KARISHMA JAIN,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, GUWAHATI

As per record, the appeal pertains to Assessment Year ["AY"] 2015-16. The dispute essentially emanates from a search and seizure operation which was conducted on 18.11.2016 under Section 132 of the Act by the Investigation Wing in Nayyar Group of cases, including the residential premises of the assessee. The said operation was followed by a survey operation under Section 133A of the Act.

Pursuant to the aforenoted search, an order under Section 127 of the Act was passed which led to centralization of the case of the assessee. Consequently, a notice under Section 153A of the Act was issued to the assessee on 22.09.2017. In response to the said notice, the assessee filed its Income Tax Return ["ITR"] on 14.08.2018, declaring an income of ₹18,48,450/- and the same was processed as per the provisions of Section 143(1) of the Act. Subsequently, the case of the assessee was picked up for scrutiny assessment and a notice under Section 143(2) was duly issued.

However, the Revenue preferred an appeal against the order of the CIT(A) before the ITAT, wherein, the approval under Section 153D of the Act by the competent authority was found to be flawed and mechanical in nature and as a sequitur, the entire search assessment was declared to be illegal.

Learned counsel for the Revenue submitted that there is no infirmity in the approval granted by the concerned authority and therefore, the ITAT has erred in declaring the assessment order to be invalid. He contended that merely because the approval was granted on the same day when the draft assessment orders were sent by the AO, the same cannot be a ground to hold that the approval was accorded without any application of mind. According to him, since the authority granting approval has been involved in the assessment proceedings from the initial days, the same

During the course of arguments, learned counsel for the assessee apprised this Court that the Special Leave Petition preferred by the Revenue against the decision in the case of Serajuddin “Considering the submissions of the learned counsel for the parties and having perused the order of the Tribunal, in view of the undisputed facts before us about the manner in which the approval to the draft assessment order was granted under Section 153D for the assessment proceedings, by a letter dated 30.12.2017 in 85 cases placed before the approving authority in a single day, we are required to examine as to whether a substantial question of law arises for consideration before us so as to admit the present appeal. To answer the same, we are required to go through the relevant provisions of the Income Tax Act. Section 132 provides the procedure for search and seizure operations in consequence of the information in possession of the Income Tax Authorities. Section 153A prescribes assessment in case of search or requisition. Section 153A provides that in the case of a person where a search is initiated under Section 132, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, 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), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may apply accordingly as if such return were a return required to be furnished under Section 139. Section 153D of the Act relevant for our purposes is to be noted hereinunder: "Prior approval necessary for assessment in cases of search or requisition. 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." 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 [Principal Commissioner or] Commissioner under sub-section (12) of section 144BA. The Tribunal while quashing the assessment order had relied upon its earlier decision in Navin Jain and Others (Supra) wherein a detailed discussion has been made with regard to the requirement of prior approval of superior authority on the draft assessment order under Section 153D, before passing the assessment order by the Assessing Officer. It was noted that the word 'approval' though has not been defined in the Income Tax Act but the general meaning of the word 'approval' in Black's Law Dictionary, 6th Edition was to be seen. The decision of the Apex Court in Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer (2003) 5 SCC 83 wherein the distinction between Approving Authority and Appellate Authority was drawn, had been noted. The decision of the High Court of Gauhati in Dharampal Satyapal Ltd. vs. Union “21. 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. No. Name of the assessee Section under which order passed Asst. Year 1 M/s Serajuddin& Co, 19A, u/s.153A/143(3)/144/145(3) 2003-04 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 3.11. The appeal of the assessee is allowed.

In the result, the all the appeals of the assessees are allowed.