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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI VIMAL KUMAR
O R D E R
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal of assessee is against order dated 14.03.2023 of Learned Commissioner of Income-Tax (Appeals)-30, Delhi (hereinafter referred as “Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of order dated 27.12.2019 by the AO/DCIT, Circle-32, New Delhi (hereinafter referred as “Ld. AO") under Sections 143(3) r.w.s. 153A of the Act for assessment year 2017-18.
Brief facts of case are that on 26.03.2018, appellant/assessee e-filed its return of income on declaring income of Rs.14,47,890/- which was processed under Section 143 of the Act. A search and seizure operation on various places of Bajaj Group and its associates including the assessee and the directors and other premises on 20.04.2017. Due to centralization order under Section 127 of the Act passed by the Ld.PCIT, Delhi-22, New Delhi vide order dated 02.11.2018. Jurisdiction was transferred to this Circle. Consequent to search action in this case, being the search year, a notice under Section 153A of the Act was issued on 05.09.2019 requiring the assessee to file the return of his income within 15 days from the service of this notice. The assessee vide letter dated 25.09.2019, raised objection for validity of the notice under Section 153A and jurisdiction of the Ld. AO and submitted that the return filed by the assessee company on 26.03.2018 may be treated as the return filed in response to notice under Section 153A of the Act. In this letter, assessee also submitted that inspite of numerous requests both verbal and written, the Investigation Wing, Rajasthan and previous Assessing Officers had not provided documents related to search i.e. complete Panchnama along with all the annexures, statements recorded, material seized, warrant of authorization, documents for collection of digital evidences etc. Vide letter dated 05.10.2019 the assessee was informed that though copies of all the seized/impounded documents had already been provided, in case the assessee needed any specific document/material, the same might also be obtained from this office on 09.10.2019. Another letter 2 dated 10.10.2019 was sent by this office disposing off all the above objections of the assessee. Vide letter dated 15th October, 2019, the assessee submitted that it had not made any allegations but had only exercised its right under Section 124 of the Act. Notice under Section 142(1) of the Act along with detailed questionnaire was issued. No details were filed by the assessee. On 04.11.2019, assessee filed a letter and submitted that notices were for seven years, notices were comprehensively voluminous, festival of Diwali was celebrated starting from 25th October, 2019 along with the last dates of ROC filings and hence all professionals were very busy and accordingly on these grounds sought some more time to respond. The case was adjourned to 11.11.2019. Vide another letter dated 11.11.2019, the assessee again requested for long adjournment on the ground of weather, Pollution, and health conditions prevailing in Delhi. Vide letter 18.11.2019, the Ld. AO intimated the assessee that the assessment proceedings going to be time barred on 31.12.2019 and the case was finally adjourned to 25.11.2019. Show Casue Notice under Section 274 r.w.s. 272A(1)(d) for failure to comply with the notices u/s 142(1)/143(2) of the Act. Notice under Section 142(1) of the Act along with a specific query was issued on 04.12.2019. Notice under Section 143(2) of the Act was issued on 05.12.2019. Fresh notice under Section 153A of the Act was issued. The most peculiar facts which prove that the assessee in this case was trying to linger on the time-barring assessment proceedings are supportive of the fact that the assessee was changing his ARs one after the other occasionally. On completion 3 of investigation, assessment order dated 27.12.2019 making additions of Rs.65,35,57,000/- and Rs.3,60,92,000/-.
Against the order of Ld. AO, appellant/assessee preferred appeal before Ld. CIT(A) which was dismissed vide order dated 14.03.2023.
Being aggrieved, appellant/assessee preferred present appeal with following grounds:
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) (CIT (A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the learned AO under section 153Ar.w.s 143(3) is illegal and bad in law as the same has been passed without having valid jurisdiction.
3. On the facts and circumstances of the case, the leamed CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the AO under section 153A r.w.s. 143(3) is bad and liable to be quashed as the same has been framed consequent to the search which was initiated under the wrong pretext. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the learned AO under section 153A r.w.s 143(3) is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law. 5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the assessment order passed by the AO is illegal and liable to be quashed as the same has been passed violating the provisions of section 124 of the Income Tax Act.
6. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A against the appellant and the assessment framed under section 153A r.w.s. 143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 7. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that notice issued 142(1) of the Act is bad in law as the same was issued prior to the issue of notice under section 143(2) of the Act. (ii) That the learned CIT(A) has erred, both on facts and in law, in confirming the action of the learned AO in drawing adverse inference against the appellant on the basis of above notice issued under section 142(1) of the Act which itself is invalid. 8. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the learned AO has erred in making the addition in order passed u/s 153A r.w.s 143(3) of the Act, without any incriminating material having been found during the course of search. 9. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A against the appellant and the consequent reassessment framed under section 153A r.w.s 143(3) are in violation of mandatory provisions of Section 153D of the Act and as such the same is bad in eyes of law. (ii) That the CIT(A) has erred in ignoring the contention of the assessee that the purported approval u/s 153D of the Act is illegal, bad in law and also without any application of mind. 10. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the assessment order passed by the AO is invalid and bad in law as the same was passed in violation of the circular No. 19/2019 issued by CBDT which mandates that no order shall be passed without there being valid Document Identification Number (DIN) 11.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 5 65,35,57,000/- made by the AO as undisclosed income on the basis of documents found during the course of search. (ii) That the addition has been confirmed rejecting the detailed submission and explanation brought on records by the assessee. 12. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 3,60,92,000/- made by the AO as undisclosed income on the basis of documents found during the course of search. (ii) That the addition has been confirmed rejecting the detailed submission and explanation brought on records by the assessee.
13. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition has been made by misinterpreting the statements recorded on oath during the course of search.
14. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above said additions despite the fact that same has been made on the basis of material collected at the back of the assessee without giving assessee an opportunity to rebut the same in violation of provisions of section 142(3) of the Act.
15. On the facts and circumstances of the case the leamed CIT(A) has erred both on facts and in law in confirming the addition despite that same has been made without conducting any independent enquiry by the AO during the course of assessment proceedings.
16. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the learned AO by indulging in conjecture and surmises only on the basis of presumption and assumption.
17. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the AO has erred in charging the tax under section 115BBE of the Act.
On the facts and circumstances of the case, the learned A.O. has erred both on the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee
that AO has erred in applying the amendment brought by The Taxation Laws (Second Amendment) Act, 2016) under section 115BBE retrospectively from 01.04.2016, despite the fact that the Act itself was notified on 15.12.2016. 19. On the facts and circumstances of the case, the leamed CIT (A) has erred in facts and in law in confirming interest charged u/s 234A and 234B of the Act. 20. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
Learned Authorized Representative for the assessee restricted his submissions to ground of appeal no.9. He submitted that approval under Section 153D of the Act has been granted in mechanical manner and without due application of mind and thus assessment order in consequence of such inexplicable approvals lacks legitimacy and are liable to be quashed. The case of assessee is squarely covered by the Hon'ble Tribunal order in assessee own case for AY 2018-19 bearing wherein approval under section 153D of the Act was granted in verbatim same manner and Hon'ble Tribunal quashed the Assessment Order.
Further reliance was placed upon following judicial pronouncements to support the contention of assessed:
➤ PR. COMMISSIONER OF INCOME TAX-15 VERSUS SHIV KUMAR NAYYAR, 2024 (6) TMI 29-DELHI HIGH COURT, Dated.- May 15, 2024 ➤ VEENA SINGH VERSUS ACIT CENTRAL CIRCLE-25, DELHI, 2024 (4) TMI 1025 - ITAT DELHI, Dated. - April 24, 2024 ➤ ARCH PHARMALABS LTD. VERSUS ACIT CC-32, MUMBAI AND (VICE-VERSA) AND M/S ARCH IMPEX P. LTD. VERSUS ACIT CC-32, MUMBAI, 2021 (4) TMI 533 ITAT MUMBAI, Dated.- April 7, 2021 ➤ SANJAY DUGGAL, KRITIKA TALWAR, ARUN DUGGAL, RATNA TALWAR, C/O KAPIL GOEL, ADV, NEHA DUGGAL, NANY DUGGAL, POONAM DUGGAL, NEERU DUGGAL, RAJNISH TALWAR, RATNASHRI BUILDTECH PVT. LTD, DUGGAL ESTATE PVT. LTD, DUGGAL & SONS BUILDWELL P. LTD., VERSUS ACIT, CENTRAL CIRCLE-4, NEW DELHI, 2021 (1) TMI 909-ITAT DELHI, Dated.- January 19, 20211 ➤M/S. INFOLANCE SOFTWARE SOLUTIONS PVT. LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-13, NEW DELHI. AND DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-13, NEW DELHI. VERSUS M/S. INFOLANCE SOFTWARE SOLUTIONS PVT. LTD., GOLDMINE BUILDCON PVT. LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-13, NEW DELHI., 2024 (11) TMI 1307-ITAT DELHI, Dated. - November 26, 2024.
7. Learned Departmental Representative for the Revenue submitted that approval under section 153D of the Act is the internal correspondence between AO and DCIT/Addl. CIT, the CIT has examined the assessment records, draft assessment order and applying his mind granted approval. The Tribunal cannot examine the legality of the said correspondence.
From examination of record in light of aforesaid rival contentions, it is crystal clear that approval accorded under section 153D of the Act. The copies of request letter for approval and approval accorded under section 153D of the Act both dated 27.12.2019 are as under:
9. The Addl. CIT has granted approval under section 153D of the Act in respect of seven cases by a single Letter which included multiple assessment years on the same day. There is no reference to examination of any assessment record and incriminating material and any objective reasoning leading to his conclusion. Hence, the approval under section 153D of the Act has been granted in mechanical manner without application of mind.
10. The Co-ordinate Bench of Tribunal in titled as “Ram Narayan Bajaj Vs. DCIT” i.e. in assessee’s own cae for assessment year 2018-19 in order dated 31.01.2025 has held as under:
“9. The Co-ordinate Bench of Tribunal in has held as under: “6. We have heard both the parties and perused the material available on record. For the purpose of examining the legality or otherwise of the approval accorded u/s 153D of the Act and the consequential assessment proceedings, we shall advert to approval accorded u/s 153D of the Act. The approval accorded u/s 153D of the Act dated 17-12-2019/18-12-2019 granted by Additional Commissioner of Income Tax, Central Range 8, New Delhi to DCIT Central Circle, 32, New Delhi is reproduced as under:-
On a perusal of the approval dated 17/18-12-2019 addressed by the Addl. CIT, Central Range-8, New Delhi to the AO, it emerges that the Addl. CIT, has not uttered a single word on the subject matter of additions. The approval is in the nature of Performa approval; the approval granted is nothing but mechanical one and the approving authority has exercised symbolic powers vested under s. 153D of the Act. Apart from the same, a single approval has been granted for seven Assessment Years in total. 8 The Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax Vs. Shiv Kumar Nayyar (supra) held as under:- “11. A plain reading of the aforesaid provision evinces an uncontrived position of law that the approval under Section 153D of the Act has to be granted for "each assessment year" referred to in clause (b) of subsection (1) of Section 153A of the Act. It is beneficial to refer to the decision of the High Court of Judicature at Allahabad in the case of PCIT v. Sapna Gupta [2022 SCC OnLine All 1294] which captures with precision the scope of the concerned provision and more significantly, the import of the phrase- "each assessment year" used in the language of Section 153D of the Act. The relevant paragraphs of the said decision are reproduced as under:- "13. It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative 12 intent as per scheme of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of the Act, This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise of power. *** 19. The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A." [Emphasis supplied] 12. It is observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that the authority granting approval has to apply its mind for "each assessment year" for "each assessee" separately.
Reliance can also be placed upon the decision of the Orissa High Court in the case of Asst. CIT v. 13
Serajuddin and Co. [2023 SCC OnLine Ori 992] to understand the exposition of law on the issue at hand. Paragraph no.22 of the said decision reads as under:- "22. As rightly pointed out by learned counsel for the assessee there is not even a token mention of the draft orders having been perused by the Additional Commissioner of Income-tax. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like "seen" or "approved" will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of section 158BG of the Act, it would equally apply to section 153D of the Act. There are three or four requirements that are mandated therein, (i) the Assessing Officer should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind ; (ii) the final approval must be in writing ; (iii) the fact that approval has been obtained, should be mentioned in the body of the assessment order." [Emphasis supplied]
During the course of arguments, learned counsel for the assessee apprised this Court that the Special Leave Petition preferred by the Revenue against the decision in the case of Serajuddin (supra), came to be dismissed by the Supreme Court vide order dated 28.11.2023 in SLP (C) Diary no. 44989/2023.
A similar view was taken by this Court in the case of Anuj Bansal (supra), whereby, it was reiterated that the exercise of powers under Section 153D cannot be done mechanically. Thus, the salient aspect which emerges from the abovementioned decisions is that grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind.
In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under:- "10. We have gone through the approval granted by the ld. Addl. CIT on 30.12.2018 u/s 153D of the Act which is enclosed at page 36 of the paper book of the assessee. The said letter clearly states This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 that a letter dated 30.12.2018 was filed by the ld. AO before the ld. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The ld. Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30.12.2018 for seven assessment years in the case of the assessee and for seven assessment years in the case of Smt.
Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. Neetu Nayyar from Central Public Information Officer who is none other than the ld. Addl. Commissioner of Income-tax, Central Range-S, New Delhi, under Right to Information Act, wherein, it reveals that the ld. Addl. CIT had granted approval for 43 cases on 30.12.2018 itself. This fact is not in dispute before us. Of these 43 cases, as evident from page 36 of the paper book which contains the approval u/s 153D, 14 cases pertained to the assessee herein and Smt. Neetu Nayyar. The remaining cases may belong to some other assessees, which information is not available before us. In any event, whether it is humanly possible for an approving authority like ld. Addl. CIT to grant judicious approval u/s 153D of the Act for 43 cases on a single day is the subject matter of dispute before us. Further, section 153D provides that approval has to be granted for each of the assessment year whereas, in the instant case, the ld. Addl. CIT has granted a single approval for all assessment years put together."
Notably, the order of approval dated 30.12.2020 which was produced before us by the learned counsel for the assessee clearly signifies that a single approval has been granted for AYs 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above.”
The Hon’ble Orissa High Court in the case of ACIT vs Serajuddin & Co. 454 ITR 312 (Orissa) had an occasion to examine substantial question of law on the propriety of approval granted under s. 153D of the Act. The Hon’ble High Court made wide ranging observations towards the manner and legality of approval under s. 153D of the Act by observing that the approval under s. 153D of the Act being mandatory, while elaborate reasons need not be given, there has to be some indication that approving authority has examined draft orders and finds that it meets the requirement of law. The approving authority is expected to indicate his thought process while granting approval, held that it is not correct on the part of the Revenue to contend that the approval itself is not justifiable. Where the Court finds that the approval is granted mechanically, it would vitiate the assessment order itself. The Hon’ble High Court inter-alia observed that there is no even a token mention that draft order has been perused by the Ld. Addl. CIT. The approval letter simply grants approval. In other words, even the bare minimum requirement of approving authority having to indicate what thought process involved leading to the aforementioned approval has not been provided. As explained, the mere repeating of words of the Statue or mere rubber stamping of the communication seeking sanction by using similar words like ‘approval’ will not, by itself, meet the requirement of law. The Hon’ble Court made reference to manual issued by the CBDT in the context of erstwhile section 158BG of the Act and observed that such manual serves as a guideline to the AOs. Since it was issued by CBDT, the powers of issuing such guidelines can be traced to section 119 of the Act. The Hon’ble High Court also held that non-compliance of requirement of section 153D of the Act is not a mere procedural irregularity and lapse committed by Revenue may vitiate the assessment order. The SLP filed against the aforesaid judgment in the case of ACIT vs Serajuddin & Co. Kolkata was dismissed as reported in (2024) 163 taxmann.com 118 (SC).
The ratio of judgement delivered in the case of ACIT vs Serajuddin & Co. Kolkata; PCIT vs Anuj Bansal; PCIT vs Shiv Kumar Nayyar; and PCIT vs Subhash Dabas (supra) has held in chorus that the approval granted under s. 153D of the Act, if granted mechanically, will vitiate the assessment order itself.
11. As noted in the instant case, In the first para of the approval memo, the Addl. CIT referred the letter of the A.O. dated 17/12/2019, and in the second para, it was stated that the on the basis of discussion held from time to time the approval u/s 153D of the Act is granted in respect of seven cases. The approval dated accorded u/s 153D of the Act is bearing the printed date of 17/12/2019 and hand written date of ‘18/12/2019’ and the same has been signed on 18/12/2019. There is not even mentioning of any draft assessment order or the assessment records or the seized materials in the said approval letter. Such mechanical approval cannot be sustainable in law in the light of judicial dicta available. The approval memo is totally silent on the issues involved and has granted omnibus approval without any thoughtful process being discernible. A single approval u/s 153D has been accorded comprising out of seven Assessment Years. Applying the ratio of judgements delivered as noted above, the assessment order based on ritualistic approval stands vitiated and thus quashed by allowing Ground No. 9 of appeal of the Assessee.
Since, we have quashed the Assessment Order on the ground of erroneous approval accorded u/s 153D of the Act by allowing the Ground No. 9, we do not consider it necessary to address on other legal and factual contentions raised in the other grounds of Appeal
of the Assessee.
13. In the result, the appeal of the Assessee is allowed.
10. In view of above material facts and the judicial view of the Coordinate Bench as per law of precedent, the assessment order on ground of erroneous approval accorded under section 153D of the Act deserves to be quashed and is set aside. Therefore, ground no. 8.1 is allowed.”
In view of above material facts and well settled principles of law, exercise of jurisdiction is unsustainable in law and illegal. Therefore, impugned order is set aside. Accordingly, ground of appeal no. 9 is allowed. Ground nos. 1 to 8 and 10 to 20 are not pressed, these are left open.