VIBHU PRAKASH BANSAL ,BIJNOR vs. DCIT CENTRAL, MORADABAD

The brief facts of the case are that a search & seizure operation u/s 132 of the Income tax act 1961 was carried out at the residence of Shri Vibhu Prakash Bansal, Shri Vineet Prakash Bansal and therefore business place M/s Ravi Prakash & Sons Saraffa Bazar, Dhampur-246761 on 10.08.2018. During the search incriminating documents and unexplained cash of Rs. 94,29,200/- was found out of which Rs. 80 Lacs was seized and assessee also surrendered Rs. 1 Crore on account of incriminating document. The case was centralized with the ACIT/DCIT (Central Circle), Moradabad vide order u/s 127 dated 26.02.2019 of the Pr. CIT, Moradabad. The assessee filed its original return of income for the assessment year 2015-16 through e-filing on 22/03/2016 declaring total income of Rs, 3,09,740/-. Notice u/s 153C dated 01.01.2021 of the I.T. Act for the A.Y. 2015-16 was issued to the assessee but the assessee did not file its ITR with in stipulated period so notice u/s 142(1) dated 31.01.2021 along with detailed questionnaire was issued to the assessee fixing for 08.02.2021. Again on the fixed date neither anybody attended nor any written submission was filed by the assessee. Later on in response to the notice u/s 153C, the assessee filed its return of income for the assessment year 2015-16 through e-filing on 11.02.2021 declaring total income of Rs. 3,09,740/-. Notice u/s 143(2) of the Income Tax Act, 1961 dated 15.02.2021 was issued and served upon the assessee electronically. Notice u/s 142(1) dated 23.02.2021, 07.04.2021 and 12.04.2021 along with Annexure were issued electronically requiring the assessee to make the compliance of said notices. Assessee has not made any compliance of the said notices but furnished a written submission on 05.04.2021 which is reproduced here as under: "In this reference it is most humble submitted that during the course o f search and seizure proceedings u/s 132 o f the Income tax Act 1961 carried out o f the business and residential o f Mr. Vibhu Prakash Banashal & Mr Vineet Prakash Banashal on 10.8.2018. No incriminating documents were found relating the assessee for the above said assessment year. Hon'ble Supreme Court in the case o f Principal Commissioner o f Income Tax Central IT, New Delhi v/s Meeta Gugutia (2018) 98 taxmann.com 468(SC)] has held that invocation of section 153A/153C to re-open concluded assessments o f the assessments earlier year o f search was not justified in absence o f incriminating material found in the search.

"On the facts and circumstances o f the case and in law, the assessment order passed by the assessing officer is contrary to the provisions o f section 153D o f the Income Tax Act, 1961."

In the approval, the JCIT has merely referred to telephonic discussion and meeting with AO on 18.03.2021 whereas the assessee has filed various replies after that date i.e. 18.03.2021. Accordingly, it is clearly established that the JCIT has not even examined the basic assessment records leave alone the seized materials. - The approval u/s 153D is thus ritualistic, listless and nondescript and such approval cannot be treated as valid approval as envisaged u/s 153D o f the Act.

In the case ofPCIT Versus Sapna Gupta, 2022 (12) TM I887 - ALLAHABAD HIGH COURT it has been held as under: - It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application o f mind then the very purpose o f obtaining approval under Section 153D o f the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D o f the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect o f "each assessee'" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme o f assessment o f Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D o f the Act, requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise o f power. (i) It was noted that the obligations o f the approval o f the Approving Authority serves two purposes: (ii) On the one hand, he has to apply his mind to ensure the interest o f the revenue against any omission or negligence by the Assessing Officer in taxing right income in the hands o f right person and in right assessment year, ii) On the other hand, superior authority is also responsible and duty-bound to do justice with the tax-payer by granting protection against arbitrary or creating baseless tax liability on the assessee. The Tribunal has further noted that the provisions contained in Sections 153A to Section 153D provide for separate notice to be given to assessee for assessment for each year as specified in Section 153A o f the Act; the assessee has to file separate ITR for each year as specified in Section 153A o f the Act; separate assessment orders are to be passed for each year as specified in Section 153A o f the Act. It was observed that this is an important concept mentioned in Section 153A o f the Act, which is peculiar to the scheme o f the said Section. Keeping in view o f this basic fundamental features o f Section 153A, if Section 153D is scrutinized, then, it would become manifest that an important phrase is employed in the text o f Section 153D, which is "each assessment year". The readins o f the provisions in Section 153A and 153D conjointly makes it clear that separate approval o f draft assessment order for each year is to be obtained under Section 153D of the Income Tax Act. In its erudite judgement with the discussion on the legislative intent o f Section 153A to 153D and the meaning o f the "approval" as defined in Black's Law Dictionary as also the decisions o f the Apex Court in the case o f Sahara India vs. CIT and Others (2008) 300 JTR 403 (SC) where the discussion on the requirement o f prior approval o f Chief Commissioner or Commissioner in terms o f provision o f Section 142 (2A) o f the Act had been made, it was noted that the Apex Court has held therein that the requirement o f previous approval o f the Chief Commissioner or Commissioner in terms o f the said Court has held therein that the approval must be granted only on the basis of material available on record and the approval must reflect the application o f mind to the facts o f the case. The above discussion made in the judgement o f Tribunal dated 3.08.2021 in the case o f Navin Jain Vs. Dy. C.I. T. (Supra) has been relied by the Tribunal, in the instant case, to arrive at the conclusion that the mechanical approval under Section 153D o f the Act would vitiate the entire proceedings in the instant case. For the reasoning given in the case o f Navin Jain (Supra), as extracted in the impugned order passed by the Tribunal, as noted above, there cannot be any two opinion to the requirement o f prior approval o f the Joint Commissioner to the draft assessment order prepared by the Assessing Officer, as per the mandate o f Section 153D o f the Income Tax Act. The approval o f draft assessment order being an in-built protection against any arbitrary or unjust exercise o f power by the Assessing Officer, cannot be said to be a mechanical exercise, without application o f independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is an administrative exercise o f power on the part o f the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date o f the passing o f the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval o f superior authority means that it should appraise the material before it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the Assessing Authority before preparing the draft assessment order. It is trite in law that the approval must be granted only on the basis o f material available on record and the approval must reflect the application o f mind to the facts o f the case. The requirement of approval under Section 153D is pre-requisite to pass an order o f assessment or re-assessment. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect o f "each assessment year" referred to in Clause (b) o f subsection (1) o f Section 153A which provides for assessment in case o f search under Section 132. Section 153A(l)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return o f income in respect o f "each assessment year" falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) o f sub-section (1) o f Section 153A. The proviso to Section 153A further provides for assessment o f the total income in respect o f each assessment year falling within such six assessment years (and for the relevant assessment year or years). The careful and conjoint reading o f 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 85 cases, i.e. for 85 assessment years placed before the Approving Authority on 30.12.2017 was approved on same day i.e. 30.12.2017, which not only included the cases o f respondent- assessee but the cases of other groups as well. It is humanly impossible to go through the records o f 85 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 o f power, therefore, cannot be said to be perverse or contrary to the material on record. The aforesaid decision has since been upheld by Hon'ble Apex Court reported at 452ITR 227 SC.

In the case of ACIT Versus M/S. Serajuddin & Co., 2023 (3) TMI 785 - ORISSA HIGH COURT, wherein it has been held as under: - 12. It must be noted at this stage that even prior to the introduction o f Section 153D in the Act, there was a requirement under Section 158BG o f the Act, which was substituted by a Finance Act 14 o f 1997 with retrospective effect from 1st January 1997, o f the AO having to obtain a previous approval o f the JCIT/Additional CIT by submitting a draft assessment order following a search and seizure operation.

As rightly pointed out by learned counsel for the Assessee there is not even a token mention o f the draft orders having been perused by the Additional CIT. The letter simply grants an approval. In other words, even the bare minimum requirement o f the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement o f the law. As explained in the above cases, the mere repeating of the words o f the statute, or mere "rubber stamping" o f the letter seeking sanction by using similar words like 'see' or 'approved' will not satisfy the requirement o f the law. This is where the Technical Manual o f Office Procedure becomes important. Although, it was in the context o f Section 158BG o f the Act, it would equally apply to Section 153D o f the Act. There are three or four requirements that are mandated therein, (i) the AO should submit the draft assessment order "well in time". Here it was submittedjust two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order.

For all o f the aforementioned reasons, the Court finds that the IT AT has correctly set out the legal position while holding that the requirement o f prior approval o f the superior officer before an order o f assessment or reassessment is passed pursuant to a search operation is a mandatory requirement o f Section 153D o f the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding o f the IT AT that in the present cases such approval was granted mechanically without application o f mind by the Additional CIT resulting in vitiating the assessment orders themselves.

In the case of ACIT Versus M/S Janak Raj Gupta & Co., 2024 (2) TM I35 - TAT DELHI it has been held as under: - 12. The legal objection o f transgression o f requirements o f approval under section 153D o f the Act is in controversy. Pursuant to search carried out on 06/11/2008 on M/s. Nimtaya group o f Companies, the assessment proceedings u/s. 153A o f the Act carried out. The Assessing officer forwarded the draft assessment orders for 5 vears (AY 2005-06 to AY 2009-10) in both the cases o f the Assessees for endorsement and approval o f the superior authority at the fag-end o f the limitation period on 30/12/2010 to meet the legal requirement imposed by section 153D o f the Act. The AddI. CIT i.e. the superior authority, in turn, granted a combined and consolidated approval for all 5 assessment vears in promptly on 30/12/2010 itself. For passing such assessment orders, the assessing Officer is governed by S. 153D o f the Act, whereby the Assessing Officer should complete the assessment proceedings and prepare a draft assessment order which need to be placed before the approving authority i.e. Joint/Addl. Commissioner (designated authority giving approval to search assessments u/s. 153D o f the Act). The approving authority is necessarily required to objectively evaluate such draft assessment order with due application o f mind on various issues contained in such order so as to derive his/her conclusive satisfaction that the proposed action o f AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/directions o f the designated authority. Inevitably, this evaluation is to be made on the basis o f material gathered at time o f search as well as obtained in the course o f the assessment proceeding.

As observed, Section 153D o f the Act bestows a supervisory jurisdiction on the designated authority in respect o f search related assessment and thus enjoins a salutary duty o f statutory nature. The designated superior authority is thus expected to confirm to the statutory requirement in letter and spirit. It is evident from the communication o f AO and consequent approval thereon under S. 153D o f the Act, that no assessment record for any assessment years in question or any seized material had travelled to the authority concerned for his objective consideration o f the same qua the draft assessment orders. No reference in this regard is made in the approval note either which may discard such allegation as untrue. No other materials were placed before us by the Revenue to establish otherwise.

Thus, there is nothing else before us to prove the facts differently. A bare glance at the approval so accorded makes it evident that such approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect o f any o f the 5 assessment years. Apparently, the approval has been granted on a dotted line without any availability o f reasonable time which firms up the belief towards non application o f mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf o f assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking / initials etc. could have given a valuable input on the applicability o f mind and could throw some light on objectivity applied owing to total silence on any delineation on these aspects in the approval memo.

Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 30.12.2010 for the first time. It is axiomatic from the plain reading o f approval memo that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 30.12.2010. It is evident from the CBDT Circular No. 3 o f 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments o f search cases should be made with the prior approval o f superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis o f which the Assessing officer is making the assessment and after due application o f mind and on the basis o f seized materials, the superior authority is required to accord approval o f the respective Assessment order. Solemn object o f entrusting the duty o f Approval of assessment in search case is that the Additional CIT, with his experience and maturity o f understanding should at least minimally scrutinize the seized documents and any other material forming the foundation o f Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application o f mind. Thus, the obligation o f granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise o f discretion by the AO. The approval granted under section 153D o f the Act should necessarily reflect due application o f mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line o f judicial precedents which provides guidance in applying the law in this regard.

At the cost of repetition, it may be reiterated that in the instant case, approving authority did not mention anything in the approval memo towards his/ her process o f deriving satisfaction so as to exhibit his/her due application o f mind. We may observe that the above approval letter issued by the Addl. Commissioner merely says that the approval has been granted in view o f the letter o f the A.O. The letter o f approval issued under Section 153D reads as under: 20. Plain reading o f the letter o f approval granted by the Addl. Commissioner, clearly depicts that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis o f letter o f the Ld. A. O. without any application o f mind and the seized materials were not looked at and/or other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the Draft Assessment Orders were approved, solely relying upon the implied undertaking obtained from the Assessing Officers in the form o f draft assessment orders that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination/investigation o f seized material and issues unearthed during search have been stately considered by the AO seeking approval. Thus, the sanctioning authority had in effect abdicated its statutory functions and delightfully relegated its statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration o f merits in proposed additions with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach o f the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be countenanced in Reliance in this regard is also placed on the following case law: - * Ambika Alloys, c/o Kapil Goel Adv., J.B. Rolling Mills Ltd., c/o Kapil Goel Adv., Aditya Industries, c/o Kapil Goel Adv. Versus PCIT-Central Gurgaon 2025 (1) TM I567 -ITAT Delhi * Deepak Gulati Versus ACIT Central Circle-25 New Delhi 2025 (2) TMI 401 -ITAT Delhi * M/s Aashiyana Buildmart Pvt. Ltd. Versus DY. Commissioner o f Income Tax, Central Circle, Noida. 2024 (9) TMI 1671 - ITAT Delhi * M/s. Skylark Hatcheries Pvt. Ltd. Versus DCIT, Central Circle, Karnal 2025 (3) TMI 87 - ITAT Delhi ACIT, Central Circle-3, New Delhi. Versus Splendor Landbase Ltd. and (Vice- Versa) and ACIT, Circle-3, New Delhi. Versus Hridey Vikram Bhatia and (Vice- Versa) 2025 (3) TMI 599 - ITAT Delhi * Millenium Vinimay Pvt. Ltd. Versus ACIT Central Circle - 28 New Delhi 2024 (5) TMI 1494 - ITAT Delhi * Gulshan Kumar Sethi Versus DCIT, Central Circle, Ghaziabad 2024 (11) TM I235-ITATDelhi * Veena Singh Versus ACIT Central Circle-25, DELHI * Shri Santosh Subhashappa Versus The Assistant Commissioner o f Income Tax, Central Circle-2, Aurangabad And (Vice-Versa) 2024 (9) TMI 1663 - ITAT Pune * M/S. Infolance Software Solutions Pvt. Ltd. Versus Assistant Commissioner o f Income Tax, Central Circle-13 2024 (11) TMI 1307 - ITAT Delhi In view o f the above, it is submitted that in the absence o f valid approval u/s 153D, the assessment order passed by the assessing officer are liable to be quashed. ”

Per contra, Ld. CIT(DR) relied upon the orders of the authorities below.

We have carefully considered the submissions and perused the records. We find considerable cogency in the contention of the Ld. AR that in this case the approval u/s. 153D is invalid as it is a consolidated approval for various 19 | P a g e years. However, the approval was required to be given for “each year”. It is also noted that copy of approval of Addl. CIT, Central Range, Lucknow u/s. 153D provided to the assessee is dated 08.06.2021, however, as per the order sheets, at page no. 7 of the small paper book of the assessee shows that the order was sent for approval by AO on 14.6.2021 and approval by Addl./Jt. CIT, CR Lucknow was given on 15.6.2021 by mentioning the only word "Approved”. It is further observed that Addl. CIT, CR, Lucknow while granting the approval u/s. 153D of the Act on 08.06.2021, copy of which is placed at page no. 5 of the Paper Book, has only referred to telephonic discussion and meeting with AO on 18.3.2021 whereas the assessee has filed various replied after that date i.e. 18.3.2021, which establish that Addl. CIT, CR, Lucknow has not even examined the basic assessment records leave alone the seized materials. We further note 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 of Jt/Addl. CIT should reflect application of mind. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the Approving Authority hast to act in a judicious manner by due Application of mind in a manner of a quasi judicial authority. It is settled law that if the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval u/s. 153D of the Act and the mandate of the enactment by the legislature will be defeated. However, Addl. CIT, CR Lucknow without any consideration of merits in proposed additions with reference to the incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Addl. CIT has rendered approval be a mere formality and cannot be countenanced in law. In view of the peculiar facts and circumstances of the case, we are of the considered view that approval by Addl/JCIT is not valid, hence, deserves to be quashed. It is apparently clear that Addl. Commissioner of Income Tax has given approval which is purely mechanical and without application of mind. In such cases, the assessment looses its validity. The case laws refereed by the Ld. Counsel for the assessee are germane and supports the case of the assessee. We further note that Delhi Bench of the Tribunal in the case of M/ACIT vs, Splendor Landbase ltd. and Vice Versa and ACIT vs. Hridey Vikram Bhatia and (vice versa) vide order dated 7.3.2025 reported in 2025 (3) TMI 599 has considered the exactly similar issue and has held as under:- “2025 (3) TMI 599 - ITATDELHI ACIT, CENTRAL CIRCLE-3, NEW DELHI. VERSUS SPLENDOR LANDBASE LTD. AND (VICE-VERSA) AND ACIT, CIRCLE-3, NEW DELHI. VERSUS HRIDEY VIKRAM BHATIA AND (VICE-VERSA)

In view of the aforesaid discussions and also by respectfully following the aforesaid precedents, we hold that the approval u/s. 153D granted by the ld. Addl. Commissioner of Income Tax, Central Range, Lucknow in the instant case is mechanical and without due application of mind. Accordingly, we quash the assessment and allow the assesse’s appeal. Since we have quashed the assessment, the other grounds, have become academic, hence, need not be adjudicated upon;

In the result, the Appeal filed by the Assessee is allowed in the aforesaid manner.