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YASMIN KAPOOR,DELHI vs DCIT, CENTRAL CIRCLE - 19, DELHI, DELHI | BharatTax

YASMIN KAPOOR,DELHI vs. DCIT, CENTRAL CIRCLE - 19, DELHI, DELHI

ITA 1542/DEL/2025Status: DisposedITAT Delhi30 January 2026AY 2016-1732 pages

AI SummaryAllowed

Facts

The appeals involve challenges to search assessment orders where the assessees argued that the mandatory approval under Section 153D of the Income Tax Act, 1961, was granted mechanically without proper application of mind. The Revenue contended that the approval was validly obtained. The Tribunal considered multiple appeals from Yasmin Kapoor and Deepa Talwar for assessment years 2016-17 and 2017-18.

Held

The Tribunal held that the approval granted under Section 153D of the Act for the search assessments was indeed mechanical and lacked due application of mind by the approving authority. This was evidenced by consolidated approvals granted for multiple cases and assessment years without adequate scrutiny.

Key Issues

The key issue was whether the approval granted by the competent authority under Section 153D of the Income Tax Act, 1961, was valid or if it was granted mechanically, thereby invalidating the assessment proceedings.

Sections Cited

153D, 143(3), 153A

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Income Tax Appellate Tribunal, DELHI BENCH A: NEW DELHI

Before: SHRI M. BALAGANESH & SHRI RAJ KUMAR CHAUHAN

For Appellant: Shri Sanjay Kumar Agarwal, CA, Shri Lakshay Gupta, CA, Shri Sumaksh Mahajan, CA

For Respondent: Shri Jitender Singh, CIT DR, Shri Nitin Kumar Jaiman, Sr. DR

Hearing: 23/12/2025Pronounced: 30/01/2026

ITA/CO CIT/PCIT Order Dated AO Order dated AY Filed by 1542/Del/2025 PCIT-2 04.03.2025 DCIT, 28.12.2019 2016-17 Assessee Central Circle-19, Delhi CO 98/Del/2025 CIT(A)-31, 31/01/2025 DCIT, 30.12.2019 2017-18 Assessee in Central 2221/Del/2025 Circle-19, Delhi 3337/Del/2025 PCIT-2 04.03.2025 DCIT, 28.12.2019 2016-17 Revenue Central Circle-19, Delhi 2221/Del/2025 CIT(A)-31, 31/01/2025 DCIT, 30.12.2019 2017-18 Revenue Delhi Central Circle-19, Delhi

2.

The appeals filed by Deepa Talwar are as under:-

ITA/CO CIT/PCIT Order Dated AO Order dated AY Filed by 2203/Del/2025 CIT(A)-31, 31/01/2025 DCIT, 28.12.2019 2017-18 Revenue Delhi Central Circle-19, Delhi CO 97/Del/2025 CIT(A)-31, 31/01/2025 DCIT, 28.12.2019 2017-18 Assessee in Central 2203/Del/2025 Circle-19, Delhi 3. The above appeals are filed by different assessees in different CO Nos. arising out of different CIT(A) orders [hereinafter referred to as „ld. CIT(A)‟, in short] for different dates against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) by the Assessing Officer (hereinafter referred to as „ld. AO‟).

4.

All these appeals are having identical issues and hence they are taken up together and disposed of by this common order for the sake of convenience.

5.

In each of the Appeals of the respective assessees or in the Cross Objections of the respective assessees, we find that there is ground raised challenging the validity of search assessment per se on the ground that the mandatory approval u/s 153D of the Act has been granted by the Jt. Commissioner of Income Tax, Central Range-5, New Delhi in a mechanical manner without due application of mind, which vitiates the entire search assessment proceedings. This goes to the root of the matter and accordingly, we deem it fit and appropriate to address the same first in all the appeals. For the sake of convenience, the relevant grounds raised by the respective assessees are reproduced herein.

3.3 It is not a gainsaying that the assessment is a continuous process involving administrative as well statutory roles being donned by the Range Head. It is incumbent upon the Range Head to examine and monitor the assessments which can't be denied if the same is not reduced in writing at every point of time till the finalization of the assessment. The approval of the approving authority underlines that he has examined the assessment records, relevant copies of seized documents and the relevant issues arising from the material on record judiciously in independent manner by way of due application of mind. It would not be out of place to mention here that the assessee has not come out with any case that there is case of non-application of mind. The Hon'ble Supreme Court in the case of Chuharmal vs. CIT 172 ITR 250had held that there was a presumption in law, specifically section 114(e) of the Evidence Act that Judicial and Official Acts supposed to be performed in a particular manner had actually been performed in the way they were supposed to be conducted. There could not be presumption of illegality. 3.4 There is no reason to hold the assessments to be invalid on account of any irregularity in the approval process. It was submitted that cases had come up for decision where there was absolute lack of approval and there too the Courts had not held such assessments to be invalid. The lack of approval had been held to be a procedural irregularity that was not fatal to the order passed. Our attention wasinvited to the judgment of the Hon'ble Karnataka High Court in the case of Gayathri Textiles vs. CIT (2000) 111 taxman 123 (Kar) wherein the ld. CIT(A) had cancelled the penalty levied under section 271(1)(c), holding that the ld. AO had not obtained the previous approval of the IAC as required under section 274(2). On appeal by the Revenue, the Tribunal had reversed the order, holding that the failure to obtain the previous permission from the IAC for imposing penalty under section 271(1)(c) was only a procedural error and it was not fatal to the order of penalty under section 271(1)(c). The Hon'ble High Court held that in the said case, the proceedings were validly initiated and the proceedings under section 271(1)(c)(iii) only require prior approval of the IAC for direction for payment of penalty and not for the initiation of proceedings. Page | 9 3.5 The assessee has to positively prove that there is a case of non- application of mind in light of the submission that the approval u/s 153D is an administrative approval. Here, it would not be out of place to highlight that the relevant seized documents in a case are always part of the assessment records as per practice, and requirement of the work. They are not kept separately as relevant seized material is frequently referred to by the assessing officer during the course of assessment proceedings and also made part of assessment order most of the time. In fact, as per the law, seized material is considered as part of records before Assessing Officer and all such seized records, return of income, notices etc. used during an assessment proceeding when considered collectively is known as 'Assessment record'. Therefore, from the letter seeking approval, it is evident that the entire assessment records which included seized material was placed before the approving authority for the purpose of taking decision with regard to approval under section 153D of the Act. 3.6 Further, in the present case, the Range Head (RANGE HEAD, JCIT/Addl CIT) had been involved and hence, was well aware about the progress of the assessment proceedings, relevant issues of the assessee, nature and content of the seized material in light of the fact that the as per the CBDT guideline F. No. 286/161/2006-IT (Inv. II) dt. 22.12.2006, copy of appraisal report is shared by Investigation Wing with both the assessing officer and Range Head, JCIT. In fact, CBDT guideline dt. 22.12.2006 on the subject of the search and Seizure Assessments clearly outlines such close coordination. Thus, as per the prevailing Practice and Guidelines, the approving authority has good idea of issues involved in particular case before hand i.e. much before the cases are sent to him for approval Under Section 153D of the Act. This guideline of CBDT is relevant piece of information, which throws light on the way search assessments are taken up by the filed officers. Therefore, in light of such peculiar fact of instant case, it cannot be inferred that the approval granting authority was not in a position to independently apply his mind in judicial manner to the case of assessee on the same day. 3.5. In this regard, it is further submitted that on perusal of case laws on the issue of requirements for proper approval under section 153D, it is found that Hon'ble jurisdictional high court has emphatically held that such an issue is essentially a question of fact and has to be decided based of factual matrix of a particular case, Further, it has been held that approval cannot be reduced to a mechanical exercise and approving authority is required to apply his/her independent mind while granting such an approval. Thus, all the cases have been decided on this point by Hon'ble Tribunal and Hon'ble High court in light of peculiar facts of those cases only. Some of such peculiar facts of such cases are outlined here in under to emphasize upon distinguishing nature of facts of instant cases from those cases. : Case Name and Peculiar Facts of cases in mentioned Distinguishing facts of the Citation in first col. instant case HIGH COURT OF DELHI in -No Assessment records were sent along Appellant has not been able to the case of PCIT vs. Anuj with draft assessment order prove that its case and facts are in -There were infirmities in the figures of alliance with the cited case. Bansal ITA 368/2023 Original Return of income and Assessed Further, there is nothing on the Dated July 13,2023 income. record to suggest that in the instant -Range Head, JCIT did not apply his mind as case of the assessee, there were he did not notice such errors/infirmities. some factual infirmities in the order granting approval. None of the peculiar factual aspects are present in the instant case. Therefore, the case of Anuj Bansal had distinguishable facts than those of instant case. HIGH COURT OF DELHI in The approval order failed to make any Further, in the instant case, the case of Principal mention of the fact that the draft approval is given for the case of Commissioner of Income- assessment orders were perused at all, assessee only. tax v. Shiv Kumar Nayyar much less perusal of the same with an Therefore, facts of the instant case [2024] 163 taxmann.com 9 independent application of mind. are distinguishable. (Delhi) Also, in this case of Shiv Kumar Nayyar, there was no fact brought on the record by the Revenue to prove that identical issues (involving similar facts) were involved in different cases submitted for approval by the AO. It was in absence of such factual information that granting of approval for 43 cases in a single day was viewed by the Hon‟ble High Court. ITAT NEW DELHI in the The approving authority had granted In the instant case, approval is case of Seh Realtors Pvt. approval in 232 cases in a single day. given for the case of assessee only Ltd. v. ACIT Central Circle- Therefore, issue of judicious approval for and that too in single case. such large number of cases from the angle Therefore, facts of the instant case Dated 23.07.2024 of human limitations was an issue before are distinguishable. Hon‟ble Bench.

Further, reliance is also placed on the judgement of Hon‟ble Kerala High Court in OP(C) No. 340 of 2019 against the order in IA 3123/2018 in OS 125/2018 of II Additional Sub Court, Ernakulam dated 23.06.2022, wherein it is held that the “5 Courts should endeavor to dispose of a case on merits rather than on default The Apex Court in the case of Improvement Trust, Ludhiyana vs Ujagar Singh & Ors on 09.06.2010 in Civil Appeal NO. 2395 of 2008 also held that “ After all, justice can be done only when the matter is fought on merits and in accordance with law rather to dispose it of on such technicalities and that too at the threshold. Both sides had tried to argue the matter on merits but we refrain ourselves from touching the merits of the matter as that can best be done by the Executing Court which had denied an opportunity to the appellant to lead evidence and to prove the issues so formulated. In our opinion, ends of justice would be met by setting aside the impugned orders and matter is emitted to the Executing Court to consider and dispose of appellant‟s objections filed under Order 21 Rule 90 of CPC on merits and in accordance with law, at an early date. It is pertinent to point out that unless malafides are writ large on the conduct of the party, generally as a normal 1 rule, delay should be condoned. In the legal arena, an attempt should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities. ” 3.6 The Hon‟ble ITAT Mumbai in the case of Smt. Usha Satish Salvi vs ACIT Central Circle-4(4), Mumbai in & 4238/Mum/2023 dated 23.01.2025 has examined all the following judgements of the Tribunal and Hon‟ble High & Courts [Para 6.2] and rejected the objection raised by the assessee that approval granted u/s 153D of the Act has been accorded on presumption and without application of mind rather opined that approval was granted by the Addl CIT after due application of mind: 6.2 (i) Decision dated 06/06/2024 of Delhi bench of the Tribunal in the case of Shri Guvinder Singh Duggal in to 863/Del/2021 for AY 2012-13 to2018-19. (ii) Decision dated 29/04/2024 of Delhi Bench of Tribunal in the case of MDLR Airline (P) Ltd. in & and 2008- 09. (iii) Decision of Hon ‟ble Allahabad High Court in the case of PCIT vs Sapna Gupta in of2022.

(iv) Decision of Hon ‟ble Delhi High Court in the case of PCIT vs Shiv Kumar Nayyar in ITA 285/2004 & CMAppela 28994/2024 (v) Decision of Mumbai Bench of Tribunal in the case of Arch Phamalabs Ltd in for AY 2011-12 and other appeals. (vi) Decision of Hon‟ble Delhi High Court in the case of PCIT Vs M/s Hotels P Ltd in ITA 593/2023 (vii) Decision dated 24/04/2024 of Delhi Bench of Tribunal in the case of Veena Singh in & 295/Del/2022for AY 2016-17 and 2017-18. 3.7 It is submitted that Central Ranges are specialized ranges designated for assessment of search and seizure cases. The structure ensures deep involvement of the Addl. Commissioner with each case. These are not routine assessments; the number of cases is limited, and the Range Head, JCIT plays a crucial role throughout the lifecycle of the case. The assumption by the assessee that the Range Head, JCIT was a stranger to the assessment work is factually erroneous and perverse. It is further submitted that there cannot be any presumption drawn against the approving authority with regard to application of mind merely on the ground that number of cases approved in a day were high. There cannot be any threshold limit set for the same. How many cases will be considered unreasonably high and how many cases will be considered reasonable? It is submitted that every approval needs to be examined in light of its peculiar facts such as number of issues involved, nature of issue involved, modus-operandi involved, number of cases involved and inter-relationship among facts of such cases. If identical issues are involved involving same modus-operandi and cases are of same search group only, it would not be unreasonable to consider that an approving authority will be able to apply its independent mind judiciously to relatively larger number of cases in a single day. Ultimately, it boils down to factual matrix of the cases sent for approval. In the instant case, in light of the factual matrix that additions were made in different cases of the group on the same ground based on same factual position with regard to same accommodation entry provider and involving same modus-operandi, it would be justified to consider that the approving authority would have been in a position to apply his mind to all such cases sent for approval by the AO on the same day, particularly when number of such cases is not too high and facts/issues involved are in the knowledge of approving authority beforehand i.e. before receiving proposal for approval. 3.8 It is submitted that Section 153D does not prescribe any specific procedure or method for the grant of approval. As long as Range Head, JCIT is satisfied with the draft assessment order and conveys his approval, the mandate of law stands fulfilled. 3.9 In the present case, the approval was in fact granted under Section 153D. There is no finding that the assessment was so fundamentally flawed as to render it unfit for any reasonable authority to approve it. This is not a case where Approval has not been granted. 3.10 It is relevant to point out that approval u/s 153D of the Act needs to be put at a different pedestal in comparison to sanction u/s 151 of the Act. Section 151 deals with prior approval for issuing notices for reopening assessments (such as under section 148). The approval here is for cases where the Assessing Officer believes income has escaped assessment; higher authorities‟ consent is required before such notices are issued. If the sanction u/s 151 is not proper, the jurisdictional notice issued u/s 148 has been held to be void. However, the approval u/s 15 3D has to be granted by the Ld. Add. CIT once the draft assessment order is prepared by the Ld. Jurisdictional Officer making the assessments u/s 153A/153C of the Act. In this case, there is no challenge to the validity of search, procedure followed by the Department in search, however the only challenge raised by the assessee before this Hon‟ble Tribunal is that the approval granted by Range Head, JCIT is mechanical. No evidence to prove the same have been sufficiently submitted by the assessee. CBDT has issued guideline for search and seizure assessments in F. No.286/161/2006-IT (Inv. II) on 22.12.2006 contained in Appendix V of the Search &Seizure Manual 2007, involves the Range Head in the assessment process right from the stage of receipt of the appraisal report and the seized material to the granting of the final approval. As brought out by the ld. DRs, it is observed that the Range Head (approving authority) is involved in scrutinizing the appraisal a report and the seized material at the time of preparation of the examination note to decide which cases were to be taken up under section 153A, 153C or section 148.Subsequently, he was also supposed to vet the action note prepared by the A within 90 days of receipt of seized material after methodological examination of the seized material and it has been brought to our knowledge by the DRs that usually these action notes are prepared by the Id. AO and the Range Head in consultation with each other. We also observe that the Range Head has been directed to ensure proper satisfaction note are recorded before issuance of notices under section 153Cor under section 148. Furthermore, it appears that the Board envisaged that the Range Head was to be associated with the preparation of the detailed questionnaire and could even give directions under section 144A where it was considered necessary. Therefore, when the Range Head has been actively monitoring the assessment proceedings the whole year, then it cannot be averred that the same officer granted several other approvals during the same period resulted in non-application of mind.

DheerajChoudhary 2 Mr. 153A AASPK9267B 2010-11 307943 10241352 DheerajChoudhary 3 Mr. 153A AASPK9267B 2011-12 403908 15000460 DheerajChoudhary 4 Mr. 153A AASPK9267B 2012-13 438939 23094073 DheerajChoudhary 5 Mr. 153A AASPK9267B 2013-14 1018269 10903269 DheerajChoudhary 6 Mr. 153A AASPK9267B 2014-15 584183 30911700 DheerajChoudhary 7 Mr. 143(3) AASPK9267B 2015-16 1004820 221698040 DheerajChoudhary The above proposed orders are approved with the direction that the assessment orders be passed before the prescribed time limit. It is also specified that a copy of the final orders passed be sent to this office. (Rinku Singh) Additional Commissioner of Income Tax Central Range-2, New Delhi” Learned Counsel stated that the copy of approval is 4. obtained through RTI and Department, vide letter dated 2ndAugust, 2021, provided this approval.Accordingly, the additional groundsare raised vide application dated 27th October, 2021. Learned Counsel for the assessee made argument that as per the mandate of Section 153D of the Act, the approval is to be granted to the assessment order by the Additional CIT/JCIT after due application of mind. Learned Counsel for the assessee stated that this approval dated 27.12.2016 was granted in lieu of proposal sent by the Assessing Officer i.e. the Assistant Commissioner of Income Tax, Central Circle-08, New Delhi dated 27.12.2016. It means, according to learned Counsel, the Additional CIT granted approval of these seven draft assessment orders on the same date. He further explained that as per this proposal, the Assessing Officer, no assessments records, search materials, replies filed by assessee or any material related to these assessments was provided or examined by the Additional CIT. In view of these facts, learned Counsel argued that that this issue is now settled by the decision of Hon'ble Delhi High Court in the case of PCIT(Central)-2 Vs. Anuj Bansal – [2024] 165 taxmann.com 2 (Delhi) and PCIT Vs. Shiv Kumar Nayyar – [2024] 163 taxmann.com 9 (Delhi). Even this issue has been dealt with by Hon‟ble Orissa High Court in the case of ACIT Vs. Serajuddin& Co. – [2023] 150 taxmann.com 146(Orissa). Similar view is taken by Hon‟ble Allahabad High Court in the case of PCIT Vs. Sapna Gupta – [2023] 147 taxmann.com 288 (Allahabad). Learned Counsel argued that the jurisprudence arising out of the above case laws is that an approval under Section 153D of the Act is considered to be as given with no application of mind and given in a mechanical manner when the approval itself does not reflect any application of mind. He narrated the facts of the present case stating that on 27th December, 2016, the Assessing Officer sent the draft assessment order to the Additional CIT for approval and on the very same date i.e., 27th December, 2016, the Additional CIT granted approval. He produced before us the said letter of the Assessing Officer along with approval granted by the Additional CIT. From a perusal of the above said approval, it was argued that there is not even a token of mention of the draft orders having been perused by the Additional CIT, rather, the letter simply grants approval. He argued that even the bare minimum requirement of the approving authority, having to indicate what the thought process was involved was, is missing in the aforementioned approval order. In the approval order, there is no whisper in regard to the fact that the Additional CIT has examined the seized documents or the proposed additions made in the draft assessment order as the same was forwarded to him for her perusal. From the approval, it is clear that there is no reason given and it is bare minimum for the approving authority that there should have been some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the Act. In terms of the above, learned Counsel for the assessee stated that the above approvals are mechanical and without application of mind and hence, the assessment orders approved without application of mind is to be quashed. He supported the order of learned Judicial Member.

5. On the other hand, learned CIT-DR Ms. PoojaSwaroopsubmitted that as pointed out during the course of hearing, there is a mistake in the question of law framed, as reproduced below:- “As to whether under the present facts and circumstances of the matters, the approval granted by the ACIT, dated 27.12.2016 under Section 153D of the Income Tax Act 1961 are sustainable in the eyes of law or not.” She submitted that approvals under Section 153D of the Act are granted by the Joint/Additional CIT. However, in the present case, ACIT has been stated, which is incorrect, because ACIT is actually Assistant Commissioner of Income Tax and not Additional Commissioner of Income Tax. Without prejudice to the above, she drawn our attention to Paragraph 11 and 14 to 17 of the draft order of learned Accountant Member. She also produced copies of relevant guidelines enunciated by the Search & Seizure Manual and relevant SOPs for search assessments issued by the CBDT. She also referred to Appendix-V of the Assessment Manual issued by the Income-tax Department in regard to search and seizure assessments dated 22nd December, 2006 vide F.No.286/161/2006-IT(Inv.II). She particularly referred to Paragraph 1.3 and argued that the Range Head i.e., Additional CIT/JCIT is involved in scrutinizing the seized material and Page | 18 issuance of notices under Section 153A, 153C and 148 of the Act and also where assessment in other than the searched person is to be done. The relevant Paragraph 1.3 referred by her reads as under:- “1.3 On receipt of the appraisal report and seized material, the Assessing Officer and Range Head should jointly scrutinize the appraisal report and seized material and prepare an Examination Note to decide: i. Cases where notices u/s 153A of the Income-tax Act, 1961 (the Act) are required to be issued. ii. Cases where notices u/s 153C of the Act are required to be issued. iii. Cases where notices u/s 148 of the Act are required to be issued. iv. Cases where seized material pertains to persons other than those whose cases have been centralised.” Subsequently, she referred to Paragraph 2.9 and stated that 6. in case the Assessing Officer is not in agreement with any findings/conclusions drawn in the Appraisal Report, the matter should be brought to the knowledge of the Additional CIT/JCIT who should resolve the issue with the concerned Addl./Joint DIT(Inv) and also with CIT(Central) or DIT(Inv). She further referred to Paragraph 2.10 of the Manual and stated that even the Additional CIT/JCIT can issue instructions to the Assessing Officer in terms of Section 144A of the Act. She stated that even the Additional CIT/JCIT is involved in the preparation of final assessment order by way of instructing the Assessing Officer issuing final show cause notice. She referred to Paragraph 3.2 of the Manual, which reads as under:- “3.2 All the issues and evidence that is going to be relied upon in the assessment order should be made available to the assessee. The final show cause notice should be prepared in consultation with the Addl. CIT and should contain: i. The proposed structure of the order; ii. The evidence in possession of the department; iii. The case laws being relied upon; iv. The opportunity of rebuttal being provided to the assessee.”

7.

I have heard the rival submissions and gone through the facts and circumstances of the case. Admitted facts are that for all the relevant six assessment years, only one approval is granted by the Additional CIT as is available on record, which is a part of this order at Paragraph 5. The provisions of Section 153D of the Act where prior approval is made necessary for assessments in search and seizure cases is introduced by the legislature by the Finance Act, 2007 with effect from 1st June, 2007. The relevant 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.” As argued by the learned Counsel for the assessee, in view 8. of this provision, I noted that an important concept mentioned in Section 153A of the Act, which is peculiar to the scheme of search assessments. Keeping in view the basic fundamental features of search assessments i.e., Section 153A of the Act, if the provisions of Section 153D is scrutinized, it would become manifest that an important phrase is employed in the text of Section 153D, which is “each assessment year”. The bare reading of Section 153D of the Act makes it clear that separate approval of draft assessment order in each year is to be obtained. The Hon‟ble Allahabad High Court in the case of PCIT Vs. Sapna Gupta – [2023] 147 taxmann.com 288 (Allahabad), while adjudicating this issue, has considered the important concept of each assessment year for the purpose of approval to be granted under Section 153D, as under:- “19. The approval of draft assessment order being an in- built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of 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 of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval of 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 of material available on record and the approval must reflect the application of mind to the facts of the case. The requirement of approval under section 153D is pre- requisite to pass an order of assessment or re-assessment. 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).

12.

I have gone through the case law of Hon‟ble Orissa High Court in the case of Serajuddin & Co. (supra), wherein Hon‟ble High Court has considered the meaning of approval and what must contain while granting of approval as discussed by Hon'ble Supreme Court in the case of Rajesh Kumar Vs. DCIT – [2006] 157 Taxman 168 (SC), wherein Hon'ble Supreme Court, in the context of Section 142(2A) of the Act which empowers the Assessing Officer to direct a special audit and obtaining a prior approval, has explained the approval as under:- “58. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the assessing officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/or the entries made therein. While exercising its power, the assessing officer has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given.” Further, Hon‟ble Orissa High Court in the case of Serajuddin 13. & Co. (supra) has also considered the CBDT Manual of Office Procedure issued in February, 2003 in exercise of powers under Section 119 of the Act and reproduced Para 9 of Chapter 3 of Volume-II(Technical) of the Manual, which 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.” Further, in the case of Serajuddin& Co. (supra), Hon‟ble 14. Orissa High Court has also considered the issue of approval, according to the Revenue, it is itself not justifiable. Hon'ble Supreme Court has considered where approval granted is mechanical and it would vitiate the assessment order itself. Hon'ble Supreme Court, in the case of Sahara India (Firm) Vs. CIT – [2008] 169 Taxman 328 (SC), has considered this issue 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 emphasize 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.”

17.

Shiv Kumar Nayyar – [2024] 163 taxmann.com 9 (Delhi) and Page | 25 PCIT(Central-2) Vs. Anuj Bansal – [2024] 165 taxmann.com 2(Delhi), has considered the identical issue wherein it was emphasized that approval was granted without examining the assessment records or the searched material and, Hon‟ble High Court in Paragraph 13, extracted the findings of the Tribunal as under:- “13. In another words, it was emphasized 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 that 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 of Rs.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 income 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 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. 43(3) has to be quashed, thus ordered accordingly. The ground raised by the Assessee is accordingly allowed.” On the other hand, learned CIT-DR relied upon the decision 18. of Hon'ble Supreme Court in the case of Spacewood Furnishers (P) Ltd. – [2015] 374 ITR 595 (SC) and Mumbai ITAT decision in the Page | 26 case of Pratibha Pipes and Structural Ltd. in ITA No.3874/Mum/2015. She also relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kelvinator of India Ltd. – [2002] 256 ITR 1(Delhi). She also relied on the decision of Hon'ble Supreme Court in the case of Kunhayammed Vs. State of Kerala – [2000] 245 ITR 360(SC) and Khoday Distilleries Ltd. Vs. MahadeshwaraSahakaraSakkareKarkhane Ltd. – [2019] 104 taxmann.com 25(SC).

19.

I noted that the case law cited by the learned CIT-DR of Spacewood Furnishers (P) Ltd. (supra) relates to warrant of authorization issued under Section 132 of the Act for carrying of search by the Income-tax Department and whether the assessee has right to inspection of documents or communication of reasons for belief at the stage of issuing of authorization. Hon'ble Supreme Court has categorically said No but also said that the requisite material may have to be disclosed at the stage of commencement of assessment proceedings. Hence, this case cannot be equated with the present controversy regarding approval under Section 153D of the Act. Regarding the case law of this Tribunal in the case of Pratibha Pipes &Structurals Ltd. (supra), the only issue before the Tribunal was whether the approval under Section 153D is granted or not. In the given facts and circumstances of that case, the Tribunal reached to a conclusion that there is approval granted under Section 153D of the Act and nothing else. Hence, on facts, this is clearly distinguishable. As regards the decision of Kelvinator of India Ltd. (supra), that was the case of reopening and whether the reason to belief of Assessing Officer is founded on an information which has been received by the Assessing Officer after completion of assessment and that can be a sound foundation for exercising power under Section 147 read with Section 148 of the Act. Hence, this decision also cannot be equated with the approval as amended under Section 153D of the Act. As regards the other decisions cited by the learned CIT-DR of Kunhayammed (supra) and Khoday Distilleries Ltd. (supra), these relate to the concept of merger of High Court order in question with Supreme Court‟s order while dismissing the SLP. Here, that is not the question, rather, the question is whether approval is mechanical or not. Whether approval granted under Section 153D of the Act is on application of mind or not in the given facts and circumstances of the case. Hence, these decisions are clearly distinguishable on facts and principle of law.

21.

I notethe above observations of learned Accountant Member and is of the view that assessment proceedings or any proceedings under the Act before the Assessing Officer which affect the levy of tax on the subject are judicial in nature. It is well-settled that the Assessing Officer upon whom jurisdiction has been conferred to make all orders judicially, has to act independently. The Assessing Officer, while framing assessment, cannot act on the advice given by an outsider even though he may be an authority higher in rank to him in official hierarchy. Higher authorities that include Additional CIT/JCIT under whom the Assessing Officer is administratively under control, are not entitled to give opinion or advice in regard to assessment proceedings being quasi-judicial in nature. This is, however, subject to the provisions of Section 144A of the Act, where the assessee or the Assessing Officer suo-moto can refer the matter but, for that, he has to invoke this provision. This view is supported by Hon'ble Bombay High Court in the case of DinshawDarabshaw Shroff Vs. CIT – [1943] 11 ITR 172 (Bom), wherein it is held that although the Assessing Officer making an assessment is not acting as a court of law, it is clear that while framing assessment is acting in quasi-judicial capacity, and he ought to conform to the more elementary rules of judicial procedure, and in particular to conduct the case himself, and not allow somebody else, even his superior officer, to interfere in the conduct of the case. What to talk of superior authority, Hon'ble Supreme Court in the case of Union of India Vs. Tata Engineering & Locomotive Co.Ltd. – AIR 1998 SC 287, 288, held that the Assessing Officer is entitled to complete the assessment as per the provisions of Section 143(3) of the Act and, for this purpose, he can call for and examine whatever document he considers relevant. Hon'ble Supreme Court held that, if the Assessing Officer fails to follow any judgment of the High Court or of the Supreme Court, the assessee has adequate statutory remedies by way of an appeal and revision against the assessment order but, the Court should not try to control the mode and manner in which an assessment should be made. Hence, the higher authority including the Additional CIT/JCIT or CIT or CCIT, being administrative controlling authorities of the Assessing Officer, are not entitled to interfere in the judicial process of the Assessing Officer while framing assessment. In view of the above, I am of the view that, while making an assessment, the Assessing Officer is solely to be guided by the provisions of law and he cannot avail of any instructions or directions given by his higher authority including CBDT in making a particular assessment in a particular way. While passing assessment orders, he is only bound by what, if any, has been directed under Section 144A of the Act by his Additional CIT/JCIT or the instructions issued by the CBDT under Section 119 of the Act or what has been decided by the appellate authorities as mentioned in the Act. He has also to follow the precedence established by Hon‟ble High Courts or the Supreme Court. The proceeding under Section 153D for granting approval is entirely different from the process of making assessment. Once draft assessment is prepared, the process of approval starts under Section 153D of the Act. Then the authority prescribed under Section 153D i.e., the Additional CIT/JCIT has to apply his mind for grant of approval after verifying the assessment records, seized records, etc.

22.

I noted that the common thread discussed by Hon‟ble Orissa High Court in the case of Serajuddin& Co. (supra), by Hon'ble Delhi High Court in the case of Anuj Bansal (supra) and by Hon‟ble Allahabad High Court in the case of Sapna Gupta (supra) is that the requirement of previous approval of assessment by the Additional CIT/Joint CIT in terms of provisions of Section 153D of the Act 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 formality. Needless to say that before granting approval, the Additional CIT/Joint CIT, 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 and the approval must reflect the application of mind to the facts of the case. The CBDT itself recognized the importance of this provision and the above laid down principle and hence issued Manual of Office Procedure in February, 2023 in exercise of powers under Section 119 of the Act. Vide Para 9 of Chapter 3 of Volume-II (Technical), a clear procedure is devised i.e., how an approval is to be granted for draft assessment for passing of assessment order in search cases. According to the Manual, the Assessing Officer should submit the draft assessment order for such approval well in time along with docketed in the order sheet, a copy of the draft assessment order, covering letter filed in the relevant miscellaneous records folder. Even, it is noted that 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. It is further noted that once such approval is granted, it must be in writing and filed in the relevant folder indicating above after making due entry in the order sheet. This is the mandate provided in the office manual of the Department.In view ofabove, I am of the view that the „approval‟, as mandated u/s 153D of the Act,signifies a product of human thoughts based on the given set of facts and interpretation of the applicable law. It provides equality in treatment and thus prevents bias, prejudice and arbitrariness. It also prevents and avoids inconsistent and divergent views. The power of approval to the specified authority i.e., Superior authority has been envisaged with the objectives that no illegality or biasness, to either of the sides i.e., the assessee or the Revenue, remains.