M/S. SEH REALTORS PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

The ld AR also submitted that the meaning of “approval“ as contemplated u/s 153D of the Act is that the ld JCIT is required to verify the issues raised by the ld AO in the draft assessment order, apply his mind and ascertain whether the entire facts have been appreciated properly by the ld AO together with the supporting evidences. The said approval proceeding is a quasi judicial function to be performed by the ld JCIT based on sound reasoning on due examination of the seized documents, replies filed by the CO No. 9/Del/2022 SEH Realtors Pvt. Ltd assessee and the draft assessment order of the ld AO. It is highly impossible for the Ld JCIT to grant approval to all the assessment orders on the very same day on receipt of draft assessment orders for various assessment years comprising various issues. Accordingly, the ld AR submitted that the ld JCIT had granted approval by devoting very few minutes for each case in a mechanical manner u/s 153D of the Act without due application of mind. Accordingly, he pleaded that this type of approval cannot be treated as a valid approval contemplated u/s 153D of the Act and consequentially, the entire assessment framed in the hands of the assessee for Asst Year 2013-14 requires to be quashed as void ab initio. In support of this argument, the ld AR placed heavy reliance on the decision of the coordinate bench decision of this tribunal in the case of Shiv Kumar Nayyar Vs. ACIT in to 1285/Del/2020; ITA No. 1078/Del/2021 and ACIT Vs. Shiv Kumar Nayyar in ITA No. 1867/Del/2021 dated 26.07.2023 wherein, this Tribunal had placed reliance on the decision of the Hon‟ble Orissa High Court in case of ACIT Vs. M/s. Serajuddin and Co. in ITA Nos. 39 to 45 of 2022 dated 15.03.2023; decision of Hon‟ble Allahabad High Court in the case of PCIT Vs. Subodh Aggarwal in Income Tax Appeal No. 86/2022 dated 12.12.2022 and the decision of the Hon‟ble Jurisdictional High Court in the case of ACIT Vs. Anju Bansal in ITA 368/2023 dated 13.07.2023 had quashed the search assessment proceedings as there was no valid approval u/s 153D by the ld JCIT. He also placed on record that this tribunal decision in the case of Shiv Kumar Nayyar has been approved by the Hon‟ble Jurisdictional High Court in the case of PCIT vs Shiv Kumar Nayyar reported in 163 taxmann.com 9 (Del) dated 15.5.2024.

Per contra, the Ld. DR vehemently argued that the role of ld. JCIT, Central Range is totally different from the role of a JCIT in the normal range. CO No. 9/Del/2022 SEH Realtors Pvt. Ltd He argued that in a Central Range, the ld. JCIT is involved in the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and is involved with the Ld. AO from time to time while issuing various questionnaires to the assessee. The ld. JCIT in Central Range also examine the seized documents in detail immediately after receipt of the appraisal report and provides able assistance to the Ld. AO about the interpretation of the said seized documents while issuing questionnaires to assessee, examining the replies filed by the assessee and drawing conclusions thereon. Hence, it is very easy for the ld. JCIT to grant approval of the draft assessment order on the same day since he is involved with the assessment proceedings right from the inception. Accordingly, he argued that the objection raised by the Ld. AR has no force. Further, the Ld. DR vehemently argued that bare reading of provisions of section 153D of the Act talks only about existence of approval from the ld. JCIT. There is no mention of application of mind on the part of the ld. JCIT or the approving authority in the said section. The expression „application of mind‟ is only provided by the judicial decisions and not provided in the statute. Hence the Ld. DR argued that literal interpretation is to be given to the provisions of section 153D of the Act which does not provide for application of mind of the approving authority and hence any other interpretation contrary to the same would only result in re-writing the law. The Ld DR also argued that the assessee files details at the last moment and that is why the approval is obtained from ld JCIT in the last moment. The Ld DR also argued that the ld. JCIT or ld. Additional CIT does not look into the figures and even if there are mistakes in the figures, the same would not vitiate the assessment proceedings. The ld DR further submitted that the RTI information was obtained by the assessee on 22.3.2022 only and hence the same constitutes additional evidences which should not be admitted by this tribunal. He also CO No. 9/Del/2022 SEH Realtors Pvt. Ltd argued that this issue of approval being granted u/s 153D of the Act in a mechanical manner was never raised by the assessee before the ld. CIT(A). The ld. DR also relied on the decision of Hon‟ble Karnataka High Court in the case of Rishabchand Bhansali vs DCIT reported in 267 ITR 577 (Kar) and also on the guidelines issued by the Central Board of Direct Taxes (CBDT) dated 22.12.2006 on the subject of Search and Seizure Assessments.

At the outset, we find that the decision relied by the ld. DR of Hon‟ble Karnataka High Court referred supra is factually distinguishable as it was dealing with the issue of whether it is mandatory on the part of the ld JCIT or ld Additional CIT to give opportunity of hearing to the assessee before granting approval of draft assessment orders under the erstwhile block assessment proceedings in terms of section 158BG of the Act . This is not the issue involved herein in the instant case. The issue here is whether the approval has been granted by the ld. JCIT or ld. Additional CIT u/s 153D of the Act after due application of mind and not the question of granting opportunity to the assessee before granting approval. Hence the reliance placed by the revenue on the decision of Hon‟ble Karnataka High Court referred supra would not advance the case of the revenue.

Further reliance was placed by the ld. DR on the CBDT guidelines dated 22.12.2006. We have gone through the said guidelines placed on record by the ld. CIT DR. On perusal of the said guidelines, we find there is not even a whisper regarding the approval proceedings to be granted u/s 153D of the Act by the competent authority. It only says that JCIT/ Addl CIT is also part of the assessment proceedings right from the time of receipt of appraisal report. The said guidelines only reiterate the statutory provisions and the manner in which search assessments are to be framed by the Assessing Officer in the manner known to law. It no where even whispers CO No. 9/Del/2022 SEH Realtors Pvt. Ltd that approval u/s 153D of the Act could be granted by the ld. JCIT / ld. Addl CIT without any application of mind. In any event, in our considered opinion, the CBDT guidelines relied upon by the ld. DR does not have any statutory force. Hence the reliance placed thereon would not advance the case of the revenue.

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 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 CO No. 9/Del/2022 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 CO No. 9/Del/2022 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 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.

Let us now examine whether in the aforesaid background of the scheme of the Act, whether the approval in terms of section 153D of the Act has been granted by the ld. JCIT in a judicious way after due application of mind or not, in the instant case. We have gone through the approval granted by the ld. JCIT on 27.03.2015 u/s 153D of the Act. The said approval letter clearly states that a letter dated 27.03.2015 was filed by the Ld. AO before the ld. JCIT seeking approval of draft assessment order u/s 153D of the Act. The ld. JCIT has accorded approval for the said draft assessment order on the very same day i.e. on 27.03.2015 for various assessment years for 232 files on a single day. In any event, whether is it humanly possible for an approving authority like the ld. JCIT to grant judicious approval u/s 153D of the Act for all the assessment years on a single day is the subject matter of dispute before us. Further, we find that similar issue has been addressed by CO No. 9/Del/2022 SEH Realtors Pvt. Ltd the Hon'ble Jurisdictional High Court in the case of PCIT vs. Anju Bansal in ITA 368/2023 order dated 13.07.2023 wherein, under similar circumstances, the Hon'ble Delhi High Court categorically held that statutory approval given by a quasi judicial authority without due application of mind as contemplated in section 153D of the Act would be fatal to the entire search assessment proceedings. The relevant operative part of the said order is reproduced below:-

In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in holding that the approval u/s 153D of the Act has been granted by the ld. JCIT in the instant case before us in a mechanical manner without due application of Page | 11 CO No. 9/Del/2022 SEH Realtors Pvt. Ltd mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decisions of the Hon'ble Orissa High Court; Hon'ble Allahabad High Court and Hon‟ble Jurisdictional High Court (Delhi High Court) referred to supra. Hence, we find lot of force in the arguments advanced by the Ld. AR in support of the ground raised in the Cross Objections of the assessee. Hence the assessment framed for the Asst Year 2013-14 by the ld. AO is hereby declared as void abinitio and is hereby quashed. Accordingly, the ground raised by the assessee in the Cross Objection is hereby allowed.

Since, pursuant to the allowing of the Cross Objections of the assessee, the entire assessment framed in the hands of the assessee is to be declared illegal and bad in law, the other legal grounds and grounds on merits raised by the assessee as well as by the revenue need not be gone into, as adjudication of the same would be merely academic in nature and, hence, they are left open.

In the result, the appeal of the assessee is allowed, cross objections of the assessee is allowed and appeal of the revenue is dismissed.