TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 1336
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....val in accordance with law. It was further submitted that, in case, this Tribunal comes to the conclusion that the matter is required to be heard on merits, and the ground no 11 supra is decided against the assessee then the matters are required to be heard on merits and other legal grounds were required to be decided . 4. To this the ld. DR had submitted, he has no objection for arguing and ground no .11, However, it was submitted that in case the Tribunal comes to the conclusion that the order passed by the AO was bad in law, on account of lack of approval u/s 153D, then, the matter may be remanded back to the lower authorities for passing the appropriate order. 5. The ld. AR for the assessee, at the outset had drawn our attention to para 8 to 8.3 of the CIT(A) order at page 10 to the following effect:- "8. Vide ground no. 10 of the appeal is against the order passed by the AO without obtaining requisite approval under section 153D of the act. The appellant has submitted 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 ....
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....eedings and a proper procedure must be followed and every activity is supposed to be recorded. The AO/Range heads keep on getting transferred during the proceedings. To apprise the successor AO/Range head, what decisions have been taken in past, must be recorded in the file and mention should be there in the order sheet also. During the inspection of the file, there was no such material available, which could justify this contention of the AO. In case the same is in some different folder, the AO should be directed to produce the same and the copy may please be provided to the assessee. Otherwise keeping in view, the comments of the AO there is no application of mind at the final stage and this is in violation of the spirit of section 153D and is illegal. In addition to this AO has written that in present time being time of technology, the communication between persons at different stations is held via phone/ fax and date of receipt of 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, agreeing that approval was received by Fax, the copy of the fax duly seen by the AO....
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....onal CIT(A), without applying his mind, without considering the draft assessment order and documents, had wrongly granted the approval in a mechanical manner . The approval was communicated to the AO on 28/7/ 2016. It was submitted that non-application of mind by Add. CIT, is manifest from the letter itself, where, no reason whatsoever for granting the approval was mentioned . It was submitted that for all the assessment years, common approval was granted by the Add Cit, without giving reasons for each year. It was submitted that along with letter seeking the approval, neither draft orders were enclosed, nor assessment records were enclosed . However the additional CIT(A), had wrongly mentioned that "Assessment records in the above cases are enclosed". The approval letter of Add CIT provides as under :- 9. It was submitted by the ld. AR that the letter at page 788 dated 26.07.2016 was never sent by the DCIT to the Addl. CIT seeking 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....
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.... Dated: 12.12.2017 To The Commissioner of Income Tax (Appeal)-2, Jalanadhar. (Through the Additional commissioner of Income Tax, Central Range, Jalandhar) Sub:- Furnishing of Remand Report in the case of Sh. Madan lal, S/o Bihari Lal, R/o Model Town, shahkot in appeals no. 357, 361, 365, 344, 369, 373, 345, 377,381/16-17 for the A. Yrs. 2007-08 to 2013-14 -Reg. Sir, Kindly refer to your office letter no 2235 dated 12.12.2017 on the subject cited above. In the written submission for the all the assessment years in question, the assessee has taken common grounds of appeals. Comments of this office on these 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 o....
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....ut later, to cut short the time involved, a fresh letter was prepared seeking approval in all the six cases involved. The first letter in fact was withheld and not sent to the Addl. CIT since both copies are available in record for the A.Y.2007-08. Nonavailability of office copy of draft order sent to the Addl. CIT is not an issue at all since the same depends to the practice and not any legal requirement. In respect of the last argument that when four more days were available with the Assessing Officer to pass the orders, he acted in a haste by releasing the order on the same day, it is submitted that once an order is approved, there cannot be any illegality in passing the same on the same on the same day and no prejudice has been done 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 gr....
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....approval is liable to be quashed. 2. There were two proposals prepared by Assessing Officer. The first communication was dated 26.07.2016 (at page number 788 of PB). Howeverthesecond letter dated 27.07.2016 (at page number 789 of PB) with the same dispatch number containedtherecord of 6 different Assessee for 7 years each with 42 draft orders. The approval letter by the Addl CIT is also dated 27.07.2016 in which all 42 orders are approved in one link. 3. Assessee is challenging the validity of the assessment order and of the alleged approval given under Section 153D and the procedure adopted by the revenue authorities while granting mandatory approval under section 153D of the Act before passing the 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 Ran....
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....as received by the Assessing Officer. The Hon'ble of Punjab & Haryana High Court in the case of K. G. Madan reported in 275 ITR 294 has held that - "accordingly, the Tribunal held that notice u/s 148 of the Act was issued before recording the reasons u/s 148 (2) and therefore, initiation of proceedings u/s 148 assessment made in pursuance thereof were bad in law". A similar view was taken by Hon'ble Punjab & Haryana High Court Baldev Gyan 248 ITR 266 wherein Hon'ble High Court has held that prior to the issue of notice u/s 148 it is mandatory to record reasons as per the provisions of section 148 (2) of the Act. 9. AO has referred in the remand report at page 1128 of paper book that,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 f....
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....tion. Relavant extract is reproduced for reference- The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality 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 year....
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....ed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. 15. It is submitted that provisions of section 153D imply that the meaning of approval is not simple approval or approval of the order in a mechanicalmanner.From this, it can be well imagined that how much mind the Addl. CIT has applied, and approval is nothing but stereotype and without application of mind. The act by introducing section 153D has withdrawn the free hand of AO and cast 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 issuin....
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....val. The Addl. CIT, Chandigarh has merely gone through the draft assessment order as per PB-47. Therefore, the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion, we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. We, accordingly, set aside the orders of the 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....
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....ing approval was received in his office, and circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind and even without going through the records as the same were in Jodhpur while the Jt. CIT was at Udaipur, therefore, the approval granted by him cannot be sustained. Impugned assessments are annul led." ITAT Cuttack in the case of Geetarani Panda, Bhubaneswar vs. ACIT, Corporate Circle-1(2), Bhubaneswar ITSSA 1/CTK/2017 (at page 10-35 of CLC)observed that: 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 Office....
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....o 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 relevant records and orders. The scope and issue agitated by the assessee by way of legal ground in the present case is not that of grant of hearing or representation to the assessee at the time of granting approval but the main grievance and legal objection of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized materials and investigation report and draft assessment/reassessment orders and this fact " 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....
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....estigation and seized material and has granted the approval without any meaningful discussion and going through the record. In our view such a practice is required to be deprecated and we deprecate the same. It is the duty of the additional Commissioner of income tax to apply his mind while according the approval and should not grant approval in a callous and clandestine manner. There is a statutory duty on the additional Commissioner of income tax with a corresponding obligation on him to examine the record and thereafter accord the approval. The reason for granting the approval may not be subject matter 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....
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....he Assessing Officer has not denied the fact of receiving the letter on 28.07.2016, however, merely stated that the letter was dispatched from the office of Addl. CIT on 27.07.2016 vide Diary No.435. 21. From the reading of the above, it is clear that the approval was received in the office of the Assessing Officer on 28.7.2016, whereas the Assessment Order was passed by the Assessing Officer on 27.7.2016. In the remand report, the Assessing Officer had submitted that in the era of technology where communication between the persons via phone /fax, date of receipt of physical letter by post 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 ....
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....iting the letter from the Addl. CIT and alongwith that it was alleged that draft assessment order as well as assessment records were also sent to the Addl. CIT. In view of the above, when the approval was not sought either by fax or by email or by phone, the reasoning given by the Assessing Officer /DR does not hold good and is required to be rejected. 24. 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. 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 Commission....
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....ioner was obtained. As a natural corollary therefore, in the absence of the requirement of prior approval of the Joint Commissioner being satisfied, the whole proceeding would stand invalidated. The Tribunal was, therefore, wholly justified in holding that the impugned order of assessment would stand vitiated in view of noncompliance of the provisions of section 153D of the Act. On this count also, therefore, the appeal, does not merit acceptance. 25.Similarly in the matter of Akil Gulamali Somji 20 taxmann.com 380 (Pune) tribunal had held as under :- 11. We have considered the above submissions and have gone through the decisions relied upon by the parties in view of orders of the authorities below and material available on record. The relevant facts are that during the course of search and seizure action on 29.7.2003 at the business and residential premises of Mr. Shriram Soni, certain documents belonging to the assessee were found and seized. Notice u/s. 153C was issued to the assessee and assessment u/s. 153C r.w.s. 144 have been framed for all the 4 A.Ys. under consideration. Before the Ld CIT(A), the assessment orders were questioned both on legal issue and on merits. On l....
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....ent shall be considered directory or obligatory with an implied nullification for disobedience. As per the decision of Hon'ble Supreme Court in the cases of Banwari Lal Agarwalla v. State of Bihar AIR 1961 SC 849 ; Raza Buland Sugar Co.Ltd., v. Municipal Board AIR 1965 SC 895 if object of the enactment will be benefited by holding the same directory, it will be construed as mandatory, whereas if by holding it mandatory, serious general inconvenience will be created to nascent persons without very much further object of enactment, the same will be construed as directory. But all these does not mean that language used is to be ignored, only that the prima facie inference of the intention of the legislature arising from the words used may be displaced by considering the nature of the enactment, its designed consequences flowing from alternative constructions. The wordings and language used in Sec. 153D of the Act and the heading "prior approval necessary for assessment in cases of search or requisition" under which, Sec. 153D has been provided do not leave an iota of doubt about the very intention of the legislature to make the compliance u/s. 153D a mandatory. There is no dispute....
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....ng date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself." Chapter XIVB also deals with assessment of search cases. Sections 153A, 153B & 153 C have been introduced to Chapter XIV "procedure for assessment" w.e.f. 1.6.2003 by the Finance Act 2003 whereas Sec. 153 D has been inserted to the Chapter w.e.f. 1.6.2007 by the Finance Act 2007. These provisions thus also deal with the assessment in case of search or requisition and when the assessment orders in the present case were passed the provisions laid down u/s. 153D were very much in operation. In the present case, assessments in question have been framed on 27.12.2007. 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 ....
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....l. The reason for granting the Approval may not be subject matter of the challenge but the manner and the material on the basis of which the approval was granted can always be examined by the Tribunal 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. 22. We may record 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....
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....ll as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement. 11.2 In the backdrop of facts narrated in the preceding paras, it is the contention on behalf of the asssessee that approval granted under S. 153D does not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law. The assessment orders thus passed is vitiated in law which illegality cannot be cured. 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 sa....
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.... objectivity applied owing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 for the first time. It is axiomatic from the plain reading of approval memo that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 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 A....
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..... CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. 11.6 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 di....