NAVEEN NARANG ,DELHI vs. PCIT (CENTRAL), - 3, DELHI

3.2022 at income of Rs. 14,93,82,868/- after making certain additions against which the assessee has filed appeal before the Ld. CIT(A) which is pending. 2.1 Ld. PCIT issued notice dated 26.03.2024 u/s. 263 of the Act asking the assessee to show cause as to why the aforesaid assessment order dated 30.3.2022 should not be revised as, according to Ld. PCIT, the same was erroneous and prejudicial to the interest of the revenue. The assessee was asked to submit its reply on 27.3.2024. The assessee submitted its reply on 27.3.2024 explaining that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The ld. PCIT however, did not agree with the contentions of the assessee and passed order dated 31.03.2024 u/s. 263 of the Act. Against this order u/s. 263 of the Act, the assessee is in appeal before us. 3. It is noted that earlier this captioned appeal was disposed of by the Tribunal vide order dated 03.10.2024. For recalling the said order, assessee filed a Misc. Application, which was recalled vide order dated 27.03.2025 for adjudicating the Ground No. 5 & 9 which were not adjudicated by the Tribunal in order dated 03.10.2024. Pursuant to the said recalled, the instant appeal has been fixed and heard to adjudicate the Ground Nos. 5 & 9, which read as under:- Ground No. 5 : On the facts and circumstances of the case and in law, the Ld. PCIT erred in stating that the assessment passed by the AO was without making inquiries or verification which should have been made.

Sh. Naveen Narang AADPN0344D 2016- 17 153A r.w.s. 143(3) 57,91,510/- 14,35,91,358/- 14,93,82,868/-

Copies of the final assessment orders should be forwarded to this office immediately after passing the orders. Proposal for retention of seized material should also be forwarded to this office within time as per IT Act, 1961. Before passing the final order, in case, there is requirement of protecting the interest of revenue, permission u/s 281B from Pr. CIT(C)-3, New Delhi should be taken. Office note indicating additions in relevant assessment years should be indicated in all Assessment Years. You have certified about perusal and verification of data seized in electronic format through working copies having certified hash values as that of original hard drives/CDs/pen drives/mobile data & any other electronic data. You have also certified to the undersigned that all information available in AIR/CIB/from other Law Enforcement Agencies have been properly scrutinized by you before finalizing the draft assessment order.

Please ensure that penalty is levied under proper section of the Income Tax Act, 1961, if applicable.”

1 In view of aforesaid factual matrix, we find that the Assessing Officer has sent the letter for approval to JCIT on 28/03/2022 and JCIT has granted approval on 30/03/2022. Thus, it was not possible for the JCIT to properly examine the facts of the case, the seized material and the issue involved. The approval has been granted by the JCIT on the basis of implied undertaking/certificate from the AO about the perusal and verification of seized data that the contents of the appraisal report, seized material etc. have been examined by him. Thus, the JCIT has not made any independent application of mind. It is observed that the JCIT has not mentioned that he has gone through the appraisal report, assessment records, seized material and other materials. The approval granted by the JCIT is without going through the seized material, appraisal report and other material on record. There is not even a token mention in the approval that the draft assessment orders have been perused by the JCIT. It is noted that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval of JCIT should reflect application of mind which is missing in the instant case. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the approving authority has to act in a judicious manner by due application of mind in a manner of a quasi- judicial authority. If the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval under section 153D of the Act and the mandate of the enactment by the legislature will be defeated. Thus, the approval u/s 153D in this case is cosmetic and not a valid approval as envisaged u/s 153D of the Act. Therefore, the provisions of section 263 cannot be invoked in respect of such assessment order which itself is bad-in-law and non-est. Assumption of juri iction u/s 263 of the Act in respect of an assessment which is non-est/bad-in-law/without juri iction is also bad-in-law. Such challenge to the validity of the assessment order can be made even in the proceedings challenging the order u/s 263. 7

2 We note that this issue in dispute stands fully covered by the very latest decision of the Coordinate Bench of the ITAT Delhi decided in assesse’s own case relevant to assessment year 2017-18 to 2019-20 which was decided on 16.05.2025 in ITA Nos. 3993 to 3995/Del/2024 wherein, on exactly similar verbatim of the approval dated 30.03.2022 granted u/s. 153D of the Act by the same JCIT, Central Range-8, New Delhi, the assessment was quashed by the Tribunal. The relevant findings of the Tribunal reads as under:- “12. Apart from Ld. AR has drawn our attention to the approval dated 30.03.2022 in each of the years issued by the JCIT, Central Range-8, New Delhi under Section 153D of the Act, the contents thereof are as follows: “2 Approval is hereby accorded u/s 153D of the Income Tax Act, 1961 to the draft assessment order as amended in the following case, on the basis of the detailed discussion with you time to time, information available on record, facts mentioned in the Appraisal Report and relevant seized documents perused by you & brought to the notice of undersigned.

Copies of the final assessment orders should be forwarded to this office immediately after passing the orders. Proposal for retention of seized material should also be forwarded to this office within time as per IT Act, 1961. Before passing the final order, in case, there is requirement of protecting the interest of revenue, permission u/s 281B from Pr. CIT(C)-3, New Delhi should be taken. Office note indicating additions in relevant assessment years should be indicated in all Assessment Years. You have certified about perusal and verification of data seized in electronic format through working copies having certified hash values as that of original hard drives/CDs/pen drives/mobile data & any other electronic data. You have also certified to the undersigned that all information available in AIR/CIB/from other Law Enforcement Agencies have been properly scrutinized by you before finalizing the draft assessment order.

Please ensure that penalty is levied under proper section of the Income Tax Act, 1961, if applicable.”

On this aspect it was further submitted by the Ld. AR that such approval under Section 153D was granted without making any reference on the order-sheet and therefore the same is a mechanical one. 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. Moreso, the third para of the approval is a conditional one. The same has been granted in a blanket manner without referring the year under consideration. In fact, it is nothing but the verbatim copy of the approval granted in the case of Veena Singh which was assailed before the ITAT and the Coordinate Bench in the case of Veena Singh v. ACIT CC-25, Delhi dated 24.4.2024 [2024 (4) TMI 1025 –ITAT Delhi ], quashed the entire assessment on account of approval under Section 153D having been granted in a mechanical manner; a product of non-application of mind and therefore, the same is invalid and entire proceedings initiated as void ab initio, copy thereof has been duly submitted before us. Relevant observation of the Bench is as follows:

Approval is hereby accorded- u/s 153D of the Income Tax Act, 1961 to the draft assessment orders as amended In the following, .cases, on the basis of the detailed discussion with you time-to time, information available on-record, facts mentioned in the Appraisal Report and relevant seized documents perused by you & brought to the notice of undersigned.

No Name of the assesses PAN KY. Returned Income Assessed Income 1 Ms. Veena Singh AXJPS9588H 2011-12 7,31890/ 14,11,393/- 2 Ms. Veena Singh AXJPS9588H 2012-13 17,77,440/- 37,27,440/- 3 Ms. Veena Singh AXJPS9588H 2013-14 25,57,350/- 57,87,350/- 4 Ms. Veena Singh AXJPS9588H 2014-15 10,99v220/- 52,29,220/- 5 Ms. Veena Singh AXJPS9588H 2015-16 7,47,730/- 33,69,650/- 6 Ms. Veena Singh AXJPS9588H 2016-17 13,18,830/- 182,31,454/- 7 Ms. Veena Singh AXJPS9588H 2017-18 1165,510/- 2,52,33,8201-

Copies of the final assessment orders should be forwarded to this office immediately after passing the orders. Proposal -tor retention of seized- material, should also be forwarded to this, office within time as per IT Act, 1961. Before passing the final order, in case, there is requirement of protecting the- interest of revenue, permission u/s 281B from Pr. CIT(.C)3, New Delhi should be taken: Office notice indicating additions in relevant assessment years should be indicated In all Assessment Year, A.0 to certify about perusal and verification of data seized in electronic format through working copies having certified hash values as that of original hard drives/CDs/ pen drives/mobile data & any other electronic data, You have also certified to the undersigned that all Information available In AIR/CIB/from other Law Enforcement Agencies have been properly scrutinized by you before finalizing the draft assessment.

On plain reading of the above appeal, it is found following:-

The above mentioned approval 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 5 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 voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record as no such draft Assessment order has been referred while according the approval u/s 153D of the Act.

The provision of Section 153D of the Act envisages prior approval of JCIT before passing the assessment order, for the purpose of ready reference the provisions of Section 153D of the Act is reproduced as under:-

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 of mind. 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.

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 the above approval letter issued by the Addl. Commissioner says that the approval has been granted subject to certain conditions.

Plain reading of the letter of approval granted by the Addl. Commissioner, clearly depicts that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of letter of the Ld. A.O. without any application of mind. From the said approval, it can be easily inferred that the approved has been accorded with certain conditions. Thus, the sanctioning authority had in effect abdicated its statutory functions and delightfully relegated its statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The said approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be sustained in the eyes of law.

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 of the Act. 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.) which has been approved by juri ictional High Court subsequently, reported in 307 CTR 218 affirms the plea of the Assessee, wherein the Hon’ble Bombay High Court held as under:-

Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 2007- 08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with.

This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. The Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The 14

The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid.

Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks :

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.

Accordingly, the Tax Appeal is dismissed.”

In the case of ACIT, Circle-1 (2) Vs. Serajuddin and Co. the Hon’ble Supreme Court in SLP (Civil) Dairy No. 44989/2023 vide order dated 28/11/2023, dismissed the Appeal filed by the Department of Revenue against the order dated 15/03/2023 in ITA No. 43/2022 passed by the Hon’ble High Court of Orissa at Cuttack, wherein the Hon’ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing 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 arguments advanced by the Ld. the Assessee's Representative on the Aditional Ground of Appeal. In our considered opinion the approvals so granted under the shelter of section 153D of the Act does not 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 orders in the captioned appeals are non-est and a nullity and hence the same are quashed.”

Thus, having regard to the entire aspect of the matter we do not find any reason to deviate from the stand taken by the Coordinate Bench on each of the issues discussed hereinabove holding the initiation of assessment proceedings bad in law particularly having regard to the approval under Section 153D of the Act being issued in a routine manner without application of mind and without making any 16

In the background of the aforesaid discussions and respectfully following the aforesaid binding precedents, we do not find any reason to deviate from the stand taken by the Coordinate Bench discussed hereinabove holding the initiation of assessment proceedings bad in law particularly having regard to the approval under Section 153D of the Act being issued in a routine manner without application of mind and the same is found to have been issued by the JCIT, Central Range-8, New Delhi in a mechanical manner and thus not sustainable in the eyes of law. Thus, the approval u/s 153D in this case is cosmetic and not a valid approval as envisaged u/s 153D of the Act and bad in law and non-est and null and void and liable to be quashed. We hold and direct accordingly. Resultantly, the assessee succeeds in ground no. 9 raised by him. Since the original assessment has been quashed, thus, the provisions of section 263 cannot be invoked in respect of such assessment order which itself is bad-in-law and non-est. Assumption of juri iction u/s 263 of the Act in respect of an assessment which is non-est/bad-in- law/without juri iction is also bad-in-law. Such challenge to the validity of the assessment order can be made even in the proceedings challenging the order u/s 17

We thus set aside the order passed by the Ld. Pr. CIT under section 263 of the I.T. Act and quash the same as the assessment order itself was void-ab-initio. 7. Since we have already quashed the revisional order of the Ld. PCIT u/s. 263 of the Act by deciding the ground no. 9 raised by the assessee wherein, original assessment order has been quashed, hence, the Ground No. 5, as reproduced under para no. 3 of this order, was not pressed by the Ld. AR for the assessee, therefore, the same is treated as infructuous. 8. In the result, assessee’s appeal is allowed. Order pronounced in open court on 29.05.2025. (SUDHIR KUMAR)