TMI Blog2023 (5) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... time till September 2019 for passing the assessment order, why the approvals were granted within 24 hours and order also was passed. The approval given was a conditional approval and on the basis of presumption only The action of the JCIT granting approval in this case was a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. 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. Assessment orders passed u/s 153A r.w.s. 143 (3) stand cancelled. Decided in favour of assessee. - ITA Nos. 717/Del./2021, 718/Del./2021, 719/Del./2021, 720/Del./2021 and 721/Del./2021, CO Nos. 126 to 130/Del/2022 in ITA Nos. 717 to 721/Del./2021 - - - Dated:- 18-4-2023 - SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER And MS. ASTHA CHANDRA , JUDICIAL MEMBER For the Assessee : Shri Ajay Wadhwa , Advocate For the Revenue : Shri P. Praveen Sidharth , CIT DR ORDER PER SHAMIM YAHYA , ACCOUNTANT MEMBER : 1. These are appeals by the Revenue and cross objections by the assessee against the common order of ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahendra Singh Bhatia ADBPB3244K 2001-02 to 2007-08 7 Inderpal Singh Bhatia ADBPB3241K 2001-02 to 2007-08 3. Further in view of this office letter no.F.No.JCIT (C)/ RPR/Draft Asst. Order/2016-17 dated 09.09.2016 it is presumed that the AO has - given proper opportunity of hearing has been given to the assessee thoroughly verified the seized material and that there are no adverse findings satisfied himself that all the issues emanating from the records have been verified and the additions wherever required have been proposed. 4. You may act accordingly. The copy of the final order may be submitted for record purpose in this office. Encls. : case records sd/- (R.M. Mujumdar) Joint Commissioner of Income tax, Range - Central, Raipur. 6. Assailing the above approval, ld. Counsel of the assessee made following submissions :- I. Approval granted by the Joint Commissioner of Income Tax, Range Central, Raipur ( JCIT ) was devoid of application of mind and without considering materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were granted within 24 hours and order also was passed. j. The approval given was a conditional approval and on the basis of presumption only as is evident from para 3 of the approval reproduced below: 3. Further in view of this office letter no. F.No. JCIT(C)/RPR/Draft Asst. Order/2016-17/ dated 09.09.2016 it is presumed that the AD has- given proper opportunity of hearing has been given to the assessee thoroughly verified the seized material and that there are no adverse findings satisfied himself that all the issues emanating from the records have been verified and the additions wherever required have been proposed. 4. These facts clearly show that the action of the JCIT granting approval in this case was. Thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. 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. 5. As per the provisions of section 1530 of the Act, no assessment order under section 153A or 153C can be framed without prior approval of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 protect the interests of the revenue, recourse to the said provision can be had. The word complexity used in section 142(2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 (All.), it is a nebulous word. Its dictionary meaning is: The state or quality of being intricate or complex, or that is difficult to understand. However, all that is difficult to understand should not be regarded as complex. What is complex to one may be simple to another. It depends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed under section 153A of the Act a. Hon'ble High Court of Gujarat in the case of PCIT vs. Sunrise Finlease (Pvt.) Ltd. has held that: 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 sub-section (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 language employed in the provision is couched in the negative and therefore, there is a prohibition against passing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12. Only writing the word approved does not fulfil the requirement of section 153D of the Act c. Hon'ble High Court of Orissa in the case of ACIT vs. M/S. Serajuddin Co. (ITA no. 39- 45 of 2022) has held that: 22. As rightly pointed out by learned counsel for the Assessee there is not even a token mention of the draft orders having been perused by the Additional CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al has been examined by the Assessing Authority before preparing the draft assessment order. It is trite in law 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. The requirement of approval under section 153D is pre-requisite to pass an order of assessment or re- assessment. 21. In the instant case, the draft assessment order in 85 cases, i.e. for 85 assessment years placed before the Approving Authority on 30-12-2017 was approved on same day i.e. 30-12-2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of85 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. 14. Inability to analyse the issues in draft assessment order by the approving authority is no approval and renders the assessment order null and void f. Hon'ble Bombay High Court (ITA No. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very same day and give approval. Even if such approval has been given, it can be said that the same is nothing but a technical formality without application of mind. Further, as mentioned earlier, there is nothing on record to suggest that the files have in fact moved from Dehradun to Meerut for obtaining approval. Therefore, in our opinion, the mandatory provisions as required u/s 153D has not been complied with. h. Hon'ble ITAT Delhi in the case of Rishabh Buildwell P. Ltd. (ITA No. 2122/D12018) has held that: 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(l) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time or if the Add!. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. Nothing has been clarified during the course of hearing to the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the Dart 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 appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee has pointed out that assessee has suffered serious prejudice because of non-application of mind on the part of the JCIT while granting approval under section 153D of the I. T. Act because the A.O. has made several double or triple additions on account of share capital, investments, FDRs purchased, loans, capital gains because these were created out of bank deposits made in the bank accounts of the assessees after the money transferred from the account of M/s. Alfa India. The JCIT even in approval did not mention if assessment record is seen by him........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. We also rely on following decisions: k. MG Metalloy Pvt. Ltd. (ITA No. 3306/D/2018)- ITAT Delhi l. MDLR Hotels Pvt. Ltd. (3076/D/2016) - ITAT Delhi m. Shri Subash Dabas (ITA No. 2399/D/2016) - ITAT Delhi n. Ajay Sharma (ITA No. 3554/D/2015) - ITAT Delhi o. M/s Akshata Realtors Pvt. Ltd. (IT(SS)A No. 09/RPR/2018)- ITAT Raipur p. M/s. Goyal Energy Steel Pvt. (ITA No. 240 to 243/RPR/2019) - ITAT Rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A 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 may be, is required to be passed by the Assessing Officer with the prior approval of the [Principal Commissioner or] Commissioner under sub-section (12) of section 144BA. 2. Perusal of the section reproduced above along with the innumerable cases quoted by the learned AR unmistakably point to underlying principle and intention of the legislators and law makers that in the interest of justice, equity and fair play, it was imperative that the Range head/ supervisory authority of the Assessing Officer(AO) must give his approval prior to the passing of the Assessment Order, after going through the seized materials upon which the AO is relying whilst making his Order and most importantly, after due and proper application of mind, give his prior approval that the Order proposed by the Officer is as per law and the facts of the case. The judicial pronouncements of Various Courts cited by the ld. AR suggest the same and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the seized material and that there are no adverse findings satisfied himself that all the issues emanating from the records have been verified and the additions wherever required have been proposed. 9. Herein, it is alleged that the Range head has not applied his mind. On the contrary, this shows that the Range head has in fact satisfied himself completely with the draft order and the presumption is only to the extent that the AO has also satisfied himself. This cannot in any way be constructed as mechanical as it has been sought to do by Ld AR. 10. As for as the various judicial pronouncement cited by the Ld AR, it is prayed that ultimately the finding of mechanical approval u/s 153D is a factual finding. In this current case, the arrival of such a finding cannot rest on the interpretation of a few lines written by the Range Head. It will be imperative to examine the assessment records, the records of meetings/ discussion of AO with range head, order sheet entries etc. before a factual finding can be made. 8. We have carefully considered the submissions and perused the records. We note that the issue raised by the assessee is that whether the assessment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error in the assessment order. Further, it is not clarified as to whether the assessment record in the case of the assessee has been seen by the JCIT or not. Therefore, the approval granted by the JCIT, Range-Central, Raipur in the case of the assessee is merely technical approval just to complete the formality and without application of mind as there was no examination of the seized documents, only on the presumption the approval cannot be granted. Thus, we hold the approval under section 153D of the Act has been granted in the case of the assessee was without application of mind, the same is invalid, bad in law and liable to be quashed. 15. Reliance can be placed on the case law relied on by the ld. AR of the assessee, in the following cases :- (i) Pr.CIT v. Subodh Agarwal in I.T.Appeal No.86 of 2022 (Date of Judgment: 12.12.2022) (Allahabad HC): The approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records of 38 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. (ii) Pr.CIT v. Sapna Gupta in I.T.Appeal No.88 of 2022 (Date of Judgment: 12.12.2022) 2022 (12) TMI887 (Allahabad HC), wherein the similar findings were offered by the Hon'ble High Court of Allahabad as in the case of Subodh Agrawal (supra) and held as under :- Search and seizure-Assessment under s. 153A- Approval under s. 153D-Prior approval of superior authority means that it should appraise the material before it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the approving authority before preparing the draft assessment order-In the instant case, the draft assessment orders in 123 cases placed before the approving authority on 30th Dec., 2017 and 31st Dec., 2017 were approved on 31st Dec., 2017, which not only included the cases of assessee but the cases of other groups as well-It is humanly impossible to go through the records of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the similar ground of appeal in granting bulk approval of the assessment under section 153A, in case of Arch Pharmalabs Ltd vs. ACIT (supra) held that 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. The relevant part of the order is extracted below; 11.5 At the cost of repetition, it may be reiterated that in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that Para 2 of the above approval letter merely says that Approval is hereby accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders... which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onary approval under section 153D cannot termed as legitimate. The consequential assessment orders based on non est approval under section 153D, thus are void-ab-initio on this ground alone. Considering the facts that we have allowed the appeal on the legal issues therefore, consideration of appeal on merit have become academic. (iv) Ritanjali Khatai Ors. v. ACIT, CC-1, Bhubaneswar in IT(SS) A.No.51 to 53/CTK/2019 (Date of Order: 08.04.2022) (ITAT Cuttack), wherein the Tribunal has held that the assessment framed u/s.153A/143(3) of the Act is not sustainable without proper approval u/s.153D of the Act. The relevant observations of the Tribunal are as under :- 11. On perusal of the above two approvals given in the case of two different assessees, we found that both the approvals are similar to each other. In both the approval letter, the JCIT has simply mentioned that approval is hereby accorded as per provisions of Section 153D of the Act for passing the assessment order, therefore, the arguments of the ld. CIT-DR that facts and circumstances along with the approval given in Dilip Construction Pvt. Ltd. and in the case of Ritanjali Khatai are different, cannot be accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent orders u/s.153A r.w.s 143(3) of the Act. 34. Considering the facts and circumstances of the case in the light of above discussion, it is amply clear that the AO vide latter dated 17.11.2017 requested the Approving Authority i.e. JCIT to grant approval u/s 153D of the Act and furnished relevant assessment records and draft assessment order before him for consideration prior to grant of approval. As we have already noted above that there is no requirement of mandate of section 153D of the Act that an opportunity of hearing should be allowed to the assessee before grant of approval u/s.153D of the Act but at the same time, it is also a requirement of mandate of section 153D of the Act that the approving authority must apply his mind to the relevant assessment records and draft assessment order before granting approval u/s.153D of the Act. As the requirement of grant of approval by the Superior authority is not merely a formality but it is a mandate and requirement of provisions of the Act. 35. In our considered and humble opinion, no procedure for grant of approval has been provided u/s.153D of the Act and the Income tax Rules, 1962. However, when legislature has enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be cured or rectified by any other exercise or working undertaken by the approving authority after grant of approval and after passing the assessment orders u/s.153A of the Act by the Assessing officer. 37. The provisions of section 153D of the Act was inserted by the Finance Act, 2007 w.e.f. 1.6.2007. In our humble understanding of said provision, the legislative intent for insertion of said provision is clear inasmuch as prior to insertion of provision u/s.153D, there was no provision for taking approval in cases of assessment or reassessment where search and seizure operation was conducted u/s.133A of the Act. Therefore, in our considered view, the legislature wanted the assessment/reassessment of search and seizure cases should be made and orders should be passed with the prior approval of superior authority, which also means that the superior authority should apply his mind on the materials on the basis of which the AO is making or passing assessment orders and after due application of mind to material in the hands of department while initiating search proceedings, material found seized during the course of search and also material or information unearthed or gathered d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the duty of the approving authority to act in accordance with the mandate and provisions of law while granting approval and discharging statutory function lay on his shoulders by following proper procedure and also by applying his judicious and cautious mind to the relevant assessment folders/files and draft assessment orders while granting approval u/s.153D of the Act. This is not a formality but a statutory duty of the approving authority with a corresponding obligation on him to examine relevant record and assessment orders and thereafter grant the approval. We are cautious about that the reasons for granting approval may not be a subject matter of challenge or are not required to be mentioned in the order of approval but the manner and the material on the basis of which approval has been granted can be challenged by the assessee and following proper procedure and application of mind by the approving authority should be discernible from the order of approval. No other evidence or documents is required to be considered or appreciated as the approval should be self-speaking that it has been granted by the ld JCIT by following due procedure and due application of mind to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has been sanctioned or accorded by the ld JCIT before allowing the AO to pass the relevant assessment orders. From the relevant approval orders dated 23.11.2017, it is vivid that ld JCIT has not mentioned in the approval orders that he has gone through the relevant assessment records/files/folders and draft assessment orders for granting approval. These facts clearly show that the approval had been granted in a mechanical manner without application of mind and, thus, no valid approval has been granted by the ld JCIT before authorising the AO to pass assessment orders u/s.153A of the Act. Accordingly, all assessment orders are vitiated and thus same are void being bad in law. The requirement of mandate of section 153D of the Act has not been satisfied in both the cases and accordingly we hold that the all assessment orders are vitiated and thus same are void being bad in law. We, accordingly set aside the impugned orders of lower authorities and quash the assessment orders by allowing additional ground of the assessees in all appeals filed by both the assessees having identical and similar facts and circumstances. 12. Thus, respectfully following the above observations of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or through uploading the same on portal of the department makes no difference, however in the present case no such issue has been agitated, thus the same has no bearing on the issue to be decided herein. 18. In view of the above discussion and observations, respectfully following the decision of the Hon'ble High Court of Allahabad as well as orders of the coordinate benches of the Tribunal referred to above, in absence of any submission or decisions contrary to what has been emerged by the observations herein above, we do not have any reason to upheld the order of the authorities below, consequently we hold that the order of Ld CIT(A) in affirmation of the order of Ld AO u/s.153A r.w.s.143(3) of the Act is unsustainable and derives to be quashed and we do so. Accordingly, the assessment order in the case of the assessee u/s.153A r.w.s.143(3) of the Act stands cancelled. Thus, the legal ground raised by the assessee in the form of additional ground is allowed. Since, we have allowed the legal ground of the assessee, other grounds, though not argued by the ld AR, are not adjudicated upon. 19. In the result, the appeal of assessee is allowed. 9. We note that facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all the issues emanating from the records have been verified and the additions wherever required have been proposed. These facts clearly show that the action of the JCIT granting approval in this case was. Thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. 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. 10. Thus, the facts in the present case are quite identical to the case dealt with by the coordinate Bench at Raipur. Case laws referred in the aforesaid order and cited by the ld. Counsel of the assessee also support the case of the assessee. 11. Ld. DR for the Revenue could not make any cogent rebuttal of the submissions of the case laws cited by the ld. Counsel of the assessee. His plea shows that section 153D approval is proper and that there is lack of appreciation of the Income-tax Department. He further submitted that as per section 153D, there is no specific format for granting the approval. As regards various case laws cited by the assessee, ld. DR for the Revenue did not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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