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TMI Blog2025 (3) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) further seriously erred in law as well as on facts of the case by not following the law laid down by the Apex Court holding that no addition is legally permissible in absence of any incriminating material found during the course of search in the case of an unabated/completed assessment and hence, in this case, in absence of any incriminating material found, the impugned addition deserves to be deleted in full. 3. Rs. 25,07,454/-: The ld. CIT (A) erred in law as well as on the facts of the case in confirming the addition/deduction made by the ld. AO of Rs. 25,07,454/- on account of alleged expenditure. The addition so made and confirmed by the ld. CIT (A) being contrary to the provisions of law and facts of the case, the same may kindly be deleted in full. The following is the chart of these expenditures : S.No. Heads of Expenses/Deductions Expense/Deduction sustained by CIT (A) 3.1 Travelling Expenses Rs. 3,00,000/- 3.2 Staff Welfare Rs. 3,00,000/- 3.3 Office Expenses Rs.11,02,093/- 3.4 Students Welfare Expenses Rs. 50,000/- 3.5 BD Expenses Rs. 5,00,000/- 3.6 Function Expenses Rs. 50,000/- 3.7. Disallowance u/s 14A Rs. 2,05,361/- Total Bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er accepting or rejecting the contentions. The appellant submits that the new plea go to the very basis of assuming jurisdiction for passing the assessment order u/s 143(3) read with section 153A/153B(1)(b) of the Income Tax Act, 1961. Consequently, as per the ratio laid down by the Hon'ble Apex Court in the case of NTPC vs. CIT (1998) 229 ITR 383 (SC) the new plea is admissible. Therefore, the additional grounds raised by the assessee can be adjudicated on the basis of the facts and material available on the assessment record. Thus when the additional grounds are not raising a new issue or plea, then in the facts and circumstances of the case, we admit the additional grounds raised by the assessee for adjudication on merit. Since the additional grounds raised by the assessee are purely legal in nature and goes to the root of the matter, therefore, first we take up for adjudication of the additional grounds. Since the additional grounds raised by the assessee are common for all the assessment years, we take up ITA No. 672/JP/2024 as lead case and the decision rendered thereon shall apply with equal force for other appeals also except with variance in figures. 4. The brief facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding Circular No. 19/2019 dated 14.08.2019. 5.1 In this regard the ld. AR for the assessee submitted his written submission as under : "1.1. It is submitted that in order to prevent instances where certain notices, orders, summons, letters and other correspondences which have been issued manually do not have proper audit trail of their communication despite various e-governance initiatives and computerization and to maintain proper audit trail of all the communications, the Central Board of Direct Taxes ("CBDT" in short) vide its Binding Circular No.19/2019 dated 14.08.2019 (DC-1-2) has made it obligatory on the part of the authorities below to essentially mention of Document Identification Number ("DIN" for short) and has directed that no communication shall be issued by any Income-Tax Authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval, etc. to the Assessee or any other person, on or after the 01.10.2019 unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. Para 3 of the said Circular provides fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o how the non-compliance of the CBDT Circular dt. 14th Aug., 2019, which was noted by the Tribunal when it passed the main order. The Tribunal notes that this specific query was unable to be answered by the Revenue and therefore the learned Tribunal came to the conclusion that the order passed under s. 263 does not satisfy the requirement mandated by the CBDT circular. "7. Thus, we find no substantial question of law arises for consideration in this appeal. Accordingly, the appeal is dismissed." 2.2 Kindly refer Hexaware Technologies Limited vs ACIT & Ors. (WP no.1778/2023) (DC 5-47), wherein the notice u/s 148 was issued without DIN. The Hon'ble Court vide its order dated 04.05.2024 held as under: "31 As regards issue no.3, in the notice dated 27th August 2022 impugned in the petition, admittedly there is no DIN mentioned. It is petitioner's case that the notice is invalid and bad in law in view of the Circular No.19 of 2019 dated 14th August 2019 issued by CBDT. A separate intimation letter also dated 27th August 2022 was issued and the said letter reads as under: xxx----xxx-----xxx-----xxx-----xxx We agree with petitioner that this letter cannot validate the notice issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P directions dated 30.12.2021 is invalid in the eyes of law and shall be deemed to have never been issued as per Para 4 of the CBDT circular as the order is not conformity with Para 2 and Para 3. Accordingly, the DRP order dated 30.12.2021 is held to be null and void ab initio and quashed. Thus, the additional grounds No. 24 & 25 raised by the assessee on the legal issue are allowed." While holding so, the Hon'ble ITAT has firstly admitted the additional ground of Appeal in Para 5 and thereafter, followed the decision in the case of Intrado EC India Private Ltd. v. DCIT IT(TP)A No.239/Bang/2021. 2.5 Various other decisions are in the case of Bangalore Narayan Das vs. ITO (International Taxation) (2023) 226 TTJ (Bang) 66, Ankit Jain v. DCIT (2023) 155 taxmann.com 321 (Delhi - Trib.) and Deepak Kumar vs DCIT (2024) 159 taxmann.com 358 (Delhi - Trib.) 3. Supporting Case Laws - CBDT Instructions are binding: 3.1 The CBDT circular and instructions have been held to be binding on the Income-Tax Authorities for which a useful reference can be made to the cases of CIT v. Hero Cycles (P.) Ltd. (1997) 94 Taxman 271/228 ITR 463 (SC), wherein, it was held that circulars bind the ITO bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion statute, strict Rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favorable to the assessee need to be applied. 4. In the instant case, since the impugned assessment order has been passed in the absence of DIN as aforesaid, hence the impugned assessment order may kindly be held as non-est / invalid and quashed." 6. On the other hand, Ld. DR for the Revenue has submitted that the matter as regards impact of non-mentioning of DIN number, as per instructions issued by CBDT is pending adjudication before the Hon'ble Supreme Court, and as such, there is no merit in the contention on behalf of the assessee-appellant. 7. We have heard rival contentions, perused the material on record and gone through the orders of the lower authorities. The first additional ground raised on behalf of the assessee-appellant is that the impugned assessment order is a nullity as no DIN Number was generated as regards the assessment order, as prescribed by CBDT in its instructions issued to the Income Tax Authorities, which they are required to follow, but were not followed, and as such, impugned assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirements of the law. The mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like 'see' or 'approved' will not satisfy the requirement of the law. 2.2 Moreover, it is contented that the provisions contained in S. 153D as enacted by the parliament cannot be treated as an empty formality. The provision has a 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 bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually apply to s. 153D. It is an admitted position that the assessment orders are totally silent about the AO having written to the Addl. CIT seeking his approval or of the Addl. CIT having granted such approval. Interestingly, the assessment orders were passed on 30th Dec., 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure. For all of the aforementioned reasons, the Court finds that the Tribunal has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of s. 153D and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the Tribunal that in the present cases such approval was granted mechanically without application of mind by the Addl. CIT resulting in vitiating the assessment orders themselves The initial assessment order as also the impugned assessment order without jurisdiction is void-ab-initio being a nullity and hence the same deserves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and is completed under the active guidance and monitoring / supervision of JCIT/Addl.CIT. It is not a matter of application of mind in few days. The JCIT/Addl. CIT frequently goes through the seized documents and makes discussion from time to time with AO. 10. We have heard both the parties and perused the material available on record. Let us now examine whether in the aforesaid background of the scheme of the Act, whether the approval in terms of section 153D of the Act has been granted by the ld. Addl. CIT in a judicious way after due application of mind or not, in the instant case. Before us, the ld. A/R for the assessee has contended that the impugned assessment order is nullity, being without jurisdiction, in as-much-as no prior approval, as mandated by section 153D of the Act, was obtained. Furthermore, it has even been contended that if the said approval was obtained, same was accorded mechanically without application of mind. Accordingly, Ld. A/R for the appellant has urged that the impugned assessment order deserves to be set aside. The ld. A/R further contended that the assessments in these cases were completed u/s 153A of the Act by Asst. CIT, Central Circle, Kota vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval' to an 'order' of subordinate authority then the superior authority must apply his mind to all material on record, basis of order made by subordinate authority and superior authority must ensure that the subordinate authority has followed due process of law and has not taken arbitrary decisions. It was submitted that the obligation of the approval of the approving authority is of two fold i.e. on one hand, he has to apply his mind to ensure the interest of the Revenue against any omission or negligence by the Assessing Officer in taxing right income in the hands of right person and in right assessment year and on the other hand, superior authority is also responsible and duty bound to do justice with the taxpayer by granting protection against arbitrary or creating baseless tax liability on the assessee. 10.3 The ld. AR argued that in the case of search, assessment orders whether framed under section 153A or 153C of the Act, the Joint Commissioner i.e. approving authority is required to see that whether the additions have been made in the hands of assessee are based properly based on incriminating and/ or other material found during the course of search and further enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.12.2010 by merely saying that the draft orders submitted by the officer in the above case for the seven assessment years are hereby approved. The Hon'ble Orissa High Court took note of this fact and quashed the search assessment and decided the issue in favour of the assessee by holding as under:- "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, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like 'see' or 'approved' will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Althou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment record or the search material. The relevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: "17.1 However, in the present case, we have no hesitation in stating that there is complete non-application of mind by the Learned Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs. 87,20,580/-. Similarly, when the total assessed income as per the AO comes to Rs. 16,69,42,560/-, the Addl. CIT could not have approved the assessed income at Rs. 1,65,07,560/- had he applied his mind. The addition of Rs. 15,04,35,000/- made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. 17.2 Even the factual situation is much worse than the facts decided by the Tribunal in the case of Sanjay Duggal (Supra). In that case, at least the assessment folders were sent where as in the instant case, as appears from the letter of the Assessing Officer seeking approval, he has sent only the draft assessment order without any assessment records what to say about the search material. As me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of the Act, requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise of power. 16. It was observed that this is an important concept mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under section 153A. " 10.8 Pertinently, this issue is also directly covered by the judgment of Coordinate Bench of the Tribunal, Jodhpur in the case of Indra Bansal & Ors. Vs ACIT in ITA Nos. 321 to 324, 279 to 281, 325 to 331 & 400 to 404/Jodh/2016 vide order dated 23.02.2018. The relevant portion is reproduced below : "6. We have heard the rival contentions and have perused the material on record. The main contention of learned Authorised Representative is that reasonable time was not available with the Joint Commissioner for the grant of necessary approval as envisaged under section 153D of the Act. We have perused the forwarding letter dt. 30-3-2013 seeking approval of the draft assessment order. The date of receipt of this letter in the office of Joint Commissioner is indisputably on 31-3-2013 which is apparent from the date stamped on it by the office of the Joint Commissioner. Thus, this leaves no doubt that the letter requesting grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, 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 Co-ordinate Benches of Mumbai and Allahabad as aforementioned and also applying the ratio of the judgment of the Hon'ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to look into all the facts and details of search proceedings, the detailed and voluminous orders containing number of evidences, documents, statements of various persons etc. Thus, it clearly suggests there was no sufficient time for the Addl. CIT to look into to all the evidences, documents, statements of various persons in one day i.e. 26.12.2019; as 25.12.2019 being Christmas holiday. Hence, the approval granted by the Addl. CIT clearly lacks any application of mind and the approval granted in mechanical manner cannot be said to be valid approval taken in the eye of law. 10.11 Further, the Approving Authority has to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. The Hon'ble Allahabad High Court in PCIT vs Sapna Gupta [2023] 147 taxmann.com 288/[2022 SCC OnLine All 1294] took note of this fact and quashed the search assessment holding that the "approval" as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the Assessing Officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148." 10.14 Therefore, for various reasons discussed above, the impugned approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D of the Act. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decision of the Hon'ble Orissa High Court and Hon'ble Allahabad High Court referred to supra. Hence, we find lot of force in the arguments advanced by the ld. AR in support of the additional ground raised for all the assessment years under consideration before us. Accordingly, the additional ground no. 8 raised by the assessee is hereby allowed. 11. Since, pursuant to the allowing of the additional ground, the entire search assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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