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Before: Shri Laliet Kumar & Dr. Mitha Lal Meena
ITA Nos. 112 to 118/Asr/2018 1
In the Income-Tax Appellate Tribunal, Amritsar Bench, Amritsar Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member ITA Nos. 112 to 118/Asr/2018 Assessment Year’s 2007-08 & 2013-14 Sh. Madan Lal V.S. DCIT Central Circle - I H.No. 24, Model Town, Jhalandhar MogaRoad,Shahkot, Jhalandhar PAN:ABFPL4650B (Appellant) (Respondent)
Appellant by Sh. Salil Kapoor, Adv. Sh. Nirmal Mahajan, C.A. & Respondent by Smt. Rajindra Kaur, DR.
Date of Hearing 15.07.2021 16.08.2021 Date of Pronouncement
ORDER Per Laliet Kumar, J.M.
The present appeal was filed by the assessee on various grounds mentioned in the memo of appeal however, the assessee before us has argued only on ground no. 11 of the memo of appeal which is as under: “11. That the CIT(A) has erred in law by upholding
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the alleged approval u/ s 153D of the IT Act being illegal, bad in law and without any application of mind and the Assessment order is passed without obtaining requisite approval.”
This ground is common in all the appeals.
The ld. AR for the assessee had submitted that if the Tribunal decide this legal ground in favor of the assessee , than entire assessment order passed by the AO and the CIT(A) would became nullity ,as orders were passed without any jurisdiction and without any prior approval in accordance with law. It was further submitted that ,in case ,this Tribunal comes to the conclusion that the matter is required to be heard on merits, and the ground no 11 supra is decided against the assessee then the matters are required to be heard on merits and other legal grounds were required to be decided .
To this the ld. DR had submitted, he has no objection for arguing and ground no .11, However, it was submitted that in case the Tribunal comes to the conclusion that the order passed by the AO was bad in law ,on account of lack of approval u/s 153D, then, the matter may be remanded back to the lower authorities for passing the appropriate order.
The ld. AR for the assessee, at the outset had drawn our attention to para 8 to 8.3 of the CIT(A) order at page 10 to the following effect:- “8. Vide ground no. 10 of the appeal is against the order passed by the AO without obtaining requisite approval under section 153D of
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the act. The appellant has submitted that under the provisions of IT act before passing an order, AO required to get prior approval u/s 153D of the act. The authority giving the approval is supposed to apply its mind before giving approval· and it should be stereotyped. The appellant has placed reliance on the decision of Hon 'blePuneBench of the ITAT in AkilGularnaliSomji vs. Income Tax Officer, and on the decision of Hon'ble Mumbai Bench ofthe ITAT in Smt. Shreelekha Damani vs. DCIT 173 TTJ (Mumbai) on this issue.
8.1 The submissions filed by the appellant were forwarded to the AO and a remand report received on this issue is as under:
In this respect, it is submitted that the ld. AR is not correct on the facts, as has been mentioned by him. In the chart on page 2 of the written submission, reference for Special Audi~ was made on 20.03.2015. i.e. 11 days were remaining on that date for framing the assessment. The report of special audit was received on 18.09.2015. Therefore, as per Explanation (ii) to section 153B(1) the period taken for special audit from 20.03.2015 to 18.09.2015 will be excluded from the period of limitation. After exclusion, the time period left with the AO was l l days and not zero days as claimed by the Ld. AR. Since Since the period available was less than 60 days, the same stood extended by 60 days, ending with 18.11.2015. Therefore, submission of the ld. AR is devoid of merits and further case laws relied upon by him must not be applicable to the facts of this case
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(since facts of the case and copy of the Judgment of Hon'ble ITAT is not available with this office). 8.2 The appellant has filed counter comments on the remand report received of the Assessing Officer which are as under: The assessee totally disagree with the contention of the AO. The JCIT/ Addi. CIT is supposed to apply his/her mind on the draft assessment order once it is submitted to him for approval u/s 153D of the Act. Here AO has himself conceded that there is no application of mind at the last stage. Inspite of that he has tried to justify the act of his predecessor and Addi. CIT citing the reason that in such cases there is day to day monitoring/ review meeting with the range head and line of action to be adopted in investigations and the· conclusion to be drawn. Hence the final approval is just a formality. This contention of the AO is not within the frame work of law prescribed. Just for the sake of arguments but not admitting, even if we hold the contention of the AO right, there must be some minutes of the meeting on the file. Income tax proceedings are quasi-judicial proceedings and a proper procedure must be followed and every activity is supposed to be recorded. The AO/Range heads keep on getting transferred during the proceedings. To apprise the succesor AO/Range head, what decisions have been taken in past, must be recorded in the file and mention should be there in the order sheet also. During the inspection of the file, there was no such material available, which could justify this contention of the AO. In case the same is in some different folder, the AO should be directed to produce the same and the copy may please be provided to the assessee.
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Otherwise keeping in view, the comments of the AO there is no application of mind at the final stage and this is in violation of the spirit of section 153D and is illegal.
In addition to this AO has written that in present time being time of technology, the communication between persons at different stations is held via phone/ fax and date of receipt of physical letter by post is immaterial as held by judicial courts also. However, the AO has failed to mention any judicial decision on this issue. Without prejudice, agreeing that approval was received by Fax, the copy of the fax duly seen by the AO before signing the final orders citing approval of the Range head, must be in the file, proceedings being quasi-judicial proceedings. Regarding two different letters, AO has commented: "Regarding availability of two letters with the same dispatch number, it is submitted that initially the AO framed a different letter for each assessee, but later, to cut short the time involved, a fresh letter was prepared seeking approval in all the six cases involved." We are surprised from where the AO has taken out this information a, he was not the officer who framed the assessment and there is no mention of this in the file Secondly, we fail to understand when letters for all the persons were prepared, then how framing a combined letter for all the assessee will save time. Rather it will consume more time. Availability of draft order in the file is a legal requirement but the AO has held it otherwise. Rest of the submissions of the AO on this ground are also frivolous and without any basis.
ITA Nos. 112 to 118/Asr/2018 6
8.3 Having considered the material available on record, I find that due procedure as laid down under the provisions of the IT act has been followed by the AO before passing the order. It is seen from the record and as stated by the AO that due consultations were made with the authority granting approval under section 153D 0l the act. It is also stated by the AO that approval was obtained prior to the passing of order in this case. The same is evident from the record of receipt & dispatch register in the office of the AO. In the present times, once the approval has been granted and conveyed by the competent authority through the other means of communication telephonically, the orders can be passed by the AO. Thus, I do not find any infirmity in the procedure being followed by the AO before passing the assessment order. The appeal filed by the appellant on this ground is dismissed. ”
Ld. AR had submitted that that initially the approvalwas sought vide letter dated 26.07.2016 by the AO from the Addl. CIT, as required under section 153D of the Act. In the said letter dated 26.7.2016 it was as under:-
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Further LdAR had drawn our attention to page 789 of the paper book where , another letter with date 27.07.2016 with the same diary number was sent for approval to the Addl. CIT. The copy of letter dated 27.7.2016 provides as under:
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It was submitted by the LdAr that Additional CIT(A), without applying his mind , without considering the draft assessment order and documents , had wrongly granted the approval in a mechanical manner . The approval was communicated to the AO on 28/7/ 2016. It was submitted that non-application of mind by Add. CIT, is manifest from the letter itself, where, no reason whatsoever for granting the approval was mentioned . It was submitted that for all the assessment years , common approval was granted by the Add Cit, without giving reasons for each year. It was submitted that along with letter seeking the approval, neither draft orders were enclosed, nor assessment records were enclosed . However the additional CIT(A), had wrongly mentioned that “Assessment records in the above cases are enclosed”.The approval letter of AddCIT provides as under :-
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It was submitted by the ld. AR that the letter at page 788 dated 26.07.2016 was never sent by the DCIT to the Addl. CIT seeking the approval u/s 153D however, the letter dated 27.07.2016 was sent by the DCIT at page 789.
It was submitted that before the approval was granted by the Addl. CIT to the AO, the AO had wrongly passed the assessment order on 27.07.2016itself .Ld AR had drawn our attention to page 1 of the assessment order, where date of passing of the order was mentioned as 27/7/2016. which is to the following effect:-
Assessment Order
I T. M.S 67 1- Name of the assessee Madan Lai, S/o Bihari Lai
2- Address of the assessee Model Town, Shahkot.
3- PAN/GIR ABFPL4650B
4- Ward/Circle Central Circle-I, Jalandhar 5- Status Individual
6- Method of accounting Mercantile
7- Resident Whether resident/Resident but not ordinarily resident/Non- resident 8- Nature of Business Income from Business/ Profession. 9- Asstt. Year 2007-08
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10- Previous Year 2006-07 11- Date of Hearing As per records 12- Date of Order 27-07-2016 13- Section and sub section under 153A read with Section 143(3) of which order is passed the Income Tax Act, If 51.
ASSESSMENT ORDER A search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted at the residence of the assessee alongwith survey u/s 133 of the Income Tax Act, 1961 on the business premises on 03.04,2012. After centralization of the case u/s 127 of the Income Tax Act, 1961, notice u/s 153A of the Income-Tax Act, 1961.”
The ld. AR had submitted that the fact ofpassing theassessment order on 27.07.2016, i.e prior to receipt of the approval letter is confirmed from the receipt stamp dated 28/7/2016, marked on the approval letter dated 27.07.2016 , after it was received in the office of the DCIT.
To buttress his argument that the AO passed the order prior to receipt of the approval ,LdAR had drawn our attention to the remand report given by the AO in the appellate proceeding where the AO has categorically mentioned as under:
No. : CC-1/JAL/2017-18/2022 Dated: 12.12.2017
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To The Commissioner of Income Tax (Appeal)-2, Jalanadhar. (Through the Additional commissioner of Income Tax, Central Range, Jalandhar) Sub:- Furnishing of Remand Report in the case of Sh. Madan lal, S/o Bihari Lal, R/o Model Town, shahkot in appeals no. 357, 361, 365, 344, 369, 373, 345, 377,381/16-17 for the A. Yrs. 2007-08 to 2013-14 -Reg. Sir, Kindly refer to your office letter no 2235 dated 12.12.2017 on the subject cited above. In the written submission for the all the assessment years in question, the assessee has taken common grounds of appeals. Comments of this office on these written submissions are submitted hereunder:- 2. Ground No. 3 ……………….. 2.1 ……………… 2.2 3.1 The id. AR has argued that the alleged approval u/s 153D was given in haste and without any application of mind since first, the 42 orders were approved within hours or the same day of having received the copies from the Assessing Officer, second, the communication of approval was received on 28.07.2016, whereas the order was passed on 27.07.2016; third, there was no order sheet entry about the movement of file for approval or receiving back of the file and issuance of final order; fourth, no draft orders sent to the Addl. CIT for approval were found in the assessment record.( emphasis supplied by us )
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3.2 In this respect, it is submitted that in respect of search cases, regular review meetings are held by the Range heads with the Assessing Offices discussing facts of the search cases, line of action to be adopted in investigations and the final conclusion to be drawn. Therefore, the approval given is not mechanical but after regular application of mind throughout the assessment proceedings. This is so to avoid any difference of opinion at the fag end of the limitation period of the assessment proceedings. This is why the id. Addl. CIT was able to give approval to 42 orders on the same date of receipt of draft orders because he was well aware of the facts of the case and the investigations and the approach adopted by the Assessing Officer in taking final decisions. Further, it is common for the concerned officers in the Central charge to sit late in the evening to clear the urgent pending work and there was nothing illegal for the Addl. CIT to spend 3-4 extra hours even after office hours in going through the draft assessment orders and approving the same. In respect of second contention, it is submitted that in this era of technology, were communication between persons at different stations is held via phone/fax, date of receipt of physical letter by post is immaterial as has been held by judicial courts also. Approval conveyed by the Addl. CIT on the same day when he signed the letter of approval, was sufficient compliance of there relevant provisions of law even though the letter was received in ‘DAK’ by the AO on the next working day. As per records of the Addl. CIT, Central Range, Jalandhar, approval letter was dispatched vide no. 435 on 27.0702016 itself. Copy of the relevant page of the dispatch register is enclosed for kind reference. In respect of third contention, when the record was forwarded to the Addl. CIT through a letter, there was no requirement of recording the same on the order sheet. Regarding availability of two letters with the same dispatch number, it is submitted that initially the Assessing Officer framed a different letter for each assessee, but later, to cut short the time involved, a fresh
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letter was prepared seeking approval in all the six cases involved. The first letter in fact was withheld and not sent to the Addl. CIT since both copies are available in record for the A.Y.2007-08. Non- availability of office copy of draft order sent to the Addl. CIT is not an issue at all since the same depends to the practice and not any legal requirement. In respect of the last argument that when four more days were available with the Assessing Officer to pass the orders, he acted in a haste by releasing the order on the same day, it is submitted that once an order is approved, there cannot be any illegality in passing the same on the same on the same day and no prejudice has been done to the assessee in doing so.
On the basis of above, ld. AR had submitted that at the time of passing the assessment order, the AO has no prior approval as contemplated u/s 153D and therefore the assessment order was passed by the AO without having prior approval u/s 153D , hence it was bad in law and required to be annulled .
it was submitted that , even the approval granted after passing of the order was also bad in law, as the official granting the permission had not seen the draft assessment order and other relevant material, which was necessary to be seen for the purposes of forming the opinion, as to whether approval could be granted by Add CIT or not . He had drawn our attention to the forwarding letter and remand report submitted by the AO before CIT(A). On the basis of the above it was submitted that the approval being mechanical approval , without
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application of mind therefore it was not an approval in the eyes of law, hence the assessment orders are required to be annulled .
Ld. AR relied upon the following decision of various Tribunal and of the High Court.
“i. RishabhBuildwell P. Ltd. vs. DCIT ITA No. 2122/Del/2018 (ITAT Del) ii. Geetarani Panda vs. ACIT IT (SS) No.01-02/CTK/2017 (ITAT, Cuttack) iii. CIT vs. Shri AkilGulamaliSomji ITA (L) No. 1416-19/2012 &Ors BHC iv. AkilGulamaliSomji vs. ITO ITA No.455-58/PN/2010 v. M3M India Holdings vs. DCIT, ITA No. 2691/Del/2018 vi. Smt. Shreelekha Damani vs. DCIT 88 taxmann.com 383 (ITAT- Mum) vii. PCIT Smt. Shreelekha Damani, ITA No. 668/2016 (Bom. HC) viii. Shri Saurabh Agarwal C/o D.S. (India) Jewelmart P. Ltd. vs. DCIT, ITA No. 263-267/Agr/2017 ix PCIT vs. Sunrise Finlease (P) Ltd. 89 taxmann.com 1 (Guj.) x. Inter International, ITA No. 1573/Chd/2018 (ITAT-Chd.) xi. UttrakhandUthanSamitee vs. ITO, ITA No. 48- 52/DDN/2019 (ITAT-Del). xii. Sanjay Duggal &ors vs. ACIT, ITA No.1797- 1827/Del/2019 & ITA No. 1608-1627/Del/2019 (ITAT-Del).
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xiii. Isolux Corsan India Engineering & Construction P. Ltd. DCIT, CWP No. 8357/2014 (P & H) xiv. Rajesh Ladhani vs. DCIT ITA No. 106-108/Agr/2019, dated 06.11.2019 xv. Arch Pharmalabs Ltd. vs. ACIT ITA No.6656/Mum/2017 dated 07.04.2021.” 16. It was submitted that for all the assessment years, the common approval was granted by the Addl.CIT after passing of the order u/s 153D. It was required that before passing the order, the prior approval should be obtained by the AO from the JCIT. As the needful would not done, therefore, the assessment orders are required to be quashed. Ld AR had filled the w.s. in support of case of the assessee, which is reproduced herein for the completeness of record :
“It is submitted that the alleged approval u/s 153D of the Act is illegal, bad in law and without any application of mind and the Assessment order passed without obtaining valid approval is liable to be quashed.
There were two proposals prepared by Assessing Officer. The first communication was dated 26.07.2016 (at page number 788 of PB). Howeverthesecond letter dated 27.07.2016 (at page number 789 of PB) with the same dispatch number containedtherecord of 6 different Assessee for 7 years each with 42 draft orders. The approval letter by the Addl CIT is also dated 27.07.2016 in which all 42 orders are approved in one link. 3. Assessee is challenging the validity of the assessment order and of the alleged approval given under Section 153D and the procedure adopted by the revenue authorities while granting mandatory approval under section 153D of the Act before passing the assessment order. It is the case of Assessee that approval by Add CIT under Section 153D is not a mere formality. It is an important check on Assessing Officer. Addl. CIT is expected to go through the material found during the search, assessment records, draft assessment order, record reason and then grant approval as per the mandate of law.
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In the facts of the present case Assessing Officer sent the assessment record to the Additional Commissioner of Income Tax, Central Range, Jalandhar camp at Ludhiana as he was having additional charge of Jalandhar on 27.08.2016. Kindly refer to submission before CIT(A) at Page number 990-1004 (volume 2) of the Paper Book. This fact is not denied by the AO in his remand report dated 12.12.2017 reference page 1127-1131 of the paper book (volume 2) of the Paper Book. 5. It is physically and humanly not possible that going through the record, search material and draft orders of all 42 cases within few hours. Addl. CIT approved all the 42 files and draft assessment order within few hours and gave the approval vide letter No. Addl. CIT/CR/JAL/153D/16-17/435 dated 27.07.2016 (at page number 800) in one line. It clearly proved that Add CIT has not even looked at the records, seized material and all draft assessment orders and issued approval letter just for the purpose of formality. 6. Further, as a matter of undisputed facts said communication of approval under Section 153D of the Act was received by Assessing Officer on 28.07.2017, whereas the assessment order was passed on 27.07.2016. This fact is admitted by the Assessing Officer in the remand report filed before CIT(A)at Page number 1128 of the Paper Book. This shows that assessment orders are passed even before approval is received by the AO and assessment orders are passed violating the provisions of law and all assessment orders are liable to be quashed. Without prejudice to our issue of limitation, as per AO, the time was to get timebarred on 31.07.2016 and the Addl. CIT had enough time to go through the material and apply his mind. However, for the reasons best known to him, he acted in a haste and gave approval without any application of mind to fullfill the legal formality. 7. That there is no mention of any such approval under Section 153D of the Act in the order sheet entry passed by AO during Assessment proceedings. Copy of order sheet entry is at page number 818-808 of the paper book. It is not even recorded that seized material was ever sent to Add CIT. 8. At this juncture, it is relevant to refer to the judgement rendered by the jurisdiction High Court, though in the cases on reassessment. However, the logic of the same is applicable to the facts of the present case, wherein it was obligatory on the part of the Assessing Officer to pass the final order and issue demand notice only once the approval under Section 153D was received by the Assessing Officer. The Hon’ble of Punjab & Haryana High Court in the case of K. G. Madan reported in 275 ITR 294 has held that - “accordingly, the Tribunal held that notice u/s 148 of the Act was issued before recording the reasons u/s 148 (2) and therefore, initiation of proceedings u/s 148 assessment made in pursuance thereof were bad in law”. A similar view was taken by Hon’ble Punjab & Haryana High Court Baldev Gyan 248 ITR 266 wherein Hon’ble High Court has held that prior to the issue of notice u/s 148 it is mandatory to record reasons as per the provisions of section 148 (2) of the Act.
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AO has referred in the remand report at page 1128 of paper book that,in the present time beingtime of technology, the communication between persons at different stations is held via phone/fax and date of receipt of a physical letter by post is immaterial as held by judicial courts also. However, the AO has failed to mention any judicial decision on this issue. Without prejudice,if approval was received by Fax on 27.7,2016 the copy of the fax duly seen by the AO before signing the final orders citing approval of the range head, must be in the file. However no such fax is on the file which proves that approval was received on 27.7 2016, rather it is clear from file that approval was received by AO on 28.7.2016 and assessment orders are passed on 27.7.2016. The CA of the assessee has inspected the file and fact of inspection is submitted before CIT(A) in the submissions of assessee and it is not denied by AO in the remand report. 10. Further, no draft assessment orders were submitted to the Addl. CIT and approved copies of the same were found in the assessment file. This shows how the issue has been dealt by the controlling authority in a casual way defeating the purpose of the Act. The fact that there are no draft assessment orders on the file is not denied by Ao in the remand report, rather it says that there is no requirement of having draft assessment order in the file. 11. During the inspection of the file, there was no such material available, which could justify this contention of the AO. This opportunity was again given to AO during the course of proceedings before CIT(A), however, no such documents are placed on record. As a matter of fact, AO admits the fact in the remand report at page number 1129 of the paper book that there is no draft order in the file. AO has justified his stand by submitting that there is no legal requirement to maintain such draft order in the file. 12. The case of the Assessee is primarily based on the argument that the approval so granted by Addl. CIT is merely a formality to pass the assessment orders in the cases as recorded in the approval letter. It is humanly not possible to go through the files of each and every case on the day of receipt of the draft order for approval and granting the approval on the same day. 13. It is pertinent to mention here that the distance between Jalandhar and Ludhianais about 62 kms and request for approval as well as approval granted has been received on the same date and assessment order has been passed on the very same day which shows that no independent application of mind is there by Addl. CIT while giving approval and the assessement order is passed ignoring the provisions of the Income tax Act. Such assessment orers are liable to be quashed.
It is important to refer to the recent judgement in the case of Arch Pharmalabs Ltd. v ACIT CC-32 I.T.A. No. 6656/Mum/2017 order dated 07.04.2021 at page
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number 497-535 of case law compilation. Relavant extract is reproduced for reference- The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement.... 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 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 / intials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity appliedowing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 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
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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 of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her 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/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments 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 and can not be countenanced in law.
It is submitted that provisions of section 153D imply that the meaning of approval is not simple approval or approval of the order in a mechanicalmanner.From this, it can be well imagined that how much mind the Addl. CIT has applied, and approval is nothing but stereotype and without application of mind. The act by introducing section 153D has withdrawn the free hand of AO and cast responsibility on the Addl./CIT/JCIT to apply his mind and to see that no hardship is being caused to the assessee by the order of the AO. Here, the controlling authority has just completed a formality and approved the illegal acts of the AO in one line without even looking at relevant documents and seized material. 16. An inspection of the assessment record of the assessee was carried out but no entry was found on the order sheet about the movement of file for approval, receiving back of the file, and even regarding issuing of the final order. This is a gross violation of the directions of the CBDT and various judicial pronouncements regarding the maintenance of the order sheet and its sanctity.\
In this regard, appellant society places reliance on the following decisions:- Hon’ble ITAT, Delhi in the case of M/s M3M India Holdings Vs. DCIT in ITA No. 2691/D/2018 held that (emphasis supplied) “Considering the facts of the case in the light of above discussion, it is clear that assesseefiled last reply before assessing officer at Faridabad on 29th January 2014 and according to Learned Counsel for the Assessee, it contained more than 500 pages. Therefore, it is difficult for the Assessing Officer at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the
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draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the Assessing Officer. Similarly, no record is available as to how the draft order and assessment record have been received by Addl. CIT at Chandigarh. The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced before him. Since no details are available on record about the mode, through which, assessment record was transmitted by the assessing officer at Faridabad to Addl. CIT in Chandigarh and vice-versa by Addl. CIT, Chandigarh to Assessing Officer at Faridabad on the very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time or if the Addl. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. Nothing has been clarified during the course of hearing to the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the part of the Addl. CIT before granting approval. The Addl. CIT, Chandigarh has merely gone through the draft assessment order as per PB-47. Therefore, the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion, we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. We, accordingly, set aside the orders of the authorities below and quash the assessment order in the matter. Resultantly all additions stand deleted. In the result, Ground No.1.3 of the appeal of Assessee is allowed.” Further, strong reliance in this regard is also placed on the decision of High Court of Madhya Pradesh in the case of CIT, Jabalpur Vs. S. Goyanka Lime & Chemicals Ltd. [2015] 56 taxmann.com 390 (Madhya Pradesh) wherein the approval granted and completion of the procedure as envisaged in the Act within 24 hours has been held to be without application of mind. (emphasis supplied) We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the
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case of Arjun Singh [2000] 246 ITR 363 (MP), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:— 'The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.' In the case of Smt. ShreelekhaDamani v. Deputy Commissioner of Income-tax (OSD-1), CR-7, Mumbai [2017] 88 taxmann.com 383 (Mumbai - Trib.) The Hon’ble ITAT held that “We have no hesitation to hold that the approval granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. Commissioner before granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/s. 143(3) of the Act r.w. sec. 153A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed.” The ITAT, Jodhpur Branch in the case of Smt. Indira Bansal vs., ACIT, held as under: “Jt. CIT having granted the approval under s. 153D on the very same day on which the forwarding letter seeking approval was received in his office, and circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind and even without going through the records as the same were in Jodhpur while the Jt. CIT was at Udaipur, therefore, the approval granted by him cannot be sustained. Impugned assessments are annulled.” ITAT Cuttack in the case of Geetarani Panda, Bhubaneswar vs. ACIT, Corporate Circle-1(2), BhubaneswarITSSA 1/CTK/2017 (at page 10-35 of CLC)observed that:
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In our considered view, the provisions contained in Section 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. It is apparent that the purpose behind the enactment of the above provision in the Statute by the Parliament are two folds. Firstly, the approval of the Senior Authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by Senior Authority will also ensure that proper enquiry or investigation are carried out by the Assessing Authority. Thus, the above provision provides for mental application of a Senior Officer of the Department, which in turn, provides safeguard to both i.e. Revenue as well as the assessee. Therefore, this important provision laid down by the legislature cannot be treated as a mere empty formality. The same view was expressed by the Pune Benches of the Tribunal in the case of AkilGulamaliSomji vs ITO, in IT Appeal Nos.455 to 458 (Pune) of 2010 order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. The Hon’ble Bombay High Court in the case of CIT-II Vs Shri AkilGulamaliSomji, in Income Tax Appeal (L) No.1416 of 2012 order dated 15.1.2013 concurred with the view of the Tribunal that not following of the provisions of section 153D of the Act will render the related order of assessment void” Recently ITAT Cuttack in the case of Dilip Constructions Pvt Ltd vs. ACIT, Circle-1, Bhubaneswar IT(ss)A Nos.66 to 71/CTK/2018 vide order dated 29.11.2019 observed that: “In view of foregoing discussion, we reach to a logical conclusion that it is the duty of the approving authority to act in accordance with the mandate and provisions of law while granting approval and discharging statutory function lay on his shoulders by following proper procedure and also by applying his judicious and cautious mind to the relevant assessment folders/files and draft assessment orders while granting approval u/s.153D of the Act. mandate and provisions of law while granting approval and discharging statutory function lay on his shoulders by following proper procedure and also by applying his judicious and cautious mind to the relevant assessment folders/files and draft assessment orders while granting approval u/s.153D of the Act. This is not a formality but a statutory duty of the approving authority with a corresponding obligation on him to examine relevant record and assessment orders and thereafter grant the approval. We are cautious about that the reasons for granting approval may not be a subject matter of challenge or are not required to be mentioned in the order of approval but the manner and the material on the basis of which approval has been granted can be challenged by the assessee and following proper procedure and application of mind by the approving authority should be discernible from the order of approval. No other evidence or documents is
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required to be considered or appreciated as the approval should be self-speaking that it has been granted by the ld JCIT by following due procedure and due application of mind to the relevant records and orders. The scope and issue agitated by the assessee by way of legal ground in the present case is not that of grant of hearing or representation to the assessee at the time of granting approval but the main grievance and legal objection of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized materials and investigation report and draft assessment/reassessment orders and this fact”
It is important to refer to the judgement passed by High Court of Bombay in the case of PCIT v Shreelekha Damani ITA 668 of 2016. Relavent extract is reproduced for reference – “7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises.” In a recent judgement passed by Agra ITAT, Hon’ble Bench in the case of Shri Saurabh Agarwal DCIT, Central Circle, Agra ITA No. 263 to 267/Agr/2017 observed that – 4.14. In view of the above we are of the considered opinion if the approval is granted by the superior authorities for extraneous reasons, without application of mind or without looking into the record, then the approval loses its character of an approval in the eyes of law. Accordingly we have no hesitation in declaring that the approval granted by the higher authorities on 27 March 2014 is no approval in the eyes of law and accordingly the assessment made by the assessing officer based on
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such an approval is also declared to be null and void. In fact, the issue of judicial review of the administrative decision were examined by Hon’ble Supreme Court in Tata Celular vs. Union of India (1994) 6SCC 651 (Paragraph 77) and also in the matter of West Bengal Central School Service Commission vs. Abdul Halim, (2019) SCC online (SC) 902. We are bound by the law laid down by the Hon’ble Supreme Court in the aforesaid judgment.
4.15 we may mention that in the approval granted by additional Commissioner of income tax on 27 March 2014 it is clearly mentioned that he has not applied its mind and he has not even look into the draft assessment order and he solely relied upon the undertaking of the assessing officer who had completed the assessment proceedings. He has also not gone into the record of investigation and seized material and has granted the approval without any meaningful discussion and going through the record. In our view such a practice is required to be deprecated and we deprecate the same. It is the duty of the additional Commissioner of income tax to apply his mind while according the approval and should not grant approval in a callous and clandestine manner. There is a statutory duty on the additional Commissioner of income tax with a corresponding obligation on him to examine the record and thereafter accord the approval. The reason for granting the approval may not be subject matter of the proceedings but the manner and the material on the basis of which the approval was granted can always be examined by the tribunal and also by the other courts to come to the conclusion whether the approval was granted in a mechanical manner or after applying mind looking into the record. No evidences required to be appreciated as the approval is self-evident, i.e., that it was granted by the additional Commissioner of income tax without application of mind and without looking into the record. In view of the above the assessment order passed by the assessing officer is void and accordingly all the appeals of the assessee are allowed.”
On the other hand, the ld. DR had submitted that this is a technical error and can be cured u/s 292B of the Act and it was further submitted that the matter may kindly be remanded back to the file of the AO for passing the afresh order, in case the Tribunal grounds that the contention of the ld. AR.
We have heard the contention of the parties and perusal the material available on record. As is clear from the record that the application for seeking the approval u/s 153-D was sent by the Assessing Officer to the Additional CIT on
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26.07.2016 vide Diary Dispatch No.658. However, the said letter was not sent by the Assessing Officer to the Additional CIT. Later on, another letter dated 27.07.2016 was sent by the Assessing Officer for seeking the approval u/s 153D of Income Tax Act in respect to 42 cases. At the serial no.1 of the application the name of Assessee was mentioned for which the approval was sought for 7 assessment year i.e. 2007-08 to 2013-14. In the said letter, it was also mentioned by theAssessing Officer, “Draft Assessment Orders alongwith assessment folders for assessment years 2007-2008 to 2013-2014 in 6 cases are enclosed.
The letter was received in the office of Additional CIT on 27.07.2016 and the Additional CIT on the same date i.e. 27.07.2016, as alleged, has granted the approval. In the letter granting the approval, it is mentioned, “In this regard, the proposed assessment order in the following cases submitted by you, are hereby approved.” and in the bottom of letter, it is mentioned that “assessment records in the above mentioned cases are enclosed herewith”. The said letter of 27.07.2016 was received in Dak on the Assessing Officer on 28.07.2016 at Serial No.609.
The Assessing Officer in the Demand Report submitted before the CIT appeal had admitted that “Approval conveyed by the Addl. CIT on the same day when he signed the letter of approval, was sufficient compliance of there relevant provisions of law even though the letter was received in ‘DAK’ by the AO on the next working day. As per records of the Addl. CIT, Central Range, Jalandhar, approval letter was dispatched vide no. 435 on 27.0702016 itself.” From the above
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said, it is crystal clear that the letter granting the approval was received in the office of the Assessing Officer on 28.07.2016, as the Assessing Officer has not denied the fact of receiving the letter on 28.07.2016, however, merely stated that the letter was dispatched from the office of Addl. CIT on 27.07.2016 vide Diary No.435.
From the reading of the above, it is clear that the approval was received in the office of the Assessing Officer on 28.7.2016, whereas the Assessment Order was passed by the Assessing Officer on 27.7.2016. In the remand report, the Assessing Officer had submitted that in the era of technology where communication between the persons via phone /fax, date of receipt of physical letter by post is immaterial. In our considered opinion, the requirement of Section 153D is clear and unambiguous, which requires prior approval of the Addl. CIT before passing the order by the Assessing Officer. For the ready reference, we are reproducing herein below Section 153D of the Income Tax Act which provides as under:-
"153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [subsection (1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner]."
In our view, the prior approval as contemplated u/s 153D cannot be granted over the phone, sometimes the approving agency may not agree in the complete draft order and suggest some modification, changes or deletion in the draft assessment orders. At times, the approving agency may also suggest the assessing officer to consider some material which has been missed by the
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assessing officer, for consideration and incorporating in the proposed assessment order. All the above said cannot be conveyed over the telephone. There has to be some written more for conveying the approval either by fax/ email/ letter after due deliberation or consideration of the relevant material and draft assessment order. In no case, oral approval can be granted by the Addl. CIT. The order granting the approval can be subject matter of judicial review if it is passed without application of mind, without assigning the reason or non-consideration of the relevant material or passing the order considering the irrelevant or extraneous material or reason.
The Statute has carefully used the word ‘prior approval’ in section 153D of 22. the Act and passing of the order without prior approval, would lead to annulment of the assessment order. In fact, no assessment or re-assessment order can be passed without seeking the approval from the Addl. CIT. In our opinion, once the statute require an act to be done in a particular manner, it should be done in that manner only. In the case of 153D, it is mandatory for the Assessing Officer to take prior approval from the Addl. CIT or JCIT, as the case may be, before passing the assessment /re-assessment order and in case no previous approval is sought before passing the order, the assessment order, if any passed could not nullity and non-est in the eyes of law.
The Assessing Officer and DR, as submitted that in the age of technology, if the approval is taken over the phone or facts that it is sufficient compliance of the
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provisions of law. In our considered opinion, the approval taken on the fax/ email may be considered approval in law if it fulfill the other requirements of law. However, this is not the case before us where the approval was sought either by fax or by email or by phone. The letter dated 27.07.2016 clearly shows that the written approval was sought by writing the letter from the Addl. CIT and alongwith that it was alleged that draft assessment order as well as assessment records were also sent to the Addl. CIT. In view of the above, when the approval was not sought either by fax or by email or by phone, the reasoning given by the Assessing Officer /DR does not hold good and is required to be rejected.
As the Assessing Officer has passed the assessment order without having the approval in his record, in our considered opinion, the assessment order passed in all the cases before us is null and void and cannot be acted upon. In view of the above, all the appeals from the assessee are required to be allowed. We may rely and refer the decision of GujaratGujrat High Court in the matter of Pr. CIT v. Sunrise Finlease P. Ltd. [2018] 89 taxmann.com 1 (Gujarat)Vin paragraph No. 9 - 11 had held as under :
As regards proposed questions [B] and [C] viz., whether lack of approval under section 153D would invalidate the assessment order and was not a curable defect, it may be noted that section 153D of the Act mandates that no order of assessment or reassessment shall be passed by an 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 the assessment year referred to in clause (b) of sub- section (1) of section 153B, except with the prior approval of the Joint Commissioner. In the present case, the assessment order has been
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passed by an Income Tax Officer, who admittedly is an officer below the rank of Joint Commissioner; therefore, the provisions of section 153D of the Act would be applicable. Section 153D starts with the words "No order of assessment or reassessment shall be passed....". In other words, the language employed in the provision is couched in the negative and therefore, there is a prohibition against passing of an assessment or reassessment order, except with the prior approval of the Joint Commissioner.
In Shin-Etsu Chemical Co. Ltd. v. AkshOptifibre Ltd. [2005] 7 SCC 234, the Supreme Court has observed that if the requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language, that is to say, if the statute enacts that it shall be done in such a manner and in no other manner, it has been laid down that those requirements are in all cases, absolute, and that neglect to attend to them will invalidate the whole proceeding. In Vijay Narayan Thatte v. State of Maharashtra [2009] 9 SCC 92, the Supreme Court has held that it is well settled that when a statute is couched in negative language it is ordinarily regarded as peremptory and mandatory in nature. The Supreme Court, in some decisions has held that merely because a provision of law is couched in a negative language implying mandatory character, the same is not without exceptions. However, the present case deals with the interpretation of a taxing statute. It is well settled that a taxing statute has to strictly construed, therefore, from the language employed in section 153D of the Act, the requirement of obtaining the prior approval of the Joint Commissioner has to be regarded as mandatory in nature.
In the facts of the present case, as the assessment order has been passed by an Income Tax Officer, the requirement of obtaining the prior
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approval of the Joint Commissioner under section 153D of the Act was absolute. The Tribunal, however, has recorded a finding of fact that there is nothing on record to indicate that the prior approval of the Joint Commissioner was obtained. As a natural corollary therefore, in the absence of the requirement of prior approval of the Joint Commissioner being satisfied, the whole proceeding would stand invalidated. The Tribunal was, therefore, wholly justified in holding that the impugned order of assessment would stand vitiated in view of non- compliance of the provisions of section 153D of the Act. On this count also, therefore, the appeal, does not merit acceptance.
25.Similarly in the matter of Akil Gulamali Somji 20 taxmann.com 380 (Pune) tribunal had held as under :- 11. We have considered the above submissions and have gone through the decisions relied upon by the parties in view of orders of the authorities below and material available on record. The relevant facts are that during the course of search and seizure action on 29.7.2003 at the business and residential premises of Mr. Shriram Soni, certain documents belonging to the assessee were found and seized. Notice u/s. 153C was issued to the assessee and assessment u/s. 153C r.w.s. 144 have been framed for all the 4 A.Ys. under consideration. Before the Ld CIT(A), the assessment orders were questioned both on legal issue and on merits. On legal issue, the validity of assessment orders in absence of approval obtained u/s. 153 D of the Act of Joint Commissioner of Income Tax has been questioned. On merits additions made by the A.O were impugned. Since the assessee could not succeed in its appeal, the present appeals have been preferred in questioning the first appellate orders.
On perusal of the provisions laid down u/s. 153C of the Act, it is apparent that after issuance of notice u/s. 153C, the A.O having jurisdiction over such other person (against which incriminating material has been found during the course of search conducted on a person) arose or re-assess income of such other person in accordance with the provisions of Sec. 153A. Sec. 153B talks about time limit for completion of assessment u/s. u/s. 153A, whereas S. 153D, talks about necessity of prior approval for framing assessment in case of search or requisition. We thus fully concur with the submission of the Ld. A.R. that provisions laid down u/s. 153D are very much applicable in case of assessment of income of any other person (i.e. the person other than the person searched). Now the issue for our adjudication is as to whether absence of obtaining prior approval u/s. 153D of Joint Commissioner of Income Tax, assessment made u/s. 153 C will
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make the assessment void or voidable/curable. For a ready reference, provisions laid down u/s. 153D of the Act are being reproduced hereunder : "153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [subsection (1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner]." The above provisions u/s. 153 D have been laid down under the heading "prior approval necessary for assessment in cases of search or requisition". This heading itself suggests that obtaining prior approval the assessment in cases of search or requisition is necessary. We further note that the provisions u/s. 153D start with a negative wording "no order of assessment or re- assessment" supported by the further wording "shall" makes the intention of the Legislature clear that compliance of Sec. 153D requirement is mandatory. No universal rule can be laid down as to whether mandatory enactment shall be considered directory or obligatory with an implied nullification for disobedience. As per the decision of Hon'ble Supreme Court in the cases of Banwari Lal Agarwalla v. State of Bihar AIR 1961 SC 849 ; Raza Buland Sugar Co.Ltd., v. Municipal Board AIR 1965 SC 895 if object of the enactment will be benefited by holding the same directory, it will be construed as mandatory, whereas if by holding it mandatory, serious general inconvenience will be created to nascent persons without very much further object of enactment, the same will be construed as directory. But all these does not mean that language used is to be ignored, only that the prima facie inference of the intention of the legislature arising from the words used may be displaced by considering the nature of the enactment, its designed consequences flowing from alternative constructions. The wordings and language used in Sec. 153D of the Act and the heading "prior approval necessary for assessment in cases of search or requisition" under which, Sec. 153D has been provided do not leave an iota of doubt about the very intention of the legislature to make the compliance u/s. 153D a mandatory. There is no dispute that if a provision is mandatory, an act done in breach thereof will be invalid, but, if it is directory, the act will be valid although non-compliance may give rise to some other penalty if provided by the Statute. The general rule that non-compliance of mandatory requirements results in nullification of the Act is subject at least to one exception. If contain requirements or conditions are provided by a statute in the interest of a particular person, the requirements, or conditions although mandatory may be waived him if no public interest are involved and in such case, the act done still be valid even if the requirement or condition has not been performed. Here, before us, is not a case where consent of assessee will waive the condition of obtaining prior approval u/s. 153D of the Joint Commissioner of Income Tax by the A.O for framing assessment u/s. 153C/ 153A of the Act. Condition of prior approval of JCIT u/s. 153D has been put in public interest and not in the interest of a particular person. Thus it cannot be waived by particular person. The use of word "shall" raises a presumption that a particular provision is imperative but this prima facie inference may be reverted by other consideration such as object and scope of the enactment and consequence flowing from such construction. The revenue has not been able to rebut the above inference by pointing out other consideration like object and scope of the enactment and the consequence flowing from such construction before us. Clause 9 of Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of
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Income Tax on behalf of Central Board of Direct Taxes, Department of Revenue, Government of India, 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. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself."
Chapter XIVB also deals with assessment of search cases. Sections 153A, 153B & 153 C have been introduced to Chapter XIV "procedure for assessment" w.e.f. 1.6.2003 by the Finance Act 2003 whereas Sec. 153 D has been inserted to the Chapter w.e.f. 1.6.2007 by the Finance Act 2007. These provisions thus also deal with the assessment in case of search or requisition and when the assessment orders in the present case were passed the provisions laid down u/s. 153D were very much in operation. In the present case, assessments in question have been framed on 27.12.2007. 26. Though, the appeals of the assessee are required to be allowed on the ground of passing of the assessment order without seeking the prior approval from the Addl. CIT, however, there is yet another reason to allow the ground raised by the assesses in the present sets of appeal, namely that the Assessing Officer had sought the approval from the Addl. CIT and at the time of seeking the approval, the Assessing Officer has not enclosed the Draft Assessment Orders and other assessment record with the letter seeking the approval and further the Addl. CIT had granted the approval without even apply his mind in a mechanical stereotype manner.
In the Remand Report (para 11 SUPRA), the Assessing Officer has admitted that there was no draft orders enclosed with the letter seeking the approval, nor the
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draft assessment order are available in the file of Assessing Officer. In our view, the grant of approval is not an empty formality and it has a rational to ensure that no assessment order is passed which has no basis or in other words, every assessment order should be supported by the reasons, documents and should be based on the appraisal report prepared by the investigation department. Once the draft assessment order was not sent to the Addl. CIT, we failed to comprehend how the Addl. CIT has applied his mind, further we are also of the opinion that the Addl. CIT has not given any reasons for granting the approval. Even he has not stated that he has gone through the draft assessment order/ assessment record in all the 42 cases and thereafter has granted the approval. There is no material to know the reasoning/ basis for granted the approval u/s 153D of the Income Tax Act. In the absence of any material or reasons, in our view, it is difficult to agree to the suggestion of the DR that the approval granted by the Addl. CIT was valid in the eyes of law.
We had occasioned to deal with the above said issue in the matter of Saurabh Aggrawal Vs. CIT as well as in the matter of Rajesh Ladhani vs. DCIT ITA No. 106-108/Agr/2019, dated 06.11.2019, where we have annulled the assessment order as it was passed without proper approval u/s 153D of the Income Tax Act. In the case of Rajesh Ladhani we have held as under:-
It is the bounden duty of the Additional Commissioner of Income Tax to act in accordance with the law, while discharging statutory functions an obligation is casted upon him by the Act to apply his mind while according the approval. There is a statutory duty on the Additional Commissioner of Income Tax with a corresponding obligation on him to examine the record and thereafter accord the statutorily required Approval. The reason for granting the Approval may not be subject matter of the challenge but the manner and the material on the basis of which the approval was granted can always be examined by the Tribunal to come to the conclusion whether
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the Approval was granted in a mechanical manner or after applying mind looking into the record. No evidences required to be appreciated as the approval is self-evident, i.e., that it was granted by the Additional Commissioner of Income Tax without application of mind and without looking into the record.
We may record that the decisions relied upon by the ld. DR are factually distinguishable as none of the order has examined this aspect of the matter which is subject matter of present litigation i.e non-application of mind by the superior authorities at the time of granting the Approval. The sum and substance of the decisions relied upon by the Ld. DR’s was that the assessee was not entitled to any hearing or representation at the time of grant of approval. As mentioned hereinabove the scope and ambit in the present litigation is not that of grant of hearing or representation at the time of Approval but whether the Approval can be granted by the superior authority without application of mind without looking into seized material, investigation report, the draft assessment order etc can be held sustainable in the eyes of law. We had already answered that such an approval is bad in law and cannot be sustained.
Our view has recently been followed by the Hon’ble Coordinate Bench in 29. the matter of Arch Pharmalabs Ltd. vs. ACIT ITA No.6656/Mum/2017 dated 07.04.2021 wherein it was held as under :-
We have carefully considered the rival submissions and material placed on record and case laws cited. The legal objection of transgression of requirements of approval under section 153D is in controversy. Pursuant to search carried out in the premises of the Assessee and other connected group cases, the assessment was carried out under S. 153A/ 143(3) of the Act. The Assessing officer has forwarded the 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 promptuon 31/12/2010.
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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 order so as to derive his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement. 11.2 In the backdrop of facts narrated in the preceding paras, it is the contention on behalf of the asssessee that approval granted under S. 153D does not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law. The assessment orders thus passed is vitiated in law which illegality cannot be cured. In support of charge of nonest approval, several contentions have been raised viz (i) 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 abstract approval of draft assessment orders which was unsubstantiated and unsupported and consequently suffered from total non-application of mind (ii) approval granted hurriedly in a spur involving voluminous assessments spanning over 7 assessment years and thus only a symbolic exercise to meet the requirement of law (iii) Total lack of objectivity in drawing satisfaction
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on objective material while giving a combined approval for 7 assessments and also without evaluating the nuances of each assessment year involved (iv) the mundane action of Addl. CIT under S. 153D in a cosmetic manner gives infallible impression of approval on dotted line and thus defeats the purpose of supervision of search assessments (iv) initialed draft assessment orders not available in office records. 11.3 As observed, Section 153D bestows a supervisory jurisdiction on the designated authority in respect of search related assessment and thus enjoins a salutary duty of statutory nature. The designated superior authority is thus expected to confirm to the statutory requirement in letter and spirit. It is evident from the communication of AO and consequent approval thereon under S. 153D that no assessment record for any assessment year 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 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
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showing some marking / intials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity appliedowing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 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 authority granting approval prior to 29.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval the respective Assessment order. Solemn object of entrusting the duty of Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application ofmind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard. 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
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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 framingrespective 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 statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her 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/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments 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 and can not be countenanced in law. 11.6 There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the co- ordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332(Mum.) and
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approved by jurisdictional High Court subsequently as reported in 307 CTR 218 affirms the plea of the Assessee. 11.7 Very recently, the co-ordinate bench in Sanjay Duggal &ors (ITA 1813/Del/2019 &ors; order dated 19.01.2021 has also echoed the same view after a detailed analysis of similar facts and also expressed a discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the plea raised by the Assessee against maintainability of hollow approval under S. 153D totally devoid of any application of mind. The approval so granted under the shelter of section 153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments relatable to search in captioned appeals are non est and a nullity and hence quashed. 12. In view of prima facie merits found in the legal objections, We do not consider it expedient to look into the aspects on merits of additions/ disallowance. 30. In the light of the above said discussion, when the Assessment Order was passed by the Assessing Officer,than there was no prior approval in the record of the Assessing Officer, from the Addl. CIT. Further, the approval granted after passing of the order was non-est in the eyes of law as it was granted in the mechanical, stereotype manner, without assigning any reasons and without considering the draft assessment order and the assessment record. On the basis of the above, we are of the opinion that ground 11 which is common in all the appeal, is required to be allowed and the assessment order and the subsequent orders passed by the CIT appeal are required to be set aside.
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As we have allowed the ground 11 of the assesse appeal and thereby set aside the assessment order, we deem it appropriate not to adjudicate the remaining grounds of appeal raised by the Assessee in the present set of appeals.
In the result, all the appeals of the Assessee are allowed.
Order Pronounced in the Open Court on 16/08/2021. Sd/- Sd/- (Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order
Sr. Private Secretary Income Tax Appellate Tribunal Agra Bench, Agra