DCIT, CENTRAL CIRCLE-25, NEW DELHI vs. PRASAHESH ARYA, DELHI

The revenue has filed this appeal, challenging the action of ld CIT(A) in deleting the addition of ₹5,55,46,490/- on account of cash found at the time of search on 05.10.2017. The assessee had filed application under Rule 27 of the ITAT Rules stating that the entire assessment framed in the instant case need to be declared as void ab initio as no approval as per the provisions of Section 153D of the Act was even obtained by the ld AO from the ld Additional Commissioner of Income Tax, Central Range-7, New Delhi. This goes to the root of the matter and accordingly the Rule 27 application of the assessee is hereby admitted and taken up for adjudication first.

We have heard the rival submissions and perused the material available on record. Pursuant to the search and seizure action carried out u/s 132 of the Act on the assessee on 05.10.2017, the return of income was filed by the assessee on 30.03.2019, declaring total income of ₹5,85,30,360/-. Since AY 2018-19, being the year of search, the assessment was framed by the ld AO under section 143(3) of the Act on 30.12.2019, determining the total income of the assessee of ₹5,85,30,360/- on protective basis after considering the cash of ₹5,55,96,490/-, which was physically found at the time of search as income in the hands of the assessee on protective basis and income in the hands of Shri Surender Kumar Arya on substantive basis. While passing the said assessment order u/s 143(3) of the Act dated 30.12.2019 for assessment year 2018-19 in para 7 of the assessment order, the ld AO had mentioned that the said order is passed with the prior approval of the Addl. Commissioner of income Tax, Central Range-7, New Delhi as accorded vide letter no. 1389 dated 30.12.2019. The reference mentioned in para 7 pertains to approval granted by the learned Addl. CIT, Central Range-7, New Delhi u/s 153D of the Act to the draft assessment order proposed by the ld AO. The ld AR placed on record the approval granted u/s 153D of the Act on 30.12.2019 by the Addl. CIT, Central Range-7, New Delhi, which is reproduced herein:-

From the above, it could be seen that a consolidated approval has been granted u/s 153D of the Act for assessment years 2008-09 to 2017–18 in the case of the assessee. There is absolutely no whisper or mention about approval either being sought by the ld AO or being granted by the Addl. CIT for assessment year 2018-19. Further, the ld AO had mentioned the approval No. 1389 dated 30.12.2019 in para 7 of the assessment order as the approval being obtained u/s 153D of the Act. But in approval No. 1389, assessment year 2018-19 was not even mentioned which is evident from the contents reproduced supra. Hence, it could be safely concluded that the no approval per se was obtained u/s 153D of the Act for AY 2018- 19 by the ld AO, which becomes fatal to the assessment proceedings itself. The law mandates the AO to frame the assessment for the year of search and for preceding years after getting prior approval from the Addl. CIT in terms of section 153D of the Act, which has not been complied with in the instant case for AY 2018-19. Hence, we have no hesitation to quash the assessment framed u/s 143(3) of the Act on 30.12.2019 for the AY 2018-19 as void ab initio. Accordingly, the Rule 27 application of the assessee is allowed. Since the entire assessment is quashed, the grounds raised by the revenue need not be adjudicated and they are left open.