KUSUM GARMENTS P. LTD.,DELHI vs. DCIT, CENTRAL CIRCLE , NOIDA

Yadav Singh and Smt. Kusum Lata hands and dated 28.12.2016 in the last assessee M/s. Kusum Garments Pvt. Ltd.’s hands; for the precise reason that separate section 153D approvals; taxpayer(s) as well as assessment year-wise, were neither obtained nor granted by the learned prescribed authority. Learned CIT(DR) vehemently objects to the assessee’s foregoing application seeking admission of additional ground(s) raising section 153D approval issue at this belated stage.

4. We find no merit in the Revenue’s foregoing technical objections against the assessee’s petition seeking to raise their identical substantive ground of section 153D approval in these corresponding section 153A assessments. We make it clear that all the relevant facts qua the above legal ground duly form part of the records. We thus quote NTPC Limited vs. CIT 229 ITR 383 (SC), and Al Cargo Logistics Ltd. vs DCIT (2012) 21 taxmann.com 429 (Mum) (SA) settling the issue in assessee’s favour and against the department that the tribunal could indeed permit such an additional ground to be raised even in second appellate proceedings so as to determine correct tax liability in the case in hand provided all the relevant facts form part of the records. The Revenue could hardly dispute that in furtherance to the department’s search action herein dated 27.11.2014 leading to initiation of section 153A assessments, these assessees have filed the Assessing Officer’s common proposal under section 153D of the Act seeking approval of the learned prescribed authority followed by the latter’s acceptance thereof dated 31st December, 2016 in Smt. Kusum Lata and Sh. Yadav Singh cases involving assessment years 2009-10 to 2015-16. This being the clinching case, we find that the tribunal’s

4 | P a g e recent coordinate order in Sh. Himanshu Verma Vs. ACIT (ITA Nos. 1236/Del/2022 & Ors.), dated 29.04.2025 has already held such an assessment involving a common section 153D approval in section 153A proceedings, as non-est in the eyes of law: “4. Learned CIT-DR at this stage seeks to distinguish the above proposal in light of the tribunal’s yet another learned co-ordinate bench order dated 23.01.2025 in Usha Satish Salvi Vs. ACIT, deciding the very issue in the department’s favour as follows: 4. Firstly, we take up the appeal for AY 2012-13. The grounds raised in appeal are reproduced as under: On the facts and in Fact and in circumstances The Ld. CIT(A) erred in confirming Rs. 6,45,572/- as unexplained casti expenses. U/s 69C of the Income Tax Act, 1961 and the reasons assigned by him, for doing so are wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961 and rules made there under. 4.1 Before us, the assessee also raised following additional grounds: On the Facts and in the circumstances of the case and in law the arrival in the On the Facts and in the circumstances of the case and in law the approval granted under section 153D of The Act is no arrival in the eyes of law as the same has been accorded on presumption and without application of mind and consequently the assessment order u/s 153C of the Act is null and Void as approval granted under section 153D is mechanical in nature and without application of Mind. 4.2 Identical grounds and additional grounds have been raised in the remaining two appeals except change of amount grounds and additional grounds have been raised in except change of amount. 5 | P a g e

4.3 We have heard rival submission of the parties on the issue of admissibility of the additional e have heard rival submission of the parties on the issue of grounds raised are e have heard rival submission of the parties on the issue of additional grounds. As the grounds raised legal in nature and not requiring investigation of fresh facts, same are admitted for adjudication in view of the settled principle in the legal in nature and not requiring investigation of fresh facts, same are admitted for adjudication in view of the settled principle in the NTPC Ltd. 229 ITR 283 (SC).

5. Before us, the learned counsel for the assessee filed a paper book containing pages 1 to 46.

6. In the additional ground, the assessee has challenged the validity of the assessment under section 153C of the validity of the assessment under section 153C of the to the assessee the approval granted by the competent authority to the assessee the approval granted by the competent authority under section 153D of the without application of the validity of the assessment under section 153C of the Act. According to the assessee the approval granted by the competent authority as been accorded on presumption, mechanical in nature, consequently the assessment order under section 153C is null and under section 153D of the Act has been accorded on presumption, without application of the mind, which is mechanical in nature, consequently the assessment order under section 153C is null and consequently the assessment order under section 153C is null and void. 6.1 The submissions in support of the additional ground made by the learned counsel for the assessee are summarized as under: (i) The letter seeking approval was submitted to the A The letter seeking Commissioner of Income 26/12/2017, approval was submitted to the Additional tax i.e. the approving authority on which is at the fag end of the expiry of limitation of the assessment. The Ld Additional Commissioner has approved the assessment on same date i.e. 26/12/2017, which shows that the approval has been without going through records.

(ii) Only the draft assessment order, without assessment record and seized material or appraisal report was sent to the approving authority with the letter for obtaining the approval. Therefore, the approving authority has granted approval without examining either the assessment record or the seized material. (iii) A common and consolidated approval has been granted for AY 2010-11 to 2015-16 and 2016 and there is no year was reasoning in the said approval. The approval has to be granted separately for each assessment year. (iv) The approval granted was not absolute. (v) The approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect of any of the assessment year. (vi) The approval was granted in a mechanical and hurried manner without mentioning the reasons and without application of mind. The approving authority anything in the approval memo toward the process of deriving satisfaction so as to exhibit his application of mind. The approving authority has not objectively evaluated the draft assessment order with due application of the mind on the issue contained in such order so as to derive its conclusive satisfaction that the proposed action of the Assessing Officer is in conformity with the subsisting law. 6.2 In support of above contentions the learned counsel relied on various decisions of the coordinate benches of the Tribunal and Hon'ble High Court's as follows: (i) Decision dated 06/06/2024 of Delhi bench of the Tribunal in the case of Shri Guvinder Singh Duggal in to 863/Del/2021 for AY 2012-13 to 2018- 19. (ii) Decision dated 29/04/2024 of Delhi Bench of Tribunal in the case of MDLR Airline (P) Ltd in & 1421/Del/2023 for AY 2007-08 and 2008-09. (iii) Decision of Hon'ble Allahabad High Court in the case of PClT vs Sapna Gupta in ITA No. 88 of 2022. 7 | P a g e

(iv) Decision of Hon'ble Delhi High Court in the case of PCIT vs Shiv Kumar Nayyar in ITA 285/2024 & CM Appeal 28994/2024 (v) Decision of Mumbai Bench of Tribunal in the case of Arch Phamalabs Ltd in for AY 2011-12 and other appeals. (vi) Decision of Hon 'ble Delhi High Court in the case of PCIT Vs M/s MDLR Hoteles P Ltd in ITA 593/2023 (vii) Decision dated 24/04/2024 of Delhi Bench of Tribunal in the case of Veena Singh in & 295/Del/2022 for AY 2016-17 and 2017-18 7. On the contrary, the Ld. DR submitted that all the additional grounds have been raised merely on the basis of the presumptions and suspicion that the learned Additional Commissioner of Income-tax i.e. approving authority had not gone through the seized material and assessment records leading to allegation of non- application of the mind by the approving authority. The learned DR submitted that after collecting all the material from the search premises, each and every material is being analysed from the angle of possible tax evasion and an 'appraisal report' is prepared by the Income-tax authority who conducts the search action. The learned DR further submitted that as per the procedure prescribed, a copy of the said appraisal report is sent to the concerned Assessing Officer, concerned Additional Commissioner of Income-tax (i.e. the approving authority) and the concerned Commissioner or Principal Commissioner of Income-tax. Accordingly, he submitted that appraisal report of the case containing analysis of entire seized material related to case was already available with the approving authority. The learned DR filed affidavits from the approving authority as well as from the Assessing Officer who passed the assessment orders, in support of the contention that assessment orders were approved after due application of mind. The Assessing officer has deposed that in the instant case, discussion on various Issues between him and approving authority happened regularly based on the appraisal reports and seized/impounded materials. For ready

8 | P a g e reference, content of the affidavit filed by the then Assessing Officer is reproduced as under: "I, Pawan Bhatti, Jt. Commissioner of Income Tax, (AU) - 1 (3), Thane stationed at Kalyan and office address at Mohan Plaza, 2nd floor, Way ale Nagar, Khadakkpada, Kalyan (W)-421301, do hereby solemnly affirm and stated in the case of Usha S. Salvi for A. Y. 2012-13 (ITA 4239M2023), A. Y.2013-14 (ITA 42372023), A. Y. 2014-15 (ITA 42382023) as under: It has been more than almost 7 years since these orders were passed after due discussion and guidance from time to time with the approval of Range Head as per the Law. Generally, the appraisal reports of such search/ survey cases are forwarded to the central charge hierarchy including the AD and Range head and in such type of cases, as per Law, approval for passing the assessment orders are to be given by the range head and so Range head has to apply his/her mind and has to give sufficient time. Since in such type of cases, regular discussion between the range head and AO happened regularly whenever needed. Appraisal report or other communication with the investigation wing of the department and seized/impounded materials explored and discussed from time to time and thereafter assessment order finalised after approval from the range head. In this case also, such type of discussion happened regularly based on the appraisal reports and seized/impounded materials as per the Law. Since the offices of the range head and the assessing officer (AO) were at the same floor i.e. 19th floor in the Air India Building the discussion or meetings were called by the range head or sought by the AO to discuss such cases. The AO had to discuss the assessment records, reply from the assessee etc. across the table with the range head on the one to one discussion basis as such type of search/ survey cases are sensitive in nature. Furthermore, approvals are granted for more than single assessment years in combined manner to save the resources of the government and to protect the interest of revenue as deliberations on such cases have already been done to conclude the assessment proceedings in holistic and 9 | P a g e logical conclusion. In the instant case, such practice was followed. Hence, proper and regular discussions, analysis of appraisal report and seized/ impounded materials have been taken place to reach the logical conclusion to finalise the assessment orders and in this way, thorough application of mind was there to conclude the assessment proceedings in the present case along with other such cases where approval is sought. The report has been prepared by recollecting the memories, all the facts and events happened at that time. I, solemnly state that the contents of this affidavit are true to the best of my knowledge and belief and that it conceals nothing and that no part of it is false." 7.1 Similarly, the approving authority also deposed that all issues involved in the assessments were regularly discussed since the stage of issuing notice for query latter to the stage of making draft assessment order. The content of the affidavit filed by the then learned Additional Commissioner of Income-tax i.e. the arriving authority is reproduced as under: "Affidavit in case of Usha S. Salvi for A.Y.2012-13 (ITA 4239M2023) A. Y.2013-14 (ITA 4237M2023), A. Y.2014-15 (ITA 4238M2023) I, Anu Krishna Aggarwal, Commissioner of Income Tax, Appeals (AU)-4, Delhi, having Office address at Room No. 108, Drum Shaped Building, IP Estate, Delhi- 110002, do hereby solemnly affirm. and state in the case of Usha S. Salvi for A.Y.2012-13(ITA 42392023), A.Y.2013-14 (ITA 4237M2023), A. Y.2014-15 (ITA 4238M2023) as under: (1) In search case, the search material and relevant record is in the possession of the Assessing Officer and the approval of the Assessment order is not a one- day affair, it is done after a series of discussions with the Assessing Officer. The Assessing Officer and the Addl. CTT both examine the records on regular basis. Therefore, the approval to the assessment order is given after a number of meetings are held and the 10 | P a g e whole case is understood. I have seen the records before giving approval of the case. The record is with the Assessing Officer. He comes with the records for discussion and after understanding the content of the record, approval is given. It is not a case where approval is given in just one day. (2) The approval was given on the same day as the letter for approval was received, does not mean that the case has been seen only on that day. The Addl.CIT and the Assessing officer both are involved in the case since the issue of the notices and before sending the questionnaire to the assessee, the record is examined by the Assessing Officer and the Addl.CIT both on a regular basis. It may not be brought on the record because generally, the practice of the department is that we don't write order sheet of the meeting with the Assessing Officer. The reason for the same is that the Assessing Officer and the Addl.CIT meet a number of times every day. Therefore, it is not a practice to write each and every meeting with the Assessing Officer in Income Tax Department. (3) In this case the offices of the range head and the assessing officer were at the same floor i. e. 19th floor in the Air India Building, sometimes the discussion or meetings were called for by the range head and sometimes meetings were sought by the AO to discuss the group case. The meeting between the Assessing Officer and the Addl. CIT were held on a regular basis as I have already said in the above point, Assessing Officer and the Addl.CIT meet very often. (4) The modifications or amendments are suggested on regular basis. The monitoring is done on regular basis and at every stage of the investigation and the examination of the records, the suggestion is being given. Therefore, it is not possible to submit all the suggestions given and no order sheet is being maintained for discussion and meeting with the Assessing Officer. Actually the Addl.CIT is involved in the process from the start of the assessment process. Therefore, the changes in the assessment order, if any, is a continuous process. Therefore, there is no need to change the draft assessment order as the draft assessment order is being prepared after a due 11 | P a g e deliberation and discussion with the Assessing Officer. (5) I, the Addl. CIT in the case at that time is confirming that due application of mind was done in the case when the order was approved u/ s. 153D and I was involved in the case from the day when the case was assigned to the charge. I, solemnly state that the contents of this affidavit are true to the best of my knowledge and belief and that it conceals nothing and that no part of it is false. 7.2 The learned DR submitted that no evidences have been filed by the assessee supporting his contention- of non application of mind by the approving authority and in view of the affidavits filed by the AO and approving authority deposing proper application of mind, the contentions of ld counsel of the assessee are liable to be rejected. In this regard, contents of written submission filed by the ld DR is reproduced as under: “……….

by the assesse regarding non application of mind while granting approval us 153D of the Act it is submitted that the Ld JCIT had duly applied her mind. It was only after applying her mind that she had suggested some changes and gave approval. As informed by the AD, the draft order is not available in records but it is humbly submitted that if a senior officer has confirmed that she had suggested some changes then the same would have been done by AD. Affidavits have also been filed by both officers i.e. the AO, as well as the Range head, wherein they have confirmed that due process was followed, various meetings were held on regular basis and only after the Range head was satisfied the approval was granted. This shows that the JCIT had applied her mind before granting approval u/ s 153D.

3. In this regard it is pertinent to mention that in the present case the seized material consists of only 3 Annexures. Thus this is not a case where huge seized material is there requiring extensive discussions.

5. Regarding assessee's contention that there is single approval for all years it is submitted that different approval has been granted as all the A Yrs are clearly mentioned. It is only an approval on a single page. In this regard it is submitted that in case different pages had been used for each A Y, even then the sum and substance would have been same.

"To, DCIT-CC-4(4) Mumbai. Approval U/ s 153D of the I T Act for assessment in the case of Smt Usha Satish Salvi (PAN-AQSPS6935J) for A. Ys. 2010-11 to 2015-16 & 2016-1 7 - reg. ------ Please refer to the above. Draft: assessment orders in the abovementioned case u/ s 143(3) r.w.s. 153C of the I T Act, 1961 for A. Ys. 2010-11 to 2015-16 and u/ s 143(3) of the I T Act for A. Y. 2016-1 7 are hereby approved u/ s 153D of the I T Act, 1961 subject to the corrections made therein. After passing the order, a copy of the same may be submitted to this office." 8.1 The learned counsel for the assessee has mainly contended that except draft assessment orders, no material was available with the approving authority. He has further alleged that approval was granted on the same date of seeking such approval in a combined manner for all the assessment year involved. The approving authority has merely directed for certain modification in the final order but not specified said modification in the approval order. But we find that except such allegation in support of the additional ground, no documentary evidence to support the allegations of non application of mind by the approving authority have been filed by the assessee. Whereas, on the other hand, the learned departmental representative has filed affidavits from the then Assessing Officer and the approving authority, wherein they have denied the allegations raised by the assessee but no counter affidavit has been filed by the assessee to controvert the deposition made by the Assessing Officer and the additional Commissioner of income-tax in their respective affidavits. In the decisions relied upon by the assessee the main ratio is that approval granted in mechanical manner without application of mind is not sustainable in law. In the decisions relied upon of coordinate benches main allegation that the Assessing Officer only forwarded letter seeking approval without enclosing assessment records or appraisal report on seized material. In the affidavits filed before us, it has been 14 | P a g e unequivocally stated by the Assessing Officer as well as the Additional Commissioner of Income-tax that all the issues involved in the assessments were discussed on regular basis from time to time between the two authorities as both the authorities were sitting on same floor of office building. The ld DR submitted that the approving authority after considering the queries raised by the Assessing Officer and the reply of the assessee in the light of appraisal report and seized record, had examined each issue dealt in the draft assessment order properly and thereafter only approval was granted. In the cases cited by the learned counsel for the assessee the fact of discussion on various issues of assessment between the two authorities from time to time has not been brought on record and therefore in those decisions this aspect has not been considered. We further note that certain modifications were suggested to the Assessing Officer in the draft assessment order, which have been carried out by the Assessing Officer in the assessment order passed, which also shows that the approving authority approved the draft order not in mechanical manner, but after due application of mind. The fact of modification suggested in the order itself shows that the approving authority has gone through drat assessment order and analyed the issue involved therein. In the cases relied upon by the assessee the fact of modification suggested by approving authority is not born out, which distinguish the case of the assessee with the cases relied upon by the assessee. In similar circumstances after considering affidavits filed by the Assessing Officer and the approving authority, the coordinate bench of the Tribunal in the case of Pratibha Pipes & Structural Ltd in to 3876/Mum/2015 and in AY 2007-08 to 2009-10 and 2011- 12, upheld validity of approval granted under section 153D of the act of observing as under: "16. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. There is no doubt with regard to the fact that as per provisions of section 153D, the AO needs to take prior approval from the Addl. Commissioner of the range in charge before passing any assessment order u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961. It is also not in dispute that the AO, in his assessment order at para 7 had categorically stated that the mandatory requirement of 15 | P a g e approval u/ s 153D of the Income-tax Act, 1961 has been taken from the Addl. CIT, Central Range- 4, Mumbai vide letter No.Addl.CIT/CR-4/Approvl- 153D/2012-13 dated 25-03-2013. It is also not in dispute that the assessee has not raised any objection, whatsoever, with regard to the issue of approval u/ s 153D either before the AO or before the first appellate authority. The assessee has taken the legal ground for the first time before the Tribunal by filing additional ground of appeal

. Therefore, the whole issue needs to be apprised in the light of above facts and also the conduct of the assessee. Admittedly, the department, in reply to RTI application clarified that neither copy of approval request letter filed by the AO to the Addl. Commissioner, nor copy of approval granted u/ s 153D of the Act, was found in the assessment order folder. However, it was further stated that in the 153D approval folder maintained in the office of Addl. CIT, Range-4, the approval granted in other group cases were traced. The assessee claims that mere mentioning of having been taken approval u/ s 153D in the assessment order is not sufficient and what is required to be seen is whether the department is able to provide copy of approval letter granted by the Addl.CIT, or not. Since the department has categorically stated that approval granted u/ s 153D of the Act is not available in the assessment folder, obviously, benefit of doubt goes in favour of the assessee that no such approval has been taken by the AO u/ s 153D before passing order u/ s 143(3) r. w.s. 153A of the 1. T. Act, 1961.

17. In the above factual background, if we examine the claim of the assessee by way of additional ground, we find that there is a serious suspicion raises about the conduct of the assessee in taking additional ground challenging the issue of approval u/ s 153D of the 1. T. Act, 1961, for the first time, before the Tribunal. The assessee never disputed this issue before the lower authorities. The assessee has taken this issue for the first time before the Tribunal after ascertaining the fact in connection with its RTI application that no such approval was available in the assessment folder. When the assessee has not raised the issue before the CIT(A), then there is a serious doubt arise in the mind about the intend of the assessee to take a legal ground before the 16 | P a g e

Tribunal. In this factual background, if we examine the contents of the approval mentioned by the AO in the assessment order coupled with affidavits filed by two senior most officers, who were in charge of the assessment proceedings, we find that both officers have stated in their affidavits about requirement of law under the provisions of section 153D of the Income-tax Act, 1961. The then AO, Shri Milind Rajguru, Joint Commissioner of Income-tax (Retd) had filed an affidavit and stated that mandatory requirement of approval u/ s 153D had been obtained. Further, Shri Abhijit Pathankar, the CIT(DR), has also filed an affidavit and stated that he had granted approval required to be given u/ s 153D vide his letter No.Addl. CIT / CR-4/ Approval- 153D/ 2012-13 dated 25-03-2013. Although, affidavit is not primary evidence which cannot be accepted in absence of circumstantial evidences, but in this case, the circumstantial evidence available in the assessment record supports the contents of affidavits filed by both officers. Therefore, the affidavits filed by the officers cannot be ignored, as not having any evidentiary value. The contents of affidavits filed by the officers coupled with circumstantial evidences available in the assessment folders clearly establish the fact of obtaining necessary approval u/ s 153D of the 1. T. Act. Though, copy of approval letter is not available in the assessment record, but the contents of approval letter issued by the competent authority has been reproduced in verbatim in the assessment order at para 7. Further, the approval granted in other group cases is very much available in the assessment folder. Therefore, it cannot be said that no approval had been taken. Further, the approval u/ s 153D is an administrative procedure which requires to be complied with by the officers, who is discharging the assessment functions. The administration action of the department is not very much relevant for the assessee to justify its case, on merits. Therefore, when assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of 17 | P a g e assessment order passed by the AO u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961. Although, the assessee has relied upon certain judicial precedents, we find that those case laws were rendered under different set of facts, where the assessee had taken the ground challenging validity of the assessment before the CIT(A) and also fact that there was no specific observation in the assessment order for taking approval required to be taken u/ s 153D of the Income- tax Act, 1961. In this case, the AO has categorically recorded at para 7 of his assessment order in respect of approval taken u/ s 153D and such reference has been further strengthened by the affidavits of two officer, who were part of assessment proceedings. Therefore, the case laws relied upon by the assessee cannot be considered as applicable to the facts of assessee case.

5. Learned CIT-DR’s vehement contentions therefore is that he is very much ready to call for the concerned filed authorities’ respective affidavits to buttress the point that not only they had applied their due mind but also section 153D approval(s) stand granted after considering all the relevant legal proposition and facts on record.

6. We see no merit in the learned CIT-DR’s foregoing arguments. This is for the precise reason that there is no such procedure of getting the field 18 | P a g e authorities’ affidavit in support of their respective orders under the provisions of the Act that stated in the case records. Case law Hindustan Lever Ltd. Vs. R.B. Wadkar (2004) 268 ITR 332 (Bom.) has already settled the issue; in section 148/147 jurisprudence, that even reasons recorded by the assessing authority could not be allowed to be improved of any latter stage which have to be read as standalone basis. The very legal proposition is applicable in administrative law as well as in hon’ble apex court’s landmark decision in Mohinder Singh Gill & Anr. Vs. CEC (1978) 1 SCC 405 (SC) wherein their held as under: “The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds latter brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji. “Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the office making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to effect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.” Orders are not like old wine becoming better as they grow older”.