TaxTMI 
TaxTMI 
2025 (3) TMI 2139
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.... appraise the fact that the appellant had filed his return of income disclosing profit estimated u/s 44AD of the Act, which has been accepted by the AO. 44AD of the Act doesn't mandate an assessee to maintain regular books of accounts. However, in violation of the provisions of section 44AD of the Act and disregarding the detailed cash flow statement furnished by the appellant in support of income earned by the appellant and other inflows and outflows of cash including money lending business, the assessing officer has added a sum Rs. 6,06,950 to the total income of the appellant estimated under section 44AD of the Act alleging unexplained investment u/s 69 of the Act. (ii) 'The Ld. CIT(A) has failed to appraise the fact that impugned loose papers represent specific report generated by the accounting software, indicating the sum of opening balance of amounts advanced against pledge as on 01.04.2014 as increased by the sum of amounts advanced to pawnors during FY 14-15. Due to some technical error, the said report does not take into account the amounts received back from the pawnors nor the interest charged to them. As a result, the amount receivable in such impugned....
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....ire was issued to the assessee fixing for 08.02.2021. Again on the fixed date neither anybody attended nor any written submission was filed by the assessee. Later on in response to the notice u/s 153C, the assessee filed its return of income for the assessment year 2015-16 through e-filing on 11.02.2021 declaring total income of Rs. 3,09,740/-. Notice u/s 143(2) of the Income Tax Act, 1961 dated 15.02.2021 was issued and served upon the assessee electronically. Notice u/s 142(1) dated 23.02.2021, 07.04.2021 and 12.04.2021 along with Annexure were issued electronically requiring the assessee to make the compliance of said notices. Assessee has not made any compliance of the said notices but furnished a written submission on which is reproduced here as under. "In this reference it is most humble submitted that during the course of search and seizure proceedings w/s 132 of the Income tax Act 1961 carried out of the business and residential of Mr. Vibhu Prakash Banashal & Mr Vineet Prakash Banashal on 10.8.2018. No incriminating documents were found relating the assessee for the above said assessment year. Hon'ble Supreme Court in the case Of Principal Commissioner of Income T....
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....0/- Rs. 5,48,900/- bill receivable shown by the assessee) should not be treated its unexplained investment and added to its income for the year under consideration. However, on the fixed date neither anybody attended nor any written submission was filed by the assessee. In this way the assessee has been failed to furnish reason for the said difference of bill receivable of Rs. 6,06,950/-. Therefore, bill receivable of Rs. 6,06,950/- (out of loan and advances of Rs. 11.55,850/- as per LP-2) are treated unexplained investment u/s 69 of IT Act, 1961 and added to its income for the year under consideration. On the basis of above facts, income of the assessee was assessed at Rs. 9,16,690/- u/s. 153C of the Act against the returned income of Rs. 3,09,740/-. Against the aforesaid assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated has confirmed the addition in dispute by dismissing the appeal of the assessee. 3. Against the impugned order Of the Ld. CIT(A), assessee is in appeal before us. 4. At the time of hearing, Id. AR for the assessee has reiterated the contents of application dated 25.7.2024 filed by the assessee for admission of additi....
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..... In this regard, Ld. Counsel for the assessee has a filed a small paper book containing pages 1-12 having the copy of satisfaction note u/s. 153C Of the Act; Copy Of approval u/s. 153D) Of the Act; Copy Of order sheet provided by the AO; Copy of reply filed before the AO on 8.4.2021; Copy of reply filed before AO on 8.4.2021 and copy of reply filed before AO on 5.4.2021. He also filed the following synopsis in support of his contention. "1. The assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Act. The provisions of section 153D are as under: - "no order of assessment or reassessment shall be passed by the assessing officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of Section 153A or assessment year referred to in clause (b) of subsection (1) of Section 153B except with the prior approval of Joint Commissioner. " 2. It is humbly submitted that 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 appl....
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....oving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure 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. (i) It was noted that the obligations of the approval of the Approving Authority serves two purposes: (ii) 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) On the other hand, superior authority is also responsible and duty-bound 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 y....
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....ise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, 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 p....
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....nder Section 109 of the Act. Para 9 of Chapter 3 of Volume-II (Technical) of the Manual reads as under:- "9. Approval for assessment : An assessment order under Chapter XIV-B 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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....sent cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment 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 ACIT Versus Janak Raj Gupta & co., 2024 (2) TMI 35 TAT 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 A Y 2009-10) in both the cases of the Assessees 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 AddI. 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 ....
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....rently, the approval has been granted on a dotted line without any availability of reasonable time which firm s up the belief towards non application of mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It 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 authorit....
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.... the said approval, it can be easily inferred that the Draft Assessment Orders were approved, solely relying upon the implied undertaking obtained from the Assessing Officers in the form of draft assessment orders 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 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....
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....T, CR, Lucknow while granting the approval u/s. 153D of the Act on 08.06.2021, copy of which is placed at page no. 5 of the Paper Book, has only referred to telephonic discussion and meeting with AO on 18.3.2021 whereas the assessee has filed various replied after that date i.e. 18.3.2021, which establish that Addl. CIT, CR, Lucknow has not even examined the basic assessment records leave alone the seized materials. We further note that 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 Jt/Addl. CIT should reflect application of mind. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the Approving Authority hast to act in a judicious manner by due Application of mind in a manner of a quasi judicial authority. 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, Addl. CIT, CR Lucknow without any consideration of merits in proposed ad....
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....dered the approval was first granted in case of protective addition and then of substantive addition in case of the company. This certainly shows that unmindful of nature of material relied and nature of additions 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 JC IT who granted the approval is doing more damage to the case of the department because when we take into consideration the letter of then JCIT, with the submission, we fin d 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 discuss....