GURVINDER SINGH DUGGAL,NEW DELHI vs. ACIT CENTRAL CIRCLE-06, NEW DELHI

These additional grounds go to the root of the matter and all the facts relevant for its adjudication are already on record. Hence, in view of the decision of the Hon'ble Supreme Court in the case of NTPC Ltd reported in 229 ITR 383 (SC), these additional grounds are hereby admitted and first taken up for the purpose of adjudication.

We have heard the rival submissions and perused the material available on record. A search and seizure operation u/s 132 of the act was carried out in the Dawar Group of cases on 03.01.2018. A separate search warrant of authorization u/s 132 of the Act was issued in the name of the assessee also on 09.01.2018. The case of the assessee stood centralized vide order dated 20.09.2018 from ACIT, Central Circle-30(1), New Delhi to ACIT, Central Circle, Delhi. A notice u/s 153A of the Act stood issued to the assessee on 23.09.2019. The assessee for AY 2012-13 had already filed his original return of income on 28.09.2012 declaring income of ₹17,30,550/- which was duly processed u/s 143(1) on 13.12.2013. No assessment was framed either u/s 143(3) or u/s 147 of the Act for the AY 2012-13 before the date of search. In response to the notice issued u/s 153A of the Act, the assessee filed his return of income on 30.09.2019, declaring total income of ₹17,30,550/- which was the same income as was disclosed in the original return of income.

The assessee for AY 2016-17 had already filed his original return of income on 25.07.2016 declaring income of ₹17,16,430/- which was duly processed u/s 143(1) on 16.09.2016. No assessment was framed either u/s 143(3) or u/s 147 of the Act for the AY 2016-17 before the date of search. In response to the notice issued u/s 153A of the Act, the assessee filed his return of income on 30.09.2019, declaring total income of ₹17,16,430/- which was the same income as was disclosed in the original return of income.

The assessee for AY 2017-18 had already filed his original return of income on 29.11.2017 declaring income of ₹4,13,470/-. No assessment was framed either u/s 143(3) or u/s 147 of the Act for the AY 2017-18 before the date of search. In response to the notice issued u/s 153A of the Act, the assessee filed his return of income on 30.09.2019, declaring total income of ₹4,13,470/- which was the same income as was disclosed in the original return of income.

For the AY 2018-19, the assessee filed his original return of income on 22.10.2018 declaring total income of ₹1,50,130/- and since search was initiated on 09.01.2018, a notice u/s 143(2) of the Act was issued to the assessee on 23.09.2019, which was duly served.

The assessments were completed u/s 153A/ 143(3) of the Act, as the case may be, as tabulated under:-

Later a rectification order u/s 154 of the Act was passed by the ld AO for all these assessment years as under:-

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. She 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.

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 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 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 the date mentioned in the table hereinabove u/s 153D of the Act. The said approval letter clearly states that a letter dated 30.12.2019 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 orders on the very same day i.e., on 30.12.2019 for various assessment years. 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, section 153D of the Act provides that approval has to be granted for each of the assessment year whereas, in the instant case, the ld. JCIT has granted a single approval for all assessment years put together.

Further, we find that similar issue has been addressed by 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 precedent 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 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 additional grounds raised for all assessment years under consideration before us. Accordingly, the Additional Grounds raised by the assessee for all the assessment years under consideration are hereby allowed.

Since, pursuant to the allowing of the additional grounds, the entire search 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 for various assessment years 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 appeals of the assessee are allowed.