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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 4000/Mum/2024 & I.T.A. No. 4003/Mum/2024, are two separate appeals by two different assessee's preferred against two separate orders of the ld. CIT(A) - 50, Mumbai [hereinafter the “ld. CIT(A)"], dated 10/07/2024 pertaining to AY 2017-18 and 2018-19 respectively. आयकर अपीलीय अधिकरण INCOME TAX APPELLATE TRIBUNAL I.T.A. No. 4003/Mum/2024
As the underlying facts in the issues are identical in both these appeals, they were heard together and are disposed off by this common order for the sake of convenience and brevity.
In both the appeals, the assessee has raised the following additional ground of appeal:- "
As against the aforesaid order, the appellant has taken ground of appeal challenging the addition sustained by the Ld. CIT(A) on merits of the case. However, the grounds of appeal challenging the validity of the assessment proceedings, validity of the assessment order, applicability of relevant provisions of the Act and the approval taken u/s 153D of the Act was inadvertently left to be taken while filing the present appeal. The appellant now wishes to take it up by way of additional grounds of appeal before Your Honour.”
Briefly stated the facts of the case are that a search and seizure action u/s 132 of the Act was conducted on 22/03/2018 by DDIT (Inv.), Unit – 6 (1), Mumbai in the case of Aachman Group and other related entities. Both the assessees are related entities to the Aachman Group.
The entire quarrel revolves around the approval taken u/s 153D of the Act.
In another group concern, Navratan Management Private Limited, the Co-ordinate Bench in ITA No. 3586/Mum/2024; AY 2017-18, order dt. 04/04/2025, has considered the approval granted u/s 153D of the Act extensively and held as under:- “23. Having heard the parties and perusing the material available on record and giving thoughtful consideration to the rival claims of the parties on the additional ground no. 3 raised by the Assessee, challenging the approval dated 27.12.2019 accorded by the Ld. Addl. Commissioner, it transpires that the draft assessment order was placed/submitted before the Ld. Addl. Commissioner on dated 27-12-2019 and on the very same day i.e. 27-12-2019, the approval u/s 153D of the Act was granted and eventually on the very same day of granting the approval on 27.12.2019 and the assessment order under consideration was passed by the AO.
It is also a fact that the Addl. Commissioner/Approving Authority, has also granted the same approval u/s 153D of the Act, on the very same day, in 12 other cases. Admittedly, from the approval, it is nowhere appearing that what आयकर अपीलीय अधिकरण INCOME TAX APPELLATE TRIBUNAL I.T.A. No. 4003/Mum/2024 3 evidence/document/ statement/material/ proposed addition(s) etc. were examined by the Approving Authority before granting the approval. It is also not clear, whether the approving authority has applied its mind and on what basis or material the approval was accorded. The aforesaid facts create the suspicion about the validity of the approval and therefore, this court will test the approval, in view of dictum laid down by various courts. M/s. Navratan Management Private Limited
Coming to the first decision by the Hon'ble Orissa High Court in the case of ACIT vs. Serajuddin & Co. (supra), which is paramount for adjudication of the instant issue, the Hon'ble High Court has dealt with almost identical situation/issue, wherein the approving authority has granted the approval in many cases but by a single approval and at the fag end of the time period prescribed for completion of the assessment proceedings. The Hon'ble High Court therefore considering the submissions made by the Assessee and the Revenue Department, ultimately held that there are three or four requirements {including first: the AO should submit the draft order "well in time" } that are mandated for seeking the approval u/s 153D of the Act. For brevity and ready reference, the relevant part of the judgment is reproduced herein below:
As rightly pointed out by learned counsel for the Assessee there is not even a token mention of the draft orders having been perused by the Additional CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like 'see' or 'approved' will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act, it would equally apply to Section 153D of the Act. There are three or four requirements that are mandated therein: (i) the AO should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order. 23. ... 24. ... M/s. Navratan Management Private Limited
For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves".
In Serajuddin & Co. case (supra), the draft assessment orders were produced before the approving authority only on 29.12.2010, with the indication that the cases will be barred by limitation on 31.12.2010 and therefore the approving authority vide consolidated approval dated 30.12.2010 granted the approval. As in the instant case as well, the approval was sought for by the AO only on 27.12.2019 and the last date for completing the Assessment was 31-12-2019. Admittedly 28.12.2019 and 29.12.2019 were Saturday and Sunday and therefore the approving authority had no sufficient time except two working days {27-12-2019 and 30-12-2019) and thus, inference can be drawn that the approving authority in the constrained circumstances and immense pressure, accorded the approval on the very same day of submitting of draft order or within 12 hours itself, in haste manner and without applying its mind due to paucity of reasonable time and therefore approval would entail as invalid and bad in the eyes of law.
The Hon'ble Juri ictional High Court in the case of PCIT vs. Shrilekha Damani in ITA No.668 of 2016 decided on 27.11.2018, has also dealt with the issue, wherein the draft order for approval u/s 153D of the Act was submitted on 31.12.2010 and hence there was no enough time left to analyse the issue of draft order on merit. Thus, the draft order was approved without application of mind and therefore the same was declared as invalid approval in the eyes of law by the Tribunal.
The Hon'ble High Court, thus considering the aforesaid facts and circumstances affirmed the decision of Tribunal by holding that the Addl. 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 M/s. Navratan Management Private Limited exercise accepting the draft order as it is, without any independent application of mind. The Tribunal is therefore justified in coming to the conclusion that the approval was invalid in the eyes of law.
The Hon'ble Juri ictional High Court, also laid down the following dictum: "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".
Coming to the contention of the Ld. D.R. that facts of the aforesaid case, are dissimilar to the facts of the instant case, as in the aforesaid case, the approval was sought only on 31.12.2010, whereas in the instant case approval was sought on 27.12.2019 and the time barring date was 4 days away. This Court observe that the Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax, Jabalpur Vs. S. Goenka Lime and Chemical Ltd. {(2015) 56 taxmann.com 390 (MP)} has also dealt with an identical situation/issue, wherein exercise for according the approval for reopening of the block assessments and issuing the notice u/s 148 of the Act, was shown to have been performed in less than 12 hours of time and in a mechanical manner and therefore such approval was held as invalid in law by आयकर अपीलीय अधिकरण INCOME TAX APPELLATE TRIBUNAL I.T.A. No. 4003/Mum/2024 5 observing that the same goes to indicate that the approving authority did not apply its mind at all, while granting sanction. The satisfaction has to be with objectivity, on objective material.
The said judgement in S. Goenka Lime and Chemical Ltd. case (supra) subsequently got affirmed by the Hon'ble Apex Court in the case of Commissioner of taxmann.com 313/Special Leave Appeal (c) No.11916 of 2015 decided on 08.06.2015. 32. In the instant case as well, the AO has submitted the draft order for approval u/s 153D of the Act on dated 27-12-2019, however, it is a fact that 31.12.2019 was the last date for making the assessment order and M/s. Navratan Management Private Limited leaving aside 28th & 29th December 2019 being Saturday & Sunday, the approving authority was having just two days only i.e. 27th & 30th December 2019. and Chemical Ltd. {supra}, as well.
The Co-ordinate Bench of the Tribunal in the case of Nilesh Shamji Bharani vs. DCIT, Mumbai ITA No.1786/M/2023 & ors. decided on 06.12.2024, has also dealt with the identical situation/issue, wherein approvals in 21 cases were accorded vide composite approval dated 27.12.2019, whereas the last date for completing the assessments was 31.12.2019. Coincidentally, in the instant case as well, the dates i.e. 27-12-2019 and 31-12-2019 are the same. The co-ordinate Bench found that there is no whisper of any seized material sent by the AO along with proposal requesting for approval u/s 153D of the Act. Even the approval does not refer to any seized material/assessment records or any other documents, which could suggest that the approving authority has duly applied his mind before granting approval. The Hon'ble Co-ordinate Bench while relying on the judgment in Serajuddin & Co. case (supra), ultimately held the approval granted on the very date of seeking approval on dated 27.12.2019, is invalid, being not only mechanical but against the ratio laid down by the Hon'ble High Courts.
The Assessing Officer is an independent quasi-judicial officer and therefore he is required to act or to pass the assessment order independently and without being influenced by any interference/indulgence of/by higher Authority. May be the higher authority was involved in process of investigation or enquiry etc. but could not interfered in deciding the issue(s) and/or passing the assessment order by the AO, except granting or rejecting the approval u/s 153D of the Act. The Approving Authority after submitting the draft order and relevant material, is required to assess the proposed assessment order independently in the context of material available on record and to give M/s. Navratan Management Private Limited reasons for granting the approval. Admittedly in this case, approval dated 27.12.2019, does not reflect any such relevant material/findings/ reasoning, which can substantiate the validity of such approval. And therefore the contention of the Ld. DR to the effects "that the procedure normally followed in such cases is that after centralization of the case, periodic discussions are held between the Range Head and the AO, where the appraisal report and the relevant seized material are duly discussed. And therefore there is no need to mention the details of reasoning and documents examined", is untenable. आयकर अपीलीय अधिकरण INCOME TAX APPELLATE TRIBUNAL I.T.A. No. 4003/Mum/2024 6
This Court is also of the considered view that the provisions of section 153D of the Act were introduced and made applicable from 01.06.2007 onwards, in order to avoid arbitrary, unwanted and whimsical assessments or reassessment under clauses (A) and (B) of section 153A of the Act. The CBDT vide circular no.3 of 2008 dated 12.03.2008, also illustrated the origin of the provisions of section 153D of the Act.
From the aforesaid analyzations, it is clear that for making the assessment or reassessment u/s 153 A & B of the Act, the approval/sanction u/s 153D of the Act of the approving authority is mandatory and therefore the approval should not be rubber stamping and mere ritual formality and should not suffer from lack of application of mind but the same has to be reasoned, based on examination of the relevant material available on record and in the approval, there should be some indication of the material examined and the order of approval is not to be mechanically granted but the same should be done, having regard to the material on record. It is the bounden duty of the AO to submit the draft assessment order, well in advance/time, so that approving authority will not face any immense pressure, due to paucity of time. Though the statute has not provided any format for granting an approval but the approval must reflect the basis of the material and reasons, on which the approval is granted.
Coming to the instant case, finally this Court reiterate and order as under: M/s. Navratan Management Private Limited That in the instant case, the approving authority on the very same date of submitting the draft order on 27-12-2019, granted the approval and it is a fact that 28th & 29th of December 2019 were holidays being Saturday and Sunday and 31st December 2019 was the last date for making the assessment order and therefore the approving authority has left with, only two working days i.e. 27th & 30th December 2019. However, the approving authority accorded the approval on the very same day (27- 12-2019) of submitting the draft order and in less than 12 hours, which goes to show that the Approving Authority due to paucity of time could not examine relevant evidence or material etc. and therefore failed to apply his mind and granted the approval in mechanical and haste manner. It is also a fact that the AO on the very same day of getting the approval, completed the assessment proceedings and passed the assessment order dated 27.12.2019, which also creates suspicion. Thus, on the aforesaid analyzations, this Court is of the considered view that in the instant case, the approval dated 27.12.2019 under consideration in not based on examining of any relevant documents and provisions of the Act in the context of the proposed addition and has been accorded in haste and time constrained pressure and therefore lacks application of mind and hence in cumulative effects, the same suffers from perversity and impropriety and consequently is un-sustainable. Thus, the approval, is declared as invalid in the eyes of law, which would entail the assessment order dated 27.12.2019 as invalid being void ab-initio. Consequently, the assessment order is quashed. Finding parity of facts qua the impugned approval, respectfully following the decision of the Co-ordinate Bench the impugned आयकर अपीलीय अधिकरण INCOME TAX APPELLATE TRIBUNAL I.T.A. No. 4003/Mum/2024 7 assessment orders are quashed. Accordingly, the additional ground for both the AYs are allowed.
Since we have quashed the assessment orders, we do not find it necessary to delve into the merits of the case.
In the result, both the appeals of the assessee are allowed. Order pronounced in the Court on 20th May, 2025 at Mumbai. (SANDEEP SINGH KARHAIL) JUDICIAL MEMBER (NARENDRA KUMAR BILLAIYA) ACCOUNTANT MEMBER Mumbai, Dated 20/05/2025 *SC SMPS आदेश की प्रतिलिपि अग्रेषित/