TaxTMI 
TaxTMI 
2022 (12) TMI 1574
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..... A.Ys. 2011-12 to 2015-16 are unabated assessments. In A.Y. 2017-18, assessee filed penalty appeal against order dated 20.03.2020 passed by CIT(A)-3, Bhopal under Section 271AAB (1A)(b) of the Act. 2. The appeals filed by the Revenue raising different issues of deletion of addition made by the Ld. CIT (A) whereas the cross objections thereto filed by the assessee are challenging the maintainability of the order passed by the Ld. DCIT on two counts: (i) Firstly, the approval granted by the Ld. Addl. CIT dated 29.12.2018 under Section 153D of the Act is not in terms of the statutory provision neither in consonance with the CBDT Circular dated 12.03.2008 in all assessment years commencing from A.Ys. 2011-12 to 2017-18. (ii) Secondly, in the absence of incriminating material found during the course of search, addition in respect of unabated assessment i.e. from A.Ys. 2011-12 to 2015-16 is not sustainable in the eye of law. It is relevant to mention that where the assessee has not filed the cross objection, the assessee has filed an application under Rule 27 of the IT Rules raising this particular ground that the approval granted by the Addl. CIT, Central, Bhopal u....
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....3,79,56,9907- Nil 2016-17 16.10.2016 9,56,23,770/- 20.10.2018 9,56,23,7707- Nil 2017-18 (Current Year) 30.03.2018 17,72,45,780/- Not Applicable Not Applicable Nil 4.1 Subsequently, notice under Section 143(2) of the Act for A.Y. 2017-18 dated 24.09.2018 followed by notice under Section 143(2) r.w.s. 153A of the Act dated 31.10.2018 for A.Ys. 2011-12 to 2016-17 were issued and served upon the assessee. Needless to mention that questionnaires were duly issued for the said assessment period on 31.10.2018. Further, notice under Section 142(1) of the Act containing the detailed questionnaire on the found and seized material and other relevant issues were also issued on 12.11.2018. The assessment was concluded by the DCIT, Central-1, Bhopal under Section 153A r.w.s. 143(3) of the Act for A.Ys. 2011-12 to 2016-17 and under Section 143(3) of the Act for A.Y. 2017-18 on 30.12.2018. Prior to that, the DCIT, Central, sent the proposal for obtaining approval under Section 153D of the Act to the Addl. CIT, Central, Bhopal on 28.12.2018 appearing at page 10 of the paper book filed before us. The draft assessment order was duly enclosed for approval of th....
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....ani AAKPV5987D 2011-12 to 2017-1 8 It is requested that approval may kindly be accorded." 4.4 In turn, on the very next day i.e. 29.12.2018, the Addl. CIT, Central, Bhopal granted approval under Section 153D of the Act appearing at page No. 9 of the Paper Book filed before us; the contents whereof is as follows: "F. No. Addl. CIT (C)/BPL/153D/2018-19/1290 Date: 29.12.2018 To The Dy. Commissioner of Income Tax (Central)-I, Bhopal Sub:- Approval u/s 153D of the Income Tax Act, 1961 in the case of - Vaswani Group - reg Please refer to your office letters in F.No, DCIT-I/Central/BPL/153D/2018-19/3031 dated 28.12.2018 seeking approval u/s 153D of the IT Act, 1961. 2. The AO has certified that: * Proper opportunity of being heard was given to the assessee on all the issues. * All the issues emanating from the material available on record have been examined properly and are incorporated in the draft orders. * Relevant seized documents were verified before p....
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....ified and/or examined by him as mandated under Section 153D of the Act. In the absence of compliance of the above mandate, the approval order dated 29.12.2018 passed under Section 153D of the Act becomes an empty formality without due process of law and, thus, not sustainable. The Ld. Addl. CIT, in fact, abdicated his statutory functions and delightfully relegated the statutory duty to his subordinate being the DCIT, Central-1, Bhopal adopting a shortcut method. Merely, an undertaking given by the Ld. AO was considered to be adequate for the Addl. CIT to accord approval in all assessments involved without considering any merit in proposed adjustment with reference to appraisal report, incriminating material collected in search etc.; this is nothing but an approval by way of mere mechanical exercise accepting the draft order without any independent application of mind by the said Addl. CIT. It is clearly evident that the Addl. CIT has not verified and / or examined the relevant materials on record as already discussed by us hereinabove. The power to grant approval as mandated under Section 153D of the Act is not to be exercised casually or any routine manner rather the concerned aut....
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....e time barring date. While going through CBDT manual placed at paper book pages 995 & 996, it was observed that this manual was printed in February 2003 and therefore, Learned counsel for the assessee was asked as to how it is applicable to the provisions of section 153D of the Act which came into existence w.e.f. 01/06/2007. Learned counsel for the assessee in this respect submitted that this manual is applicable to the provisions of section 158BG of the Act and which are para materia to the provisions of section 153D of the Act. It was further submitted that Mumbai Tribunal in the case of Shreelekha Damani, vide order dated 19/08/2015, while deciding similar issue u/s 153D, has relied on the case laws relied for deciding the issue of approval u/s 158BG of the Act and therefore this manual is applicable to provisions of Section 153D also. Learned counsel for the assessee further placed reliance on Circular No. 3 of 2008 dated 12/03/2008 issued by CBDT whereby the CBDT has issued instructions regarding mandatory approval u/s 153D if the order is to be passed by Assessing Officer below the rank of Jt. CIT. It was submitted that the present cases were becoming time barring on 31....
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....ce was also placed on the judgment of Tribunal in the case of Indra Bansal decided by Jodhpur Bench in I.T.A. No. 321 to 324 vide order dated 23/02/2018. Reliance was also placed on the judgment of Cuttack Bench of Tribunal in I.T.A. No. 01 and 02 in the case of Geeta Rani Poddar and Manju Simite Dash where vide order dated 05/07/2018 similar issue has been decided in favour of assessee. 7.1 In view of these facts and circumstances and judicial precedents, it was argued that the assessment orders passed in these cases are illegal and need to be quashed. 8. Learned CIT, D.R., on the other hand argued that proper approval, as required under the provisions of section 153D, has been obtained by the Assessing Officer. It was submitted that the approval was taken well within the time before limitation and the higher authority has fully applied his mind to grant approval. It was submitted that though the Jt. CIT has not written in so many words about his satisfaction for granting approval but the fact remains that he has granted approval to the draft assessment order and only after that the Assessing Officer has passed the final assessment order and therefore, ....
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....approval as: "The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or 'consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with." 9.2 The Hon'ble Supreme Court of South Carolina in State vs. Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that approval implies knowledge and, the exercise or discretion after knowledge. ........................... ........................... Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 2 cases was completed in one single day itself i.e., 31-3-2013. Thus, it is I.T.(SS)A. Nos. 639, 640, 641, 649, 642 & 651 apparent that the Joint Commissioner did not have....
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....sp;639, 640, 641, 649, 642 & 651 approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high- ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held 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. 11. In view of these facts and circumstances and in view of judicial precedents relied on by Learned A. R. Ground No. 5 in appeals is allowed and the assessments orders are annulled. Rest of the grounds were not argued by Learned A. R. therefore, rest of the grounds are dismissed as not pressed. 12. In nutshell, the appeals filed by the assessee are partly allowed." 5.1.2 In case of Sanjay Duggal (2021) (Del-Trib.) dt. 19.01.2021, the said Bench on identical issue has been pleased to observe as follows: "12. It may be noted that provisions of Section 153D provides for approval in case of ["Each"] the a....
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.... if procedure for its inspection or perusal is there. There is no material considered by the JCIT. Learned Counsel for the Assessee has pointed out that assessee has suffered serious prejudice because of nonapplication of mind on the part of the JCIT while granting approval under section 153D of the I.T. Act because the A.O. has made several double or triple additions on account of share capital, investments, FDRs purchased, loans, capital gains because these were created out of bank deposits made in the bank accounts of the assessees after the money transferred from the account of M/s. Alfa India. No telescopic benefit have been given as it was out of the source deposited in the bank accounts of the assessees. Netting of the money left have also not been considered and even the Ld. CIT (A) without considering the same has enhanced the assessments in some of the cases of the assessee. No steps have been taken by the A.O. for rectifying their mistakes when assessee filed petition for rectification under section 154 of the I.T. Act. Thus, there was inconsistencies and double additions made by the A.O. in various assessment years. It may also be noted that in the present case the fact....
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.... approval under section 153D of the I.T. Act in the case of Shri Rajnish Talwar and family wherein the approval in the case of Shri Rajnish Talwar for A.Ys. 2010-2011 to 2016-2017 is sought for. The A.O. send the draft assessment order along with assessment records of the above named assessee. In paragraph-4 of the letter, A.O. stated as under : "It is certified 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 himself to the record/seized material etc., The A.O. sent only assessment records to the JCIT for appeals his approval. The identical is fact 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....
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.... appeals of the Assessees are allowed." 5.1.3 In the case of Arch Pharmalabs Ltd. (2021) (Mum-Trib), the Hon'ble Bench held as under: "11. We have carefully considered the rival submissions and material placed on record and case laws cited. The legal objection of transgression of requirements of approval under section 153D is in controversy. Pursuant to search carried out in the premises of the Assessee and other connected group cases, the assessment was carried out under S. 153A/ 143(3) of the Act. The Assessing officer has forwarded the draft assessment orders for 7 years ( AY 2003-04 to AY 2009-10) for endorsement and approval of the superior authority at the fag end of the limitation period on 29/12/2010 to meet the legal requirement imposed by section 153D of the Act. The Addl. CIT i.e. the superior authority has, in turn, granted a combined and consolidated approval for all 7 assessment years in promptu on 31/12/2010. 11.1 It may be pertinent to observe at this stage that the impugned assessment orders were passed u/s. 143(3) rws 153A of the Act for the AY 2003-04 to AY 2008-09 and for the AY 2009-10 u/s. 143(3) of the Act pursuant to search carried out u....
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....s the purpose of supervision of search assessments (iv) initialed draft assessment orders not available in office records. 11.3 As observed, Section 153D bestows a supervisory jurisdiction on the designated authority in respect of search related assessment and thus enjoins a salutary duty of statutory nature. The designated superior authority is thus expected to confirm to the statutory requirement in letter and spirit. It is evident from the communication of AO and consequent approval thereon under S. 153D that no assessment record for any assessment year in question or any seized material had traveled to the authority concerned for his objective consideration of the same qua the draft assessment orders. No reference in this regard is made in the approval note either which may discard such allegation as untrue. No other material or order sheet in assessment proceedings etc. were placed before us either to establish otherwise. Except these two documents namely, a solitary communication from AO to the Addl. CIT dated 29/12/2010 and an in turn approval by Addl. CIT dated 31/12/2010, there is nothing else before us to gauge the facts differently. A bare glance at the approval....
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.... authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line 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 u/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 o....
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....t maintainability of hollow approval under S. 153D totally devoid of any application of mind. The approval so granted under the shelter of section 153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments relatable to search in captioned appeals are non est and a nullity and hence quashed." 5.1.4 The Ld. AR relied upon the judgment passed by the Raipur Bench in Goyal Energy & Steel (P) Ltd. vs. ACIT, reported in [2021] 214 TTJ (Asr) 058 (Amritsar-Trib.). The said Bench on identical issue has been pleased to observe as follows: "10. Now adverting to the adjudication of additional grounds of appeal and the Ground No. 3 of main grounds of appeal. The additional grounds of appeal relates to validity of approval under section 153D and Ground No. 3 of main grounds of appeal relates to validity of the additions under section 68 in absence of incriminating evidence found during search. The ld. AR for the assessee submits that it is a matter of fact that the AO had passed a single consolidated order for all the years ....
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....e been thoroughly verified. Thus, in a bulk approval of 95 assessment orders on a presumption basis proves the ritualistic approval to comply with the provisions of law which clearly defeat the intent and purpose behind insertion of section 153D brought in the statute by the Finance Act, 2007. The JCIT has granted a blanket approval for 95 cases without giving any reasoning at all in a consolidated manner for all assessment years for different assessee for which voluminous assessment orders on a presumptive basis. 12. To buttress his submissions the ld. AR for the assessee relied on the following decision; * Mumbai Tribunal in case of Arch Pharmalabs Ltd & Arch Impex P. Ltd. (I.T.A. No. 6656/Mum/2017 & others) (dated 07.04.2021), * Ranchi Tribunal in Rajat Minerals Pvt. Ltd. Vs DCIT (Central Circle 1) ([2020] 181 ITD 368 (Ranchi-Trib.), * Cuttack Tribunal in Dilip Constructions Private Limited Vs. ACIT IT(SS)A Nos. 66 to 71/CTK/2018. 13. In other alternative submissions the ld. AR for the assessee submits that the AO passed a single order in a hasty manner to make the impugned addition, applying same facts to each of the assess....
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....d under the guidance of Joint Commissioner of Income- tax (JCIT). The assessee was provided full opportunity during the assessment. The assessment proceedings are also supervised by JCIT to protect the interest of revenue. The JCIT granted approval of the draft assessment after considering the material placed before him. There is no unwarranted thing in the order of assessing officer. There is no mandate in the statue to pass separate order for each and every assessment years as argued by AR of the assessee. The AO has made separate additions in each assessment year and ultimately assessed income for each year separately. The AO before making additions made investigation for each of the investor company, which are Kolkata based entity. 17. In the rejoinder submissions the ld. AR for the assessee submits that no such investigation report was provided to the assessee. The ld. AR retreated that the additions were made in the unabated assessment in absence of the incriminating material found during search; therefore, all such additions are liable to be deleted. The statement of the director of the assessee-company cannot be treated incrementing evidence. Even otherwise there i....
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....nstitute incriminating material. Thus, the statement of Deepak Aggarwal cannot be treated as incriminating evidence for making basis for addition of share premium under section 68 of the Act. 20. Further, Delhi High Court in celebrated case of CIT Vs Kabul Chawla (supra) held that completed assessment can be interfered with by the AO while making assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in course of original assessment. The decision of Delhi High Court has been upheld by Hon'ble Apex Court in Singhad Technical Education Society (397 ITR 344 SC). In view of the aforesaid factual and legal discussions, no addition under section 68 was warranted in absence of incriminating evidence, in the abated assessment. We hold so. In the result the ground No. 3 raised by the assessee is allowed. 21. We further find that the assessee in response to the show cause notice dated 29.08.2018 filed its detail reply on 14.12.2018. In the said reply the assessee raised factual and legal issue. The reply of the assessee is duly acknowledged by AO ....
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....r 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 JCIT granted bulk approval of 95 assessment orders which clearly defeats the intent and purpose behind insertion of section 153D brought i....
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.... 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 cannot 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 granted approval of the draft assessment after considering the material placed before him. We do not find any such satisfaction in the approv....
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....ntents mentioned in the draft assessment order without any application of mind and seized materials were not looked at because that was not available before him at the time of granting of approval to the draft assessment order and other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the said order was approved solely relying upon the implied undertaking obtained from the AO in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations 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 statutory functions and delightfully relegated his statutory duty to the subordinate AO, whose action the Addl. 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 Addl. CIT, withou....
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....l. The approval is required to be granted only on the basis of documents available on record and that must reflect proper application of mind on the facts and circumstances of the case as of the ultimate ratio laid down by the Hon'ble Supreme Court. 5.1.9 On this aspect, we have also relied upon the CBDT Circular No. 3/2008, dtd. 12.03.2008, whereby and whereunder, the CBDT has issued instructions regarding mandatory approval u/s 153D of the Act in the event, the order is passed by an AO below the rank of JCIT. The same is also in reiterating the view taken by us. We would like to note that the essence of the judgment passed by the Hon'ble Supreme Court in the matter of Sahara India (supra) in regard granting of approval under Section 142(2A) of the Act is also applicable in the instant case in regard to granting approval under Section 153D of the Act. The statutory requirement as envisaged and further upheld by the Hon'ble Supreme Court in the said judgment is equally applicable in the case in hand. 5.2 The Revenue has failed to place any cogent evidence to the effect of granting approval of the draft assessment order upon exercising adequate time and upon examining the....