DCIT CENTRAL CIRCLE, AGRA vs. LT. SHRI MRADUL GARG, MATHURA

In the Income-Tax Appellate Tribunal, Agra Bench, Agra

Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member

ITA No. 263 to 267/Agr/2017 Assessment Year: 2008-09 to 2012-13 Shri Saurabh Agarwal C/o D.S. vs. DCIT, Central Circle, (India) Jewelmart P. Ltd., in front of Agra. Mehta Nursing Home, 2, Krishna Nagar, Mathura. PAN:ADEPA7167R (Appellant) (Respondent)

ITA No. 260 to 262/Agr/2017 Assessment Year: 2007-08, 2008-09 & 2012-13 Late Sh. Mradul Garg Throuhg L/H vs. DCIT, Central Circle, Paras Agarwal, C/o D.S. (India) Agra. Jewelmart P. Ltd., in front of Mehta Nursing Home, 2, Krishna Nagar, Mathura. PAN:ACEPG5728M (Appellant) (Respondent)

ITA No. 272 & 273/Agr/2017 Assessment Year: 2010-11 & 2012-13 ACIT, Central Circle, vs. Sh. Mradul Garg, 63, Agra. Dwarkesh Colony, Mansi Road, Mathura PAN:ACEPG5728M (Appellant) (Respondent)

ITA No. 268/Agr/2017 Assessment Year: 2012-13 M/s. D.S. (India) Jewelmart P. Ltd., vs. DCIT, Central Circle, 2, Krishna Nagar, opposite Mehta Agra. Nursing Home, Mathura. PAN:AAECD0868L (Appellant) (Respondent)

ITA No. 263/Agr/2017 2

ITA No. 276/Agr/2017 Assessment Year: 2012-13 DCIT, Central Circle, vs. M/s. D.S. (India) Jewelmart P. Ltd., Agra. 2, Krishna Nagar, opposite Mehta Nursing Home, Mathura. PAN:AAECD0868L (Appellant) (Respondent)

ITA No. 269/Agr/2017 Assessment Year: 2012-13 Ashok Kumar Agarwal C/o D.S. vs. DCIT, Central Circle, (India) Jewelmart P. Ltd., 2, Agra. Krishna Nagar, opposite Mehta Nursing Home, Mathura. PAN:ABPPA1299R (Appellant) (Respondent)

Assessee by Sh. Anil Verma, Advocate & Sh. Anurag Sinha, Advocate Revenue by Sh. Waseem Arshad, Sr. DR

Date of Hearing 06.09.2019 Date of Pronouncement 18.09.2019

ORDER Per Bench, J.M.: This bunch of appeals are directed by the assessee and the Revenue, feeling

aggrieved by the orders of the ld. CIT(A) for the captioned assessment years. Since

common questions of law and facts are involved in all these appeals, these appeals

were heard together and are being disposed of by way of this consolidated order for

the sake of convenience and brevity. We, therefore, take up ITA No. 263/Agr/2017

ITA No. 263/Agr/2017 3

for A.Y. 2007-08 as a leady case and our decision in this appeal would equally apply

to other appeals, mentioned herein above. The grounds raised in this appeal read as

under :

“1. That the Ld. CIT(A)-2, Agra has erred in Law and on facts in partly allowing assessee’s appeal without properly appreciating facts, circumstances and legal position of the case.

ground vide letter dated 08.07.2019 and the same may kindly be admitted.

Additional ground raised by the assessee provides as under :

Because the so-called approval as granted by the Learned Additional Commissioner of Income Tax, Central Range, Kanpur under section 153D for passing impugned assessment order dated 29.03.2014 under section 153A of the ‘Act’ is no approval in the eye of law, having been granted without application of mind and such a mechanically granted approval has rendered the assessment order liable to be held illegal and void ab-initio”

2.1 The ld. AR had submitted that at this is stage legal ground can be raised before

the Tribunal as it is arising out of the order passed by the Assessing Officer. For this

purpose, out attention was drawn to the last line of the assessment order where the

Assessing Officer has mentioned that the order was passed with approval of the

Addl. CIT (Central Range), Kanpur. ]

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2.2 Further, the ld. AR has drawn our attention to page 13 of the paper book

where the approval granted by the Addl. CIT was mentioned as under :

Sub: Approval of Draft assessment orders U/s 153A / 153C of the Income Tax Act, 1961 - Regarding-

Please refer to your letter bearing F No DCIT(CC)/Agra/DSJ Group/2013- 14/1560 dated 21/03/2014 which was reported to be received in this office at 05:10 PM on 27/03/2014 alongwith draft assessment orders pertaining to the cases as detailed in the said letter seeking approval U/s 153D of the Income Tax Act, 1961.

In this regard it is noticed that prior to submission of these draft assessment orders, no discussion has been made at any stage of proceedings with the undersigned including at the stage of preparation / finalization of questionnaires U/s 142(1) of the Income Tax Act, 1961. Accordingly, keeping in view the limitation aspect in the matter and also the fact that only 02 working days are left in this financial year and also the fact that approval is sought by submitting the draft assessment order through speed post including the fact that relevant case records are also not enclosed, approval is accorded in the following 69 cases, solely relying on your undertaking to the effect that while completing the assessment as per draft assessment order, all the observations made in the appraisal report relating to examination / investigation as also the issues identified in the course of examination of seized material have carefully considered / kept in view. The approval, based on your undertaking as discussed herein before, is accorded as there is hardly any time left for any discussion much less meaningful discussion including the fact that there is hardly any time available for any further enquiries / investigation because of the fact that huge pendency of time barring cases is to be liquidated in the available time as indicated above:

S. No. Name of the assessee PAN AY 1. Mridul Garg - 2006-07 to 2011-12 2. Mridul Garg HUF - 2006-07 to 2012-13 3. Ashok Agarwal - 2006-07 to 2012-13 4. Ashok Agarwal HUF - 2006-07 to 2012-13 5. Saurabh Agarwal - 2006-07 to 2012-13 6. Saurabh Agarwal HUF - 2006-07 to 2012-13 7. Shalini Garg - 2006-07 to 2012-13 8. Neelam Garg - 2006-07 to 2012-13 9. Brij Kishori Agarwal - 2006-07 to 2012-13 10. Sterling Infrastructure & Developers

A copy of the final order issued in the above cases alongwith office note immediately be sent to this office for record.”

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On the basis of the above, it was submitted that the additional CIT before granting

approval has not applied his mind and has approved the draft assessment order etc.

without himself examining the record of the assessment.

2.3 The ld. AR for the assessee had submitted that the approval envisaged under

section 153D, is not merely an administrative approval but there is a statutory duty

on the higher authorities to apply its mind before granting the approval. It was

submitted that this duty is not required to be mechanically discharged by the

officers as there is inbuilt purpose to safeguard the interest of the citizen’s.

2.4 it was submitted that the plain reading of the additional CIT observation

clearly shows the total nonapplication of mind by the additional CIT and he had

even not bother to look into the draft and the documents and close thereto. It was

submitted that the additional CIT was required to independently applied mind

before according the approval, though there may not be set formula for inferring the

application of mind but nonetheless in the present case the facts are so glaring that

additional CIT himself has recorded that he has not applied the mind before

according the request for approval was put up before him at the 11th hour.

2.5 the ld. AR relied upon the decision of the honourable Supreme Court in the

matter of

i. Sahara India (firm) vs CIT (2008) 300 ITR 403

ii. PCIT vs Sunrise Finlease Limited 89 Taxmann.com 1(Gujrat)

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iii. SmtShreelekhaDamani vs DCIT 173 TTJ 332 iv. Pcit vs SmtShreelekhaDamani 307 CTR(Bom) 218

v. AAA PAPER MARKETING VS ACIT 2017(4) TMI 1371

vi. Smt Indra Bansal vs ACIT 192 TTJ (JD) 968 vii. Geeta Rani Panda vs ACIT 194 TTJ (CTK) 915

viii. AkilGulamali vs ITO 20 Taxman.com 380 ( para12) ix. Sun engineering (P) Ltd 198 ITR 297( para37)

the assessee is not born out on record and the ld.DR relied upon the decision of

Hon’ble Bombay High Court in the matter of Ultratech Cement Ltd. (ITA No. 1060 of

2014). Further, it was submitted that the order passed u/s. 153D by JCIT was

merely an administrative order and no civil or penalty consequences would flow

against the assessee on account of the approval granted by the Addl. CIT. Further, it

was submitted that there is no requirement of law for granting the hearing to the

assessee by the Addl. CIT/JCIT prior to give approval u/s. 153D for assessment or

reassessment u/s. 153A. He has also relied upon the definition of approval and

sanction given in Black’s law dictionary.

3.1 it was submitted by the ld. DR that approval of additional CIT is distinct from

the assessment order and is not required to be communicated, hence it is not

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challenge before the court of law. the ld. DR relied upon decision in the matter of

Gopal S Pandit vs CIT 96 taxmann.com 233.It was further submitted that once the

reason for administrative approval are not required to be communicated to the

assessee then it is not permissible in law to permit the assessee to agitate the

reasons for passing the administrative approval. It was submitted the approval

granted by the additional CIT is not justiciable in law. It was submitted that the

subject matter of the proceeding before the tribunal is the assessment order for

which the existence of approval is necessary and therefore the approval cannot be

formed basis of challenging the assessment order.

3.2 He further submitted that it administrative approval granted by the

supervisory authority is not justifiable. He relied upon SpaceWood Furnishers

Private Limited of the honourable Supreme Court.

3.3 it was submitted by the learned DR that Bombay High Court in the matter of

CIT versus RatanbaiN.K.Dubash 230 ITR 495 had held as under:

“the power to determine the income vest in the authority exercising the quasi-

judicial function, and it is in violation of principle of quasi-judicial function that can

render the assessment invalid. The act of administrative approval by additional CIT

does not take away the quasi-judicial powers which still vests in AO and therefore

administrative act cannot invalidate the assessment”

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3.4 The DR had submitted that the subject matter of the challenge in the present

appeal is assessment order for which the jurisdictional fact is the existence of

approval, therefore the approval itself cannot be the subject matter of adjudication.

He had further relied upon the decision of the honourable Supreme Court in the

matter of RP Bhatt versus Union of India AIR 1986 SC 1040.It was submitted by

the DR that once the superior authority is agreeing to the finding of the lower

authority then it is not required to record the reasons for so agreeing.

3.5 it was further submitted that the recording of sanction or approval is not

required to be made in a particular manner. The same is discernible from the

reasons recorded in the assessment order. He relied upon the decision of the

honourable Supreme Court in the matter of Mac Datta(SC). It was submitted by the

DR that what could be challenged before the tribunal is want of sanction and for that

the ld. DR relies upon the decision of the Mumbai tribunal in the matter ofPratibha

Pipes & Structural Ltd DCIT 3874/Mum/2015

3.6 it was submitted by the learned DR that it is not within the spare of the

direction of the tribunal to adjudicate the administrative approval granted by the

additional CIT, it was submitted that the decision relied upon by the assessee in the

matter of ShrreLekhaDamani is distinguishable as no question of law was framed by

the high court. It was further submitted that grant of approval did not entail any

civil consequences infection of property or personal right, civil liability the provision

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of material and the property or impinging the personal right and therefore it cannot

be subject matter of any judicial scrutiny by the tribunal. He had further relied upon

the decision of the special bench in the matter of Aztec software.

3.7 Finally the ld. DR had summarized that in view of the decision of the

jurisdictional High Court in the matter of Vikram Singh ITA number 264 of 2017 and

in the matter of Pratibha Pipes & Structural Ltd DCIT 3874/Mum/2015,

AkilGulamajiSomji 20 TaxmaNN.COM 380, the legal ground raised by the assessee

are required to be dismissed as the grant of approval which is administrative in

nature would not have any material effect on the assessment.

Karnataka High court in the matter of Gopas S. Pandit v. CIT, 95 taxman. Com 246 in

paragraph 8 had held as under :

"8. Having heard the learned Counsel for the parties, we are satisfied that the internal guidelines issued by the Central Board of Direct Taxes, as urged by the learned Counsel for the Assessee, bereft of the statutory provisions in Section 153D of the Act cannot bind the approving Authority, namely, the Joint Commissioner to comply with the principles of natural justice by the said Authority. The Assessing Authority undoubtedly has of course given adequate and reasonable opportunity of hearing to the Assessee and all objections on merits were considered by him. Merely because, Section 153D of the Act requires a prior approval of the Draft Assessment Order by the higher Authority, namely, the Joint Commissioner in the present case, because the Assessment Order was passed by the Authority below the rank of the Joint Commissioner, the provisions of the Act do not mandate that a fresh round of opportunity of hearing should Date of Judgment 28-06-2018, I.T.A. No.37/2017 Gopal S. Pandit Vs. The Commissioner of Income Tax & Another be given to the Assessee by such

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Authority, namely, Joint Commissioner also even for approving Draft Assessment Order."

4.1 Similarly, Gujrat 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 :

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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.

4.2 Similarly in the matter of AkilGulamaliSomji20 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. 12. 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 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

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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 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

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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. 13. In the case of Mrs. Rataabai N.K. Dubhash (Supra), the difference between cancellation and amendment of assessment in view of the provisions of Sections 143, 144B, 153 and 251 of the I.T. Act 1961 has been dealt with. The Hon'ble High Court has been pleased to hold as under : "In view of the above discussion, we are of the clear opinion that incases falling under section 144B of the Act, the quasi-judicial function of the Income-tax Officer as an assessing authority comes to an end themoment the assessee files objections to the draft order. The power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with objections. The only thing that remained to be done by the Income-tax Officer is to pass a final order in accordance with the directions given by the Inspecting Assistant Commissioner. The function of the income-tax Officer to make the final assessment under section 144B(5) of the Act is more in the nature of a ministerial function because he can pass the order only in accordance with the directions of the Inspecting Assistant Commissioner. He cannot vary ordepart from the directions given by the Inspecting Assistant Commissioner. Moreover, the requirements of section 144B of the Act re mandatory. The Income-tax Officer has no option but to follow the same. He cannot make the final order on the basis of the draft order without forwarding the same to the Inspecting Assistant Commissioner along with the objections and without obtaining the directions of the Inspecting Assistant Commissioner. An assessment made by the Income-tax Officer in violation of the provisions of section 144B of the Act would be an assessment without jurisdiction. In the instant case, the admitted position is that on receipt of the draft order of assessment, the assessee did file objections and the Income-tax Officer completed the assessment himself on the basis of the draft order without

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forwarding the draft order and the objections to the Inspecting Assistant Commissioner and obtaining directions from him. Such an order, on the face of it, is beyond the powers of the Income-tax Officer under section 143 read with section 144B of the Act and, hence, without jurisdiction. The Tribunal, in our opinion, was, therefore, justified in its conclusion that the assessment was liable to be annulled. It was right in holding that the assessment order passed by the Income-tax Officer the instant case without reference to the Inspecting Assistant Commissioner had rightly been annulled by the Commissioner of Income-tax (Appeals). In view of the above, we answer the question referred to us accordingly in favour of the assessee and against the Revenue. This reference is disposed of accordingly with no order as to costs." 14. In the case of SPL's Siddharth Ltd. (Supra), before the Hon'ble Delhi High Court, the facts were that notice issued by the A.O u/s. 147 r.w.s 148 of the Act for re-opening the assessment for the A.Y. 2002-03 was set aside by the Tribunal on the ground that the requisite approval of Addl. Commissioner of Income Tax, which is mandatorily required, was not taken. Since 4 years had elapsed from the end of the relevant A.Y, the A.O u/s. 151(1) of the Act was required to take approval of the competent authority. The Hon'ble Delhi High Court after discussing the issue in detail and the case laws cited before it has been pleased to approve the decision of Tribunal. In view of these decisions and the position of law provided u/s. 153D of the Act, we hold that the assessment orders impugned framed in absence of obtaining prior approval of the Joint Commissioner for the A.Ys. under consideration are invalid as null and void and are quashed accordingly. 15. The decisions relied upon by the Ld. D.R are having different facts and issue, hence are not helpful to the revenue. In the case of Guduthur Bros. (Supra) the levy of penalty without affording a hearing to the assessee was questioned before the appellate authority, who set aside that order. The matter ultimately travelled to the Hon'ble Supreme Court and it was held that the ITO was well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurred and to assess the appellants to a penalty, if any. Before the Hon'ble M.P. High Court in the case of SardarilalBhasin ( Supra), the issue was regarding applicability of prescribed limitation u/s. 275 in a penalty order passed after the case is remanded by an appellate authority. The Hon'ble Court was pleased to hold that the limitation prescribed u/s. 275 of the Act is not applicable to the penalty order passed after the case is remanded by an appellate Authority. In the case of Gayathri Textiles (Supra) non-obtaining of prior approval of I.A.C u/s. 271(1)(c) (iii) for direction for payment of penalty was held as procedurally defective. The provisions laid down u/s. 153D of the Act under consideration in the present case before us, are different as here the prior approval of Joint Commissioner is not required merely for direction for payment of the due amount of tax but overall approval of the assessment framed by the I.T.O. Thus, the cited decision is not applicable in the present case. In the case of Sara

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Enterprises (Supra), the issue was as to whether the bar of limitation contained u/s. 275 of the Act would attenuate or curtail the powers of CIT, vested in him u/s. 263 of the said Act. The Hon'ble Madras High Court was pleased to hold that it is not hit by provisions of Sec. 275 of the Act. In PrabhudayalAmichand (Supra), the Hon'ble High Court of Madhya Pradesh with reference to Sec. 271(1)(c) of the Act was pleased to hold that a procedural irregularity not involving the question of jurisdiction can be cured. It is not helpful to the revenue in the present case because in the present case, the A.O was having no jurisdiction to frame assessment order without prior approval of JCIT as necessary requirement to comply with u/s. 153D of the Act. In the case of DamoderdasMurarilal (Supra), the Hon'ble High Court did not approve the view of the Tribunal in holding that in view of Clause (b) of Sec. 251(1) of the Act, the first appellate authority had no power of remand and therefore, the procedural illegality would not be corrected by recourse to remanding the case to the ITO. Here in the present case, as we have already discussed, and also cited the recent decision of Hon'ble jurisdictional Bombay High Court in the case of Mrs. Ratanbai N.K. Dubhash ( Supra) and of Hon'ble Delhi High Court in the case of SPL's Siddhartha Ltd. (Supra) that requirement u/s. 153 D for obtaining approval of JCIT is not procedural only but a mandatory requirement, hence the cited decision by the Ld. D.R is not applicable in the case of present assessee. Under above circumstances, the issue raised regarding the validity of assessment orders in question without obtaining prior approval u/s. 153D of the Act is decided in favour of the assessee. The assessment orders in question are thus quashed as null and void.

Personal hearing to the Assessee before according the approval under section

153D

4.3 From perusal of the above decisions, it is categorically clear

The assessee is not entitled to have personal hearing from JCIT before

granting approval u/s. 153D, as the assessee had already been heard during the

assessment/reassessment proceedings by the Assessing Officer and

Therefore, we are in agreement with the submissions of the ld. DR that the

assessee is not required to be given any hearing for the purpose of granting any

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approval. There is inbuilt purpose for seeking approval from an Officer below the

rank of JCIT.

Whether approval granted by the officer under 153D is administrative order

4.4 Now, we will be examining whether the order passed by the JCIT/Addl. CIT in

the case u/s. 153D was an administrative order or an order having civil, criminal or

penal consequences. The similar provision was examined by the various high courts

pertaining to section 158 BG, and after examining the scheme of Act had came to the

conclusion that the prior approval provided under section 158 BG is administrative

in nature. The Hon’ble Jurisdictional high Court in the matter of Dr. K.P. Singh*2014]

41 taxmann.com 406 (Allahabad) it was held as under ;

“9. It may be mentioned that no opportunity is required while giving the approval by the CIT as per the ratio laid down in the case of Rishabchand Bhansali (supra), where it was held that being an administrative action, assessee is not entitled to opportunity of being heard. Further, in the case of Lakshmi Jewellary (supra), it was held that : "... the Commissioner of Income-tax before making an order approving the order of assessment made by the Assessing Officer in exercise of his powers under Section 158BG(a) need not give a hearing to the assessee". Similarly, in the case of Shree Rama Medical and Surgical Agencies (supra), it was observed that : "... The provisions of Section 158BG do not contemplate that the Commissioner should come face to face with the assessee while according approval for the proposed assessment under Chapter XIB-B of the Act. Apart from the language of the provision, the nature of the functions confided to the Commissioner is inconsistent with the application of the principles of natural justice."

4.5 Similar decision was rendered by the Hon’ble Karnataka High Court in the

matter of RishabhchandBhansail, 136 Taxman 579, where the Karnataka High Court

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had held that the approval granted by the Commissioner u/s. 158BG is an

administrative approval and there is no necessity of giving hearing to the

assessee. For the purpose of that, we reproduce paragraph No. 4 to 4.4 which is to

the following effect :

4.6 The language used in section 153D and section158BG, are similar in nature

and both prohibits passing of the assessment order or reassessment /block

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assessment without the prior approval of the officers mentioned in the said sections.

The language used in these sections are in the mandatory form which prohibits

passing of the order by the assessing officer without prior approval. Meaning

thereby if an order is passed without any approval from the authorities mentioned

in the respective sections then the order shall be bad in law and would be liable to

be declared void being passed in contradiction to these provisions. Moreover these

2 provisions were provided by the legislature for the same purposes i.e to

supervise the functioning of the lower authorities by the higher authorities. The

comparative chart of these 2 provisions it is as under

[Prior approval necessary for section [Authority competent to make the block 153assessment in cases of search or assessment. requisition. 158BG. The order of assessment for the block 153D. No order of assessment or reassessment period shall be passed by an Assessing Officer shall be passed by an Assessing Officer below the not below the rank of an Assistant Commissioner 7[or Deputy Commissioner] or an rank of Joint Commissioner in respect of each Assistant Director 7[or Deputy Director], as the assessment year referred to in clause (b) of 51[sub-section (1) of] section 153A or the case may be : assessment year referred to in clause (b) of sub- Provided that no such order shall be passed section (1) of section 153B, except with the prior without the previous approval of— approval of the Joint Commissioner:] (a) the 8[Principal Commissioner or] 52[Provided that nothing contained in this section Commissioner or 8[Principal Director or] shall apply where the assessment or reassessment Director, as the case may be, in respect of order, as the case may be, is required to be passed search initiated under section 132 or books by the Assessing Officer with the prior approval the 53[Principal of Commissioner or] of account, other documents or any assets Commissioner under sub-section (12) of section requisitioned under section 132A, after the 144BA.] 30th day of June, 1995 but before the 1st day of January, 1997; (b) the 9[Joint] Commissioner or the 9[Joint] Director, as the case may be, in respect of search initiated under section 132 or books

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of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997.]

4.7 in view of the above and also on account of the fact that the issue had already

been examined by the jurisdictional High Court in respect of section 158 BG holding

that the approval granted by the higher authorities were administrative in nature

we do not find any reasons to take a contrary view and accordingly we are also of

the opinion that the approval granted by the Joint Commissioner in the present case

was in the nature of administrative approval.

Whether an administrative order which entail civil consequences/penal consequences/civil liabilities can be challenged before the tribunal if assessment order is premised on such administrative prior approval

4.8 In the above noted paragraph it is categorically mentioned that if the approval

is lacking under section 153D granted by the superior authorities, then the

assessment order is liable to be quashed being passed in violation of section 153D.

However, if the approval is granted by the superior authority without looking into

the material, without application of mind and merely relying upon the

understanding of the assessing officer, then in that eventuality the said approval

ceases to be approval in the eyes of law. In our view the approval as envisaged

under section 153D of the Act is not empty formality and there is a rational and

reason for mandating the approval before passing the assessment order under the

Act. If it was merely a formality and the superior authority is not required to apply

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its mind then there was no reason to incorporate even for approval of the superior

authority and it would not have been worded in the mandatory manner. Because the

language used in the provision is in the form of mandatory direction therefore it

cannot be argued that even if the approval is granted without application of mind

then also it is valid in the eyes of law. In our opinion, civil and penal consequences

would flow from completion of assessment and therefore if the approval is denied

then crystallize right will accrue in favour of the assessee and the assessee will have

a right to assert that the assessment made is bad in law. Similarly if the approval is

granted without application of mind which is discernible from the record then the

said approval loses its character to be approval in the eyes of law.

4.9 We had already mentioned that the assessee is not entitled to any personal

hearing before passing of the approval order by the authority under section 153D of

the Act. But, while holding this in favour of the revenue, we cannot close our eyes

and close the right of the assessee to challenge the approval granted by the superior

authority in violation of the basic fundamental principle enshrined in the income tax

Act as well as in general law whereby, it has been held that the authority while

granting the approval should not grant the approval mechanically without even

looking into the document and without applying its mind.

4.10 The right to challenge the approval, is also based on various principal

including the non-application of mind by the superior authority or granting

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approval by an authority which is not vested with the power to grant the approval

or the approval granted was after the passing of the assessment order in all these

cases and any other cases the direction of the tribunal and also the other courts are

not barred and the tribunal and the other courts can very well examine the approval

granted by the superior authority in the context of our aforesaid observation and

also the other preparation of law laid down by the high courts and the tribunal .

4.11 The jurisdictional High Court in the case of Verma Roadways vs. ACIT, 75 ITD

183 to the following effect :

“Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval pre-supposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas & Co. (supra), the I.T.A.T Madras Bench ‘A’ has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasi-judicial act, particularly because their Act, function, is likely to affect the rights of affected persons.”

4.12 Similarly in the matter of Sahara India (Firm) vs. CIT, 169 taxman 329 and in

paragraph 6 and 21-24 it was held as under :

“A bare perusal of the provisions of sub-section (2A) of the Act would show that the opinion of the Assessing Officer that it is necessary to get the accounts of assessee audited by an Accountant has to be formed only by having regard to: (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the revenue. The word "and" signifies conjunction and not disjunction. In

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other words, the twin conditions of "nature and complexity of the accounts" and "the interests of the revenue" are the prerequisites for exercise of power under section 142(2A) of the Act. Undoubtedly, the object behind enacting the said provision is to assist the Assessing Officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the revenue, recourse to the said provision can be had. The word "complexity" used in section 142(2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 1 (All.), it is a nebulous word. Its dictionary meaning is: "The state or quality of being intricate or complex or that is difficult to understand. However, all that is difficult to understand should not be regarded as complex. What is complex to one may be simple to another. It depends upon one’s level of understanding or comprehension. Sometimes, what appears to be complex on the face of it, may not be really so if one tries to understand it carefully." Thus, before dubbing the accounts to be complex or difficult to understand, there has to be a genuine and honest attempt on the part of the Assessing Officer to understand accounts maintained by the assessee; appreciate the entries made therein and in the event of any doubt, seek explanation from the assessee. But opinion required to be formed by the Assessing Officer for exercise of power under the said provision must be based on objective criteria and not on the basis of subjective satisfaction. There is no gainsaying that recourse to the said provision cannot be had by the Assessing Officer merely to shift his responsibility of scrutinizing the accounts of an assessee and pass on the buck to the special auditor. 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 Assessing Officer, 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 Assessing Officer. The approval must reflect the application of mind to the facts of the case.

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Government. In view of the said amendment, it can be argued that the main plank of the judgment in Rajesh Kumar's case (supra) to the effect that direction under section 142(2A) entails civil consequences because the assessee has to pay sub-stantial fee to the special auditor is knocked off. True it is that the payment of auditor's fee is a major civil consequence, but it cannot be said to be the sole civil or evil consequence flowing from directions under section 142(2A). We are convinced that special audit has an altogether different connotation and implications from the audit under section 44AB. Unlike the compulsory audit under section 44AB, it is not limited to mere production of the books and vouchers before an auditor and verification thereof. It would involve submission of explanation and clarification which may be required by the special auditor on various issues with relevant data, document etc., which, in the normal course, an assessee is required to explain before the Assessing Officer. Therefore, special audit is more or less in the nature of an investigation and in some cases may even turn out to be stigmatic. We are, therefore, of the view that even after the obligation to pay auditor's fees and incidental expenses has been taken over by the Central Government, civil consequences would still ensue on the passing of an order for special audit.

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Maneka Gandhi v. Union of India [1978] (1) SCC 248 and S.L. Kapoor v. Jagmohan AIR 1981 SC 136. As already noted above, the expression "civil consequences" encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. Anything which affects a citizen in his civil life comes under its "wide umbrella. Accordingly, we reject the argument and hold that since an order under section 142(2A) does entail civil consequences, the rule audi alteram partem is required to be observed.

4.13. Further, the coordinate bench in the matter of ShreelekhaDamani 88

Taxmann.com 383 had held as under : “11.9 This decision of the Tribunal was considered by Allahabad Bench of the Tribunal in the case of Verma Roadways v. Asstt. CIT[2000] 75 ITD 183 wherein also the assessee-appellant has challenged the validity of approval to the assessment order accorded by the CIT Kanpur. The Tribunal at Para-47 has held as under:

ITA No. 263/Agr/2017 25

"Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval presupposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas & Co. (supra), the I.T.A.T Madras Bench 'A' has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasi-judicial act, particularly because their Act, function, is likely to affect the rights of affected persons." 11.10 Similarly, u/s. 151 of the Act it is provided that no notice shall be issued u/s. 148 unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied that it is a fit case for the issue of such notice. The sanction under this section was considered by the Tribunal, Mumbai Bench in the case of Shri Amarlal Bajaj v. Asstt. CIT[2013] 37 taxmann.com 7/60 SOT 83 (URO) wherein at para-8, the Tribunal has considered the decision of the Hon'ble High Court of Delhi Bench in the case of United Electrical Co. (P.) Ltd. v. CIT[2002] 125 Taxman 775/258 ITR 317 (Delhi) which read as under: 'Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. v. CIT258 ITR 317 has held that "the proviso to sub-section (1) of section151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in builts safeguards to prevent arbitrary exercise of power by an 7 ITA Nos.534 & 611/M/04 Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. 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 Additional Commissioner before granting the approval'. 12. Coming to the facts of the case in hand in the light of the analytical discussion hereinabove and as mentioned elsewhere, the Addl. Commissioner has showed his inability to analyze the issues of draft order on merit clearly stating that no much time is left, inasmuch as the draft order was placed before him on 31.12.2010 and the approval was granted on the very same day.

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Considering the factual matrix of the approval letter, 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. 13. The ld. Departmental Representative has strongly relied upon the decision of the Tribunal Mumbai Bench in the case of Rafique Abdul Hamid Kokani v. Dy. CIT[2000] 113 Taxman 37 (Mag.), Hon'ble High Court of Karnataka in the case of Rishabchand Bhansali v. Dy. CIT[2004] 136 Taxman 579/267 ITR 577 and Hon'ble High Court of Madras in the case of Sakthivel Bankers v. Asstt. CIT[2002] 124 Taxman 227/255 ITR 144. 13.1 We have carefully perused the decisions placed on record by the ld. DR. We find that all the decisions relied upon by the ld. DR are misplaced inasmuch as all these decisions relate to the issue whether the Joint CIT/CIT has to give an opportunity of being heard to the assessee before granting the approval. This is not the issue before us as the ld. Counsel has never argued that the assessee was not given any opportunity of being heard. These decisions therefore would not do any good to the Revenue.” 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

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

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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

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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.

4.16. We may record that the decisions relied upon by the ld. DR are factually

distinguishable as none of the decisions have examined this aspect of 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 learned departmental representative

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 sustainable in the eyes of law. We had already

answered that such an approval is bad in law and cannot be sustained.

4.17 The last submission made by the learned departmental representative was that

the matter may be sent back to the assessing officer to pass a fresh assessment

order after seeking the approval from the competent authority. In this regard we are

of the opinion that the revenue is not entitled to 2nd inning, in the matter as the non

grant of approval/grant of approval in a mechanical manner takes out the direction

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of the assessing officer to pass the assessment order and the same cannot be

rectified or improved by the revenue in the 2nd round of litigation. Undoubtedly the

assessee is contesting the matter from the date of search before various forms

including before the Hon’ble High court and the assessee cannot be made to run

again for many more years for contesting the litigation. In view of these peculiarity

of the facts we are of the opinion that 2nd inning for rectifying or removing the

defects cannot be granted to the revenue.

4.18. As we had held that the assessment made by the Assessing Officer was bad in

law and the same has been annulled, therefore, the appeals of the Revenue

challenging the orders of the ld. CIT(A) are also liable to be dismissed.

dismissed.

Order pronounced in the open court on 18th Sept., 2019.

Sd/- Sd/-

(Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member

Dated: 18/09/2013 *aks* Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra