SHRI TARACHAND KHATRI,JABALPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE, JABALPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH : JABALPUR BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA.No.21/JAB/2019 Assessment Year 2016-2017 Shri Tarachand Khatri, The ACIT, Ramnath Building, Opp. vs., Bhawartal, Jabalpur. Central Circle, State of Madhya Pradesh Jabalpur. PAN AIJPK7280K (Appellant) (Respondent) For Assessee : Shri Pawan Ved, Advocate & Shri Rahul Bardia, C.A. For Revenue : Shri H.P. Meena, D.R. Date of Hearing : 12.12.2019 Date of Pronouncement : 17.01.2020 ORDER PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-1, Jabalpur, Dated 08.03.2019, for the A.Y. 2016-2017, on the following grounds :

2 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 1. “The CIT(A) has erred in confirming addition of Rs.2,50,00,000/- being amount disclosed before ADIT and not shown in return of income. 2. The addition made is null and void as it is not arising out of any seized material. 3. The approval given by JCIT u/s.153D is without application of mind.”

3 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 05.01.2016 in which under different heads assessee made the surrender of income which includes surrender of Rs.2.50 crores on account of undisclosed income in respect of the loose papers found during the course of search at the residential premises and at the business premises. During the course of search, various loose papers were found and seized from the premises of the assessee which were confronted to assessee during the course of post-search enquiry and assessee on that account has surrendered Rs.2.50 crores as undisclosed income on account of incriminating loose papers. The relevant portion of the letter of the assessee Dated 05.01.2016 is scanned and reproduced in the assessment order in which the assessee stated that loose papers seized. At present the assessee does not have documents, therefore, he believed that he and his family members have undisclosed income of Rs.2.50 crores recorded in these papers, which assessee would surrender for taxation. The assessee asked for copy of these documents so that further action could be taken into the matter. The A.O. on the basis of this letter noted that

4 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. assessee later on failed to honour his commitment and did not offer the amount of Rs.2.50 crores for taxation, which assessee has surrendered in his letter Dated 05.01.2016, therefore, addition of Rs.2.50 crores was added in assessment year under appeal i.e., 2016-2017. The A.O. passed the assessment order under section 153A r.w.s. 143(3) Dated 27.12.2017.

2.1. The A.O. in the assessment order has mentioned that this order is passed with the prior approval of Joint Commissioner of Income Tax [ “JCIT”], Central Range, Bhopal under section 153D of the I.T. Act, 1961 which was communicated to him vide letter Dated 22.12.2017 of JCIT, Bhopal.

2.2. The assessee challenged the addition on merit as well as challenged the approval granted by JCIT Dated 22.12.2017 which was without application of mind and without going through the record of the case. The Ld. CIT(A) on the basis of the letter of the assessee Dated 05.01.2016 confirmed the addition. The Ld. CIT(A) has also mentioned in the impugned order that assessee has not brought out

5 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. any material on record which suggests that approval has been given without application of mind. This ground was also dismissed. Ultimately, appeal of assessee has been dismissed.

3.1. Learned Counsel for the Assessee submitted that assessee is not group concern of Jabalpur Hospital & Metro Hospital Group (M.P.). No statement of assessee was recorded during the course of search and no loose paper was confronted to the assessee. During the course of assessment the addition is made by the A.O. merely on the basis of letter of the assessee Dated 05.01.2016. He has referred to letter of the A.O. copy of which is filed at page-97 of the PB in which the A.O. requested for grant of approval under section 153D in which A.O. has mentioned that he has verified the material and only draft order have been sent

6 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. to the JCIT for approval. PB-96 is approval of JCIT Dated 22.12.2017 which letter have been received on 22.12.2017 only. He has submitted that JCIT did not examine any material and he believed that all the facts have been verified by the A.O. No material was produced before him including the assessment record. Thus, no relevant documents were produced before JCIT before granting approval under section 153D of the I.T. Act. Approval have been granted on the same day on 22.12.2017 despite the fact that A.O. was having his office at Jabalpur and JCIT was holding his Office at Bhopal in which there is a significant distance. No record have been produced before JCIT, only draft order have been sent. The A.O. in his letter did not mention if he has forwarded any assessment record before JCIT for his perusal before granting approval under section 153D. No statement of assessee have been recorded under section 132(4). The JCIT did not see any seized material or submission of the assessee brought on record. Therefore, JCIT granted the approval under section 153D without application of mind and in a mechanical manner. Learned

7 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. Counsel for the Assessee relied upon the Judgment of Hon’ble Supreme Court in the case of Sahara India (Firm) vs., CIT & Another [2008] 300 ITR 403 [SC] and Judgment of Hon’ble Madhya Pradesh High Court in the case of Arjun Singh & Another vs., ADIT & Others [2000] 246 ITR 363 [M.P.], Judgment of Hon’ble Allahabad High Court in the case of CIT vs., Dilbagh Rai Arora [2019] 308 CTR 502 (All.). He has submitted that A.O. has not mentioned anything in the assessment order as to on what basis addition of Rs.2.50 crores have been made in assessment order. The letter of the assessee was conditional and no evidence have been brought on record for making such addition. There is no recovery of the gold or other material so as to levy penalty under section 271AAB of the I.T. Act, 1961. The assessee purchased the property in 2000 as per the Deed and payments have been made by cheque, so, there were no reason to make any addition against the assessee. He has also relied upon other Judgments, on which, satisfaction under section 147/148 was found invalid and submitted that the same proposition will apply to the case of the

8 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. assessee. He has submitted that since there was no material found during the course of search against the assessee, therefore, on mere filing a letter Dated 05.01.2016, no addition could be made against the assessee. He has referred to Board Circular F.286/2/2003-IT (In) Dated 10.03.2003 in which it is highlighted and advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search, seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. It is also highlighted that any action contrary to the above shall be viewed adversely. Learned Counsel for the Assessee submitted that since no evidence was found during the course of search so as to make any addition of Rs.2.50 crores, therefore, letter of the assessee Dated 05.01.2016 is without any basis and could not lead to make any addition against the assessee [PB-21]. PB-74 is statement of Shri Ghan Shyam Das, father of the assessee

9 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. Dated 22.11.2015. PB-76 is letter of the assessee Dated 05.01.2016 and no statement of assessee have been recorded during the course of search. Learned Counsel for the Assessee submitted that A.O. was not stopped to make any enquiry. The A.O. has made detailed enquiry and all the queries of the A.O. have been responded to. The A.O. did not refer to any loose paper in the assessment order to prove that addition is based on any incriminating material. There is no evidence of any constant touch between A.O. and the JCIT. He has, therefore, submitted that approval granted under section 153D is invalid and bad in Law and as such assessment order is liable to be declared as null and void. There is no basis to make any addition on merit as well.

10 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. after discussion with the A.O. in post-search investigation. The Department has collected the evidence in search and A.O. was stopped from making enquiry by filing letter in January, 2016. The letter of the assessee Dated 05.01.2016 has not been withdrawn. The Ld. D.R, therefore, submitted that the matter may be remanded to the A.O. for making further enquiry into the matter. The Ld. D.R. also submitted that in this case lesser income and sales have been shown and loan is given to the group companies only.

11 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. paper book at page-76, which clearly show that though the assessee has mentioned some loose paper in his letter, but, it is specifically stated that such papers are not with him and he believed that he and his family members would have undisclosed income of Rs.2.50 crores which might have been recorded in the documents. Therefore, he has agreed to surrender of Rs.2.50 crores and asked for photo copy of such documents from the A.O. The language in the letter Dated 05.01.2016 clearly show that none of the loose paper or documents have been made available to the assessee before writing such letter. The letter Dated 05.01.2016 is, therefore, qualified and subject to bringing such documents/loose paper to the knowledge of the assessee. The A.O. in the assessment order has no where mentioned if such documents or letter or loose paper have been provided to assessee for filing any further reply before him. Since the letter of the assessee was conditional and nothing is brought on record whether such conditions have been satisfied in this case, therefore, assessee was justified in not making any such surrender in his return of income filed in

12 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. response to notice under section 153A of the I.T. Act, 1961. Since assessee did not make any surrender of the amount in question in his return of income, therefore, it amounts to retraction from the earlier letter Dated 05.01.2016. The Hon’ble Allahabad High Court in the case of CIT vs., Dilbagh Rai Arora [2019] 308 CTR 502 (All.) held as under :

“If the person can explain with supportive evidence, material or otherwise that the admission by him earlier under s. 132(4) is not correct or contain a wrong statement or that a true state of affairs is different from that represented therein, addition cannot be made solely relying on statement under s. 132(4).”

5.1. The Hon’ble Punjab & Haryana High Court in the case of Krishan Lal Shiv Chand Rai vs., CIT [1973] 88 ITR 293 (P&H) held that “it is an established principle of Law that a party is entitled to show and prove that an admission made by him was in fact not correct and true.”

13 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 5.2. The Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co., vs., State of Kerala & Another [1973] 91 ITR 18 (SC) held that “assessee should be given an opportunity to show that admission is incorrect or does not show correct state of facts.”

5.3. Since in the present case the letter Dated 05.01.2016 was qualified and subject to documents to be supplied by the A.O, it is clear that admission of the assessee in the said letter was not correct and true because it was not based on any evidence or material if found during search. Thus, the Board Circular Dated 10.03.2003 (supra) would apply to the case of the assessee that the Department should concentrate of collection of evidence of income and should not based on addition merely on the basis of confession obtained from assessee through the letter Dated 05.01.2016. Thus, there is no evidence on record or statement of assessee recorded during the course of search so as to prove that assessee has earned undisclosed income of Rs.2.50 crores. Since no corroborate evidence have been brought on record or brought in the Orders of the

14 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. authorities below, therefore, there was no justification for the authorities below to make the addition of Rs.2.50 crores against the assessee. In this view of the matter, we set aside the Orders of the authorities below and delete the addition of Rs.2.50 crores. Ground Nos. 1 and2 of the appeal of the assessee is allowed.

6.1. The approval under section 153D of the Act is filed at page-96 of the PB which reads as under :

“GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX - CENTRAL RANGE, Room No. - 205, Aayakar Bhawan, Hoshangabad Road, Bhopal (M.P.)-462011 Bhopal.addlcit.cen@incometax.gov.in, Telephone No.0755-2551326

F.No. JCIT (Central)/BPL/153D/2017-18/1401

Date 22.12.2017

15 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur.

To The Asstt. Commissioner of Income Tax (Central) Jabalpur.

Sub:- Approval u/s 153D of the Income Tax Act, 1961 in the case of JHRC & Metro Group - reg.

Please refer to your letter in F.No ACIT/Central/JBP/ 153D/2017-18 dated 22.12.2017 seeking approval u/s 153D of the IT Act, 1961 in the case of JHRC & Metro Group. 2. The AO has certified that: Proper opportunity of being heard was given to • the assessee on all the issues. All the issues emanating from the material • available on record have been examined properly and are incorporated in the draft orders. Relevant seized documents were verified before • passing the draft orders and are kept in safe custody.

16 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 3. Subject to the above observations, the draft assessment orders are hereby approved, as required under the provisions of section 153D of the Income Tax Act in the following cases of JHRC & Metro Group :

S.No. Name of the Draft A.Yrs. Assessee PAN Order u/s. Shri Tara 2010- 1. Chand AIJPK7280K 153A 11 to Khatri 2016- 17 Shri 2010- 2. Ghanshyam AHMPK5704A 153A 11 to Das Khatri 2016- 17 4. It should be ensured that the final assessment orders are passed and served on the assessee well in time. A copy of the final assessment order should be submitted this office for record. Sd/-Alpesh Parmar Joint Commissioner of Income Tax Central Range, Bhopal.”

6.2. The letter of the A.O. requesting for grant of approval under section 153D is filed at page-97 of the PB. In the said letter the A.O. has merely stated that he has

17 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. verified the seized material and given an opportunity to the assessee before passing the draft assessment order. He has referred to draft assessment order only and sought approval from the JCIT and the Office of the A.O. is situated at Jabalpur. The JCIT is having his Office at Bhopal. Nothing is brought on record if any material relating to the case or assessment record have been sent by the A.O. for appraisal of the JCIT before granting approval under section 153D of the I.T. Act. The JCIT also in his approval Dated 22.12.2017 (supra) has merely mentioned that A.O. has verified the facts of examining the material. Thus, it is clear that JCIT has not gone through the record or the material before granting approval under section 153D of the I.T. Act. The JCIT merely believed the certificate given by the A.O. The JCIT received letter of the A.O. Dated --.12.2017 [PB Pg.97] on 22.12.2017 and on the same day he passed the approval under section 153D of the I.T. Act. The Hon’ble Supreme Court in the case of Sahara India (Firm) vs., Commissioner of Income Tax & Another (supra) held as under :

18 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. “Similarly, the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the AO, casts a very heavy duty on the said high ranking authority to see to it that the requirement of the previous approval, envisaged in the section is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the A.O. The approval must reflect the application of mind to the facts of the case.”

6.3. The Hon’ble Madhya Pradesh High Court in the case of Arjun Singh & Another vs., ADIT & Others [2000] 246 ITR 363 [M.P.] held as under :

19 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. “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.”

6.4. An identical issue was considered by ITAT, Delhi F-Bench in the case of M/s. M3M India Holdings, Gurgaon vs., DCIT, Central Circle-II, Faridabad in ITA.No.2691/Del./ 2018, Dated 15.03.2019 reported in 71 ITR 451 (Delhi Tribunal), in which in paras 11 to 14 the Tribunal held as under : “11. On Ground No.1.3, Learned Counsel for the Assessee submitted that no proper sanction as required under section 153D have been received, therefore,

20 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. assessment order is illegal and bad in Law. Learned Counsel for the Assessee referred to page 46 of the assessment order and submitted that Addl. CIT, Central Range, Chandigarh communicated the sanction under section 153D to the A.O. on 31st January 2014 and the assessing officer on the same day i.e., 31st January 2014 passed the assessment order. He has referred to page-48 of the paper book, which is copy of Fax message dated 5th February 2014 in connection with the communication of sanction/approval of Addl. CIT. PB-31 is the reply filed before A.O. by assessee on 29th January 2014. PB-469 is the reply to the RTI application filed by assessee dated 6th June 2018, in which no specific reply have been given by the Department as to by which mode the assessment record was forwarded by A.O. to Addl. CIT as no such record available and how the sanction/approval was communicated to the assessing officer. PB-46 is letter of the assessing officer to the Addl. CIT, Central Range, Chandigarh dated 30th January 2014 sending the draft assessment order for

21 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. approval in terms of section 153D of the Income Tax Act. PB-47 is approval of the Addl. CIT, Chandigarh dated 31st January 2014 without mentioning if he has seen the assessment record. Learned Counsel for the Assessee submitted that letter dated 23rd January 2019 was given to the assessing officer, in which it was brought to his notice that after inspection of the assessment record conducted on 25th October 2018, it was noted that while inspecting the assessment file, assessee has not found any original copy of statutory approval under section 153D of the Income Tax Act, 1961, except the copy of the approval only. The assessee, therefore, requested that original approval under section 153D may kindly be made available to him. He has submitted that till date no reply have been conveyed to the assessee. He has, therefore, submitted that in this case no approval have been conveyed to the assessing officer before passing the assessment order. He has submitted that in section 153D the word used is ‘Shall’ which indicates that this provision is mandatory

22 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. which is to be complied before passing the assessment order. In the present case, no such approval have been found on record. On inspection of the record, it was found the approval was received by the assessing officer for the first time by Fax on 5th February 2014 [PB 48]. There is no other documentary evidence available on record. It is, therefore, clear that approval/sanction of the Addl. CIT was received after passing of the assessment order. Therefore, assessment order is illegal and bad in Law. The assessing officer was not in possession of the valid sanction/approval of Competent Authority before passing the assessment order. Learned Counsel for the Assessee submitted that the Tribunal can in fact call for production of the assessment record for itself to determine whether the satisfaction was received, before passing the assessment order by the Assessing Officer ? Reliance was placed upon the Judgment of the Allahabad High Court in the case of S K Gupta and Co. vs ITO 246 ITR 560 (All.). He has submitted that to the same effect there

23 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. is another Judgment of the Allahabad High Court in the case of M.D. Overseas Ltd., vs., DGIT 333 ITR 407 (All.) He has, therefore, submitted that the approval in this case though not conveyed to the Assessing officer on time, but, is also given in a mechanical manner. Learned Counsel for the Assessee relied upon Judgment of the Honorable Bombay High Court in the case of Pr. CIT vs Smt. Shreelekha Damani in Income Tax Appeal No. 668 of 2016 dated 27th November 2018. He has submitted that the draft assessment order was sent from Faridabad to Chandigarh on 30th January 2014 and it is not clarified as to how it was sent, whether through messenger or courier or any other valid mode. Therefore, no time was left to consider the assessment record. Since last reply is filed on 29th January 2014, therefore, there was no application of mind by the assessing officer or the Addl. CIT to pass the assessment order within the time. Learned Counsel for the Assessee also relied upon order of ITAT, Jodhpur Bench in the case of Smt. Indira Bansal vs., ACIT (2018)

24 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 192 TTJ 968 (Jodh.). Learned Counsel for the Assessee, in the circumstances, submitted that since last reply was filed on 29th January 2014, which contains more than 500 pages, therefore, it is highly improbable that assessing officer who is stationed at Faridabad, would have sum-up the entire assessment file, containing voluminous submissions and drafted assessment order containing not less than 46 pages and sent it to the Addl. CIT at Chandigarh on 30th January 2014. The Department has filed vague reply to the RTI application. It is difficult to believe that within a span of a single day, assessment record would have reached to the Addl. CIT, at Chandigarh. It is highly unbelievable that Addl. CIT would have perused the voluminous assessment record and material on record on the same day and granted approval on the same day on 31st January 2014 and transmitted back the record from Chandigarh to Faridabad on the same day on 31st January 2014 for passing of the final assessment order. It was, therefore, submitted that sanction granted by

25 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. Addl. CIT to draft assessment order was devoid of any application of mind without considering material on record and without adopting prescribed procedure. It was, therefore, submitted that the said statutory function of granting sanction was exercised casually and not in a proper manner by due application of mind. Therefore, assessment order is null and void and liable to be quashed.

26 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 13. We have considered the rival submissions. It is not in dispute that search and seizure action was taken in the case of the assessee on 30th January 2011. Therefore, assessing officer rightly proceeded against the assessee firm under section 153A of the Income Tax Act, 1961. The assessing officer also rightly passed the assessment order under section 153B(1)(b) of the Income Tax Act, 1961. Further, Section 153D of the Income Tax Act provides that “no order of assessment or reassessment shall be passed by the 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 assessment year referred to in clause (b) of sub-section (1) of Section 153B except with the prior approval of Joint Commissioner.” Therefore, for passing the impugned assessment order, the assessing officer who is in the rank of DCIT shall have to obtain prior approval of JCIT. The Learned Counsel for the Assessee referred to PB-31, which is last reply filed before assessing officer on 29th

27 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. January 2014. The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under :

“No.Addl.CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated the 31st January, 2014. To Shri Tatung Padi Dy. Commissioner of Income Tax, Central Circle-II, Faridabad.

28 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. Sub: Approval u/s.153D of the I.T. Act, 1961, in the case of M/s. M3M India Holdings, Formerly M/s.Krishna Flexi Solution, C-13, Sushant Lok- I, Gurgaon for the A.Y. 2012-2013 – regarding.

Please refer to the Draft Assessment Order U/s. 153B(1)(b) of the I.T. Act, 1961, referred for approval u/s.153D of the I.T. Act, 1961, dated 30.01.2014.

The approval u/s. 153D of the I.T. Act, 1961, is accorded for the Assessment Year 2012-13.

Sd/-RAJEEV KUMAR, Addl.Commissioner of Income Tax, Range (Central), Chandigarh. Encl: As Above.”

13.1. The Addl. CIT, Chandigarh did not mention in the approval, if he has gone through the assessment record or whether assessment record have been produced before him before granting approval in the matter. The assessee filed RTI application to the Revenue Department, copy of reply is filed at page 469 of the PB, in which it was explained that letter of the

29 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. Assessing Officer, Faridabad dated 30th January 2014 was forwarded to the Addl. CIT, Chandigarh on 30th January 2014. No reply was given to assessee as to when the letter of the assessing officer was received by Addl. CIT, Chandigarh. It was also intimated that no such record is available in the office of Assessing Officer regarding mode by which assessment record along with the letter of the assessing officer dated 30th January 2014 were forwarded to the Addl. CIT, Chandigarh. No details/explanation were furnished as to on which date the assessment record was received by the Addl. CIT, Chandigarh. The assessee, on inspection of the record, intimated the assessing officer that no original approval under section 153D is available on record. Learned Counsel for the Assessee referred to PB 48, which is Fax message received on 5th February 2014, communicating the approval of Addl. CIT to the assessing officer. This Fax message is not legible. The Hon’ble Bombay High Court in the case of Pr. CIT vs. Smt. Shreelekha Damani (supra), held as under

30 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 668 OF 2016 The Pr. Commissioner of Income Tax ..Appellant v/s. Smt. Shreelekha Damani. ..Respondent.

Mr. A.R. Malhotra a/w Mr. N.A. Kazi for the appellant Mr. Jehangir Mistri, Senior Counsel a/w Mr. Atul Jasani for the respondent

CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. DATED : 27th NOVEMBER, 2018. P.C. 1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015.

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in

31 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. holding that there was no 'application of mind' on the part of the Authority granting approval ?

32 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 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 approval should not be an empty ritual and must be based on consideration of relevant material on record.

33 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur.

To, The DCIT(OSD)-l Mumbai

Subject : Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg.

Ref: No. DCIT (OSD)-l/CR-7/Appr/2010-ll dt. 31.12.2010

As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analise the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted.

Approval to the above said draft order is granted u/s 153D of the I.T. Act, 1961."

34 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 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

35 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 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.

13.2. The ITAT, Jodhpur Branch in the case of Smt. Indira Bansal vs., ACIT (supra), held as under:

“Conclusion : 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.”

36 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 14. Considering the facts of the case in the light of above discussion, it is clear that assessee filed 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 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

37 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 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

38 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. 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.”

6.5. In the above case, an identical issue have been considered in the light of Judgment of Hon’ble Bombay High

39 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. Court in the case of Pr. CIT vs., Smt. Shreelekha Damani in Income Tax Appeal No.668 of 2016, Dated 27th November, 2018 and it was held that “requirement of Section 153D of the I.T. Act are not satisfied in the case. It was, therefore, held that entire assessment order is vitiated and is null and void. Therefore, it was set aside and quashed.” In the present case, it is clear that A.O. did not refer to the seized material or the assessment record to the JCIT for his approval. It is not verified as to how the draft have been sent on the same day i.e., on 22.12.2017 to the JCIT from Jabalpur to Bhopal and as to how the approval have been received back on the same day i.e., on 22.12.2017 from Bhopal to Jabalpur. In the absence of any perusal of the record by the JCIT, it is clear that JCIT granted approval without application of mind and as such necessary conditions of Section 153D of the I.T. Act are not satisfied and as such the approval is invalid and bad in law. Consequently, the entire assessment order is vitiated and is liable to be quashed. Considering the facts of the case in the light of above decisions, it is clear that approval under

40 ITA.No.21/JAB/2019 Shri Tarachand Khatri, Jabalpur. section 153D is invalid and bad in law and as such we set aside the Orders of the authorities below and quash the assessment order. Ground No.3 of the appeal of the Assessee is allowed. Resultantly, all additions stand deleted.

Order pronounced in the open Court.

Sd/- Sd/- (SANJAY ARORA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 17th January, 2020 VBP/- Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT, Jabalpur Bench, Jabalpur. 6. Guard File

// BY Order //

Asst. Registrar : ITAT Jabalpur Bench : Jabalpur.