MAMTA AGRAWAL, RAIGARH,RAIGARH vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, BILASPUR, BILASPUR

That the first contention raised by the Ld.Counsel is that date for request for seeking approval u/s.153D of the Act by the ACIT was dated 16.03.2021 and it is on the same date i.e. 16.03.2021, the said approval was granted by the competent authority as is evident from the aforesaid letter and that too for A.Y. 2013-14 to 2019-20 i.e. for 7 years. The second contention raised by the Ld. Counsel is that as evident from Para 3 and 4 of the said approval, there is no satisfaction arrived at independently by the competent authority for issuing such approval u/s.153D of the Act. The approval has been granted for two assesses viz. (i) Sr. No. 1: Pawan Kumar Agrawal; and (ii) Sr. No. 2: Smt. Mamta Agrawal and Sr.No.2 is the appellant assessee before this Bench. Rather, it is only borrowed satisfaction from the A.O due to which the approval u/s.153D of the Act was granted summarily in the case of the assessee which vitiates such approval in the eyes of law.

Per contra, the Ld. Sr. DR submitted that the approval u/s.153D of the Act has been granted by the competent authority after due application of mind and there is no infirmity in the said approval.

I have heard the parties herein, carefully perused the material available on record as well as analyzed the facts and circumstances in this case. That so far as the legal ground raised by the assessee is concerned, it has been contended that the approval granted u/s.153D of the Act by the competent authority is without application of mind. I have examined the approval of the competent authority as well as request letter from the A.O requesting for grant of such approval before the competent authority. It is clearly evidenced that the approval u/s. 153D of the Act was granted by the competent authority on the same date, on which, the request application has been made by the concerned A.O. The said approval has been given for A.Ys. 2013-14 to 2019-20 i.e. 7 years. On a careful reading of the said approval granted on 16.03.202, not even a word has been written by the competent authority which shows any independent application of mind. It is evident from Para 3 and 4 wherein the competent authority presumes that the A.O had given appropriate opportunity of hearing to the assessee and thoroughly verified seized material and that the A.O has satisfied himself that all the issues emanating from records have been verified and the additions wherever required have been proposed. Thereafter, the competent authority writes at Para 4 that “you may act accordingly”. That when the competent authority is issuing approval u/s. 153D of the Act for 7 years, he is not writing any findings regarding the fact or for that matter he is not providing any reasons so to understand his reasoning for granting of such approval. It is obvious that the approval is granted in a mechanical and summary manner and that too on the same date, on which, the request letter has been furnished before the competent authority. That further, the entire action has been taken on the basis of borrowed satisfaction from the A.O.

A plain reading of the aforesaid provision evinces an uncontrived position of law that the approval under Section 153D of the Act has to be granted for "each assessment year" referred to in clause (b) of sub-section (1) of Section 153A of the Act. It is beneficial to refer to the decision of the High Court of Judicature at Allahabad in the case of PCIT v. Sapna Gupta [2022 SCC OnLine All 1294] which captures with precision the scope of the concerned provision and more significantly, the import of the phrase- "each assessment year" used in the language of Section 153D of the Act. The relevant paragraphs of the said decision are reproduced as under:- "13. It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "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 of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of 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 of power. *** 19. The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A." [Emphasis supplied]

It is observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that the authority granting approval has to apply its mind for "each assessment year" for "each assessee" separately.

The issue which we have to decide is, can these approvals be treated as fulfilling the mandate of provisions of section 153 D of the Act vis- a-vis legislative intent of the said section in the statute. Section 153 D of the Act reads as under : "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 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. Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub- section (12) of section 144BA."

The Legislative intent can be gathered from the CBDT Circular No.3 of 2008 dated 12.3.2008 which reads as under: "50. Assessment of search cases Orders of assessment and reassessment to be approved by the Joint Commissioner. 50.1 The existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132 A does not provide for any approval for such assessment. 50.2 A new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisitioned is made under section 132A. 50.3 Applicability- These amendments will take effect from the 1st day of June, 2007."

The Legislative intent is clear from the above, in as much as, prior to the insertion of Sec.153D of the Act, there was no provision for taking approval in cases of assessment and reassessment in cases where search has been conducted. Thus, the legislature wanted the assessments/reassessments of search and seizure cases should be made with the prior approval of superior authorities which also means that the superior authorities should apply their minds on the material on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authorities have to approve the assessment order. xxxx xxxx xxxx 18. In light of the afore-stated relevant provisions and legislative intent , approval dated 08.03.7.013 is in respect of 62 assessment orders as exhibited at pages 136 and 137 of the Index to Convenience Compilation furnished by the ld. counsel for the assessee. Approval dated 15.03.2013 is in respect of 37 assessment orders as exhibited at pages 138 and 139. Approval dated 18.03.2013 is in respect of 54 assessment orders as exhibited at pages 140 and 141. Approval dated 21.03.2013 is in respect of 24 assessment orders as exhibited at pages 142 and 143 and approval dated 25.02.2013 is in respect of 69 assessment orders as per exhibits in the Convenient Compilation.

Thus, the worthy Additional Commissioner of Income tax, Central Range - 2, New Delhi gave approval to 246 assessment order by a single approval letter u/s.153 D of the Act by mentioning as under: "The above draft orders, as proposed, are hereby accorded approval with the direction to ensure that the orders are passed well before limitation period. Further, copies of final orders so passed be sent to this office for record."

In our considered opinion, there is no whisper of any seized material sent by the Assessing Officer with his proposal requesting the approval u/s.153D of the Act. All the requests for approval are exhibited at pages 123 to 135 of the Convenience Compilation.

Even the approval granted by the Additional Commissioner of Income tax, Central Range - 2, New Delhi does not refer to any seized material/assessment records or any other documents which could suggest that the Additional Commissioner of Income tax, Central Range - 2, New Delhi has duly applied his mind before granting approvals. xxxxx 5. In view of the aforesaid, we find no justification to interfere with the view expressed by the Tribunal. No substantial question of law arises. The appeals fail and shall stand dismissed."

It has been well established through the various judicial pronouncements wherein it has been laid down the purpose for which, such approval u/s.153D of the Act is taken and what are the process which have to be complied with by the competent authority before issuing such approval. The Hon’ble Courts have held that if there is any approval given in mechanical and summary manner that itself defeats the purpose of Section 153D of the Act. The competent authority shall examine the case records for each of the assessment years and though it is not mandatory to give exhaustive reasons for such approval but at least requirement of law shall be complied if such authority pronounces few words in the said approval given which shall reflect his independent application of mind.

As per the aforesaid terms even without going into the merits of the matter on this legal premise itself the appeal of the assessee stands allowed. Since this legal ground is answered in affirmative, therefore, all other grounds on merits including any other legal grounds if any, becomes academic only.