TMI Blog2021 (8) TMI 1336X X X X Extracts X X X X X X X X Extracts X X X X ..... e approving agency may also suggest the assessing officer to consider some material which has been missed by the assessing officer, for consideration and incorporating in the proposed assessment order. All the above said cannot be conveyed over the telephone. There has to be some written more for conveying the approval either by fax/ email/ letter after due deliberation or consideration of the relevant material and draft assessment order. In no case, oral approval can be granted by the Addl. CIT. The order granting the approval can be subject matter of judicial review if it is passed without application of mind, without assigning the reason or non-consideration of the relevant material or passing the order considering the irrelevant or extraneous material or reason. As the Assessing Officer has passed the assessment order without having the approval in his record, in our considered opinion, the assessment order passed in all the cases before us is null and void and cannot be acted upon. In view of the above, all the appeals from the assessee are required to be allowed. When the Assessment Order was passed by the Assessing Officer, than there was no prior approval in the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that under the provisions of IT act before passing an order, AO required to get prior approval u/s 153D of the act. The authority giving the approval is supposed to apply its mind before giving approval and it should be stereotyped. The appellant has placed reliance on the decision of Hon ble Pune Bench of the ITAT in Akil Gularnali Somji vs. Income Tax Officer, and on the decision of Hon'ble Mumbai Bench of the ITAT in Smt. Shreelekha Damani vs. DCIT 173 TTJ (Mumbai) on this issue. 8.1 The submissions filed by the appellant were forwarded to the AO and a remand report received on this issue is as under: In this respect, it is submitted that the ld. AR is not correct on the facts, as has been mentioned by him. In the chart on page 2 of the written submission, reference for Special Audi~ was made on 20.03.2015. i.e. 11 days were remaining on that date for framing the assessment. The report of special audit was received on 18.09.2015. Therefore, as per Explanation (ii) to section 153B(1) the period taken for special audit from 20.03.2015 to 18.09.2015 will be excluded from the period of limitation. After exclusion, the time period left with the AO was 11 days and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost is immaterial as held by judicial courts also. However, the AO has failed to mention any judicial decision on this issue. Without prejudice, agreeing that approval was received by Fax, the copy of the fax duly seen by the AO before signing the final orders citing approval of the Range head, must be in the file, proceedings being quasi-judicial proceedings. Regarding two different letters, AO has commented: Regarding availability of two letters with the same dispatch number, it is submitted that initially the AO framed a different letter for each assessee, but later, to cut short the time involved, a fresh letter was prepared seeking approval in all the six cases involved. We are surprised from where the AO has taken out this information a, he was not the officer who framed the assessment and there is no mention of this in the file Secondly, we fail to understand when letters for all the persons were prepared, then how framing a combined letter for all the assessee will save time. Rather it will consume more time. Availability of draft order in the file is a legal requirement but the AO has held it otherwise. Rest of the submissions of the AO on this ground are also friv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king the approval u/s 153D however, the letter dated 27.07.2016 was sent by the DCIT at page 789. 10. It was submitted that before the approval was granted by the Addl. CIT to the AO, the AO had wrongly passed the assessment order on 27.07.2016itself .Ld AR had drawn our attention to page 1 of the assessment order, where date of passing of the order was mentioned as 27/7/2016. which is to the following effect:- Assessment Order I T. M.S 67 1- Name of the assessee Madan Lai, S/o Bihari Lai 2- Address of the assessee Model Town, Shahkot. 3- PAN/GIR ABFPL4650B 4- Ward/Circle Central Circle-I, Jalandhar 5- Status Individual 6- Method of accounting Mercantile 7- Whether resident/Resident but not ordinarily resident/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se written submissions are submitted hereunder:- 2. Ground No. 3 2.1 .. 2.2 3.1 The id. AR has argued that the alleged approval u/s 153D was given in haste and without any application of mind since first, the 42 orders were approved within hours or the same day of having received the copies from the Assessing Officer, second, the communication of approval was received on 28.07.2016, whereas the order was passed on 27.07.2016; third, there was no order sheet entry about the movement of file for approval or receiving back of the file and issuance of final order; fourth, no draft orders sent to the Addl. CIT for approval were found in the assessment record . (emphasis supplied by us) 3.2 In this respect, it is submitted that in respect of search cases, regular review meetings are held by the Range heads with the Assessing Offices discussing facts of the search cases, line of action to be adopted in investigations and the final conclusion to be drawn. Therefore, the approval given is not mechanical but after regular application of mind throughout the assessment proceedings. This is so to avoid any difference of opinion at the fag end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee in doing so. 13. On the basis of above, ld. AR had submitted that at the time of passing the assessment order, the AO has no prior approval as contemplated u/s 153D and therefore the assessment order was passed by the AO without having prior approval u/s 153D, hence it was bad in law and required to be annulled . 14. it was submitted that, even the approval granted after passing of the order was also bad in law, as the official granting the permission had not seen the draft assessment order and other relevant material, which was necessary to be seen for the purposes of forming the opinion, as to whether approval could be granted by Add CIT or not . He had drawn our attention to the forwarding letter and remand report submitted by the AO before CIT(A). On the basis of the above it was submitted that the approval being mechanical approval, without application of mind therefore it was not an approval in the eyes of law, hence the assessment orders are required to be annulled . 15. Ld. AR relied upon the following decision of various Tribunal and of the High Court. i. RishabhBuildwell P. Ltd. vs. DCIT ITA No. 2122/Del/2018 (ITAT Del) ii. Geetarani Pand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order. It is the case of Assessee that approval by Add CIT under Section 153D is not a mere formality. It is an important check on Assessing Officer. Addl. CIT is expected to go through the material found during the search, assessment records, draft assessment order, record reason and then grant approval as per the mandate of law. 4. In the facts of the present case Assessing Officer sent the assessment record to the Additional Commissioner of Income Tax, Central Range, Jalandhar camp at Ludhiana as he was having additional charge of Jalandhar on 27.08.2016. Kindly refer to submission before CIT(A) at Page number 990-1004 (volume 2) of the Paper Book. This fact is not denied by the AO in his remand report dated 12.12.2017 reference page 1127-1131 of the paper book (volume 2) of the Paper Book. 5. It is physically and humanly not possible that going through the record, search material and draft orders of all 42 cases within few hours. Addl. CIT approved all the 42 files and draft assessment order within few hours and gave the approval vide letter No. Addl. CIT/CR/JAL/153D/16-17/435 dated 27.07.2016 (at page number 800) in one line. It clearly proved that Add C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat,in the present time beingtime of technology, the communication between persons at different stations is held via phone/fax and date of receipt of a physical letter by post is immaterial as held by judicial courts also. However, the AO has failed to mention any judicial decision on this issue. Without prejudice,if approval was received by Fax on 27.7,2016 the copy of the fax duly seen by the AO before signing the final orders citing approval of the range head, must be in the file. However no such fax is on the file which proves that approval was received on 27.7 2016, rather it is clear from file that approval was received by AO on 28.7.2016 and assessment orders are passed on 27.7.2016. The CA of the assessee has inspected the file and fact of inspection is submitted before CIT(A) in the submissions of assessee and it is not denied by AO in the remand report. 10. Further, no draft assessment orders were submitted to the Addl. CIT and approved copies of the same were found in the assessment file. This shows how the issue has been dealt by the controlling authority in a casual way defeating the purpose of the Act. The fact that there are no draft assessment orders on the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mality or a symbolic act but a mandatory requirement.... A bare glance at the approval so accorded makes it evident that such approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect of any of the 7 assessment years. Apparently, the approval has been granted on a dotted line without any availability of reasonable time which firms up the belief towards non application of mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which volumnous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking / intials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity appliedowing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.5 At the cost of repetition, it may be reiterated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responsibility on the Addl./CIT/JCIT to apply his mind and to see that no hardship is being caused to the assessee by the order of the AO. Here, the controlling authority has just completed a formality and approved the illegal acts of the AO in one line without even looking at relevant documents and seized material. 16. An inspection of the assessment record of the assessee was carried out but no entry was found on the order sheet about the movement of file for approval, receiving back of the file, and even regarding issuing of the final order. This is a gross violation of the directions of the CBDT and various judicial pronouncements regarding the maintenance of the order sheet and its sanctity.\ 17. In this regard, appellant society places reliance on the following decisions:- Hon ble ITAT, Delhi in the case of M/s M3M India Holdings Vs. DCIT in ITA No. 2691/D/2018 held that (emphasis supplied) 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. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 authori ties 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. Further, strong reliance in this regard is also placed on the decision of High Court of Madhya Pradesh in the case of CIT, Jabalpur Vs. S. Goyanka Lime Chemicals Ltd. [2015] 56 taxmann.com 390 (Madhya Pradesh) wherein the approval granted and completion of the procedure as envisaged in the Act within 24 hours has been held to be without application of mind. (emphasis supplied) We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so Yes, I am satisfied . In the case of Arjun Singh [2000] 246 ITR 363 (MP), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- 'The Commissioner acted, of course, mechanically in order to discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liament 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, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. The Hon ble Bombay High Court in the case of CIT-II Vs Shri Akil Gulamali Somji, in Income Tax Appeal (L) No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment orders and this fact It is important to refer to the judgement passed by High Court of Bombay in the case of PCIT v Shreelekha Damani ITA 668 of 2016. Relavent extract is reproduced for reference 7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft 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 aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of the proceedings but the manner and the material on the basis of which the approval was granted can always be examined by the tribunal and also by the other courts to come to the conclusion whether the approval was granted in a mechanical manner or after applying mind looking into the record. No evidences required to be appreciated as the approval is self -evident, i.e., that it was granted by the additional Commissioner of income tax without application of mind and without looking into the record. In view of the above the assessment order passed by the assessing officer is void and accordingly all the appeals of the assessee are allowed. 17. On the other hand, the ld. DR had submitted that this is a technical error and can be cured u/s 292B of the Act and it was further submitted that the matter may kindly be remanded back to the file of the AO for passing the afresh order, in case the Tribunal grounds that the contention of the ld. AR. 18. We have heard the contention of the parties and perusal the material available on record. As is clear from the record that the application for seeking the approval u/s 153-D was sent by the Assessing Officer to the Additional CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost is immaterial. In our considered opinion, the requirement of Section 153D is clear and unambiguous, which requires prior approval of the Addl. CIT before passing the order by the Assessing Officer. For the ready reference, we are reproducing herein below Section 153D of the Income Tax Act which provides as under:- 153D. 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 sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner]. In our view, the prior approval as contemplated u/s 153D cannot be granted over the phone, sometimes the approving agency may not agree in the complete draft order and suggest some modification, changes or deletion in the draft assessment orders. At times, the approving agency may also suggest the assessing officer to consider some material which has been missed by the assessing officer, for consideration and incorporating in the proposed assessment order. All the above said cannot be conveyed over th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the above, all the appeals from the assessee are required to be allowed. We may rely and refer the decision of GujaratGujrat 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 sub-section (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 be passed.... . In other words, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (against which incriminating material has been found du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 non-compliance 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 may be waived him if no public interest are involved and in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 26. Though, the appeals of the assessee are required to be allowed on the ground of passing of the assessment order without seeking the prior approval from the Addl. CIT, however, there is yet another reason to allow the ground raised by the assesses in the present sets of appeal, namely that the Assessing Officer had sought the approval from the Addl. CIT and at the time of seeking the approval, the Assessing Officer has not enclosed the Draft Assessment Orders and other assessment record with the letter seeking the approval and further the Addl. CIT had granted the approval without even apply his mind in a mechanical stereotype manner. 27. In the Remand Report (para 11 SUPRA), the Assessing Officer has admitted that there was no draft orders enclosed with the letter seeking the approval, nor the draft assessment order ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord that the decisions relied upon by the ld. DR are factually distinguishable as none of the order has examined this aspect of the matter which is subject matter of present litigation i.e non-application of mind by the superior authorities at the time of granting the Approval. The sum and substance of the decisions relied upon by the Ld. DR s was that the assessee was not entitled to any hearing or representation at the time of grant of approval. As mentioned hereinabove the scope and ambit in the present litigation is not that of grant of hearing or representation at the time of Approval but whether the Approval can be granted by the superior authority without application of mind without looking into seized material, investigation report, the draft assessment order etc can be held sustainable in the eyes of law. We had already answered that such an approval is bad in law and cannot be sustained. 29. Our view has recently been followed by the Hon ble Coordinate Bench in the matter of Arch Pharmalabs Ltd. vs. ACIT ITA No.6656/Mum/2017 dated 07.04.2021 wherein it was held as under :- 11. We have carefully considered the rival submissions and material placed on record and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In support of charge of nonest approval, several contentions have been raised viz (i) the approval accorded under section 153D is without any occasion to refer to the assessment records and seized material, if any, incriminating the assessee and hence such approval is in the realm of an abstract approval of draft assessment orders which was unsubstantiated and unsupported and consequently suffered from total non-application of mind (ii) approval granted hurriedly in a spur involving voluminous assessments spanning over 7 assessment years and thus only a symbolic exercise to meet the requirement of law (iii) Total lack of objectivity in drawing satisfaction on objective material while giving a combined approval for 7 assessments and also without evaluating the nuances of each assessment year involved (iv) the mundane action of Addl. CIT under S. 153D in a cosmetic manner gives infallible impression of approval on dotted line and thus defeats the purpose of supervision of search assessments (iv) initialed draft assessment orders not available in office records. 11.3 As observed, Section 153D bestows a supervisory jurisdiction on the designated authority in respect of search rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval the respective Assessment order. Solemn object of entrusting the duty of Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6 There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the coordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332(Mum.) and approved by jurisdictional High Court subsequently as reported in 307 CTR 218 affirms the plea of the Assessee. 11.7 Very recently, the co-ordinate bench in Sanjay Duggal ors (ITA 1813/Del/2019 ors; order dated 19.01.2021 has also echoed the same view after a detailed analysis of similar facts and also expressed a discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the plea raised by the Assessee against maintainability of hollow approval under S. 153D totally devoid of any application of mind. The approval so granted under the shelter of section 153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various assessment years as a consequenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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