TaxTMI 
TaxTMI 
2023 (5) TMI 1094
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....ejudice to the above, on the facts and circumstances of the case and in law, the ld. CIT (A) has not considered the legal issue that approval granted by the Jt.CIT u/s 153D is in mechanical & routine manner without application of mind by the Jt.CIT in a hasty manner, merely a formality, an empty ritual; in absence of valid approval as mandated by law u/s 153D as per sec. 153B(1)(a); assessment made u/s 153A would be invalid, bad in law & non-est and is liable to be quashed." 4. Upon careful consideration, we find that above said ground goes to the root of the matter and we would adjudicate the same first. 5. Before proceeding further, it is gainful to refer to section 153 approval in this case which reads as under :- "To The Asst. Commissioner of Income tax (Central), Bilaspur. Subject- Approval under u/s 153D of the I.T. Act - Amolak Singh Bhatia Group, Bilaspur - Regarding. Please refer to your letter in F.No.ACIT (CC)/BSP/153D/2018-19 dated 08.02.2019. 2. The draft assessment orders u/s 153A and 143(3) in the following cases submitted vide above mentioned letter are hereby approved u/s 153D of the I.T. Act - S.No. Name of ....
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....t any material was supplied by the Assessing Officer to the approving authority for its perusal. It is mentioned that "draft assessment orders u/s 153A and 143(3) in the following cases submitted vide above mentioned letter are hereby approved u/s 153D of the I. T. Act. This shows only orders were submitted. d. It is no-where stated that the approving authority has perused such draft assessment orders or not. e. It is not mentioned in the approval that what is the amount of determination of income in each assessment year of each assessee. f. Approval was granted within 24 hours of proposal. g. Approval have been granted on the same day on 22.12.2017 despite the fact that A.O. was having his office at Jabalpur and JCIT was holding his Office at Bhopal in which there is a significant distance. It is not humanly possible to look into assessment records as well as draft assessment orders thereon and apply its own mind objectively by a senior designated authority involving such complex matters and grant approval as contemplated under s.153D of the Act. h. Not mentioned as to how the draft order and assessment record, if any, have been receive....
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....ials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the Assessing Officer if he was found to have adapted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of account and/or the entries made therein. While exercising its power, the Assessing Officer has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given. 8. Hon'ble Supreme Court in the case of Sahara India ( 300 ITR 403) has examined the provisions of section 142(2A) and held that the word "prior/previous approval of Commissioner" cast heavy duty on the hig....
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....y of scrutinizing the accounts of an assessee and pass on the buck to the special auditor. Similarly, the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the Assessing Officer casts a very heavy duty on the said high ranking authority to see to it that the requirement of the previous approval, envisaged in the section is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the Assessing Officer. The approval must reflect the application of mind to the facts of the case.' 9. Hence, the approval is not an empty formality but it must show that the officer has examined the material and applied his mind. 10. The Courts have held that provisions of section 153D are mandatory and not directory. The meaning of approval is not simple approval or approval of the order in the mechanical manner. The essence of approval should actively, ci....
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....s peremptory and mandatory in nature. The Supreme Court, in some decisions has held that merely because a provision of law is couched in a negative language implying mandatory character, the same is not without exceptions. However, the present case deals with the interpretation of a taxing statute. It is well settled that a taxing statute has to strictly construed, therefore, from the language employed in section 153D of the Act, the requirement of obtaining the prior approval of the Joint Commissioner has to be regarded as mandatory in nature. b. Hon'ble ITAT Pune in the case of AKil Gulamji Somi (20 ITR (T) 255) has held that: We further note that the provisions u/s. 153D start with a negative wording "no order of assessment or re- assessment" supported by the further wording "shall" makes the intention of the Legislature clear that compliance of Sec. 153D requirement is mandatory. No universal rule can be laid down as to whether mandatory enactment 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....
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....ing the approving authority under great pressure and not giving him sufficient time to apply his mind; on the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order. 13. 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 d. Hon'ble High Court of Allahabad in the case of PCIT vs. Sapna Gupta (147 taxmann.com 288) and e. PCIT vs. Siddarth Gupta (450 ITR 534) wherein a common approval was given by the approving authority in a mechanical manner for 85/123 cases, the Court has held as under: 19. 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 assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is an administrative exercise of pow....
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....red opinion, the power vested in the Joint Commissioner/Add! Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case. there has been no application of mind by the Addl. Commissioner be/ore granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/s. 143(3) of the Act r.w. sec. 153A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed. g. Hon'ble ITAT Delhi in the case of Uttrakhand Uthan Samiti (ITA No. 130/DDN/2019) has held that: 17. A perusal of the above clearly shows that the approval was given in a mechanical manner by the Addl.CIT to the draft assessment orders passed by the AO. As mentioned earlier, the AO has submitted the draft assessment orders on 30th March, 2015 as per the order sheet entry which indicated that the AO was very much available in her office at Dehradu....
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....orma approval which is envisaged u/s 153D of the Act Reliance is plated the judgment of Coordinate Bench in the case of M3M India Holdings (ITA 2691/2018) and the judgment of Hon'ble High Court of Bombay in the case of Pr CIT vs. Smt. Shreelekha Daman; [ ITA no 668 of 2016 Dated: 27th November, 2018] i. Hon'ble ITAT Delhi in the case of MIs. M3M India Holdings (26911012018) has held that Para 13 .... and 14. 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. Therefore, it is difficult for the Assessing Officer 'at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the Assessing Officer. Similarly, no record is available as to how the draft order and assessment record h....
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....plication of mind; No reference of assessment records and seized material j. Hon'ble ITAT Delhi in the case of Sanjay Duggal (ITA No. 1813/012019) has held that: the authorities below and the Approving Authority [JCIT] shall have to verify the incriminating material found during the course of search or the seized material if pertain to the same assessment year and its basis. The assessee has explained above that these cases are coming up because of the assessments framed in the case of M/s. JIL and others prior to the search in the case of assessee. Therefore, all material was within the knowledge of the Income Tax Authorities prior to the search in the cases of the assessees. Therefore, for granting approval under section 153D of the I. T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments and their effect, if any. But, in the present case, the Approving Authority i.e; JCIT has granted common approval for all the assessment years in respect of the single assessee. Thus, th....
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....TMI 1027) - ITAT Jabalpur z. Indra Bansal & Ors, vs. ACIT (ITA Nos. 321 to 324, 279 to 281, 325 to 331 & 400 to 404/Jd/2016)-ITAT- Jodhpur" 7. Per contra, ld. DR for the Revenue made the following submissions:- " As per the details submitted by the AR of the assessee vide Synopsis dated 28.03.2023, there are 5 quantum appeals and 5 Cross Objections relating to 5 AYs 2003-04 to 2007-08, wherein one common issue has been challenged. The issue pertains to legality of approval given by the Income Tax Authorities under section 153D of the Income Tax Act, 1961. In the cases before the Hon'ble Bench on 29.03.2023, the same legal issue has been raised by the Ld. AR. The gist of the objections raised in the Grounds of Appeal is that "2. Without Prejudice to the above, on the facts and circumstances of the case and in law, the Ld. CIT(A) has not considered the legal issue that approval granted by the Jt. CIT under section 153D is in mechanical & routine manner without application of mind by the Jt. CIT in a hasty manner, merely a formality, an empty ritual; in absence of valid approval as mandated by the law under section 153D as per section 153B(1)(a); asse....
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....been perused before granting the approval and the approval given does not even indicate that any material was supplied by the Assessing Officer to the approving authority for its perusal. 4. The grounds raised by The Ld. AR betray a lack of appreciation of the working of the Income Tax Department. The Range head is continuously involved in search assessments right from the start i.e. date of issue of first questionnaire. There are generally multiple discussions between the AO and the range head before finalization of search assessments. 5. The final approval is as mandated in section 153D and herein it may be noted that there is no specific format for granting approval that has been prescribed. 6. What is communicated on the file is the approval per se. But just by looking at the date of approval or the fact that other approvals have also been granted alongwith, it cannot be concluded that approval is mechanical or without application of mind. Such a conclusion will do injustice to the entire process that lies behind the approval granted. 7. Search assessments are some of the most complicated Assessments that are undertaken by the Department and ....
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....shed the assessment order on the ground that approval u/s 153D of the Act has been granted in the case of assessee is without application of mind. We may gainfully refer to the order of ITAT in that case as under :- "14. We have considered the rival submissions and perused the record carefully. The issue before us is to decide as to whether the assessment framed by the AO u/s.153A r.w.s. 143(3) of the Act after getting approval from the JCIT, Range-Central, Raipur in view of the provisions of Section 153D of the Act, is valid and sustainable or not, as has been raised by the ld. AR of the assessee during the course of hearing in the form of additional ground. On perusal of the assessment order we found that the AO has made addition u/s.56(2)(vii) of the Act under the head income from other sources as the assessee could not explain the source and details of the investment made by the assessee in M/s. Crest Steel and Power Ltd. and Topworth Pipes and Tubes Pvt. Ltd. in different financial years. Before passing the assessment order, the AO has sought approval from the JCIT, Range-Central, Raipur vide letter dated 03.11.2016 in the case of the assessee along with other assesse....
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....preciate on factual and legal aspects to ascertain that the entire material 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 reassessment. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of "each assessment year" referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of "each assessment year" falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of subsection (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within su....
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....identical to the approval granted in the case of the present assessee, held as under : 22. On careful perusal of the approval order of JCIT, we find that the JCIT while granting approval on 22.12.2018 recorded that " it is presumed that the AO has- given proper opportunity of hearing to the assessee, thoroughly verified the seized material and that there is no adverse finding, satisfy himself that all issues emanating from the record have been verified and additions wherever required have been proposed." 23. Before us, the ld AR for the assessee vehemently argued that JCIT has granted approval under section 153D in a casual and mechanical manner and without any application of mind and that from the communication made to the JCIT by AO vide letter dated 14.12.2018, the AO had not made any iota of reference as to what are the seized materials nor furnishes any assurance with respect to approval and appraisal of all evidences and corresponding reply by the assessee. And that ld. JCIT approved the assessment order by presuming that the necessary opportunity has been given to the assessee and all the records, evidences and materials have been thoroughly verified. The J....
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....tions made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. 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 ca not be countenanced in law. 26. Similar view was taken by Coordinate bench of Delhi Tribunal in Sanjay Duggal & others (supra). 27. So far as the contention of ld CIT-DR that the assessment under section 153A is passed under the supervision of JCIT and that JCIT gran....
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....ing authority had given approval for passing order u/s.153A r.w.s 143(3) in both the cases after satisfying himself with the draft assessment orders. This letter has been written to the JCIT (Central) by approving authority i.e. JCIT (BPU) pertaining to the office communication regarding additional ground of appeal, which are being adjudicated but in view of approval order dated 23.11.2017, thus we are inclined to accept the contention of ld A.R. that this submission of approving authority is mere an attempt to fill the gaps and procedural lacunas occurred in the procedure adopted by JCIT while granting approval under section 153D of the Act and, therefore, the contention of ld A.R. in this regard hold the field. 32. Similarly letter dated 4.1.2019 issued by JCIT (Central), Bhubaneswar to the CIT (Audit & ITAT), Bhubaneswar is merely a covering letter supplying copy of the approval dated 23.11.2017, which cannot be treated as an explanation to the approval dated 23.11.2019 curbing the mistake in the procedure adopted by the JCIT while granting approval u/s.153D of the Act. On these subsequent letters/correspondences, we are of the considered view that for adjudicating lega....
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....ainst any omission or negligence by the AO in taxing right income in the hands of right person in the right assessment year and on the other hand he is also responsible and duty bound to do justice with the taxpayer/assessee by granting protection against arbitrary or unjust or unsustainable exercise and decision by the AO crating baseless tax liability on the assessee and thus he has to discharge his duties as superior authority. Thus, granting approval u/s.153D of the Act is not merely an official formality but it is a supervisory act which requires proper application of administrative and judicial skill by the authority on the application of mind and this exercise should be discernible from the order of approval u/s.153D of the Act. 36. In our humble understanding the provisions of section 153D of the Act has been introduced by the legislature in its cautious wisdom to make it mandatory on the supervisory authority/approving authority to discharge the duty towards both the assessee as well as revenue to follow the proper procedure and to apply his mind on the material, relevant evidences and other documents including materials found during search & post search investiga....
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....official formality but the provision has been inserted by the legislature with some specific and useful purpose. It is apparent that the purpose behind enactment of the said provision in the Statute by the legislature are of two folds viz (i) before approval, the Sr. Authority will ensure that the assessee should be protected against undue or irrelevant addition & disallowances in the assessment and (ii) the approving granting authority will also ensure that proper enquiry investigations are carried out by the Assessing Officer on all the relevant materials including material in hands of the department at the time of initiating search proceedings, material or documents found and seized during search operation and materials found and unearthed during post search investigations and enquiries. Therefore, said provision provides and requires application of mind by the approving authority of the department which, in turn, provides safeguard to the both the parties i.e. revenue and the assessee. Therefore, the provisions of section 153D of the Act cannot be treated as a mere formality and mandate therein required to be followed by the approving authority in a judicious manner by due appl....
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....nd draft assessment/reassessment orders and this fact should be clearly discernible from the approval order and no other extraneous material/document can be seen in this regard. 40. In view of above, we are inclined to hold that if an approval has been granted by the approving authority in a mechanical manner without application of mind then the very purpose of obtaining of approval u/s.153D and mandate of enactment by the legislature will be defeated. In the present case, the approving authority, the ld JCIT got five days time but from the order of approval, we are unable to see any exercise by the approving authority and even in the approval orders (supra), he has not mentioned that the relevant appeal folders/files alongwith assessments/ reassessment orders have been perused or any discussion or consultation has been made with the AO prior to granting of approval u/s.153D of the Act. Accordingly, we are compelled to hold that the approval granted by the ld JCIT in the appeals under consideration has been granted in a mechanical manner without application of mind and that the assessments/reassessment orders passed by the AO on such approval are declared to be void and ba....
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....ssed by the CIT(A) affirming the assessment order passed by the AO, is not unsustainable. Accordingly, we allow the ground No.2 of the assessee and cancel the assessment order framed u/s.153A/143(3) of the Act. 16. In the present appeal, the JCIT, Range-Central Raipur has granted approval on the presumption basis, which in our opinion is not permissible. When the approval is not valid, then the assessment framed u/s.153A r.w.s.143(3) of the Act in the case of the assessee is not sustainable. 17. Before concluding and offering our final view on the issue, this is pertinent to mention here that the case laws relied upon by the Ld CITDR are distinguishable on facts, have no bearing on the issue under discussion in the present appeal, thus the same are not of any help to the revenue to support their contentions. The judgment in the case of Bharat Krishi Kendra vs. Union of India (supra) was decided in favour of the revenue only on the reason that where "Joint Commissioner recorded satisfaction on proposal of Assessing Officer by mentioning that it is a fit case for issuance of notice, approval under section 151. giving details of approving authority as Principal Commi....
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....ied by the Assessing Officer to the approving authority for its perusal. It is mentioned that draft assessment orders u/s 153A and 143(3) in the following cases submitted vide above mentioned letter are hereby approved u/s 153D of the I. T. Act and this shows only orders were submitted. It is no-where stated that the approving authority has perused such draft assessment orders or not. It is not mentioned in the approval that what is the amount of determination of income in each assessment year of each assessee. Approval was granted within 24 hours of proposal. Approval have been granted on the same day on 22.12.2017 despite the fact that A.O. was having his office at Jabalpur and JCIT was holding his Office at Bhopal in which there is a significant distance. It is not humanly possible to look into assessment records as well as draft assessment orders thereon and apply its own mind objectively by a senior designated authority involving such complex matters and grant approval as contemplated under section 153D of the Act. Not mentioned as to how the draft order and assessment record, if any, have been received by JCIT, if he has gone through the assessment record or that assessment r....