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Facts
Twelve appeals were filed by different assessees challenging assessment orders for A.Y. 2016-17. The primary challenge was based on two technical grounds: the validity of satisfaction recorded before initiating proceedings under Section 153C and the approval granted under Section 153D by the JCIT. The assessee argued that the approval under Section 153D was granted mechanically without proper application of mind.
Held
The Tribunal found that the JCIT's approval under Section 153D was granted without proper application of mind, citing the physical impossibility of reviewing numerous assessment orders and related documents for 84 cases within one day. Following the principle established in Serajuddin and Co., the Tribunal held the approval invalid and consequently annulled the assessment orders for the lead case and all other appeals.
Key Issues
Whether the satisfaction recorded before initiating proceedings u/s 153C was valid. Whether the approval granted u/s 153D for assessment orders was valid, given the contention of non-application of mind by the approving authority.
Sections Cited
153C, 153D, 142(1), 143(2), 143(3), 154, 234A, 119, 153A, 144, 153B(b), 145(3), 158BG, 37B
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MANISH AGARWAL
आदेश आदेश / O R D E R आदेश आदेश Per Bench : These twelve appeals filed by twelve different assessees against the separate orders passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, all dated 01.11.2024 for the assessment year 2016-2017. 2. Since common issue is involved in all the appeals, therefore, all the appeals are tagged together and disposed off by this consolidated order.
outcome of the same shall be applicable to all the other appeals under consideration.
CIT(A), National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No.ITBA/NFAC/S/250/2024-25/1070072128(1) for the assessment year 2016-2017. 4. It was submitted by the ld. AR that the assesee is challenging the assessment order on two technical grounds; first being the satisfaction recorded before initiation of proceedings u/s.153C of the Act and the second being in respect of approval granted u/s.153D of the Act by the ld. JCIT. It was the submission that in respect of the satisfaction recorded, the AO has recorded his satisfaction in the assessee’s case which is shown in ordersheet available at page 1 of the paper book as follows :-
In respect of the said document, it was the submission that the alleged transactions were between the assesee was with M/s Modern Engineering and Management Foundation (MEMF), which is a trust. It was the submission that the evidences were found in the course of search at M/s SM Consultancy. It was the submission that the seized documents have been marked as SMCB-10, 11 & 73. It was the submission that there is no recording of satisfaction in the files of M/s SM Consultancy from whose possession these documents were seized for the purpose of transferring the alleged seized documents to the AO having jurisdiction over the assesee. It was the submission that even though the AO in respect of M/s SM Consultancy was the same as the AO in the case of the assesee still there is an absolute requirement of recording of satisfaction in the file of M/s SM Consultancy before transferring of the seized document to the AO having jurisdiction over the impugned assesee. He placed reliance on the decision of the Hon’ble Supreme Court in the case of Manish Maheswari, reported in (2007) 289 ITR 341 (SC). It was the submission that after this decision of Manish Maheswari (supra), the same has also been reiterated repeatedly.
When this issue was put to ld. CIT-DR, it was submitted by the ld. CIT-DR that he is not having access to the files of M/s SM Consultancy and, therefore, he is not in a position to answer in regard to produce the satisfaction immediately. Thus, the ld. CIT-DR submitted that he needs time to produce the satisfaction.
Ld. AR further proceeded to submit with regard to the second issue which is being raised against the approval granted u/s.153D of the Act by the ld. JCIT. The ld. AR drew our attention to page 3 of the paper book which is a copy of the approval granted by the ld. JCIT on 21.12.2018, which is as follows :-
He also drew our attention to a similar approval granted in the other cases, which is as follows :-
It was submitted that there were total 16 cases in the case of assessee’s group itself and these two approvals are only for the assessment year 2016-2017. The approval in all the cases were sought vide letter dated 20.12.2020 and approval was granted on 21.12.2018.
The assessment order clearly showed that the assessments have been done for the assessment years 2011-2012 to 2016-2017, being six years and consequently the total number of approvals granted within 24 hours by the JCIT in assessee’s own group itself comes to 84 approvals.
It was also submitted by the ld. AR that the ordersheet entry which is placed in the paper book clearly showed that there was no mention of the files being sent for approval to JCIT. The said ordersheet placed in the paper book at page 2 read as under :-
It was the submission that a perusal of the approval granted also clearly shows non-application of mind. He relied upon the decision of the Hon’ble Jurisdictional High Court in the case of Serajuddin and Co. reported in [2023] 150 taxmann.com 146 (Orissa), wherein the Hon’ble jurisdictional High Court in para 21 to 25 has held as follows :-
It is seen that in the present case, the AO wrote the following letter seeking approval of the Additional CIT:
GOVERNMENT OF INDIA OFFICE OF THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), BHUBANESWAR No. ACIT/C-1(2)//Approval/2010-11/5293 Dated, Bhubaneswar, the 27/29th December, 2010 To The Addl. Commissioner of Income-tax, Range-1, Bhubaneswar.
Sub: Approval of draft orders u/s 153D of the I.T. Act 1961 in the case of M/s. Serajuddin & Co. 19A, British India Street, Kolkata (in Serajuddin Group of Cases)- matter regarding.
Sir,
Enclosed herewith kindly find the draft orders u/s 153A of the I.T.Act, 1961 along with assessment records in the case of M/s Serajuddin & Co., 19A, British India Street, Kolkata for kind perusal and necessary approval u/s.153D.
N Name of the Assessee Section under o which order passed Asst. Year 1 M/s Serajuddin & Co., 19A, 2003-04 u/s.153A/143(3)/144/145(3) British India Street, Kolkata 2 -do- -do- 2004-05 3 -do- -do=- 2005-06 4 -DO- -DO- 2006-07 5 -DO- -DO- 2007-08 6 -DO- -DO- 2008-09 7 -DO- U/s.143(3)/144/153B(B)/145( 2009-10 3)
3) The above cases will be barred by limitation on 31.12.2010. Encl: As above Yours faithfully, Sd/-
Asst. Commissioner of Income-tax, Circle-1(2), Bhubaneswar of the Tribunal itself Government of India OFFICE OF THE ADDL. COMMISSIONER OF INCOME TAX, 3 Floor, Range-1, Bhubaneswar No. Addl. CIT/R-1/BBSR/SD/2010-11/5350 Dated,
Bhubaneswar, the 30th December, 2010 To The Assistant Commissioner of Income Tax, Circle-1(2), Bhubaneswar.
Sub: Approval u/s 153D-in the case of M/s Serajuddin & Co., 19A, British India Street, Kolkata-Matter regarding.
Ref: Draft Orders u/s 153A/143(3)/144 for the A.Y. 2003- 04 to 2008-09 u/s.143(3)/153B (b)/144 of the A.Y.2009-10 in the case of above mentioned assessee.
Please refer to the above The draft orders u/s 153A/143(3)/144 for the A.Y. 2003-04 to 2008-09 and u/s. 143(3)/153B(b)/144 for the A.Y. 2009-10 submitted by you in the above case for the following assessment years are hereby approved:
Assessment Year Income Determined (Rs) 2003-04 11,66,22,771 2004-05 36,46,80,016 2005-06 65,70,12,805 2006-07 60,02,65,791 2007-08 130,03,13,307 2008-09 274,68.87,069 2009-10 301,17,05,952
You are requested to serve these orders expeditiously on the assessee, submit a copy of final order to this office for record.
Sd/- Addl. Commissioner of Income Tax, Range-1, Bhubaneswar
As rightly pointed out by learned counsel for the Assessee there is not even a token mention of the draft orders having been perused by the Additional CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of 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 of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like 'see' or 'approved' will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act, it would equally apply to Section 153D of 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 submitted just 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.
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.
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 (165) E.L.T. 257 (S.C.) 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 (143) 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."
For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves.
It was the submission that the decision of the Hon’ble Jurisdictional High Court has been approved by the Hon’ble Supreme Court as reported in [2024] 163 taxmann.com 118 (SC) by dismissing the SLP filed by the revenue. It was the submission that the approval granted in assessee’s case was similar to the approval granted in the case of Serajuddin & Co. and on this ground also the approval being vitiated consequently the assessment order is required to be annulled.
In reply, ld. CIT-DR drew our attention to the approval accorded by the ld. JCIT. It was the submission that the approval letter refers to the several discussion that has been done between the AO and the JCIT. It was the submission that it also mentions that the JCIT has gone through the assessment orders and appraisal report and other relevant materials in the case. It was the submission that the JCIT has applied his mind before making the approval and the same is liable to be upheld.
We have considered the rival submissions. As mentioned earlier by the ld. AR that there are 84 cases in this group. It is surprising that JCIT has been able to go through the assessment orders, appraisal reports and other related materials for a minimum of 84 cases within one day. We use the word “minimum of 84 cases” because this group alone contains 84 cases and the JCIT could avail his other files also before him. The assessment orders, in all the cases, are more than 9 pages, appraisal reports was also to be quite a few pages and the submissions of the assesee would be innumerable. These are physically impossible task which has been admitted to by the ld. JCIT. Consequently, the approval granted in these cases are without application of mind. This being so, respectfully following the principle laid down by the Hon’ble Jurisdictional High Court in the case of Serajuddin & Co., reported supra, which has also been approved by the Hon’ble Supreme Court by dismissal of the SLP, the approval u/s.153D of the Act granted in the impugned appeal in the case of Choudhury Swapan Kumar Mohapatra ( A.Y.2016-2017, by the JCIT, is held to be invalid and the consequential assessment order is hereby annulled. As the appeal of the assesee is allowed by allowing the legal grounds of appeal, other grounds taken on merits become academic and not adjudicated upon. Thus, the appeal of the assesee is allowed.
Since, we have already annulled the assessment framed by the AO in the case of Choudhury Swapan Kumar Mohapatra while dealing with approval u/s.153D of the Act granted by the ld. JCIT as invalid, therefore, all the remaining eleven appeals filed by the eleven different assessees as mentioned in the cause title above, which also come under the invalid approval of the JCIT, are hereby allowed and the assessment framed in all the cases are hereby quashed.
In the result, all the appeals of the assessees are allowed.
Order dictated and pronounced in the open court on 29/01/2025. Sd/- Sd/- (MANISH AGARWAL) (GEORGE MATHAN) लेखा सद�य/ ACCOUNTANT MEMBER �याियक �याियक सद�य �याियक �याियक सद�य सद�य / JUDICIAL MEMBER सद�य कटक कटक Cuttack; �दनांक Dated 29/01/2025 कटक कटक Prakash Kumar Mishra, Sr.P.S. आदे आदेश क� आदे आदे क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत अपीलाथ� / The Appellant- 1.
��यथ� / The Respondent- 2.