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DY. COMMISSIONER OF INCOME TAX, CC-1, , LUDHIANA vs M/S AMAN FEED INDUSTRIES, KHANNA | BharatTax

DY. COMMISSIONER OF INCOME TAX, CC-1, , LUDHIANA vs. M/S AMAN FEED INDUSTRIES, KHANNA

ITA 116/CHANDI/2025Status: DisposedITAT Chandigarh16 October 2025AY 2017-18Bench: SHRI RAJPAL YADAV (Vice President), SHRI KRINWANT SAHAY (Accountant Member)1 pages

AI SummaryAllowed

Facts

The appeals involved common issues concerning assessment orders passed under Section 153A of the Income Tax Act, challenged due to alleged lack of application of mind by the approving authority (Additional CIT) while granting approval under Section 153D. The assessee contended that the approval was mechanical and ritualistic.

Held

The Tribunal held that the approval granted under Section 153D of the Income Tax Act requires a mechanical exercise without application of mind, which violates the statutory requirement. It further held that the assessment orders were vitiated due to the lack of valid approval, quashing the same.

Key Issues

Whether the assessment orders passed under Section 153A are sustainable when the mandatory prior approval under Section 153D was granted mechanically without due application of mind by the approving authority.

Sections Cited

250, 145(3), 68, 153A, 153D, 143(3), 115BBE, 69A, 69, 139(1), 143(2), 142(1), 132(1), 132(4), 151(2), 147, 148, 153B(2)(b), 158BG, 271(1)(c), 292B, 142(2A), 193, 228, 196, 195, 136, 142(2A), 151(1), 143(3), 144, 145(3), 153B, 37B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH

Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY

For Appellant: Shri Ashwani Kumar, Shri Kulbhushan Goyal &

For Respondent: Shri Manav Bansal, CIT DR

Hearing: 28.07.2025Pronounced: 16.10.2025

PHYSICAL HEARING O R D E R PER RAJ PAL YADAV, VP

The separate orders of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 29.11.2024 passed to 1255/CHD/2024 & 181,457/CHD/2025 2 in assessment years 2015-16, 2017-18 to 2019-20 are being challenged by way of cross-appeals, except in assessment year 2015-16, where assessee alone is in appeal.

Since common issues are involved, rather we can say that impugned orders are verbatim except difference of quantum of amount in each year, therefore, we deem it appropriate to dispose of all these appeals by this common order. For the facility of reference, we take note of following detail in a tabular form which will exhibit appeal number, assessment year, appellant, date of CIT’s order and date of AO’s order in a more scientific manner, which reads as under :

Sr.No. ITA No. Asstt.Year Appellant Date of Date of AO’s CIT’s order order

1. 1252/CHD/2024 2015-16 Assessee 29.11.2024 08.09.2021 u/s 153A 2. 1253/CHD/2024 2017-18 Assessee -do- -do- 3. 116/CHD/2025 2017-18 Department -do- -do- 4. 1254/CHD/2024 2018-19 Assessee -do- -do- 5. 181/CHD/2025 2018-19 Department -do- -do- 6. 1255/CHD/2024 2019-20 Assessee -do- -do- 7. 457/CHD/2025 2019-20 Department -do- -do- 3. The assessee has taken seven grounds of appeal

in each year, whereas Revenue has taken five, six and seven grounds of appeal in assessment year 2017-18, 2018-29 and 2019-20 respectively. We take note of these grounds raised by the parties, which read as under : to 1255/CHD/2024 & 181,457/CHD/2025 3 : (Assessee's Appeal)

: Revenue’s Appeal 1. Whether upon facts and circumstances of the case, the Ld. C1T (A) was justified in treating the surrendered income of Rs. 1,00,00,000/- on account of excess stock as a normal business income instead of unexplained investment under the deeming provisions of 69 of the I. T. Act, 196.1 and to be taxed as per provisions of section 1 15BBE of the I. T. Act, 1961 by the AO as the assessee has failed to substantiate its claim with evidence, ignoring the facts involved in this case? 2. Whether upon facts and circumstances of the case, the Ld. CIT (A) was justified to restrict the addition from Rs. 1,96,50,000/- to Rs. 1 1.00.000. on account of unexplained investment in property by the AO as the assessee has failed to substantiate its claim with evidence, ignoring the facts involved in this case? 3. Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified to reduce the addition of Rs.30,01,168/- to Rs.2 1,67,640/- by applying GP rate of 13.36% as against .14% applied by AO. without any basis ? 4. Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in holding that no separate addition on account of undisclosed GP on account of undisclosed sales is required to be made as addition on account of excess stock has been confirmed and to 1255/CHD/2024 & 181,457/CHD/2025 8 ignoring the fact that no evidence has been furnished by the assessee to show that profit: from undisclosed sales is invested in stock? 5. Whether upon facts and circumstances of the case, the CIT(A) was justified in reducing enhancement of GP rate on account of on the disclosed turnover from 1.26% to 0.63% without analysis and by ignoring the complete facts of the case? 6. Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified to delete the addition made by the A.O. on account of unexplained investment, for the construction of Godown, without considering the facts of the case? 7. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.”

to 1255/CHD/2024 & 181,457/CHD/2025 21 (iv) There was no requirement for any hearing to be given to the Assessee by the supervisory officer prior to giving approval although Clause-9 of the Manual of Office Procedure stipulates it. This, therefore, cannot be said to be mandatory. Reliance was placed on the decisions of the Karnataka High Court in Gopal S. Pandit v. CIT [20181 96 taxmann.com 233/257 Taxman 300 and Rishabchand Bhansali v. Dy. CIT 120041 136 Taxman 579/267 ITR 577 and of the Madras High Court in Sakthivel Bankers v. Asstt. CIT [20021 124 Taxman 227/255 ITR 144 which were all in the context of Section 158 BG of the Act. (v) The mere irregularity in granting approval in the context of Section 158BG of the Act was held not to be fatal to the assessment order. Reliance was placed on the orders of the Kolkata ITAT in Shaw Wallace & Co. Ltd. v. Asstt. CIT [ 19991 68 ITD 148 and of the Delhi ITAT in Kailash Moudgil v. Dy. CIT [20001 72 ITD 97 (SB). Reliance was also placed on the decision of the Karnataka High Court in Gayathh Textiles v. CIT [2000] 111 Taxman 123 where it was held that for the purpose of section 271(l)(c) of the Act, the failure to obtain prior permission from the IAC for imposing penalty was only a procedural error and not fatal to the order of penalty. (vi) Since the entire documents were already available to the Additional CIT in the file sent for approval, there was no need for exchange of the said documents prior to the grant of formal approval under section 153D of the Act. (vii) Lastly, it was submitted that even if there had been a violation of the principles of natural justice, unless prejudice were shown by the Assessee, no interference with the assessment orders was warranted. Reliance was placed on the decisions in Dharampal Satyapal Ltd. v. Dy. CCE [2015]_58 taxmann.com 90/51 GST 197 (SO/8 SCC 519: Managing Director, ECIL v. B. Karunakar [1993] 4 SCC 727; Haryana Financial Corporation v. Kailash Chandra Ahuja [2008] 9 SCC 31; State Bank o f Patiala v. S.K. Sharma [1996] 3 SCC 364; P.D. Agrawal v. State Bank o f India [2006] 8 SCC 776 and State o f U.P. v. Sudhir Kumar Singh [Civil Appeal No. 3498 of 2020, dated 16-10-2020] It was then submitted that where initiation was valid but completion was not correct, the order may not be invalid but only irregular because the intervening irregularity is a curable one. Reliance was placed on the decision of the Kerala High Court in (CGG) Panicker v. CIT [19991 237 ITR 443 and CIT v. N. Krishnan [1999] 235 ITR 386. It was submitted that mere technicality should not defeat justice.”

17.

It is therefore not correct on the part of the Revenue to contend that the approval itself is not justiciable. Where the approval is granted mechanically, it would vitiate the assessment order itself. In Sahara India (Firm) (supra), the Supreme Court explained as under: "8. 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." to 1255/CHD/2024 & 181,457/CHD/2025 23 18. The contention of the Revenue in those cases that the non- compliance of the said requirement does not entail civil consequences was negatived. Reiterating the view expressed in Rajesh Kumar (supra), the Court in Sahara India (Firm) (supra) held as under: "29. In Rajesh Kumar (2007) 2 SCC 181 it has been held that in view of section 136 of the Act, proceedings before an Assessing Officer are deemed to be judicial proceedings. Section 136 of the Act, stipulates that any proceeding before an Income-tax Authority shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of Indian Penal Code, 1860 and also for the purpose of section 196 of I.P.C. and every Income-tax Authority is a court for the purpose of section 195 of Code of Criminal Procedure, 1973. Though having regard to the language of the provision, we have some reservations on the said view expressed in Rajesh Kumar's case (supra), but having held that when civil consequences ensue, no distinction between quasi judicial and administrative order survives, we deem it unnecessary to dilate on the scope of section 136 of the Act. It is the civil consequence which obliterates the distinction between quasi judicial and administrative function. Moreover, with the growth of the administrative law, the old distinction between a judicial act and an administrative act has withered away. Therefore, it hardly needs reiteration that even a purely administrative order which entails civil consequences, must be consistent with the rules of natural justice. (Also see: Maneka Gandhi v. Union of India [1978] 1 SCC 248 and S.L. Kapoor v. Jagmohan [1980] 4 SCC 379).

23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure. to 1255/CHD/2024 & 181,457/CHD/2025 26 24. The above manual is meant as a guideline to the AOs. Since it was issued by the CBDT, the powers for issuing such guidelines can be traced to Section 119 of the Act. It has been held in a series of judgments that the instructions under section 119 of the Act are certainly binding on the Department. In Commissioner of Customs v. Indian Oil Corporation Ltd. 2004 taxmann.com 1061 (SCV2004 (165) E.L.T. 257 (SC) the Supreme Court observed as under: "Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Central Board of Central Excise, Vadodara v. Dhiren Chemicals Industries: 2002 (1.43) ELT 19 where the view of the Constitution Bench regarding the binding nature of circulars issued under section 37B of the Central Excise Act, 1944 was reiterated after it was drawn to the attention of the Court by the Revenue that there were in fact circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam 2003 (5) SCC 528. The principles laid down by all these decisions are: (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars."

"8. We find as per the scheme of the Act, for framing search assessments, the Ld. AO can pass the search assessment order u/s 153A or u/s 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the Id. JCIT, in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the Id. JCIT is a quasi judicial proceeding requiring application of mind by the Id. JCIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme of the Act, it is the bounden duty of the Ld. AO to seek to place the draft assessment order together with copies of the seized documents before the Id. JCIT well in time much before the due date of completion of search assessment. The Id. JCIT is supposed to examine the seized documents, questionnaires raised by the Ld. AO on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the questionnaires issued by the Ld. AO and the conclusions drawn by the Ld. AO vis- a-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the Id. JCIT in a judicious way after due application of mind. Even though as vehemently argued by the Ld. CIT-DR, the to 1255/CHD/2024 & 181,457/CHD/2025 30 Id. JCIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the Id. JCIT, while granting the approval u/s I53D of the Act has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Ld. AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Ld. AO and Id. JCIT are merely guidance to the Ld. AO and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the Ld. AO to frame the assessment after getting prior approval from Id. JCIT u/s 15 3D of the Act. The Id. JCIT getting involved in the search assessment proceedings right from inception does not have any support from the provisions of the Act as no where the Act mandates so. The scheme of the Act mandates due application of mind by the Ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the Ld. AO as well as the Id. JCIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of Id. JCIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the Ld. CIT DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the Investigation Wing, both the Ld. AO and the Id. JCIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. As far as the argument of the Ld. CIT DR that the details were normally filed by the assessee at the last moment is concerned, the Id. AO has got every right to reject the said replies if not filed within the stipulated time. It is not the case of the revenue that the details were filed by the assessee in the instant case at the last moment. Even if it is so, as stated above, it is the prerogative of the Id. AO to accept the said letter containing details or reject the same as it was not filed within the stipulated time. On the contrary, if the Id. AO himself grants time to the assessee to furnish the details till the last moment, then no fault could be attributed to the assessee. In such circumstances, the only irresistible conclusion that could be drawn is that the Id. AO is not serious about the statutory deadlines provided in the Act. In our considered opinion, if the arguments of the Ld. CIT DR are to be appreciated that the Id. JCIT need not apply his mind while granting approval of the draft assessment orders u/s 153D of the Act as it is not provided in section 153D of the Act, then it would make the entire approval proceedings contemplated u/s 153D of the Act otiose. The law provides only the Ld. AO to frame the assessment, but. certain checks and balances are provided in the Act by conferring powers on the Id. JCIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the Id. AO.

13.

In another words, it was emphasised that the approval was granted without examining the assessment record or the search material. The relevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: " 17.1 However, in the present case, we have no hesitation in stating thai there is complete non-application of mind by the Learned Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs.87,20,580/-, Similarly, when the total assessed income as per the AO comes to Rs. 16,69,42,560,'-, the Addl. CIT could not have approved the assessed income at Rs. 1,65,07,560 -had he applied his mind. The addition ofRs. 15,04,35,000/- made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. 17.2 Even the factual situation is much worse than 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 order without any assessment records what to say about the search material. As mentioned earlier, there are infirmities in the figures of original return of income as well as total assessed and the Addl. CIT while giving his approval has not applied his mind to the figures mentioned by the AO. Therefore, approval given in. the instant case by the Addl. CIT, in our opinion, is not valid in the eyes of law. We, therefore, hold that approval given u/s 153D has been granted in a mechanical manner and without application of mind and to 1255/CHD/2024 & 181,457/CHD/2025 32 thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D of the Act. In view of the above discussion, we hold that the order passed u/s 153A r.w.s. 143(3) has to be quashed, thus ordered accordingly. The ground raised

2.21 Accordingly, in view of the facts discussed in detail in the foregoing paras, the transactions with M/s Goyal Enterprises being bogus/ sham transactions, the amounts of Rs.47,55,239/- and Rs.4,51,00,883/- are bogus purchases for AY 2015-16 & AY 2017-18 respectively and the credits outstanding for the AY 2016-17, 2018-19 and 2019-20 amounting to Rs.21,54,739/-, Rs.4,24,36,147/- and Rs.1,97,86,147/- respectively are found to be bogus credits. Since additions on account of these bogus purchases amounting to Rs.47,55,239/- and Rs.4,51,00,883/- is being made for A.Y. 2015-16 and A.Y. 2017-18 respectively, hence, no additions are being made for AY 2016-17, 2018-19 and 2019-20 respectively, on account of these bogus creditors. 2.22 In light of this discussion provisions of Section 145(3) of the IT Act, 1961 are being invoked and books of accounts and trading results are hereby rejected for the reasons mentioned in previous Paras. Accordingly, the amounts of Rs.47,55,239/- and Rs.4,51,00,883/- are being treated as bogus purchases for AY 2015-16 & AY 2017-18 respectively: Thus, addition on account of these bogus purchases amounting to Rs.47,55,239/- and Rs.4,51,00,883/- is to be made for A.Y. 2015-16 and A.Y. 2017-18 respectively. Accordingly, addition of Rs.4,51,00,883/- u/s 68 r.w.s 69C of the IT Act, 1961 on account of bogus purchases is being made and is to taxed as per the provisions of Section 115BBE of the IT Act, 1961. Penalty proceedings u/s 271AAC of the IT Act, 1961 have been initiated separately. (Addition: Rs.4,51,00,883/-) to 1255/CHD/2024 & 181,457/CHD/2025 40 3. As per the audited books of accounts, the assessee has shown gross turnover of Rs.100,19,44,293/- on which gross profit of Rs.6,41,87,625/- has been reported giving the GP rate of 6.41%. As per the statement of P&L, the assessee has shown gross purchases of Rs.90,53,99,589/- out of which, the purchases of Rs.4,51,00,883/- stated to be made from M/s Goyal Enterprises has already been found bogus. This leads to the conclusion that the assessee has suppressed its gross profit from the turnover through artificially increasing the (bogus) purchases.