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Facts
The appeal challenges an assessment order for AY 2016-17 passed under Sections 153A r.w.s. 143(3) following a search operation. The assessee contended that the assessment was invalid, primarily due to the mechanical approval granted by the Additional CIT under Section 153D without proper application of mind, particularly given that multiple assessment orders were approved on the same day.
Held
The Tribunal found that the mandatory prior approval under Section 153D was granted mechanically, as it was humanly impossible for the Additional CIT to apply an independent mind to approve multiple assessment orders on the same day. Citing High Court decisions, the Tribunal concluded that this mechanical exercise of power vitiated the entire assessment proceedings. Therefore, the impugned assessment order was rendered void ab initio and quashed.
Key Issues
Whether an assessment order passed under Section 153A r.w.s. 143(3) is valid if the mandatory prior approval under Section 153D was granted mechanically without proper application of mind by the approving authority.
Sections Cited
153A, 143(3), 153D, 142(1), 143(2), 124, 68, 234B, 132, 153C
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Income Tax Appellate Tribunal, \r
Before: SHRI VIKAS AWASTHYAND\r DR. MITHA LAL MEENA\r
This appeal is directed by the assessee against the order dated 24.02.2023 passed by the Commissioner of Income-Tax (Appeal)-30, New Delhi [hereinafter referred to as “CIT(A)” and arises out of the assessment order dated 27.12.2019 passed under Sections 153A r.w.s. 143(3) of the Income Tax Act 1961 [hereinafter referred as ‘the Act’]. [hereinafter referred to as “A.O” pertaining to assessment year 2016-17. 2. The grounds of appeal taken by the assessee are as follows:
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT (A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the learned AO under section 153A r.w.s 143(3) is illegal and bad in law as the same has been passed without having valid jurisdiction.
3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the AO under section 153A r.w.s. 143(3) is bad and liable to be quashed as the same has been framed consequent to the search which was initiated under the wrong pretext.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the learned AO under section 153A r.w.s 143(3) is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law.
5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee the AO has erred in passing the order despite the fact that authorization for the search was issued on non-existing entity as well as by the person not authorized to issue such authorization.
6. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the learned AO has erred. in reissuing the notice under section 153A dated 05.09.2019 despite the fact that reassessment proceedings initiated by initial notice issued under section 153A dated. 03.07.2018 was already pending and not concluded by the AO.
(ii) That the learned AO has erred in ignoring the settled position of law that the AO cannot issue the fresh notice unless and until the assessment proceedings earlier initiated by the AO was completed.
7. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the assessment order passed by the AO is illegal and liable to be quashed as the same has been passed violating the provisions of section 124 of the Income Tax Act.
8. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A against the appellant and the assessment framed under section 153A r.w.s. 143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed.
9. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the learned AO has erred, in passing the order despite the fact that the notice issued under section 143(2) is barred by limitation as the same has been issued beyond the statutory time limit prescribed under the Act. 10. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that notice issued 142(1) of the Act is bad in law as the same was issued prior to the issue of notice under section 143(2) of the Act (ii) That the learned CIT(A) has erred, both on facts and in law, in confirming the action of the learned AO in drawing adverse inference against the appellant on the basis of above notice issued under section 142(1) of the Act which itself is invalid.
11. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the learned AO has erred in making the addition in order passed u/s 153A r.w.s 143(3) of the Act, without any incriminating material having been found during the course of search 12. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A against the appellant and the consequent reassessment framed under section 153A r.w.s 143(3) are in violation of mandatory provisions of Section 153D of the Act and as such the same is bad in eyes of law.
(ii) That the CIT(A) has erred in ignoring the contention of the assessee that the purported approval u/s 153D of the Act is illegal, bad in law and also without any application of mind.
On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the assessment order passed by the AO is invalid and bad in law as the same was passed in violation of the circular No. 19/2019 issued by CBDT which mandates that no order shall be passed without there being valid Document Identification Number (DIN) 14. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 60,00,000/- made by the AO holding the same as income from undisclosed sources invoking the provision of section 68 of the Income-tax Act. 15. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 30,000/- made by the AO on account commission. (ii) That the addition has been confirmed ignoring the fact that same has been made by applying an arbitrary rate of 0.50% on the above said addition.
On the facts and circumstances of the case, the learned CIT (A) has erred in making enhancement of Rs. 2,70,00,000/- on account of amount received from M/s PDS International holding the same as unexplained invoking the provision of section 68 of the Act 17. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in making the enhancement of Rs. 2,70,000/- made by the AO on account commission on the above amount of Rs. 2,70,00,000/- received from M/s PDS International. (ii) That the addition has been made by applying an arbitrary rate of 1% on the above addition without there being any justification for the same.
On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in enhancing the income of the assessee without following due procedures as prescribed under the law.
On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition has been made by misinterpreting the statements recorded during the course of search.
20. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the learned AO by indulging in conjecture and surmises only on the basis of presumption and assumption. 21. On the facts and circumstances of the case, the learned CIT (A) has erred in facts and in law in confirming interest charged u/s 234B of the Act. 22. That the appellant craves leave to add, amend or alter any of the grounds of appeal.
3. In ground no.12 the assessee has challenged the impugned order on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A was against the appellant and the consequent assessment framed under section 153A r.w.s. 143(3) are in violation of mandatory provisions of Section 153D of the Act and as such the same is bad in eyes of law and that the purported approval was in violation of provisions u/s 153D of the Act is illegal, bad in law and also without any application of mind.
The Ld. CIT (A) has rejected the contention of the appellant regarding approval u/s 153D of the Act vide para 18.4 as follows: 18. 4. Ground No. 15: In this ground the appellant has challenged the validity of assessment completed under section 153A read with section 143(3) in violation of mandatory provision of section 153D of the Act. Further, the approval granted under section 153D is illegal, bad in law and without application of mind. The appellant in its written submissions has submitted that the approval granted under section 153D by the Addl. CIT is mechanical in nature and without application of mind. In contrast to the submission of the appellant the AO in the Addl. CIT Central Range-8, New Delhi time to time and assessment order being passed with the prior approval of the Addl. CIT under section 153D of the Act on 17.12.2019. 18.1 In this regard, it is noticed that the appellant has not been able to point out any specific defect in the approval granted under section 153D of the Act. Further, on perusal of the provisions of section 153D of the Act, it can be noticed that the Addl. CIT/JCIT need not to grant approval under section 153D reducing his satisfaction under any specific language so as to reflect application of mind. Accordingly, the validity of administrative approval being granted by Addl. CIT, Central Range-8, New Delhi in the present case of the appellant cannot be questioned. Hence, this ground of appeal
is hereby dismissed.
5. The Ld. Counsel for the assessee contended that the Addl. CIT has granted approval in a mechanical manner in violation of mandatory provisions of Section 153D of the Act and the purported approval was in violation of provisions u/s 153D of the Act. Thus, the approval granted was illegal, bad in law as being granted without any application of mind. He has drawn attention of the bench to the sequence of events that draft Assessment order was and the manner, the approval was granted u/s 153D of the Act, in the present case. He pleaded that the assessment order is illegal and bad in law. In support, He placed reliance on the following decisions 1. Delhi High Court in the case of 2024 (6) TMI 29 - DELHI HIGH COURT: [20241 467 ITR 186 (Del) PR. COMMISSIONER OF INCOME TAX-15 VERSUS SHIV KUMAR NAYYAR ITA 285/2024 & CM APPL 28994/2024 Dated: - 15-5-2024.
2023 (7) TMJ 1214 - DELHI HIGH COURT: [2024] 466 ITR 251 (Del) PR. COMMISSIONER OF INCOME TAX (CENTRAL) - 2 VERSUS ANUJ BANSAL ITA 368/2023 Dated: - 13-7-2023.
HIGH COURT OF ALLAHABAD Principal Commissioner of Income-tax v. Subodh Agarwal [2023] 149 taxmann.com 373 (Allahabad).
6. The Ld. CIT (DR) on the other hand stands by the impugned order. However, she failed to furnish any judgement in rebuttal to the contention of the assessee.
We have heard the rival contentions, perused the material on record, impugned order, written submission and case law cited before us. It is admitted fact on record that the approval under section 153D of the act was granted by the Addl. CIT, Central, Range-8, New Delhi vide letter F.No.: Addl.CIT/CR/153D/2019-20/41 and F.No.: Addl.CIT/CR/153D/2019-20/42 17/12/2019 and 16.12.2019 (Hand written date 17/12/2019) respectively on receipt of proposal of draft Assessment Order send by AO, vide letter F.No.: DCIT/CC-32/153D/2019-20/213 and F.No.: DCIT/CC- 32/153D/2019-20/224 dated 16.12.2019 and 17/12/2019 in respect of 8 and 10 cases respectively inclusive the present case of the assessee in both the proposals sent for approval. The aforesaid copy of letters of proposal of draft Assessment Orders sent by AO and approval granted by the Addl. CIT, Central, Range-8, New Delhi are placed on record for ready reference.
From the above it is evident that the assessment order has been passed on 17.12.2019, in the present case where, the approval was granted on the same day in mechanical manner, vide letter number F.No.: Addl.CIT/CR/153D/2019-20/41 dated 17.12.2019. It is admitted fact on record that though the proposal for approval of draft Assessment Order vide AO’s Office vide letter F.No.: DCIT/CC-32/153D/2019-20/213 and F.No.: DCIT/CC-32/153D/2019-20/224 dated 16.12.2019 and 17/12/2019 but it both the letters were received in the office of the Addl CIT on 17.12.2019 as per office stamp receipt endorsement of the Office of the Addl CIT.
It is seen from the approval Letter Number F.No.: Addl.CIT/CR/153D/2019-20/41 dated 17.12.2019 of the Addl. CIT that there 10 assessment orders, received in office of Addl. Commissioner of Income Tax, Central Range-8, New Delhi on 17.12.2019. The AR argued that the assessments were framed on the basis of large volume of papers seized during the course of search and written papers of submissions made by the assessee during assessment proceedings. He argued that it is humanly not possible to pass assessment orders in the present case where the draft proposal was sent on 17.12.2019 and approval u/s 153D was granted on 17.12.2019 itself. It is further argued that the Addl. CIT has hand written in office letter the date 17/12/2019 per se reveals the application of mind by the Addl CIT approving authority in granting approval u/s 153 D of the Act on the same date and that application of mind by the AO who send two proposal of draft assessment orders of 10 cases respectively including assessee’s case on the date of passing the assessment order itself.
In our view, it is humanly impossible to apply independent mind to satisfy the competent authority perse se to grant the approval u/s 153D of the Act on same date i.e. 17.12.2019 to complete the entire exercise of sending and receipt, of draft proposal, dispatch and deliver in the office of Competent authority and vice versa who had to go through the records and assessment orders of 10 assessees in one day. Meaning thereby, the
The Hon’ble High Court in the case of Pr. CIT and Anr. v. Subodh Agarwal dated 12.12.2022 [2022] 115 CCH 0528 All HC, while adjudicating on the issue of Approval u/s 153D has observed as under:
“It was submitted by the assessee that in search cases, the Assessing Officer before passing the assessment order, framed under Section 153A, 153C and 143(3), is required to take approval from the Joint C.I.T. under Section 153D of the Act, if the Assessing Officer is below the rank of Joint C.I.T. For the purpose of approval, the Approving Authority is required to see all search material including incriminating material, seized documents, appraisal reports, enquiries made by the investigation wing and various enquiries made by the Assessing Officer during the assessment proceedings and the reply submitted by the assessee, and after due application of mind and ascertaining that the Assessing Officer has appreciated the search material and other evidences in proper perspective, has to give approval to the draft assessment order and only on such approval, the Assessing Officer can pass an assessment order. In the instant case, the Assessing Officer prepared the draft assessment order on 31.12.2017 for assessment year 2015-16. The approval of the draft assessment order under Section 153D was, however, given on 31.12.2017 itself and the final assessment order was passed on the same day i.e. on 31.12.2017 by the Assessing Officer. The attention of the Court is invited to the copy of the approval letter dated 31.12.2017 extracted in the order of the Tribunal wherein the name of the assessee for the assessment year 2015-16 appears at Sr. No.
It is demonstrated by the learned counsel for the assessee that as per this approval letter, the Additional C.I.T. granted approval of draft assessment orders under Section 153D in 38 cases which also included the case of the present assessee. The Tribunal having taken note of the said undisputed facts, came to the conclusion that it was humanly impossible for the Approving Authority to peruse the material based on which, the draft assessment order was passed. It was, thus, concluded that the Approving Authority granted approval under Section 153D of the Act in a mechanical manner which vitiated the entire proceedings. Reliance is placed on an earlier decision of the Tribunal in Navin Jain & Others Vs. Deputy C.I.T., Central Circle-ll, Kanpur in to 641/Lkw/2019 passed on 03.08.2021. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of “each assessment year” referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of “each assessment year” falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years).
The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to “each assessment year” is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A.
In the instant case, the draft assessment order in 38 cases, i.e. for 38 assessment years placed before the Approving Authority on 31.12.2017 was approved on same day i.e. 31.12.2017, which not only included the cases of respondent- assessee but the cases of other groups as well. It is humanly impossible to go through the records of 38 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record.
As the facts are admitted before us, the questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeal being in the nature of second appeal. No substantial question of law arises for consideration before us.”
12. Recently Hon’ble DELHI HIGH COURT 2024 (6) TMI 29: [20241 467 ITR 186 (Del) in case of PR. COMMISSIONER OF INCOME TAX-15 VERSUS SHIV KUMAR NAYYAR ITA 285/2024 & CM APPL 28994/2024 dated 15-5-2024 has observed that Approval u/s 153D of the Act has to be granted for "each assessment year" referred to in clause (b) Of subsection (1) of Section 153A of the Act. It is beneficial to refer to the decision of the High Court of Judicature at Allahabad in the case of PCIT v. Sapna Gupta R which captures with precision the scope of the concerned provision and more significantly, the import of the phrase-"each assessment year used in the language of Section 153D of the Act. It is further observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took the view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that the authority granting approval has to apply its mind for "each assessment year for "each assessee separately.
13. Thus, the Grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind. In our considered view, a mere endorsement to a list of cases of Assessment Orders in multiple cases by putting signatures with "rubber stamping" on the letter without application of mind will not satisfy the requirement of the law for approval or sanction u/s 153D of the Act. Therefore, we hold that in the present case, the prior approval of the Additional CIT required before passing of the Assessment Orders in pursuant to a search operation being a mandatory requirement of section 153D of the Act, was not granted as per law because such approval is not meant to be given in mechanical manner without application of mind by the Additional CIT which resulted in vitiating the assessment orders per se.
In the above view, we hold that mandatory approval was being granted mechanically without application of mind by Additional Commissioner of Income Tax, Central- Range-8, New Delhi, and therefore, this mechanical exercise of power has vitiated entire assessment proceedings and consequently, the said assessment order is rendered void
Since the assessee has succeeded on the legal issue and therefore, the other issues raised on merits do not require adjudication.
Order pronounced on 21.03.2025 in accordance with the Rule 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.