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

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G : NEW DELHI

BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.429/Del/2024 Assessment Year: 2014-15 Sanjay Kumar, Vs DCIT, Prop. Shree Balaji Oil Mill, Central Circle-I, Ch. Dadri, Raillway Road, Gurgaon. Bhiwani, Haryana – 127 306. PAN: AICPK8564H ITA No.1400/Del/2023 Assessment Year: 2015-16 Sunil Gupta, Vs DCIT, Prop. M/s OP Cotton and Oil Mills, Central Circle-I, Charkhi Dadri, Gurgaon. Bhiwani, Haryana. PAN: AERPP6633H

(Appellant) (Respondent) Assessee/ Appellant by : Shri Lalit Mohan, CA & Shri Parth Singhal, Advocate Revenue by : Shri Dharm Veer Singh, CIT-DR Date of Hearing : 01.08.2024 Date of Pronouncement : 30.09.2024

ITA No.429/Del/2024 ITA No.1400/Del/2023

ORDER PER ANUBHAV SHARMA, JM: The present appeals have been filed by two different parties and the details of the relevant impugned orders are as below:- ITA No. & Details of the order Details of the Section of the IT Assessment year of the CIT(A) order of the AO Act, 1961 under which the assessment order was passed 429/Del/2024 CIT(A)-3, DCIT, Central 153A A.Y. 2014-15 Gurgaon, Circle-I, Appeal No. Gurugram, 10423/2019-20, assessment order order dated dated 30.12.2019 07.11.2023 1400/Del/2023 CIT(A)-3, DCIT, Central 153C r.w.s. A.Y.: 2015-16 Gurgaon, Appeal Circle-I, 143(3) No. 10582/2019- Gurugram, 20, order dated, assessment order 28.02.2022 dated 30.12.2019 2. These two cases were heard separately, but, on conclusion of the hearing, on going through the records, it was found that both the appellants belong to the town Charkhi Dadri in District Bhiwani, Haryana. The date of search in both the cases is 23.08.2017. Their respective search cases were centralized with Central Circle-I, Gurgaon, vide order u/s 127(2) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by PCIT, Hissar on 09.10.2018. As there was certain relevancy between the two appeals of which we could take

ITA No.429/Del/2024 ITA No.1400/Del/2023 judicial notice, we considered it appropriate to dispose of them together by this common order.

3.1 The ld. AR in both the appeals had stressed for disposal of the ground raised in the appeals on the issue of invalid approval u/s 153D of the Act. The ld. DR submitted that this is an additional ground and even if it is of pure legal nature, the assessee is required to explain the reasons for failure to raise such ground of appeal before the ld. First Appellate Authority and for which ld. AR have not established anything.

3.2 In this context, we are of the considered view that when a pure question of law goes to the very root of the exercise of the jurisdiction by any judicial or quasi judicial authority, then, the aggrieved party can raise the issue at any stage, including appeal or revision and to some extent even in collateral proceedings. Thus, the nature of ground before us of an invalid approval u/s 153D of the Act, substantially goes to the root of the valid exercise of jurisdiction by the AO and, thus, the assessee can raise the same here before us for the first time, without actually explaining the reasons for not raising it before the ld. FAA.

ITA No.429/Del/2024 ITA No.1400/Del/2023 available at page Nos. 184 of the paper book in ITA No.429/Del/2024 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.

4.1 As with regard to ITA No.429/Del/2024 Ld. AR has submitted that on 27.12.2019, the AO sought approval and on the same date, 27.12.2019, this approval was granted and on 30.12.2019 the impugned assessment order was framed and passed.

4.2 As with regard to the ITA No.1400/Del/2023 Ld. AR has submitted that on 30.12.2019, the AO sought approval of six assessee involving 30 assessment years and, on the same date, 30.12.2019, this approval was granted and on the same date the impugned assessment order was framed and passed.

4.3 In both the appeals relying the respective approvals, Ld. AR submitted that the impugned approval does not indicate if the approving authority had examined the draft order to find if the same is reasoned and requirement of law is fulfilled. It was submitted that the impugned approval letter does not indicate if the assessment record was perused and the ld. AR submitted that the approval cannot be supplemented by anything which has not been shown to have been considered while passing the approval order. It was submitted that in the approval, the approving authority has merely endorsed the submissions of

ITA No.429/Del/2024 ITA No.1400/Del/2023 the AO without independently examining the issue and reaching a conclusion. In this context, the ld. AR has specifically referred to the words “considering the fact as submitted” to contend that the approving authority has merely gone on the basis of the submissions and certification of the AO and there was no independent application of mind. He does not mention that as approving authority he had perused the draft assessment order.

4.4 As with regard to the ITA No.1400/Del/2023 Ld. AR has submitted that the very fact that by one stroke approval for six assessee was given establishes non-application of mind by the approving authority while Ld. AR representing assessee in ITA No.429/Del/2024, submitted that approval for multiple years is granted under one approval, while each assessment year is independent.

4.5 As with regard to the ITA No.1400/Del/2023 Ld. AR specifically pointed out that the non-application of mind is very much decipherable from the fact that the approving authority has granted a common and composite approval for six assessee involving 30 assessment years. However, in fact, order of assessment for AY 2012-13 in the case of M/s Makrania group Gum & Chemicals arising out of search dated 23.08.2017 has already been passed on 15.11.2019 u/s 153A r.w.s. 153A of the Act, vide a separate approval dated 15.11.2019 and a copy of this was filed before us and supplied to ld. DR at the time of arguments.

ITA No.429/Del/2024 ITA No.1400/Del/2023 5. The Ld. AR has relied the following decisions, common for both the appeals:- (i) PCIT vs. Anuj Bansal (2023) 117 CCH 0050 Del HC, (ii) PCIT vs. Shiv Kumar Nayyar (2024) 163 taxmann.com 9 (Delhi), (iii) SEH Realtors Pvt. Ltd. vs. ACIT, ITA No.2503/Del/2017, order dated 23.07.2024; (iv) Rishabh Buildwell (P) Ltd. vs. DCIT, ITA No. 2122/D/2018, order dated 04.07.2019 (v) MDLR Hotels (P) Ltd. vs. ACIT 67 CCH 0100 (Del Trib.), order dated 08.02.2023; (vi) PCIT vs. Anuj Bansal, 2023 SCC Online Del 4159, order dated 13.07.2023; (vii) PCIT vs. Anuj Bansal, ITA No. 8/2024 (Del), order dated 28.03.2024; (viii) Pr. CIT vs. Subodh Agarwal, 149 taxmann.com 373 (All), order dated 12.12.2022; (ix) Pr. CIT vs. Siddarth Gupta, 450 ITR 534 (All), order dated 12.12.2022; (x) PCIT vs. Sapna Gupta, 147 Taxmann.com 288 (Allahabad), order dated 12.12.2022; (xi) ACIT vs. M/s Serajuddin & Co., 454 ITR 312 (Orissa), order dated 15.03.2023 affirmed by Hon’ble Supreme Court in SLP (Civil) Diary No. 44989/2023 dated 15.3.2023; (xii) ACIT vs. Janak Raj Gupta & Co., ITA No. 62 l/D/2012, order dated 15.12.2023; (xiii) Mysore Finlease (P) Ltd. vs. ACIT, ITA No. 8821/D/2019, order dated 10.01.2024; (xiv) DCIT vs. Zync Global (P) Ltd., ITA Nos. 4456 & 4457/D/2019, order dated 22.01.2024; 6

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(xv) MDLR Airlines (P) Ltd. vs. DCIT, ITA No. 1420/D/2023, order dated 29.04.2024; (xvi) Nageshwar Builders (P) Ltd. vs. DCIT, ITA No. 1661/D/2023, order dated 29.04.2024; (xvii) Millenium Vinimay (P) Ltd. vs. ACIT, ITA No. 458/D/2022, order dated 31.05.2024; (xviii) Vrushali Sanjay Shinde vs. DCIT, 107 ITR(T) 274 (Mum-Trib.), order dated 08.09.2023; (xix) Yogendra Kumar Garg vs. DCIT, ITA No. 2908/D/2018, order dated 26.06.2024; (xx) PCIT vs. Smt. Shreelekha Damani 174 DTR 86 (Bom), order dated 27.11.2018 affirming the decision of Hon’ble Mumbai Bench of Tribunal in case of Smt. Shreelekha Damani vs. DCIT reported in 173 TTJ 332 (Mum); (xxi) Arch Pharmalabs Ltd. vs. ACIT, ITA No. 6656/Mum/2017, order dated 07.04.2021; (xxii) Shiv Kumar Nayyar vs. ACIT, ITA No. 1282/D/2020, order dated 26.07.2023 affirmed by Hon’ble Delhi High Court in ITA No. 285/2024 (Del) PCIT vs. Shiv Kumar Nayyar, order dated 15.5.2024; (xxiii)Veena Singh vs. ACIT, ITA No. 294/D/2022, order dated 24.04.2024; and (xxiv) HiKlass Moving Picture (P) Ltd. vs. ACIT, ITA No. 296/Mum/2013, order 30.09.2016

ITA No.429/Del/2024 ITA No.1400/Del/2023 and, thus, the ld. DR has distinguished the case of the assessee with the case law relied by the ld. AR.

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.

6.2 It was submitted that while granting approval the concerned authority has mentioned that proper opportunity of being heard was given to the assessee and all issues appearing from the material on record were duly examined and relevant copies of seized materials were verified before passing the draft order and this shows active application of mind.

6.3 As far as question of granting common approvals, in one stroke is concerned, it was submitted by Ld. DR that in case of search on a group, most of the time issues are common across different assessee or for different assessment years, therefore, a common approval does not vitiate the whole exercise done by the approving authority. It was submitted that in these cases additions were made on two issues which were similar and, therefore, the common approval was good enough.

ITA No.429/Del/2024 ITA No.1400/Del/2023 6.4 The ld. DR has then submitted that in search cases Joint CIT is well aware of the progress of the assessment proceedings, relevant issues of different assessee, nature and content of seized material at every stage during the assessment itself and, in fact, the authority has supervisory role also, therefore, if approval is granted on the same day that cannot be fatal. In this context, the CBDT Guidelines F.No.286/161/2006-IT (Inv.II) dated 22.12.2016 is relied to submit that copy of appraisal report is shared by Inv. Wing with both the Assessing Officers and Joint CIT and, further, CBDT Guidelines on the subject of search required a close coordination of all the authorities.

6.5 The ld. DR distinguished the judgement in the case of PCIT vs. Anuj Bansal (2023) 117 CCH 0050 Del HC and submitted that in that case no assessment record was sent along with the draft order and there were infirmities in the original return and assessed income and for that reason, the approval may have been vitiated. As regards the judgement in PCIT vs. Shiv Kumar Nayyar (2024) 163 taxmann.com 9 (Delhi), it was submitted that in that case the approval order failed to make any mention of the fact that draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. It was also submitted that in the case of Shiv Kumar Nayyar (supra), there was no fact brought on record by the Revenue to prove that identical issues were involved in different cases submitted for approval by the AO and in those circumstances granting of approval for 43 cases in a single

ITA No.429/Del/2024 ITA No.1400/Del/2023 day was considered by the Hon’ble High Court. Then, referring to the judgement of the coordinate Bench in SEH Realtors Pvt. Ltd. vs. ACIT, ITA No.2503/Del/2017, order dated 23.07.2024, which is authored by one of us (Hon’ble AM), it was submitted by the ld. DR that approving authority in that case had granted approval in 238 cases in a single day. Therefore, the issue of judicious approval for such a large number of cases from the angle of human limitation was an issue before the Hon’ble Bench. It was submitted that there can be no presumption drawn against approving authority with regard to non- application of mind.

ITA No.429/Del/2024 ITA No.1400/Del/2023 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

ITA No.429/Del/2024 ITA No.1400/Del/2023 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.”

We are of the considered view that merely by using the words 9. ‘consideration’ or mentioning that certain mandatory compliances have been

ITA No.429/Del/2024 ITA No.1400/Del/2023 done by the AO, the approving authority cannot justify the approval order so as to show that there has been actual consideration of the assessment record and the draft assessment order. The use of words ‘approval’ in the statute does not merely mean a permission or sanction, but approval order should show that the reasons for reaching a finding in draft assessment order, were examined and that material relied by the AO for concluding that income was concealed or misreported, was on the basis of incriminating material and its evidentiary value to make addition has been examined by the AO.

ITA No.429/Del/2024 ITA No.1400/Del/2023 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.

ITA No.429/Del/2024 ITA No.1400/Del/2023 quite mechanical way of handling this important quasi judicial power u/s 153D of the Act.

Order pronounced in the open court on 30.09.2024. Sd/- Sd/- (M. BALAGANESH) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30th September, 2024. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi