TaxTMI 
TaxTMI 
2025 (4) TMI 1132
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....cumstances of the case and in law, the assessment order passed by the AO is liable to be quashed as no valid notice u/s. 143(2) of the Act was issued and the CIT(A) erred in not holding so. 4. On the facts and circumstances of the case and in law, the addition of Rs. 1,20,04,096/- made by the AO on account of disallowance of interest is beyond the scope of provisions of section 153C r.w.s. 153A of the Act and CIT(A) erred in not holding so. 5. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs. 1,20,04,906/- made by the AO on account of disallowance of interest. 6. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of rejecting the books of accounts. 7. On the facts and circumstances of the case and in law, the assessment order passed by the AO is contrary to provision of section 153D of the Act and CIT(A) in not holding so. 8. The appellant craves leave to add one or more ground of appeal or to alter / modify the existing round before or at the time of hearing of appeal. 2. The brief facts of the case are that a search & seiz....
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....flect application of mind. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the approving authority has to act in a judicious manner by due application of mind in a manner of a quasi-judicial authority. If the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval under section 153D of the Act and the mandate of the enactment by the legislature will be defeated. 3. In the present case, the approval by JCIT is not valid in view of the following reasons:- i. As per section 153A of the Act, for making assessment notice is required to be issued for each year separately for which the assessment are to be made. The notice u/s. 142(1) is also issued separately for each of the years. The assessment order is also passed separately for each of the year. As per mandate of section 153D, the approval of JCIT is also required separately for each of the assessment year. In the present case, the JCIT has given combined approval for 7 years which is not in conformity with law. The issues stands covered in favour of the assessee by the decision of jurisdictional High Court....
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....re 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. It was noted that the obligations of the approval of the Approving Authority serves two purposes: (i) On the 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. (ii) ii) On the other hand, superior authority is also responsible and dutybound to do justice with the tax-payer by granting protection against arbitrary or creating baseless tax liability 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 ....
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....jan, learned counsel for the appellant-revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the 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 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 un....
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....VB can be passed only with the previous approval of the range JCIT/ADDL. CIT (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.). The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring 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. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - -------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ....
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....sessment orders themselves. The aforesaid decision has since been upheld by Hon'ble Apex Court reported at [2024] 299 Taxmann 448 SC. 6. In the case of PCIT Versus Anuj Bansal, 2023 (7) TMI 1214 - DELHI HIGH COURT it has been held as under: - 15. Having regard to the findings returned by the Tribunal, which are findings of fact, in our view, no substantial question of law arises for our consideration. The Tribunal was right that there was absence of application of mind by the ACIT in granting approval under Section 153D. It is not an exercise dealing with a immaterial matter which could be corrected by taking recourse to Section 292B of the Act. The aforesaid decision has been upheld by Hon'ble Apex Court reported at 466 ITR 254 SC. 7. In the case of Dilip Constructions Pvt Ltd. Versus ACIT and Shilpa Seema Constructions Pvt Ltd. Versus ACIT, 2019 (12) TMI 311 - ITAT CUTTACK it has been held as under: - 30. In this approval, we are unable to see any mention by the approving authority that he has perused the relevant assessment records and draft assessment orders proposed to be passed by the Assessing Officer. The Assessi....
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.... u/s 153D of the Act is that the Id. JCIT is required 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 Id. 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 Id. JCIT to exercise this power by applying his judicious mind. The Ld. AR vehemently argued that the 40 draft assessment orders for 10 assessee's were sent for approval by the Ld. AO to the Id. JCIT on 29.12.2017 and the Id. 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 Id. 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 Id. JCIT by the Id AO. Based on this, the Ld. AR submitted that the Id. JCIT had granted approval by devoting very few minutes for each case in a mechanical manner u....
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.... seized documents, replies filed by the assessee in response to the questionnaires issued by the Ld. AO and the conclusions drawn by the Ld. AO vis- à-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the Id. JCIT in a judicious way after due application of mind. Even though as vehemently argued by the Ld. CIT-DR, the Id. JCIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the Id. JCIT, while granting the approval u/s 153D of the Act has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Ld. AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Ld. AO and Id. JCIT are merely guidance to the Ld. AO and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the Ld. AO to frame the assessment after getting prior approval from Id. JCIT u/s 153D of the Act. The Id. JCIT getting involved in the search assessment proceed....
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....referred to supra. Hence, we find lot of force in the arguments advanced by the Ld. AR in support of the additional grounds raised for all assessment years under consideration before us for all the assessee's. Accordingly, the Additional Grounds raised by all the assessee's for all the assessment years under consideration are hereby allowed. 9. In the case of Arch Pharmalabs Ltd. Versus ACIT and M/S Arch Impex P.Ltd. Versus ACIT, 2021 (4) TMI 533 - ITAT MUMBAI it has been held as under: - 9. On the validity of approval under section 153D, Ld. AR adverted our attention to the communication letter dated 29.12.10 forwarded by the AO (reproduced supra) addressed to the Addl. CIT and pointed out that the AO in the said letter neither makes any iota of reference as to what are the seized materials of incriminating nature found nor does he forwards any such material for consideration and reference of the Addl.CIT so as to apply his mind to such material enable him to grant statutory approval of search assessments in terms of sect ion 153D of the Act. It was pointed out that all that the AO mentions in the said letter is that tall seized materials and data on electronic d....
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.... of judicial precedents which provides guidance in applying the law in this regard. 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 w/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 contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at and/or other enquiry and examination was never carried out. From the said approval, it can he easily inferred that the said order was approved, solely relying upon the implied undertaking obtained from the Assessing Officer in the form of draft assessment order that AD has taken due care while framing respective draft assessment orders and that all th....
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....pta & Co., 2024 (2) TMI 35 ITAT DELHI it has been held as under: - 12. The legal objection of transgression of requirements of approval under section 153D of the Act is in controversy. Pursuant to search carried out on 06/11/2008 on M/s. Nimtaya group of Companies, the assessment proceedings u/s. 153A of the Act carried out. The Assessing officer forwarded the draft assessment orders for 5 years (AY 2005-06 to AY 2009-10) in both the cases of the assessee's for endorsement and approval of the superior authority at the fag-end of the limitation period on 30/12/2010 to meet the legal requirement imposed by section 153D of the Act. The Addl. CIT i.e. the superior authority, in turn, granted a combined and consolidated approval for all 5 assessment years in promptly on 30/12/2010 itself. For passing such assessment orders, the assessing Officer is governed by S.153D of the Act, whereby the Assessing Officer should complete the assessment proceedings and prepare a draft assessment order which need to be placed before the approving authority i.e. Joint/Addl. Commissioner(designated authority giving approval to search assessments u/s. 153D of the Act). The approving authority is ....
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....t is also alleged on behalf of assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking / initials etc. could have given a valuable input on the applicability of mind and could throw some light on objectivity applied owing to total silence on any delineation on these aspects in the approval memo. 18. Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 30.12.2010 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 30.12.2010. 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 ....
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....during search have been stately considered by the AO seeking approval. Thus, the sanctioning authority had in effect abdicated its statutory functions and delightfully relegated its 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 to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed additions 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 cannot be countenanced in law. 11. In the case of Shri Balwinder Singh Kohli Versus DCIT, 2023 (6) TMI 1333 - ITAT AMRITSAR wherein it has been held as under: - 10. In the instant cases, the AO has submitted the draft assessment order on 20/03/2015 before the Approving Authority who had approved on same day i.e. 20/03/2015. In our view, it was humanly impossible to peruse records of all 5 cases in one....
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....ied that all issues raised in the appraisal reports have been duly examined with reference to the seized impounded material 15. Thus, the JCIT acted on certificate given by the A.O, without satisfying himseif to the record/seized material etc.. The A.O. sent only assessment records to the SCIll for his approval. The identical is fast in the case of all the request for approval made by the A.O, but factual position noted above established that even assessment records have not been seen by the JCIT. The A.O. sent draft assessment orders for 07 assessment years on 29.12.2017 which were got approved on 30.12.2017 merely on the basis of draft assessment order. The JCIT in the approval Order Dated 30.12.2017 also mentioned that A.O. to ensure all the assessment proceedings are conducted as per procedure and Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O. as per Law and records. Reliance in this regard is also placed on the following case law: - * Millenium Vinimay Pvt. Ltd. Versus ACIT Central Circle - 28 New Delhil 2024 (5) TMI 1494 - ITAT Delhi * Gulshan Kumar Sethi Versus DCIT, Central Circle....
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....rd. The approval given by JCIT is not final. He has directed the AO that the fact of the initiation of penalty proceedings, wherever applicable, must be incorporated in the assessment order. In our view, whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval of JCIT should reflect application of mind, which is missing in the instant case. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the approving authority has to act in a judicious manner by due application of mind in a manner of a quasi-judicial authority. Moreover, it is settled law that if the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval u/s. 153D of the Act and the mandate of the enactment by the legislature will be defeated. However, JCIT without any consideration of merits in proposed additions with reference to the incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the JCIT has rendered approval to be a mere formality and cannot be count....
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....ons the approvals have been mechanically granted by the JCIT. Whatever attempt is now being made by the department to fill in the lacuna by filing letters of then JCIT who granted the approval is dong more damage to the case of the department because when we take into consideration the letter of then JCIT, with the submission, we find that the said JCIT seems to be still under impression that grant of approval is mere formality and for that reasons the JCIT has stated in this letter that, "It is further noted that Approval letter U/s 153D is 'only a formal' culmination of application of mind, which takes place throughout the assessment period." On the contrary law as stands crystallized is that the approval letter should be speaking one and show that approval was granted by application of mind. There is inherent fallacy in the belief of JCIT as mentioned in this letter that "there is no requirement in law creating any evidence for discussions before granting the approval u/s 153D." On the contrary this bench is of firm view that not only as quasi-judicial authority but even in administrative capacity, if an approval is to be granted under a statut....
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....the approval dated 11.01.2018 granted u/s. 153D of the Act by the Jt. Commissioner of Income Tax, Central Range, Meerut in the instant case is mechanical and without due application of mind. Accordingly, we quash the assessment and allow the legal ground raised by the assessee. Since we have quashed the assessment, the other grounds, have become academic, hence, need not be adjudicated upon. 11. In the result, the Appeal filed by the Assessee is allowed in the aforesaid manner. Order pronounced on 16.04.2025. ============= Document 1 OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX CENTRAL RANGE, BHANSHALI GROUND, MEERUT. Phone-0121-2403191, Fax-0121-2510082 F. No. JI. GIT /Central Range-Meerut/ Approval-1530/2017-18/2763 Dated | | 01 2018 To, The Dy. Commissioner of Income Tax, Central Circle, Noida. Subject :- Draft assessment orders In the case of M/s Apple Commodities Ltd. Of "Apple Group" for approval u/s 153D of the Act-1961 - Reg. Please refer to your office letter no. 3146 dated 10.01.2018 (received in this office on 10.01.2018) with, which you have submitted the draft assessment order in the above mentioned case 2. In the cases of M/s Ap....