AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 793
X X X X Extracts X X X X
X X X X Extracts X X X X
....framed pursuant to the approval granted under section [u/s in short] 153D of the Income Tax Act, 1961 [hereinafter referred to as the "Act"] by the Learned Joint Commissioner of Income Tax, Central Range-4 Delhi [hereinafter referred to as the "ld. JCIT"] in a mechanical manner and accordingly, the entire search assessments deserve to be quashed. 4. We have heard the rival submissions and perused the materials available on record. At the outset, the additional grounds raised by the assessee go to the root of the matter and those being legal issues and facts relevant for their adjudication are already on record, we are inclined to admit those additional grounds and take up the same for adjudication first. A search and seizure operation u/s 132 of the Act was carried out on 23.7.2015 and on subsequent dates in different business and residential premises of Shri Deepak Agarwal and Shri Mukesh Kumar and other cases of Mukesh Kumar Group and Deepak Agarwal Group based at Delhi. According to the investigation wing, these groups were found to be interconnected with each other and with some group of entry operators providing accommodation entries to beneficiaries in the form of share capi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....17 Rs 3,57,660 17. Radhika Clothings Ltd 8858/del/2019 2014-15 10/07/2017 09/08/2017 Rs 3,08,050 18. Radhika Clothings Ltd 8859/del/2019 2015-16 10/07/2017 28/03/2017 Rs 1,71,060 19. Shridhar Portfolio Management Ltd 8862/del/2019 2011-12 02/09/2016 06/11/2017 Loss of Rs 47,252 20. Shridhar Portfolio Management Ltd 8863/del/2019 2013-14 02/09/2016 06/11/2017 Rs 4,87,400 21. Shridhar Portfolio Management Ltd 8864/del/2019 2014-15 02/09/2016 06/11/2017 Rs 3,22,670 22. Shridhar Portfolio Management Ltd 8865/del/2019 2015-16 02/09/2016 06/11/2017 Rs 14,43,320 23. Sperryn Gas Products Limited 8866/del/2019 2010-11 02/09/2016 06/11/2017 Rs 24,173 24. Sperryn Gas Products Limited 8867/del/2019 2011-12 02/09/2016 06/11/2017 Different figures noted in page 2 (Rs 24,173) and final income computation Rs 47,252 (loss) 25. Sperryn Gas Products Limited 8868/del/2019 2013-14 02/09/2016 06/11/2017 Rs 131,560 26. Sperryn Gas products Limited 8869/del/2019 2015-16 02/09/2016 06/11/2017 Rs 370,650 27. Late Nem Chand Gupta (through legal heir mohitgupta) 8872/del/2019 2012-13 02/09/2016 04/10/2016 Rs 538,850 28. Late Nem Chand Gupta (....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs 9,15,27,869 10. Deepak Agarwal 8830/del/2019 2013-14 29.12.2017 Rs 6,31,27,795 11. Deepak Agarwal 8831/del/2019 2014-15 29.12.2017 Rs 7,16,51,028 12. Deepak Agarwal 8832/del/2019 2015-16 29.12.2017 Rs 7,82,40,117 13. Deepak Agarwal 8833/del/2019 2016-17 29.12.2017 Rs 1,49,83,287 14. ShakumbhariAgrofarmPv tltd 8834/del/2019 2012-13 26.12.2017 Rs 69,00,000 15. RadhikaClothings Ltd 8856/del/2019 2012-13 29.12.2017 Rs 46,95,610 16. RadhikaClothings Ltd 8857/del/2019 2013-14 29.12.2017 Rs 44,08,040 17. RadhikaClothings Ltd 8858/del/2019 2014-15 29.12.2017 Rs 42,97,378 18. RadhikaClothings Ltd 8859/del/2019 2015-16 29.12.2017 Rs 29,48,030 19. Shridhar Portfolio Management Ltd 8862/del/2019 2011-12 29.12.2017 Rs 18,81,67,160 20. Shridhar Portfolio Management Ltd 8863/del/2019 2013-14 29.12.2017 Rs 43,50,826 21. Shridhar Portfolio Management Ltd 8864/del/2019 2014-15 29.12.2017 Rs 46,17,828 22. Shridhar Portfolio Management Ltd 8865/del/2019 2015-16 29.12.2017 Rs 1,55,03,131 23. Sperryn Gas Products Limited 8866/del/2019 2010-11 29.12.2017 Rs 10,07,96,672 24. Sperryn Gas Products Limited 8867/del/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....017 29.12.2017 5. Mysore FinleasePvt Ltd 8825/del/2019 2015-16 29.12.2017 29.12.2017 6. Mysore FinleasePvt Ltd 8826/del/2019 2016-17 29.12.2017 29.12.2017 7. Deepak Agarwal 8827/del/2019 2010-11 29.12.2017 29.12.2017 8. Deepak Agarwal 8828/del/2019 2011-12 29.12.2017 29.12.2017 9. Deepak Agarwal 8829/del/2019 2012-13 29.12.2017 29.12.2017 10. Deepak Agarwal 8830/del/2019 2013-14 29.12.2017 29.12.2017 11. Deepak Agarwal 8831/del/2019 2014-15 29.12.2017 29.12.2017 12. Deepak Agarwal 8832/del/2019 2015-16 29.12.2017 29.12.2017 13. Deepak Agarwal 8833/del/2019 2016-17 29.12.2017 29.12.2017 14. Shakumbhari Agrofarm Pvt ltd 8834/del/2019 2012-13 22.12.2017 23.12.2017 15. Radhika Clothings Ltd 8856/del/2019 2012-13 29.12.2017 29.12.2017 16. Radhika Clothings Ltd 8857/del/2019 2013-14 29.12.2017 29.12.2017 17. Radhika Clothings Ltd 8858/del/2019 2014-15 29.12.2017 29.12.2017 18. Radhika Clothings Ltd 8859/del/2019 2015-16 29.12.2017 29.12.2017 19. Shridhar Portfolio Management Ltd 8862/del/2019 2011-12 28.12.2017 29.12.2017 20. Shridhar Portfolio Management Ltd 8863/del/2019 2013-14 28.12.2017 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to verify the issues raised by the Ld. AO in the draft assessment order and apply his mind and ascertain whether the entire facts have been properly appreciated by the Ld. AO. The said approval proceedings is a quasi judicial function to be performed by the ld. JCIT based on sound reasoning on due examination of the seized documents, replies filed by the assessee and the draft assessment orders of the Ld. AO. Thus, it is bounden duty of the ld. JCIT to exercise this power by applying his judicious mind. The Ld. AR vehemently argued that the 40 draft assessment orders for 10 assessees were sent for approval by the Ld. AO to the ld. JCIT on 29.12.2017 and the ld. JCIT had granted approval for all the cases on the very same day, i.e., on 29.12.2017. The Ld. AR reiterated the fact that 40 draft assessment orders u/s 153A of the Act were approved by the ld. JCIT u/s 153D of the Act on the single day i.e. the day on which the draft assessment orders were forwarded to the ld. JCIT by the ld AO. Based on this, the Ld. AR submitted that the ld. JCIT had granted approval by devoting very few minutes for each case in a mechanical manner u/s 153D of the Act without due application of mind. Mor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act talks only about existence of approval from the ld. JCIT. There is no mention of application of mind on the part of the ld. JCIT or the approving authority in the said section. The expression "application of mind" is only provided by the Judicial decisions and not provided in the statute. Hence the Ld. DR argued that literal interpretation is to be given to the provisions of section 153D of the Act which does not provide for application of mind of the approving authority and hence any other interpretation contrary to the same would only result in re-writing the law. 9. We find, as per the scheme of the Act, for framing search assessments, the Ld. AO can pass the search assessment order u/s 153A or u/s 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the ld. JCIT in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the ld. JCIT is a quasi judicial proceeding requiring application of mind by the ld. JCIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e conclusions drawn in the appraisal report by the Investigation Wing, both the Ld. AO and the ld. JCIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. In our considered opinion, if the arguments of the Ld. CIT DR are to be appreciated that the ld. JCIT need not apply his mind while granting approval of the draft assessment orders u/s 153D of the Act as it is not provided in section 153D of the Act, then it would make the entire approval proceedings contemplated u/s 153D of the Act otiose. The law provides only the Ld. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. JCIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the Ld. AO. 10. 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. JCIT in a judicious way after due application of mind or not, in the instant case. 11. We have gone through the approval granted by the ld. JCIT on the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ving 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 'seen' or 'approved' will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act, it would equally apply to Section 153D of the Act. There are three or four requirements that are mandated therein, (i) the AO should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) 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. 23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves. 26. The question of law framed is therefore answered in the affirmative i.e., in favour of the Assessee and against the Department. 27. The appeals are accordingly dismissed, but in the circumstances, with no order as to costs." 13. Further, we find that similar view was taken by the Hon'ble Allahabad High Court in the case PCIT vs. Subodh Aggarwal in Income-tax Appeal No.86/2022 dated 12.12.2022. In this case, the draft assessment order was placed for approval before the Addl. CIT on 31.12.2017. The approval u/s 153D was granted by the Addl. CIT on 31.12.2017. The final assessment order was passed by the AO on 31.12.2017. The time limit for completion of search assessment was 31.12.2017. 38 cases were approved by the Addl.CIT u/s 153D of the Act on 31.12.2017. In this backgr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (1) of] section 153A or the assessment year referred to in clause (b) of subsection (1) of section 153B, except with the prior approval of the Joint Commissioner. 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." The Tribunal while quashing the assessment order had relied upon its earlier decision in Navin Jain and Others (Supra) wherein a detailed discussion has been made with regard to the requirement of prior approval of superior authority on the draft assessment order under Section 153D, before passing the assessment order by the Assessing Officer. It was noted that the word 'approval' though has not been defined in the Income Tax Act but the general meaning of the word 'approval' in Black's Law Dictionary, 6th Edition was to be seen. The decision of the Apex Court in Vijayadev Naval Kishore Bharatia vs. Land Acquisition Officer (2003) 5 SCC 83 wherein the distinction between Approving Authority and Appellate Aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty on the assessee. The Tribunal has further noted that the provisions contained in Sections 153A to Section 153D provide for separate notice to be given to assessee for assessment for each year as specified in Section 153A of the Act; the assessee has to file separate ITR for each year as specified in Section 153A of the Act; separate assessment orders are to be passed for each year as specified in Section 153A of the Act. It was observed that this is an important concept mentioned in Section 153A of the Act, which is peculiar to the scheme of the said Section. Keeping in view of this basic fundamental features of Section 153A, if Section 153D is scrutinized, then, it would become manifest that an important phrase is employed in the text of Section 153D, which is "each assessment year". The reading of the provisions in Section 153A and 153D conjointly makes it clear that separate approval of draft assessment order for each year is to be obtained under Section 153D of the Income Tax Act. In its erudite judgement with the discussion on the legislative intent of Section 153A to 153D and the meaning of the "approval" as defined in Black's Law Dictionary as also the decisions o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al 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 re-assessment. 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 subsection (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 or years), referred to in Clause (b) of sub-section (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 such six assessment years (and f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 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 whereas 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 mentioned earlier, there are infirmities in the figures of original return of income as well as total assessed and the Addl. CIT while giving his....