TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 1574
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....ments. 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 under Section 153D of the Act dated 29.12.2018 is in mechanical....
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....t 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 the same. The Addl. CIT, Central, Bhopal, thereafter, granted approval on the very next day i.e. 29.12.2018 under Section 153D of the Act appearing at page 9 of the paper book filed before....
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....d 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 passing the draft orders and are kept in safe custody. 3. Subject to the above observations, the draft assessment orders are hereby approved, as required under the provisions of section 153D of the Income Tax Act in the following cases; S. No. Assessee PAN Draft order u/s A.Ys. 1 Prakash Assudani AEFPA8202H 153 A 201 1-12 to 2....
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.... 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 authorities expected to grant approval upon examination of the entire materials before approving the draft order and the authority is legally required to apply due application of mind. 5.1 On this aspect, we have considered followings judgments relied upon by the Ld. AR: 5.1.1 In case of Navin Jain & Ors. Vs. DCIT, reported in [2021] 91 ITR 682 (Luck.-Trib.). The said Bench on identical issue has been pleased to observe as follo....
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....tion 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 31/12/2018 and draft assessment orders has been made on 30/12/2018 and approval has been taken on 30/12/2018 and on the same day final assessment order has been passed and, therefore, clearly the CBDT instructions have been violated. In view of these facts and circumstances, it was submitted that approval has been given in a most mechanical manner without any application of mind and without any independent examination of seized material and....
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....tances 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, ground No. 5 of the appeal be dismissed and appeals be heard on merits. 9. We have heard the rival parties and have gone through the material placed on record. We find that in these cases, in view of a search carried out on the Sigma Group, the assessments of various assessees were reopened and various assessees were required to file income tax returns as required under the provisions of section 153A of the Act. The search was conducted on 23....
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.... 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 adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also b....
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....e 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 assessment year. Therefore, each of the assessment year is required to be verified and approved by the JCIT being Approving Authority that it complies with Law as well as the procedure laid down. The assessee has filed details on record regarding returns filed under section 139 (1) for A.Ys. 2010- 2011 to 2015-2016. It is also explained that there are unabated assessments except A.Y. 2015-2016 in which the assessments have been abated. Therefore, for each unabated and abated assessments, the authorities below and the Approv....
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....essees 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 facts stated in the impugned orders are that the sales of liquor are made by M/s. JIL to M/s. MAPSCO and Singla Group of cases and that part of the sale proceeds have been transferred to the account of M/s. Alfa India instead of paying the entire sale consideration to M/s. JIL. Thus, the nature of total receipt/addition is the sale proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale rec....
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....iven 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 Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O. as per Law and records. 16. In some of the cases the approval was granted on the date the request was made for approval by the A.O. In all those cases merely draft assessment order and the assessment folders were available with the A.O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft ass....
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....he 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 under s. 132 of the Act. 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 necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such....
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....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 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 years for which volumnous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the ....
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....egard. 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 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 be 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 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 ....
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.... (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 under assessment rather than passing separate orders for "each year" under section 153A. Further, the AO sought a consolidated approval for about 14 different assessee from different groups under her single letter dated 14.12.2018. At the time of assessment, the assessee furnished its reply on 14.12.2018 before the AO, wherein the assessee raised several objections and contentions against the proposed additions in show cause notice. The assessee was directed to file reply by 07.12.2018. The assessee filed its reply on 14.12.2018, which was duly accepted by AO, which is otherwise clearly discern....
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.... * 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 assessment year without weighing the facts and legality of each assessment year under consideration, which is in complete violation of the statutory provisions of law and guidelines laid down by various courts and Special Bench of Tribunal. 14. The ld. AR for the assessee submits that search action was carried out on assessee group on 17.01.2017. There was a marriage function in the Goyal family, which was at concluding stage. The search action continued till 2.00 am of 22.01.2017. The authorised officer obtained a confessional statement of Deepak Aggarwal, Director of the assessee company by putting pressure and coercion for surrender of sh....
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....pany, 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 is no evidentiary value of such statement, which was not recorded during the search proceeding. 18. We have considered the rival submissions of the parties and have gone through the order of the lower authorities. We have also perused the copy of the Panchnama dated 23.01.2017. There is no dispute that a search action was carried out on the assessee group on 17.01.2017. No incrementing evidence qua the share application money was found and recorded by the authorised officer in the Panchnama dated 22.01.2017 and 28.02.2017. A discloser statement of Director namely Deepak Aggarwal was recorded on 24.01.2017. The statement was retracted on 27.01.2017 by making sworn statement before Sub-divisional Magistra....
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....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 in para 3.7 of his order. The AO sent the draft assessment order on 14.12.2018 itself to the officer of JCIT, vide reference No. F.No. ACIT (C) -2 RPR/153D/Goyel & Satya/2018-19 dated 14.12.2018, copy of which is placed on record. For proper appreciation of facts the contents of approval dated 22.12.2018 is extracted below: Office of the Jt. CIT (Central), Raipur Aayakar Bhawan, Civil Lines, Raipur 492001 Email: [email protected] Tel/Fax 2331044 F.No. JCIT(C)/RPR/153D/2018-19 Dated: 22-12-2018 To, The Asst. CIT (Central)-2, Raipur Subject - Approval under u/s 153D of the I.T. Act - Goyal, Satya & Gumber Group - Regarding. Please refer to your letter in F.No. ACIT(C)-2/RPR/153D/Goyal & S....
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....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 in the statute by the Finance Act, 2007. 24. We find that the ld. JCIT while granting approval, presumed that Assessing Officer has given proper hearing to the assessee and thoroughly verified seized material and there are no adverse findings, satisfied himself that all the issues emanating from the records have been verified and additions wherever required have been proposed. We further find that there is no independent application of mind on the part of ld. JCIT while granting the approval. 25. We find that coordinate bench of Mumbai Tribunal while considering the similar ground of appeal in granting bulk approval of the assessment under section 153A, in case of Arch Pharmalabs Ltd Vs ACIT (supra) held that 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....
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....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 approval order that draft assessment after considering the material placed before him, rather the ld. JCIT recorded that it is presumed that the AO granted proper opportunity to the assessee etc. 28. In view, of aforesaid discussion and respectfully following the decisions of coordinate benches in Sanjay Duggal & others (supra) and Archpharma Labs & Acrh Impex P Ltd (supra), we find convincing force in the submissions of the assessee that the approval granted by JCIT suffer from non-application of mind and depends on presumption of proper performance of duty by A.O. such per functionary approval under section 153D cannot termed as legitimate. The consequential assessment orders based on non-est approval under section 153D, thus are void-ab-initio on this ground alone. Considering the facts that we have allowed the appeal on the legal issues therefore, consideration of appeal on merit have become academic." 5.1.5 In the case of Inder Internatio....
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....n 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, without any consideration of merits in proposed additions with reference to incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Addl. CIT, Central has rendered the approval to be a mere formality and cannot be considered as actual approval in law. Hence, we quash the assessment framed u/s 153A on this additional ground alone. 16. Needless to say that we need not adjudicate the grounds raised on merits by the assessee as we have already quashed the assessment on jurisdictional issue that the statutory approval granted u/s 153D is without application of mind by the Addl. CIT. 17. In the result, the appeal of the assessee is allowed." 5.1.6 We have further carefully considered the judgment in case of Dharampal Satyapal Ltd. vs. UOI, reported in (2019) 366 ELT 253. While dealing with the identical issue, the Hon'ble Gauhati High Court has been pleased to observe as follows: "28. When an Authority is required to give his ap....