section 153D in the case of 67 assessees, which included the present assessees, listed at Sr. Nos. 42, 48 and 50; that it is humanly impossible to go through 67 draft assessment orders on a single day; and that the Panchnama prepared by the Revenue authorities consisted of 15,800 pages (our attention was invited to pages 997 to 1005, 1029 to 1041, 8 to 15, 1015 to 1021, 1006 to 1014 where the copies of Panchnama prepared at the time of search were placed) The ld. Counsel for the assessee also filed a chart reflecting the case-wise number of seized documents in the Group. It was stated that apart from the above seized material, there were around 2000 pages of reply filed by various assessees of the Group; that besides the above documents in the case of Sigma Group, there were seized documents belonging to other Groups also, the approval of which has also been given through the same approval letter; that it is humanly not possible to examine more than 17,800 loose pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in 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. 10. It was argued that in the case of search, qua assessment orders, whether framed under section 153A or section 153C of the Act, the Joint Commissioner, i.e., the approving authority, is required to see that whether the additions which 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 enquiries made by the Assessing Officer during the course of assessment proceedings; and that the Joint Commissioner is also required to verify whether the required procedure has been followed by the Assessing Officer or not, at the time of framing the assessment. 11. It was argued that the approval cannot be a mere discretion or formality, but is mandatory, being a quasi-judicial function, and that the Act requires that it should be based on due application of mind and prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g date. While going through the CBDT Manual placed at paper book pages 4 5, it was observed that this Manual was printed in February, 2003 and therefore, the ld. 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. 1.6.2007. The ld. Counsel for the assessee, in this regard, has submitted that this Manual is applicable to the provisions of section 158BG of the Act, which are in pari materia to the provisions of section 153D of the Act. It was further submitted that the Mumbai Bench of the Tribunal in the case of Smt. Shreelekha Damani vs. DCIT(OSD-1), Mumbai , vide order dated 19.8.2015 (copy filed), while deciding a similar issue under section 153D of the I.T. Act, has relied on the case laws relied on for deciding the issue of approval under section 158BG of the Act and, therefore, this Manual is applicable to the provisions of Section 153D also. The ld. Counsel for the assessee has further placed reliance on Circular No. 3 of 2008 dated 12.3.2008, issued by the CBDT, whereby, the CBDT has issued instructions regarding mandatory approval under section 153D of the I.T. Act, where the order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee, that the Hon'ble Bombay High Court has also dismissed the appeal of the Department filed against the above order of the Tribunal, vide order dated 27.11.2018 (copy filed). Further, reliance was placed on the order of the Mumbai Bench of the Tribunal in I.T.A. No.4916 in the case of Sumer Associates (copy filed), 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 order of the Jodhpur Bench of the Tribunal in the case of Indra Bansal in I.T.A. Nos.321 to 324, passed on 23.2.2018 (copy filed). Reliance was also placed on the order of the Cuttack Bench of the Tribunal in I.T.A. Nos.01 and 02, in the case of Geeta Rani Panda and Manjusmita Dash (copy filed), wherein, vide order dated 5.7.2018, a similar issue has been decided in favour of the assessee. 13. It was argued that in view of these facts and circumstances and judicial precedents, the assessment orders passed in these cases are illegal and need to be quashed. 14. The ld. CIT, D.R., on the other hand, has argued that proper approval, as required under the provisions of section 153D of the I.T. Act, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 144BA. 16. The above provisions of section 153D of the Act were inserted by the Finance Act, 2007 with effect from 1.6.2007. In our humble understanding of the said provisions, we are of the considered opinion that the Legislature wanted that the assessment/re-assessment of the search cases should be made and the order should be passed with the prior approval of the superior authority. The word approval has not been defined in the Income Tax Act. Black s Law Dictionary, defines the word approval as under: The Act of confirming, rectifying, sanctioning, or consenting to some act or thing done by another. Approve means to be satisfied with; to confirm, to rectify, sanction, or consent to some act or thing done by another. To sanction officially; to rectify, to confirm, to pronounce good; think or judge well of; admit the propriety or excellence of; be pleased with. 17. The Hon'ble Supreme Court, in the case of Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer , [2003] 5 SCC 83, has held as under: W hat is provided under the proviso to Section 11(1) is that the proposed award made by the Collector must have the approval of the appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant approval under section 153D of the I.T. Act for passing assessment/ re-assessment order in search cases. The approval under section 153D of the Act cannot be treated as a mere formality only. The purpose of inserting this provision is twofold, i.e., one, that before grant of approval, the senior authority will ensure that the assessee should be protected against undue and irrelevant additions and disallowances and the approving authority will also ensure that proper enquiries or investigations are carried out by the Assessing Officer on the relevant materials, including the material in the hands of the Department. Secondly, the Assessing Officer has also to keep in mind the interest of the Revenue against any omission or negligence by the Assessing Officer in taxing the correct income in the hands of the right person, and in the correct Assessment Year. Therefore, the said provision provides for application of mind by the approving authority of the Department. Hence, the provisions of section 153D of the Act cannot be treated as a mere formality and the legislative mandate contained therein is required to be followed in letter and spirit by the approving authority, in a judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53D contain features by which the assessee is to be given a separate notice for assessment for each year as specified under section 153A of the Act. Secondly, the assessee has to file a separate ITR for each year, as specified in section 153A of the Act. Thirdly, separate assessment orders are to be passed for each year as specified in section 153A of the Act. There is an important concept enshrined in section 153A of the Act, that is of abated and un-abated assessments, which is peculiar to the scheme of section 153A. If section 153D considered juxtaposed with the above basic fundamental features of Section 153A, it is seen that a very important phrase has been employed in text of Section 153D, and that is each assessment year . The word each has been used extensively and this word needs to be given due weightage and meaning. As such, for each year, separate approval is mandatorily required to be given under section 153D of the I.T. Act. This is stated lacking in the present cases, vitiating the grant of approval. There are many other provisions where statutory approval is required from higher authorities. Two of them are Sections 151 and 274, which deal with the approvals on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also 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. 21. It is evident from the CBDT Circular that the Legislature in its wisdom, made it compulsory that the assessments of search cases should be made with the prior approval of the 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 only after due application of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to this date, the case was never discussed with the authority granting the approval. The Additional CIT, without considering the merits in respect of the issues on which addition was made, granted the approval. Such approval is simply an idle formality and such a mechanically granted approval is no approval in the eye of law. The entire law, as contemplated under section 153D of the Act, has been considered by the Delhi Bench of the Tribunal in a bunch of 52 appeals, in I.T.A. No.1813/Del/2019 etc. in the case of Sanjay Duggal and Others , wherein, the Tribunal, vide order dated 19.1.2021 has quashed the assessment orders by holding that the approval granted under section 153D of the Act was granted in a mechanical manner and thus it could not be held to be an approval as required under section 153D of the Act. The relevant findings of the Tribunal are contained in para 11 onwards, which, for the sake of completeness and ready reference, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and the assessment under section 153A merges into one. Only one assessment shall have to be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on record by the A.O. Therefore, these were the mandatory provisions contained in Section 153A which shall have to be satisfied by the A.O. before proceeding to frame assessment in the cases of persons 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 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding, as he is an Appellate Authority for the purpose of remanding the matter to the Adjudicating Authority as can be done by the Appellate Authority. Further, the Approving Authority also cannot exercise its power of prior approval to give directions to the Adjudicating Authority in what beneficial to accept/ appreciate tine material on record in regard to the compensation payable. Otherwise, it would tantamount to blurring 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 other words, 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 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .A.T., Cuttack Bench, in the case of Geetarani Panda vs. ACIT in I.T.A. No.01/CTK/2019, vide order dated 5.7.2018 (copy filed), has held as under: 24. In our considered view, the provisions contained in Section 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. It is apparent that the purpose behind the enactment of the above provision in the Statute by the Parliament are two folds. Firstly, the approval of the Senior Authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by Senior Authority will also ensure that proper enquiry or 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, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner 124 Taxman 227. 13.1. We have carefully perused the decisions placed on record by the Ld. DR. We find that 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. 14. Since we have annulled the assessment order, we do not find it necessary to decide the issues raised on merits of the case. 26. In that case, the Addl. Commissioner had 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 the approval was granted on the same day. In the case before us, through the Addl. CIT has not expressly stated his inability to analyze the issues of the draft order, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office of the Joint Commissioner. Thus, this leaves no doubt that the letter requesting grant of approval and the granting of approval, both, are within one day of each other. This lends credence to the contention of the learned Authorized Representative that the draft assessment order was approved without much deliberation by the Joint Commissioner. Further, the time of the fax granting approval is 6.56 a.m. on 31-3-2013 which 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 appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discharge the obligation not mechanically, nor formally but by application of mind. Similarly, the Hon'ble Apex Court in the case of Sahara India (Firm) v. CIT Anr. (2008) 216 CTR (SC) 303 : (2008) 7 DTR (SC) 27: (2008) 300 ITR 403 (SC), 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 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 Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval of Chief Commissioner or Commissioner in terms of the provisions of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of the 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. 30. A similar view has been taken by this Bench of the Tribunal in a group of cases of Shri Navin Jain and others in I.T.(SS)A. Nos.639 to 641/Lkw/2019, etc., vide order dated 3.8.2021, for Assessment Years 2015-16 to 2017-18, wherein also, the approval under section 153D of the Act was given through the same letter dated 30.12.2018 by the ACIT, Central, Kanpur and the Ground raised in this regard by the assessee was allowed, and the assessment orders were annulled by us. While allowing the Ground raised by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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