SANJAY KUMAR PROP SHREE BALAJI OIL MIL,BHIWANI vs. DCIT CENTRAL CIRCLE-I, GURGAON

Now, in regard to the merits of this ground, the ld. AR took us through the copy of approvals granted u/s 153D of the Act. The copies of same are available at page Nos. 184 of the paper book in and in ITA No.1400/Del/2023 at page no. page 388 of the paper book and both these approvals are given by the same Joint Commissioner of Income-tax, Range-2, Gurgaon.

This all has been countered by the ld. DR by submitting that when the letter seeking approvals is seen, the AO had sent draft assessment order in the case of these assessee along with the relevant assessment records to the approving authority and based upon the same, the approvals have been given 6.1 It is further submitted by the ld. DR that from the content of approval letter, it is evident that the approving authority has accorded approval only after ‘considering’ all the issues appearing from the material on record and it was submitted that the use of word ‘considering’ is sufficient to indicate application of mind and the approval orders need not be elaborate or descriptive, but, should only show that the approval is not accorded in a mechanical manner.

We have given thoughtful consideration to the matter on record and the submissions of the ld. representatives and we consider it appropriate to refer to the findings of the coordinate Bench decision in the case of SEH Realtors Pvt. Ltd. (supra) which to a great extent covers the submissions of the ld. DR. In para 8, certain principles with regard to the approval u/s 153D have been acknowledged and we would like to reproduce the same below:- “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 ld. JCIT, in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the ld. JCIT is a quasi judicial proceeding requiring application of mind by the ld. 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 ld. JCIT well in time much before the due date of completion of search assessment. The ld. JCIT is supposed to examine the seized documents, questionnaires raised by the Ld. AO on the assessee 10 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- à-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the ld. JCIT in a judicious way after due application of mind. Even though as vehemently argued by the Ld. CIT-DR, the ld. JCIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the ld. JCIT, while granting the approval u/s 153D of the Act has to independently apply Page | 7 SEH Realtors Pvt. Ltd 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 ld. 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 ld. JCIT u/s 153D of the Act. The ld. 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 ld. 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 ld. 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 ld. 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 ld. 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 ld. AO to accept the said Page | 8 SEH Realtors Pvt. Ltd letter containing details or reject the same as it was not filed within the stipulated time. On the contrary, if the ld. 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 ld. 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 ld. JCIT need not apply his mind while granting approval of the draft 11 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 ld. JCIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the Ld. AO.”

In the light of aforesaid we like to further observe that it is the settled proposition of law that as regards examining the issue like valid approval, every case has to be examined independently on its own facts. This principle equally applies to the approving authority. In the cases in hand, if we examine the approval, we find that the approving authority was same person for these assessee and that although on two different dates the approvals have been granted, the language used in approvals and the format of the approvals is exactly same. We consider it appropriate to reproduce the conclusion of approving authority, in both the approvals, herein below:- “2. The approval u/s 153D of the IT Act, 1961, is accorded in the above cases for the above mentioned A.Y (s) considering the facts as submitted that 1. Proper opportunity of being heard were provided to assessee 2. All the issues appearing from the material on record were duly examined. 3. Relevant copies of seized documents were verified before passing the draft order. 4. It is further directed that orders should be passed well before the limitation and copies of the final orders so passed be sent to this office for records.”

However, what we find in the two cases before us is that the Assessing Officer had in fact rejected the books of account of both the assessee and, thereupon, proceeded to consider the purchases as bogus and to recalculate the profits. When such is the situation, by mentioning in the approval order that ‘relevant copies of seized documents’ were verified by AO, before passing the draft order indicates that the approval was given without examining the actual issues and evidences relied in the draft assessment order.

The ld. DR has although cited certain distinguishing facts with regard to the decisions relied by the ld. AR, however, we are of the considered view that as far as the proposition of law is concerned, one thing is certain that the approval order should be speaking and from the same itself, it should be reasonably decipherable that there was application of active mind on the draft assessment order and not merely a passive action of granting the approval in a 13 mechanical manner, by mentioning in many words that assessment record is considered. Thus, after going through the approval as granted in the cases before us, we are not inclined to accept the plea of the ld. DR that the same has been passed with active consideration of the assessment record so as to endorse the draft assessment orders.

We are of considered view that this argument of revenue that as the approving authority is well informed of the assessment proceedings in due course of supervision, so the approvals need not be very elaborate, rather goes against the revenue, as that cannot mean that when approval is given, the same is mere formality. We are of considered view that the approval is not given for validating an act of the AO. The approval order should indicate to the assessee that there is due exercise of powers of search assessment, under correct provisions of Act and admissible material relied to make additions. In the cases before us, the use of identical languages and reasoning in regard to different set of assessee for whom approval requests were independently received and on different dates the approval was granted, manifests that there was mechanical approval, without going through the records and draft assessment orders.

Particularly in regard to the we find force in contention of Ld. AR that giving an approvals of an assessee whose case was all together and for which already approval stood granted on 15.11.2019 shows

In the result, the approvals granted in the cases before us are established to be invalid and consequential assessments not sustainable. The relevant grounds in both appeals are sustained and the appeals of both the assessees are allowed.