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TaxTMI 
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TaxTMI 
2026 (4) TMI 118
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.... 1552/Hyd/2025 for the assessment year 2023-24 as "lead" appeal. The assessee had more or less raised common grounds of appeal in all these appeals. Therefore, for the sake of brevity, the grounds of appeal filed by the assessee in ITA.No.1552/ Hyd/2025 for the assessment year 2023-24 in the case of Shri Madhava Reddy Baddevolu are reproduced as under: "1. The order of the Learned CIT(A) is erroneous both in law as well as on the facts of the case. 2. On the facts and circumstances of the case, the Learned CIT(A) is not justified confirming the addition of an amount of Rs. 42,00,000/- as unexplained investment u/s. 69 of the I.T.Act. 3. On the facts and circumstances of the case, Learned CIT(A) is not justified in confirming that treating an amount of Rs. 40,68,000/- as unexplained investment u/s. 69 of the 1.T. Act and taxing the same under the provisions of Section 115BBE of the I.T. Act towards consideration paid on land purchased even though such amount was already admitted in the return of income filed. 4. On the facts and circumstances of the case, the Learned CIT(A) is not justified to confirming the addition of Rs. 3,50,000/- as unexplain....
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....ever, could not satisfactorily explain the balance amount of Rs. 40,68,000/- and accordingly offered the same as income in the return of income. The assessee further submitted that, the funds were pooled from relatives and friends for investment in real estate and for development of property. 5. The A.O., after considering the submissions of the assessee and material available on record, accepted the explanation only to the extent of Rs. 28,70,000/- and treated the balance amount as unexplained and accordingly treated Rs. 3,50,000/- as unexplained money under Section 69A and also treated the amount of Rs. 40,68,000/- as unexplained money chargeable under Section 115BBE of the Act. Further, during the course of search, a Memorandum of Understanding (MOU) dated 30.04.2022 entered into with M/s Samooha Projects Private Limited was found and seized from the residence of the assessee, as per which the assessee had paid an amount of Rs. 1,42,00,000/- in cash, including Rs. 42,00,000/- on 29.04.2022, however, the assessee contended that, the said MOU was only a draft proposal, was not signed by him, and no actual payment was made. The A.O., however, rejected the explanation of the asse....
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.... legal ground which can be taken at any time of the proceedings, including pending proceedings before the Tribunal. Further, the assessee could not take up this ground before the lower authorities. However, facts with regard to the above legal ground is already available on record and there are no new facts brought on record, and thus, in view of the decision of Hon'ble Supreme Court in the case of NTPC Ltd. Vs. CIT, 229 ITR 383 (SC), the additional ground filed by the assessee may be admitted for adjudication. 10. The learned Senior A.R. for the Revenue, Dr. Sachin Kumar, on the other hand, opposed the petition filed by the assessee for admission of additional ground and argued that, the assessee could not explain as to how the facts relating to the above ground were already on record and if we go by the ground of appeal of the assessee, it is very clear that, the facts with regard to the date of draft assessment order and approval, if any, accorded by the Addl.CIT/JCIT should be verified with reference to the assessment order passed by the A.O. and thus, the petition filed by the assessee for admission of additional ground should be rejected. 11. We have heard both part....
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....to the provisions of Section 158D of the Act, and in light of provisions of Section 158D, various Courts have categorically held that, approval provided under Section 158D is not an empty formality, and the authority should apply his mind to relevant facts in light of the order passed by the A.O. before according approval, if any, for passing the assessment order. This fact is further strengthened by the instruction issued by the CBDT in the form of Manual of Office Procedure, where the CBDT has categorically explained as to how approval provided under Section 158D/148B has to be considered by the Range Head. If we go by the approval accorded by the Addl.CIT, Central Range-1, Hyderabad, dated 12.03.2025, it is very clear that, from the approval, it is not discernible as to application of mind by the approving authority to the relevant facts. Therefore, the approval granted by the authority in a mechanical manner and without any application of mind is invalid, and consequently, the assessment order passed by the A.O. under Section 143(3) of the Act, dated 14.03.2025 in pursuant to said invalid approval, becomes non-est in law and liable to be quashed. In this regard, he relied upon ....
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....although the time limit for completing the assessment was up to 31.03.2025, but the A.O. has passed the draft order well within the time limit and the same has been forwarded to the Addl.CIT, Central Range-1, Hyderabad on 10.03.2025 and the Range Head, after considering the draft order, has accorded approval under Section 148B of the Act, on 12.03.2025 and therefore, it cannot be said that the approval accorded by the authority is mechanical and without any application of mind. The learned Senior A.R. for the Revenue further submitted that, the law does not provide for any approval in a particular manner, and it is subjective satisfaction of the Range Head. Therefore, from the approval accorded under Section 148B of the Act, dated 12.03.2025, it is very clear that, the Range Head has perused the draft assessment order and has accorded approval. Therefore, the argument of the counsel for the assessee in light of certain judicial precedents is devoid of any merit and needs to be rejected. 14. We have heard both parties, perused the material available on record, including the relevant additional ground of appeal filed by the assessee and the issue of validity of assessment order pa....
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....t cannot be decided whether the approval accorded by the authority is in accordance with law and the authority has applied his mind independently to the relevant facts considered by the A.O. However, it is very essential from the approval accorded by the authority that, the authority has applied his mind to the relevant facts before according any approval as required under Section 148B of the Act. This is because the approval provided under Section 148B/158D is not an empty formality, but it is a statutory requirement provided under the Act, to put a check and balance to curtail any arbitrary or unjust exercise of power by the A.O. while passing the assessment order. Therefore, it is necessary for the authority while granting approval under Section 148B of the Act, to go through the relevant draft assessment order passed by the A.O. in light of assessment records and also discuss in the order passed for granting approval under Section 148B of the Act. This is further fortified by the Manual of Office Procedure issued by the CBDT in February, 2023 in exercise of powers under Section 119 of the Act, where in para 9 of Chapter III of Volume 2 (Technical), a clear procedure is provided....
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.... in (2024) 165 taxmann.com 2 (Delhi), and also the Hon'ble Bombay High Court in the case of PCIT vs. Smt. Shreelakha Damani, ITA No. 668 of 2016 dated 27.11.2018. The Hon'ble High Court of Allahabad in the case of Principal CIT vs. Siddhartha Gupta, reported in (2023) 147 taxmann.com 305 (Allahabad), has also considered identical issue and held that, prior approval of JCIT to draft assessment order prepared by the A.O. is essential as per mandate of Section 153D, however, where draft assessment order for 123 cases were placed before the approving authority on 30.12.2017 and 31.12.2017 and the final assessment order was passed on 31.12.2017, it is a case of non-application of mind and mechanical exercise of power by the authority. In the present case, going by the order passed by the Addl.CIT, Central Range - 1, Hyderabad, dated 12.03.2025, it is not discernible from the said order as to any application of mind to relevant facts in light of draft assessment order passed by the A.O. and the issues discussed in the said order. Therefore, in our considered view, the approval accorded by the Addl.CIT/JCIT under Section 148B of the Act, is a mechanical one, without any applicatio....
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....correct on the part of the revenue to contend that the approval itself is not justiciable. Where the approval is granted mechanically, it would vitiate the assessment order itself. [Para 17] The contention of the revenue that the non-compliance of the said requirement does not entail civil consequences was negatived. [Para 181 It is seen that in the instant case, the Assessing Officer wrote a letter seeking approval of the Additional Commissioner. [Para 21] As rightly pointed out by the assessee there is not even a token mention of the draft orders having been perused by the Additional Commissioner. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained, the mere repeating of the words of the statute, or mere rubber stamping of the letter seeking sanction by using similar words like 'see' or &....
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....ied upon the decision of ITAT Delhi Benches, (Third Member) decision in the case of Dheeraj Chaudhary vs. ACIT reported in (2025) 178 taxmann.com 360 (Delhi - Trib.), wherein the coordinate bench of ITAT, Delhi on identical set of facts and on the issue of approval provided under Section 158D of the Act, has held as under: "21. I note the above observations of learned Accountant Member and is of the view that assessment proceedings or any proceedings under the Act before the Assessing Officer which affect the levy of tax on the subject are judicial in nature. It is well-settled that the Assessing Officer upon whom jurisdiction has been conferred to make all orders judicially, has to act independently. The Assessing Officer, while framing assessment, cannot act on the advice given by an outsider even though he may be an authority higher in rank to him in official hierarchy. Higher authorities that include Additional CIT//CIT under whom the Assessing Officer is administratively under control, are not entitled to give opinion or advice in regard to assessment proceedings being quasi-judicial in nature. This is, however, subject to the provisions of Section 144A of the Act, wh....
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....rom the process of making assessment. Once draft assessment is prepared, the process of approval starts under Section 153D of the Act. Then the authority prescribed under Section 153D Le the Additional CIT/JCIT has to apply his mind for grant of approval after verifying the assessment records, seized records, etc. 22. I noted that the common thread discussed by Hon'ble Orissa High Court in the case of Serajuddin & Co. (supra), by Hon'ble Delhi High Court in the case of Anuj Bansal (supra) and by Hon'ble Allahabad High Court in the case of Sapna Gupta (supra) is that the requirement of previous approval of assessment by the Additional CIT/Joint CIT in terms of provisions of Section 153D of the Act 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 formality. Needless to say that before granting approval, the Additional CIT/Joint CIT, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been....
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....lidays being Saturday and Sunday and 31 December 2019 was the last date for making the assessment order and therefore the approving authority has left with only two working days i.e. 27th & 30th December 2019. However, the approving authority accorded the approval on the very same day (27.12.2019) of submitting the draft order and in less than 12 hours, which goes to show that the Approving Authority has not applied his mind due to paucity of time and therefore granted the approval in a mechanical and hasty manner. It is also a fact that the A.O. on the very same day of getting the approval, completed the assessment proceedings and passed the assessment order dated 27.12.2019, which also creates suspicion. As we have observed above that granting of approval is not a technical or mechanical exercise or ritual formality but must demonstrate the examination of the relevant material and finding/reasoning, as to why the approval has been granted. And therefore the contention of Ld. DR to the effect that "the procedure normally followed in such cases is that after centralization of the case, periodic discussions are held between the Range Head and the A.O., where the appraisal r....
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....der passed by the A.O. under Section 143(3) of the Act, dated 14.03.2025. Thus, additional ground no.8 is allowed. 21. Since we have allowed Additional Ground No.8 raised by the assessee and held that, the assessment order passed under Section 143(3) of the Act, is not sustainable in law, the other grounds raised by the assessee i.e., ground nos.1 to 7 on merits challenging the additions made under Sections 69 and 69A of the Act, become academic and hence, are not adjudicated. 22. Coming back to other appeals. The facts and issues involved in these six appeals are similar to the issue which we had considered in ITA No. 1552/Hyd/2025 for A.Y. 2023-24. In the present cases, the assessee's have challenged the validity of the assessment order passed by the A.O. in light of approval accorded under Section 148B of the Act, by the Addl.CIT/JCIT and claimed that, the approval accorded under Section 148B of the Act, is mechanical, without any application of mind and consequently, the entire assessment proceedings becomes vitiated. We find that, in all these cases, the approval under Section 148B of the Act, has been accorded by the authority i.e., Addl.CIT, Central Range-1, Hyderabad,....