ACIT, NEW DELHI vs. M/S SUBASH DABAS, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘G’: NEW DELHI (Through Video Conferencing) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER

ITA No.2399/DEL/2016 [Assessment Year: 2009-10]

The ACIT, Sh. Subash Dabas, Central Circle-18, Prop. Tirupati Construction Co. Room No.102, ARA Centre, E-2, Plot No.3, Dwarka City Centre, Jhandewalan Extn. Sector-10, Dwarka, New Delhi New Delhi-110017 PAN-AAGPD6947F Revenue Assessee

CO No.222/DEL/2016 (Arising out of ITA No.2399/DEL/2016) [Assessment Year: 2009-10] Sh. Subash Dabas, The ACIT, Prop. Tirupati Construction Co. Central Circle-18, Plot No.3, Dwarka City Centre, Room No.102, ARA Centre, Sector-10, Dwarka, E-2,Jhandewalan Extn. New Delhi-110017 New Delhi PAN-AAGPD6947F Assessee Revenue

Revenue by Sh. H.K. Chaudhary CIT-DR Assessee by Sh. Mahavir Singh, Advocate

Date of Hearing 08.09.2021 Date of Pronouncement 25.11.2021

ORDER PER R.K. PANDA, AM, This appeal filed by the Revenue is directed against the

order dated 22.02.2016 of the Ld. CIT(A)-27, New Delhi, relating

to Assessment Year 2009-10. The assessee has filed Cross

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Objection against the appeal filed by the Revenue. For the sake

of convenience, these were heard together and are being

disposed of by this common order.

company is engaged in the business of carrying out work as civil

contractor under the proprietary concern M/s Tirupati

Construction Co. The assessee is also director in M/s Tirupati

Constwell Pvt. Ltd. The original return of income was filed on

30.09.2009 declaring income of Rs.2,69,85,790/-. A search

operation u/s 132 of the Income Tax Act, 1961 (in short ‘the

Act’) was undertaken at business premises and residential

premises of the assessee on 14.09.2010. In response to notice

u/s 153A of the Act issued on 22.10.2012, the assessee filed a

letter on 21.01.2013 stating that the return filed u/s 139(1) on

30.09.2009 may be treated as return in response to notice u/s

153A of the Act.

Assessing Officer observed from the capital account filed along

with balance sheet that there is an addition to capital amounting

to Rs.20 Lakhs. He, therefore, asked the assessee to provide the

source of addition to the capital. In absence of any proper

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explanation given by the assessee, the Assessing Officer made

addition of Rs.20 Lakhs u/s 69 of the Act.

the Assessing Officer noted that there is an increase in the

amount of unsecured loans of Rs.15,06,50,000/- during the

year, the details of which are as under:-

S. Particulars Amount (Rs.) No. 1 Golden Buildmart Pvt. Ltd. 7,00,000 2 Santosh Singh 20,00,000 3 Surinder Yadav 4,50,000 4 Tirupati Real Tech Pvt. Ltd. 14,75,00,000 Total 15,06,50,000/- 5. On being questioned by the Assessing Officer, the

assessee filed only the photocopies of the confirmations and did

not file the supporting documents such as bank account of the

parties, balance sheet etc. to satisfy the creditworthiness &

genuineness of the transactions. Further, a notice u/s 133(6)

was issued and sent to the above parties but no reply was

received. The Assessing Officer, therefore, invoking the

provisions of section 68 of the Act made addition of

Rs.15,06,50,000/- to the total income of the assessee.

interest shown against M/s Swan Software Ltd. amounting to

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Rs.5,94,317/-, the Assessing Officer, invoking the provisions of

section 40(a)(ia) of the Act, made addition of the same to the

total income of the assessee.

Assessing Officer noted that the assessee is holding more than

10% shares in the company M/s Tirupati Constwell Pvt. Ltd.

The company has granted loans and advances to the assessee to

the tune of Rs.24,25,07,712.31/-. The Assessing Officer asked

the assessee to explain as to why the loans/advances may not

be treated as deemed dividend as per provisions of section

2(22)(e) of the Act. It was explained by the assessee that this

company is doing business with the assessee and in order to

facilitate payments to the parties and to carryout business for

the company, he had transferred the funds to himself and made

the payments to various parties. It was explained that there is

no payment for individual benefit of the Director. Relying on

various decisions, it was submitted that the provisions of

deemed dividend are not applicable for commercial transaction.

However, the Assessing Officer was not satisfied with the

arguments advanced by the assessee and held that the

submissions of the assessee are baseless and only an

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afterthought. He noted that in the books of accounts of M/s

Triupati Constwell Pvt. Ltd. in the ledger of the assessee, the

amount of Rs.24,25,07,712/- is given as advance to the

assessee. Therefore, invoking the provisions of section 2(22)(e) of

the Act, the Assessing Officer made addition of Rs.1,16,57,861/-

, which is the accumulated profit of current year available for

distribution of dividend after tax in the case of the company.

has claimed car expense in the Profit & Loss Account for the

year under consideration and has not claimed any car expenses

as personal expenses. Since, personal use of the cars and

expenditures incurred cannot be ruled out, the Assessing Officer

made addition of Rs.51,750/- being 1/5th depreciation at

Rs.31,255/- and 1/5th of repair and maintenance at Rs.20,495/-

. Thus, the Assessing Officer determined the total income of the

assessee at Rs.19,19,39,700/-.

submissions and filed an application under Rule 46A of the

Income Tax Rules, 1962 (in short ‘the Rules) for admission of

certain additional evidences. The Ld. CIT(A) forwarded the

written submissions and additional evidences to the Assessing

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Officer for his examination and to submit his report. The copy of

the remand report was provided to the assessee who filed a

rejoinder to such remand report.

Officer and the rejoinder of the assessee to such remand report,

the Ld. CIT(A) sustained disallowance to the tune of

Rs.56,57,861/- out of addition of Rs.1,16,57,861/- made by the

Assessing Officer u/s 2(22)(e) of the Act and the disallowance of

Rs.51,750/- on account of motor car expenses. He, however,

deleted the other additions/disallowances.

Assessing Officer is concerned, he deleted the same by observing

as under:-

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Assessing Officer on this issue, I find that the Assessing Officer neither examined the additional evidences nor made any verification or enquiry inspite of the fact that all the details necessary for such examination were made available to the Assessing Officer in the form of additional evidence.

9.1 On analysis of documents and facts in entirety, I find that the Appellant has discharged its preliminary onus by providing confirmation and bank account of the lender. Since the said amount has been received by the appellant through account payee cheques and confirmation and bank account of the lender has been provided by the appellant, the contention of the appellant and genuineness of the transaction cannot be doubted. Therefore, the addition made amounting to Rs. 20,00,000/- is not sustainable and hence the same is liable to be deleted.” 12. So far as the addition of Rs.15,06,50,000/- made by

the Assessing Officer u/s 68 of the Act, he deleted the same by

observing as under:-

“11. I have considered the facts of the case, the assessment order, written submissions of the appellant, remand report of the Assessing Officer, rejoinder of the appellant and also the additional evidences filed under Rule 46A of the Income Tax Rules, 1962 during the course of appellate proceedings. I have also perused the case laws relied upon by appellant in support of its case. The impugned addition was made by the Assessing Officer on the ground that the appellant did not prove the credit worthiness of the creditors and the genuineness of the transactions in the context of section 68 of the IT Act, 1961, in respect of the credits appearing in the names of M/s Golden Buildmart P Ltd, Mr. Santosh Singh, Mr. Surinder Yadav and M/s Tirupati Real Tech P Ltd amounting to Rs. 15,06,50,000/-. In the course of the appeal proceedings, the appellant filed additional evidences in the form of chart giving name, address, PAN and the jurisdiction of the Assessing Officer with whom the said parties were assessed alongwith the confirmation of accounts, balance sheets, etc. All these evidences were sent to the Assessing Officer for his examination/ verification/enquiry and to send a report on the additional evidences filed by the appellant. On perusal of the remand report of the Assessing Officer on the issue of the unsecured loans amounting to Rs. 15,06,50,000/- , I find that the Assessing Officer neither

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examined the additional evidences nor made any verification or enquiry inspite of the fact that all the details necessary for such examination were made available to the Assessing Officer in the form of additional evidence. The documents filed as additional evidences gave complete details of the case. In the absence of any comments by the Assessing Officer on the additional evidence which was crucial to the disposal of the ground of appeal relating to the impugned addition, I proceed to decide the issue of credits appearing in the names of these parties in the books of the appellant amounting to Rs. 15,06,50,000/- on merit. 11.1 In the instant case, during the course of appeal proceedings, the relevant details filed by the appellant mentioned above would constitute an acceptable proof or an acceptable explanation by the appellant that would prima facie satisfy the ingredients of section 68. With necessary information on hand the Assessing Officer was unjustified in making the addition by drawing an adverse inference only on the ground that the parties to whom the notices were issued u/s 133(6) did not respond. Section 133(6) does not refer to any enquiry about any particular person, but pertains to information in relation to “such points or matters” which the Assessing Authority issuing the notices requires. Therefore, the Assessing Officer can make fishing and roving enquiries based on the information available with him. From the remand report, it is seen that the Assessing Officer did not acknowledge the confirmation alongwith the PAN, ITR and bank account of the appellant which are relevant regarding the identity, capacity and genuineness of the unsecured loans available on record. Without considering these documents, simply rejecting the same does not warrant an addition on the ground that the appellant did not submit details to satisfy the provisions laid down u/s 68. These loans were taken through banking channels and the Assessing Officer did not bring any material on record to prove it otherwise. In view of the above evidence available on records, the capacity of the lenders and genuineness of the transactions stands established and there is no merit in invoking the provisions of section 68. 11.2 On this issue, I draw support from the issue laid down by the Hon’ble Delhi High Court in CIT vs. Winstral Petro Chemicals P Ltd in ITA No. 992/2010 dated 12.05.2010 wherein Hon’ble High Court held that where the identity, creditworthiness and genuineness of the transitions stands explained, there is no merit in making any addition in the hands of the appellant.

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11.3 Therefore, the addition made amounting to Rs. 15,06,50,000/- is not sustainable and hence the same is liable to be deleted.” 13. So far as the disallowance of Rs.5,94,317/- made by

the Assessing Officer u/s 40(a)(ia) of the Act is concerned, the

Ld. CIT(A) deleted the same by observing as under:-

“13. I have considered the facts, contents of the assessment order and written submissions of the appellant filed during the course of appellate proceedings and considered them judiciously on merits. I have also perused the copies of documents filed by the appellant in support of its submissions with regard to deduction of TDS and find that the appellant has placed on record sufficient documentary evidence exhibiting the deduction of TDS made by the appellant on said payment of Rs. 5,94,317/-. Therefore considering the complete facts of the case, I hold that the Assessing Officer was not justified in holding that the no TDS deduction has been made by the appellant while making payment of interest to M/s Swan Software Ltd. The Assessing Officer has overlooked the fact that the Appellant has deducted Rs. 1,54,193/- from the total payment of Rs. 7,48,510/-. Therefore, the addition of Rs. 5,94,317/- made by the Assessing Officer is deleted accordingly.” 14. So far as the addition of Rs.1,16,57,861/- made by

the Assessing Officer on account of deemed dividend u/s 2(22)(e)

of the Act is concerned, the Ld. CIT(A) sustained the addition of

Rs.56,57,861/- and deleted the amount of Rs.60 Lakhs being

remuneration of two directors by observing as under:-

“15. I have considered the facts of the case, the assessment order and written submissions of the appellant filed during the course of appellate proceedings. I have also perused the case laws relied upon by the appellant in support of his case. I find that the amount of Rs. 1,16,57,861/- given to the appellant by the payer out of which amount of Rs.56,57,861/- paid to the appellant by the payer company, should only be treated as

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deemed dividend u/s 2(22)(e) as the payment of Rs. 60.00 Lacs was towards the director’s remuneration for services rendered by the appellant to the payer. 15.1 Accordingly, the addition of Rs.56,57,861/- is sustained as addition u/s 2(22)(e) being deemed dividend and the amount of Rs.60,00,000/- which was paid as director’s remuneration, is directed to be deleted. The ground is partly allowed.” 15. So far as, the addition of Rs.51,750/- made by the

Assessing Officer on account of disallowance of expenses for

personal expenses is concerned, the Ld. CIT(A) sustained the

addition by observing as under:-

“17. I have considered the facts, contents of the assessment order and written submissions of the appellant filed during the course of appellate proceedings and considered them judiciously on merits. I find that the appellant has neither maintained any log book during the year under consideration nor it has maintained any details of visits made during the year. In absence of these details, possibility of existence of personal expenses cannot be ruled out. Further, the addition made by the Assessing Officer amounting to Rs. 51,750/- is quite reasonable and on lower side. Therefore, I upheld the addition made by the Ld. Assessing Officer and accordingly addition made is confirmed. The ground is dismissed.”

CIT(A), the Revenue is in appeal by raising the following

grounds:-

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received by the assessee as unsecured loan, without appreciating the fact that the assessee has failed to prove the creditworthiness of the loans givers/providers. 3. That the commissioner of Income Tax (Appeals) has erred in law and on facts in deleting of Rs. 15,06,50,000/-by ignoring the fact that the AO has clearly commented in the Remand report that the perusal of bank statement showed circulatory transactions, typical of entry businesses and loan givers don’t have the capacity to advance such loans. 4. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in deleting Rs. 60,00,000/-(out of Rs. 78,05,000/-) by treating as director’s remuneration) which was added to the income of the assessee as Deemed Dividend u/s 2(22)(e). 5. That the commissioner of Income Tax (Appeals) has erred in law and on facts in accepting the assessee plea of treating Rs. 60,00,000/- as director’s remuneration without realizing the fact that the assessee never took this grounds in assessment proceedings and the department never got the chances/opportunity to rebut or examine the claim of the assessee. 6. That the commissioner of Income Tax (Appeals) has erred in law and on facts of the case in deleting Rs. 20,00,000/-which was added to the income of the assessee as unexplained sources of addition to capital u/s 69 of the IT Act. 7. That the commissioner of Income Tax (Appeals) has erred in law and on facts of the case in deleting Rs. 5,94,317/-which was added to the income of the assessee u/s 40(a) (ia) of the IT Act. 8. That the commissioner of Income Tax (Appeals) has erred in law and on facts of the case in admitting additional evidences under Rule 46A of Income Tax Rules. 9. That the commissioner of Income Tax (Appeals) has erred in law and on facts by neither conducting her own independent and effective inquiry nor giving a direction as per subsection 4 of section 250, Income Tax Act and ignoring Honble Delhi High Court’s judgment in the case

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of “The Commissioner of Income Tax - II Vs M/s Jansampark Advertising and Marketing (P) Ltd.” 10. (a) The order of the Ld. CIT(Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 17. The assessee has filed the Cross Objection by raising

the following grounds:-

grounds in the cross objection:-

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additional ground raised by the assessee in the Cross Objection

is purely legal in nature. Relying on the decisions of the Hon’ble Supreme Court in the case of NTPC Ltd. vs CIT, reported in

(1998) (229 ITR 383) (SC) and Jute Corporation of India Ltd.

vs CIT (1991) 187 ITR 688 (SC), he submitted that the

additional ground being purely legal in nature and all the

material facts are already available on record, therefore, the

additional ground raised by the assessee in the Cross Objection

should be admitted for adjudication.

ground.

that the additional grounds raised by the assessee in the CO are

purely legal in nature and no new facts are required to be

investigated, therefore, the additional grounds are admitted for

adjudication.

assessee has filed an application u/s 6(3) of RTI Act, 2005 on

09.10.2019, wherein, the information was sought regarding the

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letter of the Addl. CIT approving the assessment order vide letter

F. No.153D/CC-09/Jagat group/2012-13/988 dt. 28.03.2013.

Referring to the approval sought by the DCIT vide his letter

dated 28.03.2013, he drew the attention of the Bench to the

letter addressed by the Assessing Officer, wherein, he has

requested the Addl. CIT to grant necessary approval u/s 153D of

the Act, for the cases completed u/s 153A/143(3) of the Act.

Referring to the approval given by the Addl. CIT, he submitted

that the same was granted on the very same day. Referring to

both the letters i.e. letter requesting for granting approval and

the letter giving approval by the Addl. CIT, he submitted that

only draft assessment orders were sent in 35 cases and no

assessment record/appraisal report was sent. He submitted

that Dy. Commissioner, who is the Assessing Officer, has sent

the final orders for approval and not the draft orders, which is

evident from the last lines of the letter seeking approval of the

cases. This shows that the assessment was already completed

and the letter was written for technical approval only. He

submitted that the Addl. CIT has given approval in a mechanical

manner without verification of the assessment records. He

submitted that when approval of the cases was given on the

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same day within few hours of receipt and when there is very

little time left with the Assessing Officer to complete the

assessment, it clearly shows that there is non-application of

mind by the Assessing Officer as well as the Addl. CIT.

following facts also will clearly show that there is complete non-

application of mind by the approving authority. He submitted

that in Assessment Year 2009-10, the Assessing Officer made

addition of Rs.15,18,06,000/- u/s 68 of the Act which included

credit of Rs.14,75,00,000/- in the name of M/s Tirupati

Realtech Pvt. Ltd. He submitted that a bare perusal of the

account of above party will reveal that it included opening

balance of Rs.8 Crores and receipts during the year is only

Rs.6,75,00,000/-. He submitted that the Assessing Officer

himself has added this amount of Rs.8 Crores as unexplained in

the earlier Assessment Year i.e. 2008-09. He submitted that had

the approving authority applied his mind then, the addition of

Rs.8 Crores which was made in earlier Assessment Year 2008-09

and again in Assessment Year 2009-10, would have come to the

conclusion that this is double addition. Referring to the copy of

the remand report, which has been reproduced by the Ld. CIT(A)

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in his order, he submitted that the Assessing Officer himself has

admitted that the assessee has taken loan amounting to Rs.

6,75,00,000/- instead of Rs.14,75,00,000/- and Rs.8 crores

was opening balance. The mistake is apparent from record and

needs to be rectified. The Ld. Counsel for the assessee strongly

submitted that if the Addl. CIT(A) would have gone through the

records, he would have noticed this blunder of double addition.

He submitted that the addition is not of a small addition but of

crores and the name of the creditor was appearing in both the

assessment orders. He submitted that statutory approval has to

be granted carefully especially when the addition was huge and

made in every year. Since, the assessment records were never

sent, therefore, it was not possible on the part of the Addl. CIT to

take a decision as to whether the order was as per fact and law.

is another creditor in the name of Golden Buildmart Pvt. Ltd. for

Rs.7,00,000/- which was the opening balance and there was no

receipt during this year. Further this credit was added u/s 68 in

the immediate preceding year i.e. Assessment Year 2008-09.

Approval u/s 153D for both the years were granted

simultaneously by the Addl. CIT on the same day. This fact also

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show that the approval u/s 153D was granted without

application of mind and in a mechanical manner without

analyzing the basic facts especially when there were only four

creditors which were added u/s 68 of the Act. He accordingly

submitted that the approval so granted is bad in law and

subsequent proceedings are void-ab-initio. For the above

proposition, the ld. Counsel for the assessee relied upon the

following decisions:-

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appeal filed by the ACIT Central Circle 18 Delhi after statutory

approval u/s 253(2) of I.T. Act from PCIT against the order of Ld.

CIT(A) also stated facts about addition u/s 68 of I.T. Act which

are patently wrong and any approval based on such facts is bad

in law. Since, the appeal filed by the Revenue is suffering from

inherent flaws and the approval of PCIT was given on incorrect

facts, therefore, the appeal filed by the Revenue is not

maintainable on this score.

25.1. The Ld. Counsel for assessee submitted that after

admitting in the remand report that the addition u/s 68 is

incorrectly shown at 14,75,00,000/- in place of 6,75,00,000/-

and needs rectification still the Revenue has not corrected the

figure of addition in the grounds raised by them. The Ld. PCIT

has approved the same without going through the assessment

record which leads to the conclusion that no careful thought was

given to verify the facts and grounds of appeal were framed on

the basis of incorrect facts which was admitted in the remand

report by the Assessing Officer. He submitted that the Ld. Addl.

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CIT who granted the approval has not gone through the grounds

of appeal properly and merely signed mechanically by giving

approval without application of mind. Hence, the appeal filed on

this score is not maintainable and approval granted u/s 253(2)

is void-ab-initio.

Counsel for the assessee submitted that the Assessing Officer

has already admitted the major mistakes. So far as the addition

u/s 68 of the Act and disallowance u/s 40(a)(ia) of the Act is

concerned, he submitted that the Ld. CIT(A) after carefully

considering the remand report of the Assessing Officer and

rejoinder of the assessee to such remand report and the

submissions made by the assessee has granted relief which is

fully justified.

the Ld. CIT(A) u/s 2(22)(e) of the Act is concerned, the ld.

Counsel for the assessee submitted that since this is a trade

transaction, the provisions of section 2(22)(e) are not applicable

and needs to be deleted.

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orders of the Assessing Officer. He submitted that the Ld. CIT(A)

should not have admitted the additional evidences since the

assessee did not file all the requisite details before the Assessing

Officer. Further, in view of the decision of the Hon’ble Delhi High

Court in the case of M/s Jansampark Advertising and Marketing

(P) Ltd. reported in 231 Taxman 384 the Ld. CIT(A) should have

conducted further independent effective enquiry or could have

given direction u/s 250(4) of the Act. Since, the Ld. CIT(A) in the

instant case has not done the same, the matter may be restored

to the file of the Assessing Officer for fresh adjudication.

submitted that the ld. CIT(A) had forwarded the copy of the

application filed under Rule 46A along with written submission

and additional evidences to the Assessing Officer for his

comments. He drew the attention of the Bench to the

observation given by the Ld. CIT(A) while admitting the

additional evidences, which reads as under:-

“6. I have gone through the contents of the remand report of the Assessing Officer, rejoinder of the appellant and also the additional evidences filed under Rule 46A of the IT Rules, 1962. On perusal of the same, I find that the additional evidences filed were relevant and vital that

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would go the root of the matter while deciding the issues to which they relate. Therefore, the documents now filed by the appellant as additional evidences are admitted under Rule 46A to decide the issues involved on merit. In this case of CIT vs Virgin Securities Credit P. Ltd. (2011) 332 ITR 396 (Del.) the jurisdictional High Court has held that, evidence which is crucial in disposing of the case can be admitted. Since, the documents filed by the appellant as additional evidences are of the nature that may advance the interest of natural justice, the same need to be admitted and considered. Therefore, the documents filed as additional evidence in the course of appeal proceedings are admitted for consideration and adjudication of the issues raised in the grounds of appeal. Accordingly, I proceed to adjudicate the issued raised in the grounds of appeal in the following paragraphs.” 30. He accordingly submitted that the arguments

advanced by the Ld. DR on this issue is not justified. Since, the

Ld. CIT(A) had given full opportunity to the Assessing Officer and

since these additional evidences go to the root of the matter for

deciding the issue as per law, therefore, the Ld. CIT(A) was fully

justified in admitting the additional evidences.

the sides, perused the orders of the Assessing Officer and the

learned CIT(A) and the paper book filed on behalf of the

assessee. We have also considered the various decisions cited

before us. We find the Assessing Officer in the instant case,

completed the assessment u/s 143(3)/153A of the Act on

28.03.2013 determining the total income of the assessee at

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Rs.19,19,39,700/- as against the returned income of

Rs.2,69,85,790/-. We find the Ld. CIT(A) sustained the addition

of Rs.51,750/- on account of disallowance of expenses for

personal use of motor car and sustained the addition of

Rs.56,57,861/- out of the total addition of Rs.1,16,57,861/-

made by the Assessing Officer u/s 2(22)(e) of the Act and deleted

the rest of the additions, the reasons of which have already been

reproduced in the preceding paragraph.

Revenue, we would first like to decide the additional ground

raised by the assessee in the cross objection challenging the

validity of approval given by the Ld. Addl. CIT in a mechanical

manner and without application of mind, for which the

assessment order according to the ld. Counsel for the assessee is

void-ab-initio. We find some force in the above argument of the

ld. Counsel for the assessee. A perusal of the details received by

the assessee from the Department under RTI vide application

u/s 6(3) of the R.T.I Act, 2005 shows that the Assessing Officer

sought approval of the Addl. CIT on 28.03.2013 in respect of the

following cases, the details of which are placed at page no. 6 of

the paper book and which are as under:-

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28.03.2013 has given approval, the copy of which is placed in

the paper book at page, 5 which is as under:-

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report of the Assessing Officer where the Assessing Officer while

giving his comments about the addition on account of unsecured

loan has given the following report:-

“2. Unsecured loans During the year the assessee has received Rs.15,06,50,000/- as unsecured loan from following parties Sl. Name of Loaner Loan Amount No. 1 M/s Golden Buildmart Pvt. Ltd. Rs.7,00,000/- 2 Sh. Santosh Singh Rs.20,00,000/- 3 Sh. Surinder Yadav Rs.4,50,000/- 4 M/s Tirupati Real Tech Pvt. Ltd. Rs.14,75,00,000/- Total Rs.15,06,50,000/- Since the identity, creditworthiness and genuineness of transaction was not proved same was added back as unexplained credit u/s 68. The additional evidences in respect of unverifiable unsecured loan were examined and report on the same is as under:- Regarding unsecured loan the assessee has submitted that he had already submitted confirmation of accounts of various loaner parties during the course of assessment. It is pertinent o mention here that during the course of assessment confirmation of accounts was submitted as appearing in the books of the assessee and the same were not verifiable during the course of assessment and even in remand proceedings assessee has failed to furnish any additional evidence except a chart showing names, addresses, PAN and AO’s jurisdictions of the loaner parties. The assessee has failed to produce the bank statement of the above mentioned parties. In view of the above decision may be taken on merits of the case. However, from the perusal of assessment record and j confirmation of account it is found that the assessee has taken loan amounting to Rs. 6,75,00,000/- during the year under consideration instead of Rs. 14,75,00,000/- and

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Rs.8,00,00,000/- was opening balance. The mistake is apparent from record and needs to be rectified. Additional evidences may be considered on merits subject to recommendation made regarding the admissibility of additional evidences in of para 2.” 35. Similarly, while giving his report for disallowance u/s

40(a)(ia), the Assessing Officer has given his observation as

under:-

Disallowance u/s 40(a)(ia)-Non deduction of TPS on payment 3. of interest During the assessment proceedings it is found that the assessee has claimed payment of interest of Rs.15,24,125/-. The assessee has been paid interest of Rs.5,94,317/- to M/s Swan Software Ltd., however, the assessee has not deducted tax at source as provided u/s 194A of the Income Tax Act, 1961. Therefore, payment of interest on which TDS was not deduction amounting to Rs. 5,94,317/- was added back to the income of the assessee. On this issue the assessee submission is as under: “total interest payable to M/s Swam Software Ltd. was Rs. 7,48,510/- on which a TDS of Rs. 1,54,193/- has been deducted and duly deposited in Central Govt, account. This is only a matter of accounting presentation, instead of crediting the gross interest first and debiting the TDS amount: the net interest has been directly credited to the party a/ c and the TDS as deducted above, has been shown in the narration. The TDS was deducted and deposited as evident from the bank statement. Additional evidences may be considered on merits subject to recommendation made regarding the admissibility of additional evidences in of para 2. 36. A perusal of the approval sought by the Assessing

Officer shows that he has requested to grant necessary approval

u/s 153D for the cases completed u/s 153A/143(3) of the Act. A

combined perusal of the approval sought by the Assessing

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Officer, the approval given by the Addl. CIT and the copy of

remand report of the Assessing Officer show that there is only

some namesake approval given by the Addl. CIT on the very

same day on which the Assessing Officer sought approval. The

Addl. CIT without verifying the records has given approval in a

mechanical manner. This is more so evident from the fact that

the opening balance of unsecured loans of Rs.8 Crores was

added by the Assessing Officer, which is not a small amount and

the number of unsecured loan creditors are only four and not

very large. We find merit in the argument of the ld. Counsel for

the assessee that the Ld. Addl. CIT received draft assessment

order in 35 cases and approved all cases in one go on the same

day and the Assessing Officer not only passed the orders on the

very same day but also prepared demand notices after

completion of tax calculation and penalty notices etc. which is

not possible within a span of few hours.

to be performed by the Addl. CIT or CIT in granting previous

approval requires an enquiry and judicial approach on the entire

facts, material and evidence. It has been held that where any

act or function requires application of mind and judicial

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discretion or approach by any authority it partakes and assumes

the character and status of judicial or at least quasi judicial act,

particularly because their Act or function is likely to affect the

rights of affected persons. The approving authority 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. However, in the present case, we have no hesitation in

stating that there is complete non-application of mind by the Ld.

Addl. CIT before granting the approval. Had there been

application of mind, he would not have approved the addition of

Rs.8 Crores in respect of M/s Tirupati Real Tech Pvt. Ltd. and

Rs.7 lakhs in respect of M/s Golden Buildmart Pvt. Ltd. which

are opening balances and the very same amounts were added in

the preceding Assessment Year. Even the Assessing Officer in

his remand report has also admitted the mistake that the

addition of an amount of Rs.8 Crores, was the opening balance

and the mistake is apparent from record and needs to be

rectified.

case of Sanjay Duggal vs ACIT vide ITA No.1813/Del/2019,

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order dated 19.01.2021 and batch of 52 appeals, while

adjudicating an identical issue has observed as under:-

“11. We have considered the rival submissions and perused the written submissions filed by the parties and considered the material on record. It is an admitted fact that search and seizure action were carried-out in the cases of the assessees on 29.12.2015. Section 153A have been inserted into the Income Tax Act w.e.f. 01.06.2003. Prior to that there were provisions contained under section 158BC being the special procedure for assessment of search cases. Thus, the provisions of Section 153A to 153D are applicable in the case of assessees. According to Section 153A of the I.T. Act, there should be a search initiated under section 132 of the I.T. Act and panchanama drawn, the A.O. shall have to issue notice to the assessee requiring him to furnish the return of income within the specified time in respect of each assessment year falling within six assessment years. The A.O. shall assess or re-assess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Provided that the A.O. shall assess or re-assess the total income in respect of each assessment year falling within such six assessment years. It is further provided that assessment or re-assessment, if any, relevant to any assessment year falling within the period of six assessment years referred to in this Section pending on the date of initiation of the search under section 132 or making of requisition under section 132A as the case may be, shall abated. Thus, when provisions of Section 153A are applicable in a case of assessee, A.O. shall have to give separate notice of each assessment year and assessee shall have to be directed to file return of income for each year and separate orders shall have to be passed for each assessment year. In Section 153A of the I.T. Act, the A.O. shall have to see whether there are abated or non-abated assessments which was not provided in earlier provisions for block assessments. The Hon’ble Delhi High Court in the case of CIT vs., Kabul Chawla [2016] 380 ITR 573 (Del.) considered the issue of abated and non-abated assessments and with regard to completed assessments held that the same can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. It is also held in the same Judgment that in so far as pending assessments are concerned, the jurisdiction to make the original assessment and the

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assessment under section 153A merges into one. Only one assessment shall have to be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on record by the A.O. Therefore, these were the mandatory provisions contained in Section 153A which shall have to be satisfied by the A.O. before proceeding to frame assessment in the cases of persons searched under section 132 of the I.T. Act, 1961. Further safeguard have been provided for framing the assessments under section 153A that prior approval shall be necessary for assessments in the cases of the search or requisitioned, under section 153D of the I.T. Act. Section 153D of the I.T. Act is reproduced as under : “153D – No Order of assessment or re-assessment 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 Sub-Section (1) of Section 153A or the assessment year referred to in Clause (b) of sub-section (ii) of Section 153B except with the prior approval of the Joint Commissioner.

"Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA.".

11.1. It is an admitted fact that in all the above appeals assessments under section 153A have been framed by ACIT, Central Circle, New Delhi, therefore, prior approval of the JCIT in respect of each assessment year referred to under section 153A or 153B shall have to be obtained. Thus, no order of assessment or re-assessment shall be passed by the A.O. in the present cases in respect of each assessment years under section 153A/153B of the I.T. Act, 1961, except with the prior approval of the Joint Commissioner. Learned Counsel for the Assessee has argued that the approval under section 153D have been granted by the JCIT without going through the seized material, appraisal report and other material on record. Thus, the approval is granted in a most mechanical manner and without application of mind. Therefore, same is invalid, bad in Law and void abinitio and as such all assessments under section 153A got vitiated and as such A.O. was not having jurisdiction to pass the assessment orders under section 153A of the I.T. Act, 1961. 11.2. The meaning of the word “Approval” as defined in Black Law Dictionary is –

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“The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with.” 11.3. The Hon’ble Supreme Court of South Carolina in State vs., Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that “Approval implies knowledge and, the exercise or discretion after knowledge.” 11.4. The Hon’ble Supreme Court in the case of Vijayadevi Naval Kishore Bharatia vs., Land Acquisition Officer [2003] 5 SCC 83 wherein it has been held that : “Whenever there is an administrative approval given by higher authority, higher authority applies its mind to see whether the proposed Award is acceptable to the Government or not ? Such Authority may satisfy itself as to the material relied upon by the Adjudicator, but, the Approving Authority cannot reverse the finding, as he is an Appellate Authority for the purpose of remanding the matter to the Adjudicating Authority as can be done by the Appellate Authority. Further, the Approving Authority also cannot exercise its power of prior approval to give directions to the Adjudicating Authority in what beneficial to accept/ appreciate the material on record in regard to the compensation payable. Otherwise, it would tantamount to blurring the distinction between Approving Authority and Appellate Authority”. 11.5. The Hon’ble Gauhati High Court in the case of Dharampal Satyapal Ltd., vs., Union of India [2019] 366 ELT 253 (Gau.) Manu/GH/07070/2018 in para-28 has held as under : “When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In otherwords, grant of approval and application of mind as to whether such approval is to be granted must co-exist and, therefore, where an Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements.” 11.6. Therefore, in the cases of search, assessment orders whether framed under section 153A or 153C, the Joint Commissioner [Approving Authority] is required to see that whether the additions have been made in the hands of assessee

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are based properly on incriminating material found during the course of search, observations/comments in the appraisal report, the seized documents and further enquiries made by the A.O. during the course of assessment proceedings. Therefore, necessarily at the time of grant of approval of the assessment made by the A.O, the Joint Commissioner is required to verify the above issues, apply his mind that whether they have been properly appreciated by the A.O. while framing the assessment orders or not. The JCIT is also required to verify whether the required procedure have been followed by the A.O. or not at the time of framing of the assessments. Thus, the approval cannot be a mere discretion or formality, but, is mandatory being Quasi Judicial function and it should be based on reasoning. In our view, when the legislature has enacted some provision to be exercised by the higher Revenue Authority enabling the A.O. to pass assessment order or re-assessment order in search cases, then, it is the duty of the JCIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of two folds ; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the A.O. in taxing right income in the hands of right person and in right assessment year and on the other hand, JCIT is also responsible and duty bound to do justice with the tax payer [Assessee] by granting protection against arbitrary or unjust or unsustainable exercise and decision by the A.O. creating baseless tax liability on the assessee and thus, the JCIT has to discharge his duty as per Law. Thus, granting approval under section 153D of the I.T. Act is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the JCIT on the application of mind and this exercise should be discernable from the Orders of the approval under section 153D of the I.T. Act.

11.7. In the following Orders of various Benches of the Tribunal, it is held that while granting approval under section 153D, the JCIT shall have to peruse all the incriminating material and other seized material on record and proper procedure if have been adopted by the A.O. and appraisal report as well. The JCIT shall apply his mind to such material on record before granting his approval, otherwise, it will be invalid and bad in Law. We may refer to such Orders as under. 11.8. Order of ITAT, Delhi Bench, Delhi in the case of M3M India Holdings vs., DCIT [2019] 71 ITR (Trib.) 451 (Del.) in which in paras 11 to 14 it was held as under :

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“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, 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 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 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

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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 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) 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 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.

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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,

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Central Circle-II, Faridabad.

Approval u/s.153D of the I.T. Act, 1961, in the Sub: 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 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 :

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 668 OF 2016

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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.

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval ?

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record.

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 analyze 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." 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 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.

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“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.”

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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.”

11.9. Order of ITAT, Cuttack Bench, Cuttack in the case of Dilip Construction P. Ltd., Bhubaneswar vs., ACIT, Circle-1, Bhubaneswar (supra) in which in paras 20 to 41 held as under :

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"'153D. Prior approval necessary for assessment in cases of search or requisition.--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 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.

Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case maybe, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA." 23. First of all, we observe that we are in agreement with the contention of ld CIT DR based on the judgment of Karnataka High Court in the case of Gopal S Pandit (supra), wherein, it was held that the provisions of section 153D of the Act do not require that any opportunity of hearing to be given to the assessee by the authority who has to approve the draft assessment order passed by the Assessing Authority. Therefore, there is no requirement of allowing opportunity of hearing to the assessee before granting approval under section 153D of the Act. It is also not a contention of the assessee/appellant that they were not provided due opportunities of hearing before granting approval.

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Lordships held that the question of validity of the approval goes to the root of the matter and could have been raised at any time and the Tribunal was justified in holding that there was no application of mind on the part of the authority granting approval and, therefore, approval was invalid. The relevant paras 4 & 5 of this judgment read as follows:

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

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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 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. "

" 25. In the instant case, we find that the supervisory authority has himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement was merely a formality. The said supervisory authority had a duty towards both the assessee as well as the Revenue which was failed to be performed in the instant case.

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respect of opening cash in hand. The assessing authority thereafter has never communicated his findings of the further enquiry to the supervisory authority and not taken the approval of justification of his findings. Thus, in our considered opinion, alleged approval letter dated 27.3.2015 of the Addl. CIT, Range-1, Bhubaneswar does not constitute the approval which is envisaged by the provisions of section 153 of the Act. Thus, following the decision of the Hon'ble Bombay High Court in the case of Akil Gulamali Somji (supra), we hold that the impugned order of assessment is void and bad in law. Therefore, the impugned order of assessment is hereby cancelled...." 28. In view of above requirements of provisions of section 153D of the Act, as vehemently relied upon by ld counsel for the assessee, as noted above, when we logically analyse the procedure adopted by JCIT while granting approval u/s.153D of the Act in the case of both the assessees, then, first of all, we find it necessary and appropriate to reproduce verbatim the approval granted by JCIT for both the assessees. The approval in the case of Dilip Construction Pvt Ltd., available at page 3 of paper book is as under:

" OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX (CENTRAL), AAYAKAR BHAWAN ANNEXE. 4TH FLOOR. RAJASWA VMAR. BHUBANESWAR-751007 F.No .JCIT(Central) /BBSR/153D CC-1 BBSR/2017-18/3138 Date: 23.11.2017 To The Assistant Commissioner of Income Tax, Central Circle-1, Bhubaneswar

Sub: Approval of the Assessment orders u/s 153D of the LT. Act, 1961 in respect to the cases of M/s Dillip Construction P Ltd- Reg Ref: Your letter no. ACIT/CC-l/BBSR/Report/2017-18/7 dated 17.11.2017 seeking approval of draft assessment orders u/s 153D Approval is hereby accorded as per the provisions of section 153D of the I.T. Act tor passing the assessment orders in respect to the following cases.

Sl.No. Name of the PAN A.Y. Total Assessed Section under assessee Income (Rs.) which order

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passed 1. M/s. Dilip 2010-11 18,25,68,000/- u/s.153A/143(3) 2. Construction 2011-12 14,96,41,388/- u/s.153A/143(3) P Ltd., 3. 2012-13 8,21,92,330/- u/s.153A/143(3) AABCD1417E 4. 2013-14 10,07,78,950/- u/s.153A/143(3) 5. 2014-15 9,53,00,070/- u/s.153A/143(3) 6. 2015-16 16,51,32,390/- u/s.153A/143(3) . 2016-17 14,72,53,800/- u/s.143(3)

Sd/- Joint Commissioner of Income Tax (Central), Bhubaneswar

End: Record for the AY 2010-11 to 2016-17

(In Seven Folders)

The approval granted in the case of Shilpa Seema Constructions Pvt Ltd., available at page 1 of paper book is as under:

" OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX (CENTRAL), AAYAKAR BHAWAN ANNEXE. 4TH FLOOR. RAJASWA VMAR. BHUBANESWAR-751007 F.No .JCIT(Central) /BBSR/153D CC-1 BBSR/2017-18/ 3137 Date: 23.11.2017 To The Assistant Commissioner of Income Tax, Central Circle-1, Bhubaneswar.

Sub: Approval of the Assessment orders u/s 153D of the LT. Act, 1961 in respect to the cases of M/s Shilpa Seema Construction P Ltd- Reg Ref: Your letter no. ACIT/CC-l/BBSR/Report/2017-18/8 dated 17.11.2017 seeking approval of draft assessment orders u/s 153D Approval is hereby accorded as per the provisions of section 153D of the I.T. Act for passing the assessment orders in respect to the following cases.

Sl.No. Name of the PAN A.Y. Total Section under Assessee Assessed which order Income (Rs.) passed 1. M/s. Shilpa 2010-11 41,43,750/- u/s.153A/143(3)

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Sd/- Joint Commissioner of Income Tax (Central), Bhubaneswar

End: Record for the AY 2010-11 to 2016-17 (In Seven Folders)

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covering letter supplying copy of the approval dated 23.11.2017, which cannot be treated as an explanation to the approval dated 23.11.2019 curbing the mistake in the procedure adopted by the JCIT while granting approval u/s.153D of the Act. On these subsequent letters/ correspondences, we are of the considered view that for adjudicating legal ground of assessees challenging the validity of approval u/s.153D of the Act dated 23.11.2017, we have to evaluate said approval apparently by considering the totality of facts and circumstances and the manner in which such approval has been granted. This cannot be improvised by way of subsequent exercise or correspondence between the approving authority and the AO or other officers.

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arbitrary or unjust or unsustainable exercise and decision by the AO crating baseless tax liability on the assessee and thus he has to discharge his duties as superior authority. Thus, granting approval u/s.153D of the Act is not merely an official formality but it is a supervisory act which requires proper application of administrative and judicial skill by the authority on the application of mind and this exercise should be discernible from the order of approval u/s.153D of the Act.

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assessee during search and assessment proceedings, the superior authority has to grant the approval u/s.153D of the Act for passing assessment/reassessment orders in the search cases.

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authority should be discernible from the order of approval. No other evidence or documents is required to be considered or appreciated as the approval should be self-speaking that it has been granted by the ld JCIT by following due procedure and due application of mind to the relevant records and orders. The scope and issue agitated by the assessee by way of legal ground in the present case is not that of grant of hearing or representation to the assessee at the time of granting approval but the main grievance and legal objection of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized materials and investigation report and draft assessment/ reassessment orders and this fact should be clearly discernible from the approval order and no other extraneous material/document can be seen in this regard.

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application of mind and, thus, no valid approval has been granted by the ld JCIT before authorising the AO to pass assessment orders u/s.153A of the Act. Accordingly, all assessment orders are vitiated and thus same are void being bad in law. The requirement of mandate of section 153D of the Act has not been satisfied in both the cases and accordingly we hold that the all assessment orders are vitiated and thus same are void being bad in law. We, accordingly set aside the impugned orders of lower authorities and quash the assessment orders by allowing additional ground of the assessees in all appeals filed by both the assessees having identical and similar facts and circumstances.”

11.10. Order of ITAT Agra Bench, Agra in the case of Rajesh Ladhani, Faizabad vs., DCIT, Central Circle, Agra (supra) in which in paras 11 to 25 it was held as under :

"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 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. Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case maybe, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of Section 144BA.”

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with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. 50.3 Applicability-These amendments will take effect from the 1st day of June, 2007."

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heartedly without application of mind and without considering and perusing the material on record. Thus, we are inclined to hold that there has been no application of mind by the ACIT before granting the approval. Consequently, we hold that the assessment orders made u/s 143(3) of the Act r.w.s 153A of the Act in the case of M/s Siddhbhumi Alloys Ltd. for Assessment Year 2006-07 is bad in law and deserve to be annulled, thus, we ordered accordingly. Finally additional ground of appeal raised by the assessee by way of Rule 27 of the IT AT Rules in ITA No. 321/Lkw/2016 for the Assessment Year 2006-07 is allowed."

“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. 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

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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. ”

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“Despite a reminder given on 19th March, 2015 to submit the time barring draft assessment orders for approval under s153D on or before 23rd March, 2015, the draft orders in M/s. Neelachal CarboMetalicks (P) Ltd. Group of cases has been received in this office only on 26th March, 2015 in the afternoon. The draft orders having being submitted only 5 days before final orders are getting barred by limitation, I have no other option but to accord the approval to the same as the approval is statutorily required under s. 153D, even though there is no time left for undersigned to ensure that all the points raised in the appraisal report, the appellate proceedings, audit inspection etc. are duly taken into account, and the enquiries and investigations that are required to be made are actually made before finalization of the assessment orders.

It would have been much better and in the interest of Revenue if you had submitted the draft orders at least one month earlier so as to allow the undersigned sometime to go through and analyse the same vis-a-vis the appraisal report and seized records. It also goes without saying that you never cared even to discuss these cases with the undersigned for guidance and line of investigation to be taken.

However, despite all this, I have gone through the material available on records and some of the observations, in respect of the following cases are given in subsequent paras."

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himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement was merely a formality. The said supervisory authority had a duty towards both the assessee as well as the Revenue which was failed to be performed in the instant case.

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provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in jnind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity, (emphasis supplied) In view of these peculiarity of the facts we are of the opinion that second inning cannot be granted to the revenue. 24. In view of the above, we hold that if the approval is granted by the superior authorities in mechanical manner without application of mind then the very purpose of obtaining approval is defeated. Moreover, where 4 clear days’ time was available with the administrative authority, it was a half-hearted approval and as' such held as no approval in the eyes of law. Accordingly, we have no -hesitation in declaring that the Approval granted by the Additional CIT, Central, Kanpur on 27.03.2015 is no approval in the eyes of law and therefore, the assessment made by the AO based on such an approval is also declared to be null and void.

11.11. Order of ITAT, Agra Bench in the case of Shri Saurabh Agarwal vs., DCIT, Central Circle Agra (supra) in which in paras 4 to 5 it was held as under :

“4. We have heard the rival contentions of the parties and perused the record. 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

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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 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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because a provision of law is couched in a negative language implying mandatory character, the same is not without exceptions. However, the present case deals with the interpretation of a taxing statute. It is well settled that a taxing statute has to strictly construed, therefore, from the language employed in section 153D of the Act, the requirement of obtaining the prior approval of the Joint Commissioner has to be regarded as mandatory in nature.

4.2. Similarly in the matter of Akil Gulamali Somji 20 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.

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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. 153D have been laid down under the heading "prior approval necessary for assessment in cases of search or requisition". This 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

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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 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

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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.

"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 the moment 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 or depart 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 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

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to costs."

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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 Damoderdas Murarilal (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. Dubhah ( 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 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 ;

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“9. It may be mentioned that no opportunity is required while giving the approval by the CIT as per the rat o 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 Rishabhchand Bhansail, 136 Taxman 579, where the Karnataka High Court 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 :

4.1 Chapter XIV-B contains a special procedure for assessment of search cases. Section 158BC prescribes the procedure for block assessment. Clause (c) of section 158BC enables the Assessing Officer, on determination of the undisclosed income of the block period, to pass an order of assessment and determine the tax

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payable by him on the basis of such assessment. Clause (b) requires he Assessing Officer to proceed in the manner laid down in section 158BB and the provisions of sec ion 142 sub-sections (2) and (3) of section 143 and section 144, while determining the undisclosed income of the block period. It is thus evident that the procedure clearly contemplates the Assessing Officer giving a hearing to the assessee before making an assessment order in regard to the block period.

4.2 Clause (k) of section 246A provides for an appeal against the order of assessment for the block period made by the Assessing Officer under clause (c) of section 158BC. Sub-section (2) of section 250 provides for a hearing of the appeal. Thus, the assessee is heard by the Assessing Officer before making the assessment order under section 158BC. If the assessee is aggrieved by the assessment order he had a remedy by way of an appeal under section 246A where also he is heard. There is no need therefore for the Joint Commissioner, to give a hearing before giving previous approval under section 158BG. Firstly, the statute does not provide for such a hearing; secondly, principles of natural justice also do not require such a hearing having regard to the fact that the assessee gets a hearing before the assessment and also a hearing if he files an appeal against the order of assessment; and thirdly the order passed by the Joint Commissioner granting previous approval under the proviso to section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does not decide upon any rights of the assessee. The Joint Commissioner, while examining the matter under the proviso to section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV-B.

4.3. In V.C. Shukla v. State AIR 1980 SC 962, the Supreme Court gave the following example :

“In cases where law requires sanction to be given by the appointing authority before a prosecution can be launched against a Government servant, it has never been suggested that the accused must be heard before sanction is accorded. ."

4.4. Where a statute requires the Executive to take an administrative action after being satisfied or after forming an opinion as to the existence of a state of circumstances, the action is based on the subjective satisfaction. It is well-settled that any administrative actions based either on policy or on subjective assessment, if does

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not prejudicially affect any vested right or interest, need not be preceded by a hearing, unless the statute specifically provides for the same. Therefore, in the absence of any provision for opportunity of hearing in section 158BG, there is no need for the Joint Commissioner to give a hearing to the assessee before granting "previous approval" under section 158BG. The first question is, therefore, answered against the assessee.

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 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 153assessment in cases of search or block assessment. 158BG. The order requisition. 153D. No order of of assessment for the block period assessment or reassessment shall be shall be passed by an Assessing passed by an Assessing Officer Officer not below the rank of an below the rank of Joint Commissioner Assistant Commissioner 7 [or Deputy in respect of each assessment year Commissioner] or an Assistant referred to in clause (b) of 51[sub- Director 7 [or Deputy Director], as the section (1) of] section 153A or the case may be : Provided that no such assessment year referred to in clause order shall be passed without the (b) of subsection (1) of section 153B, previous approval of— (a) the 8 except with the prior approval of the [Principal Commissioner or] Joint Commissioner:] 52[Provided that Commissioner or 8 [Principal Director nothing contained in this section shall or] Director, as the case may be, in apply where the assessment or respect of search initiated under reassessment order, as the case may section 132 or books of account, other be, is required to be passed by the documents or any assets Assessing Officer with the prior requisitioned under section 132A, approval of the 53[Principal after the 30th day of June, 1995 but Commissioner or] Commissioner before the 1st day of January, 1997; under sub-section (12) of (b) the 9 [Joint] Commissioner or the 9 section144BA.] [Joint] Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets

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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 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

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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 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 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

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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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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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respect of the material gathered on the basis of the audit report submitted under sub-section (2A) and not on the validity of the original order directing the special audit. It is well-settled that the principle audi alteram partem can be "excluded only when a statute contemplates a post decisional hearing amounting to a full review of the original order on merit, which, as explained above, is not the case here.

4.13. Further, the coordinate bench in the matter of Shreelekha Damani 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 :

"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

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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 Honble Hígh 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 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'.

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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. Considering the factual matrix of the approved 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.

13.1. 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

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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 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 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 of the assessing

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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.

11.12. The Order of ITAT, Delhi Bench in the case of Uttarakhand Uthan Samiti, Dehradun vs., ITO, Ward 45(5), New Delhi (supra) in which in paras 13 to 19.1 it was held as under : 13. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited by the parties. The only issue to be decided in the impugned appeals are regarding the validity of the assessment order in absence of proper approval necessary for assessment as per the provisions of section 153D. The provisions of section 153D read as under :- “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 sub- section (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. Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA.”

13.1. A perusal of the order sheet entries copy of which is placed at page 37 of the paper book, Volume-I shows that on 30th March, 2015, the AO has mentioned as under:-

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“Draft order submitted for approval u/s 153D. Approval received vide letter No.1158. Order passed u/s 153A. Issue notice of demand.” 14. Similarly, the letter addressed by the DCIT, Central Circle, Dehradun to the Addl.CIT, Central Range, shows that such draft assessment orders were submitted for approval on 30th March, 2015. The relevant scanned copy of the same reads as under:- “ F.No.: DCIT/CC/DDN/DFA/2014-15/ Office of the Dy. Commissioner of Income Tax, Central Circle, Dehradun Dated : 30.03.2015

To The Addl. Commissioner of Income Tax, Central Range, Meerut Sir, Subject: Submission of Draft Assessment Orders in DBIT Group of cases, Dehradun - Approval thereof - regarding Kindly refer to the subject cited above. 2. In this context, it is submitted that in compliance to your directions the Draft Assessment Orders in the following cases u/s 153A of the I T Act 1961 are being submitted for your kind perusal and necessary approval.

Sl.No. Name of the assessee PAN Asstt. Years 1. Sh. Sanjay Bansal ACZPB9725A 2007-08 To 2013-2014 2. Uttarakhand Uthan samiti AAAAU1376N 2007-08 To 2013-2014 3. Wali Gram Udhyog sansthan AAAAW1501B 2007-08 To 2013-2014 ; 4. Shri Krishna Educational Trust AAATS 3624 C 2007-08 To 2013-2014

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It is requested that approval may kindly be accorded to the draft assessment orders. Yours faithfully, Encl: Case records: Sd/- (Poonam Sharma) Dy. Commissioner of income Tax, Central Circle, Dehradun.”

F. No. Addl. CIT/CR/MRT/153D/2014-15/1158 Dated: 30.03.2015

To’ The Dy. Commissioner of Income Tax Central Circle, Dehradun Sub.: Draft Assessment Orders u/s I53A/153C in DBIT Group of cases, Dehradun - Approval u/s 153D of Income Tax Act, 1961 - regarding –

Please refer to your letters F.No. DCIT/CC/DDN/2014- 15/2338 dated 27.3.2015 and F.No. DCIT/CC/DDN/ 2014- 15/2339 dated 30.03.2015 on the above the above mentioned subject.

U/s. 153 A Sl.No. Name of the assessee PAN Asstt. Years

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01 Smt. Seema Bansal AHBPB3579P 2007-08 To 2013-2014 02 Smt Bimal Bansal ADCPB1768R 2007-08 To 2013-2014 03 Drishti Builders AAIFA4643E 2012-13 to 2013-14 04 Sh. Sushil Kumar AQLPK2365D 2007-08 To 2013-2014 05 Sh Sunil Dandriyal ALTPD8489N 2007-08 To 2013-2014 06 Strategic Marketing AADFS8010M 2007-08 To 2013-2014 07 Sh. Ashok Mehta ABNPM2590F 2007-08 To 2013-2014 08 CKSR Animation pvt ltd AAECC0802F 2011-12 to 2013-14 09 Bharti Water Pvt Ltd AACCB5459M 2007-08 To 2013-2014 10 Chand sons education city pvt ltd AAECC0801G 2011-12 to 2013-14 11 Water wealth infra tech india pvt ltd./AABCW0319C 2011-12 to 2013-14 12 Sumer chand and sons AACFS6622C 2007-08 To 2013-2014, 13 Sh. Sanjay Bansal ACZPB9725A 2007-08 To 2013-2014 14 Uttarakhand Uthan samiti AAAAU1376N 2007-08 To 2013-2014 15 Wali Gram Udhyog sansthan AAAAW1501B 2007-08 To 2013-2014 16 Shri Krishna Educational Trust AAATS 3624 C 2007-08 To 2013-2014

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u/s 153C Sl.No. Name of the assessee PAN Asstt. Years

01 Rama Gautam ADQPA8706L 2007-08 To 2013-2014 02 Mamta Dandriyal AYDPD5055F 2007-08 To 2013-2014 03 Gulzar Ahmed AFGPA7405Q 2007-08 To 2013-2014 04 Sohan lal kala AKMPK8071H 2007-08 To 2013-2014 05 Rishi Raj ANOPS3775M 2007-08 To 2013-2014

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Ld.CIT-DR submitted that there is no separate movement register for the purpose of sending for approval of the draft assessment orders by the AO to the JCIT/Addl.CIT, Central Range, Meerut. She submitted that it is customary practice that staff go with file and after discussion/approval get it back. The relevant portion of the reply given by the ld. CIT-DR at para 10 of her written synopsis reads as under:-

“10. It has been submitted by the Assessing Officer that the there is no separate movement register for the purpose of seeking approval of draft order by the Assessing Officer from the JCIT/Addl. CIT, Central Range Meerut. It is customary practice that staff go with file and after discussion/approval get it back.” 17. A perusal of the above clearly shows that the approval was given in a mechanical manner by the Addl.CIT to the draft assessment orders passed by the AO. As mentioned earlier, the AO has submitted the draft assessment orders on 30th March, 2015 as per the order sheet entry which indicated that the AO was very much available in her office at Dehradun on 30th March, 2015. The Office of the Addl.CIT is situated at Meerut which is about 250 Kms from Dehradun. There is no other record to suggest that the files containing the draft orders were, in fact, moved from the office of the AO at Dehradun to the office of the Addl.CIT at Meerut who went through the same and has given approval with certain amendments. It is not possible on the part of the Addl.CIT to go through the orders in about more than 100 cases on the very same day and give approval. Even if such approval has been given, it can be said that the same is nothing but a technical formality without application of mind. Further, as mentioned earlier, there is nothing on record to suggest that the files have in fact moved from Dehradun to Meerut for obtaining approval. Therefore, in our opinion, the mandatory provisions as required u/s 153D has not been complied with.

17.1 We find identical issue had come up before the Delhi Bench of the Tribunal in the case of Rishabh Buildwell Pvt Ltd. (supra). The Tribunal, after considering the various decisions, quashed the assessment orders by observing as under :-

“ 11. We have heard the arguments of both the parties and gone through the record and documents filed before us. For ready reference the entire part of the letter of approval dated 30.12.2016 is reproduced as under:

“Subject: Prior approval u/s 153 D in the cases of Cloud-9 & Sethi Group- regarding.

Please refer to your office letter F. No. DCIT/ CC/ GZB/ S&S/153D 2016- 17/2904, 2908 & 2911 dated 28-12-2016 & 30-12-2016 on the above mentioned subject.

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S. Name of the assessee PAN A.Yrs. No. 1 M/s Risabh Buildcon Pvt. Ltd. AACCR7502F 2009-10 to 2015-16 2 M/s R.G.V. Fininvest Pvt. Ltd. AAACR4383G 2009-10 to 2015-16 3 M/s Aggarwal Capfin Fin. Services P.Ltd. AABCA0925E 2009-10 to 2015- 16 4 M/s Arihant Info Solutions P. Ltd. AADCA5015H 2009-10 to 2015-16 5 M/s Sethi Estate P. Ltd. AABCS7643B 2009-10 to 2015-16 6 Sh. Chander Mohan Sethi AASPS1246A 2009-10 to 2015-16 7 Sh. Gulshan Sethi AASPS1248Q 2009-10 to 2015-16 8 M/s East View Developers P. Ltd. AABCE5324R 2009-10 to 2015-16 9 Sh. Desh Bhushan Jain AAFPJ6467R 2009 10 to 2015-16 10 M/s Max City Developers Pvt. Ltd. AAECM5401A 2009-10 to 2015-16 11 Sh. Sanjeev Jain ACFPJ3817P 2009-10 to 2015-16 12 M/s Sethi Buildwell Pvt. Ltd. AAICS9/42C 2009-10 to 2015-16 13 Sh. Satpal Nagar AAFPN6467M 2009 10 to 2015-16 14 M/s Risabh Buildwell Pvt. Ltd. AACCR9776R 2009-10 to 2015-16 15 Srnt. Magan Jain AIMPJ8085G 2009-10 to 2015-16 16 M/s Angel Buildcon Pvt. Ltd. AAFCAI968H 2009-10 to 2015-16

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order. The initiation of correct penalty provisions of I.T. Act u/s 271 (1)(c)/ 271AAB, as per facts of the ease, must be ensured.

“no order of assessment or reassessment shall be passed by the assessing officer below the rant 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.”

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directed the DCIT to ensure the seized materials and the findings of the appraisal report to be incorporated in the final assessment order. This clearly goes to proves that the approval given by the JCIT is not a final approval as required u/s 153D of the Act but a conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval has to be statutory nature after due application of mind, it should be neither technical nor proforma approval which is envisaged u/s 153D of the Act. Reliance is placed the judgment of Coordinate Bench in the case of M3M India Holdings (ITA 2691/2018). And the judgment of Hon’ble High Court of Bombay in the case of Pr CIT vs. Smt. Shreelekha Damani [ ITA no 668 of 2016 Dated: 27th November, 2018 ] is as under:

“1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015.

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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.

"To, The DCIT(OSD)-1 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)-1/CR-7/Appr/2010-11 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."

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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 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. 8. Accordingly, the Tax Appeal is dismissed.”

“6.4. Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 22 cases was completed in one single day itself i.e., 31-3-2013. Thus, it is apparent that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also

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been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co- ordinate Benches of Mumbai and Allahabad as afore-mentioned and also applying the ratio of the Judgment of the Hon'ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained. Accordingly, assessments in three COs and nineteen appeals of the assessee(s), on identical facts, are liable to be annulled as suffering from the incurable defect of the approval not being proper. Accordingly, we annul the assessment orders in CO Nos, 8 to 10/Jodh/2016 and ITA Nos.325 to 331/Jodh/2016. Thus, all the three Cos and the nineteen appeals of the assessee, as aforesaid are allowed.” (emphasis supplied by us)

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11.13. The Order of ITAT, Delhi G-Bench, Delhi in the case of Rishabh Buildwell P. Ltd., New Delhi vs., DCIT, Central Circle, Ghaziabad (supra) in paras 8 to 16 has held as under :

“8. We have heard the arguments and find that the issue is a purely legal issue pertaining to approval of assessment u/s 153D of the Act and hence being admitted. We rely on the judgment of the Hon'ble Supreme Court in the case of NTPC v. CIT (1998) 229 ITR 383 SC wherein it has explained that the power of the Tribunal in dealing with the appeals under Section 254 of the Act is " expressed in the widest possible terms". It was further observed as under:

"5. .....The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier."

On basis of the ration of the above judgements, it was argued that the additional grounds be admitted on legal and jurisdictional grounds , allow the appeal, and quash the orders passed by Ld AO and Ld CIT(A).

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Subject: Prior approval u/s 153D in the cases of Cloud-9 & Sethi Group- regarding.

Please refer to your office letter F. No. DCIT/ CC/ GZB/ S&S/153D 2016- 17/2904, 2908 & 2911 dated 28-12- 2016 & 30-12-2016 on the above mentioned subject.

S.No. Name of the assessee PAN A.Yrs.

1 M/s Risabh Buildcon Pvt. Ltd. AACCR7502F 2009-10 to 2015-16 2 M/s R.G.V. Fininvest Pvt. Ltd. AAACR4383G 2009-10 to 2015-16 3 M/s Aggarwal Capfin Financial Services P.Ltd. AABCA0925E 2009-10 to 2015-16 4 M/s Arihant Info Solutions P. Ltd AADCA5015H 2009-10 to 2015-16 5 M/s Sethi Estate P. Ltd. AABCS7643B 2009-10 to 2015-16 6 Sh. Chander Mohan Sethi AASPS1246A 2009-10 to 2015-16 7 Sh. Gulshan Sethi AASPS1248Q 2009-10 to 2015-16 8 M/s East View Developers P. Ltd AABCE5324R 2009-10 to 2015-16 9 Sh. Desh Bhushan Jain AAFPJ6467R 2009 10 to 2015-16 10 M/s Max City Developers Pvt. Ltd.AAECM5401A 2009-10 to 2015-16 11 Sh. Sanjeev Jain ACFPJ3817P 2009-10 to 2015-16 12 M/s Sethi Buildwell Pvt. Ltd. AAICS9/42C 2009-10 to 2015-16 13 Sh. Satpal Nagar AAFPN6467M 2009 10 to 2015-16 14 M/s Risabh Buildwell Pvt. Ltd.AACCR9776R 2009-10 to 2015-16 15 Srnt. Magan Jain AAIMPJ8085G 2009-10 to 2015-16 16 M/s Angel Buildcon Pvt. Ltd. AAFCAI968H 2009-10 to 2015-16

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"No order of assessment or reassessment shall be passed by the assessing officer below the rant 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."

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can be said that the approval given by the JCIT is invalid. The Act envisages that the JCIT's approval before passing of the final order. There is no provision to alter, change, modify, adjust, amend or rework the order once the approval has been accorded. The approval to be given is statutory in nature and legally binding. In the instant case, the approving authority has clearly mentioned that the approval given is a technical approval. Moreover, he has directed the DCIT to ensure the seized materials and the findings of the appraisal report to be incorporated in the final assessment order. This clearly goes to proves that the approval given by the JCIT is not a final approval as required u/s 153D of the Act but a conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval has to be statutory nature after due application of mind, it should be neither technical nor proforma approval which is envisaged u/s 153D of the Act. Reliance is placed the judgment of Coordinate Bench in the case of M3M India Holdings (ITA 2691/2018). And the judgment of Hon'ble High Court of Bombay in the case of Pr CIT vs. Smt. Shreelekha Damani [ ITA no 668 of 2016 Dated: 27th November, 2018 ] is as under:

"1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015. 2. Following question was argued before us for our consideration:-

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval ? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 2007-08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with.

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without application of mind and, therefore, not a valid approval in the eye of law. The Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record.

"To, The DCIT(OSD)-1 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)-1/CR-7/Appr/2010-11 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 analyze 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."

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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 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.

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approval under section 153D of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments and their effect, if any. But, in the present case, the Approving Authority i.e., JCIT has granted common approval for all the assessment years in respect of the single assessee. Thus, there is no application of mind on the part of JCIT while granting approval for all the common years instead of granting approval under section 153D for each assessment years separately.

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proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale receipts cannot be the income either in the hands of M/s. JIL or M/s. Alfa India or the Assessees who may be the conduit as argued before us. The A.O. has failed to consider the concept of real income for the purpose of determining the correct tax liability and correct determination of income of the assessees. We rely upon the Judgment of the Hon’ble Supreme Court in the case of Godhra Electricity Co. Ltd., 225 ITR 746 (SC). This fact is also not verified and considered by the JCIT while granting approval under section 153D of the I.T. Act. It may be noted here that entire sale proceeds when cannot be added in the hands of M/s JIL as income which is also not done in the case of M/s. JIL, rightly so, how the same sale proceeds could be added as income in the hands of assessees under section 68 of the I.T. Act is not understandable. Thus, the Approving Authority without application of mind and in a most mechanical and technical manner granted approval under section 153D even without reference to any reason in the Order under section 153D of the I.T. Act. We, even, otherwise failed to understand that in search cases how an approval can be granted to an assessment year which is required to be based only on incriminating material without verification of those material and its reference in the appraisal report. The JCIT even in approval did not mention if assessment record is seen by him.

“It is certified that all issues raised in the appraisal reports have been duly examined with reference to the seized impounded material.”

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approval. The identical is fact in the case of all the request for approval made by the A.O. but factual position noted above established that even assessment records have not been seen by the JCIT. The A.O. sent draft assessment orders for 07 assessment years on 29.12.2017 which were got approved on 30.12.2017 merely on the basis of draft assessment order. The JCIT in the approval Order Dated 30.12.2017 also mentioned that A.O. to ensure all the assessment proceedings are conducted as per procedure and Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O. as per Law and records.

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merits are left with academic discussion only. Accordingly, all the appeals of the Assessees are allowed.

NOTICE U/S. 150 TO M/s. JAGATJIT INDUSTRIES LTD.,

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direction under section 150 of the I.T. Act be issued against the assessee because the A.O. shall have to satisfy the requirements of Section 147 of the I.T. Act on assumption of jurisdiction in their case. He has relied upon several decisions in support of the contention that even if direction is issued under section 150 of the I.T. Act, the A.O. shall have to satisfy the requirement of Section 147 of the I.T. Act which cannot be done in the present case because the case of M/s. JIL is also connected with the search and as such no direction could be issued for reopening of the assessment in the matter.

the facts decided by the Tribunal in the case of Sanjay Duggal

(supra). In that case, at least the assessment folders were sent

whereas in the instant case, as appears from the letter of the

Assessing Officer seeking approval, he has sent only the draft

assessment orders without any assessment records what to say

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about the search material. Therefore, the approval given in the

instant case by the Ld. Addl. CIT is not valid in the eyes of law.

We, therefore, hold that the approval u/s 153D has been granted

without application of mind and is invalid, bad in law and is

liable to be quashed. Since, we have held that the approval u/s

153D is invalid and bad in law, therefore, the Assessing Officer

cannot pass the assessment order u/s 153A of the Act against

the assessee. Therefore, all assessment orders are vitiated for

want of valid approvals u/s 153D of the Act and as such no

addition could be made against the assessee.

passed u/s 153A of the Act. The additional ground raised by the

assessee in the cross objection is allowed.

grounds raised by the Revenue challenging the deletion of

additions on merit become academic in nature and do not

require any adjudication.

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is allowed and the appeal filed by the Revenue is dismissed.

Order was pronounced in the open court on 25/11/2021.

Sd/- Sd/- [SUCHITRA KAMBLE] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 25/11/2021. f{x~{tÜ? f{x~{tÜ? f{x~{tÜ? f{x~{tÜ? Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR

Asst. Registrar, ITAT, New Delhi