SAVITA GOYAL,DELHI vs. ITO, DELHI

ORDER PER ANUBHAV SHARMA, JM: These are cross appeals preferred by the Assessees as well as the Revenue against the orders of the Ld. Commissioner of Income-tax (Appeals)-II, Delhi & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under:- ITA No. & Appeal No. & Date of AO who passed the Assessment Year order of the Ld. FAA assessment order & Date of order 2820/Del/2012 (A) 73/11-12, dt. 30.04.2012 ACIT, CC-3, Delhi, dated 11.08.2011 3663/Del/2012 (D) - Do - - Do - 2821/Del/2012 (A) 72/11-12, dt. 30.04.2012 - Do - 3657/Del/2012 (D) - Do - - Do - - Do - 3082/De/2012 (A) 71/11-12 dt. 30.04.2012 3658/Del/2012 (D) - Do - - Do -

2. At the time of hearing, the ld. Counsel for the assessee has stressed on disposal of record additional grounds which are common to all the appeals in hand and for convenience, the additional grounds in in the case of the assessee are reproduced below:- “1. That having regard to the facts and circumstances of the case, the impugned assessment order passed by Ld. AO u/s 153A/143(3) is bad in law as the approval obtained u/s 153D is mechanical, without application of mind and is no approval in the eyes of law.

3. That in any view of the matter and in any case, the approval u/s 153D is bad in law.”

ITA No.2409/Del/2015; & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014

on the issue of invalid approval under section 153D of the IT Act may kindly be dismissed for the reason mentioned above, it is submitted that aforementioned ground of appeal on the issue of invalid approval under section 153D of the IT Act may kindly be dismissed for the reason mentioned above it is submitted that aforementioned ground of appeal on the issue of invalid approval under section 153D of the IT Act may kindly be dismissed for the reason mentioned above. The Hon’ble High Court of Kamatka in Rishabhchand Bhansali vs. DCIT in 136 taxman 579 held the approval granted by the JCIT is an administrative act and does not create any right to the appellant. The Hon’ble ITAT Mumbai in the case of Smt. Usha Satisb Salvi vs ACIT Central Circle-4(4), Mumbai in & 4238/Mum/2023 dated 23.01.2025 has examined all the following judgements of the Tribunal and Hon’ble High Courts [Para 6.2] and rejected the objection raised by the assessee that approval granted u/s 153D of the Act has been accorded on presumption and without application of mind rather opined that approval was granted by the Addl CIT after due application of mind.

2. Without prejudice to above objection, It is submitted that combined reading of letter dated Joint CIT/CR-5/ 153D/2019-20/1548 dated 26.12.2019 giving approval under section 153 D of the I.T. Act and letter dated 25.12.2019 seeking approval under section 153D of the I.T, make it amply evident that in the instant case, approving authority i.e. Joint Commissioner of Income Tax, Central Range, 05, New Delhi had applied his mind independently in judicious manner while granting his approval in accordance with the provisions of the Act. It is not a gainsaying that the Joint CIT hold the concurrent jurisdiction and that the assessment is a continuous process involving administrative as well statutory roles being domed by the Joint CIT. And it is incumbent on the approving authority to examine and monitor the assessments which can’t be denied if the same is not reduced in writing at every point of time till the finalization of the assessment. The approval of the approving authority underlines that he has examined the assessment records, relevant copies of seized documents and the relevant issues arising from the material on record judiciously in independent manner by way of due application of mind. It would not be out of place to mention here that the 6 & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 appellant has not come out with any case that there is case of non- application of mind. The appellant has to positively prove that there is a case of non-application of mind in light of the submission that the approval u/s 153D is an administrative approval. Here, it would not be out of place to highlight that the relevant seized documents in a case are always part of the assessment records as per practice, and requirement of the work. They are not kept separately as relevant seized material is frequently referred to by the assessing officer during the course of assessment proceedings and also made part of assessment order most of the time. In fact, as per the law, seized material is considered as part of records before Assessing Officer and all such seized records, return of income, notices etc. used during an assessment proceeding when considered collectively is known as ‘Assessment record’. Therefore, from the letter seeking approval, it is evident that the entire assessment records which included seized material was placed before the approving authority for the purpose of taking decision with regard to approval under section 153D of the Act. In view of the same, it cannot be inferred in any manner from the letter seeking approval by the AO and the letter granting approval by the Joint CIT that approval under section 153D of the Act was granted in mechanical manner without independent application of mind by the Joint CIT.

3. It is pertinent to submit here that, single assessee has been granted approval on single day. Thus, it cannot he considered by any stretch of imagination that the approving authority was not in a position to apply his mind to the facts of the case and issues involved while granting approval under section 153D of the Act. The approving authority had sufficient time to go through all the records and relevant material to arrive at decision granting approval Under Section 153D of the I.T Act in judicious manner in the instant case. Further, in search cases, a Joint CIT is well aware about progress of the assessment proceedings, relevant issues of different assessee, nature and content of the seized material in light of the fact that the as per the CBDT guideline F. No. 286/161/2006-IT (Inv. II) dt. 22.12.2006, copy of appraisal report is shared by Investigation Wing with both that the assessing officer and Joint CIT. In fact, CBDT guideline dt. 22.12.2006 (Copy enclosed) on the subject of the search and Seizure Assessments clearly outlines such close coordination. Thus, as per the prevailing Practice and Guidelines, the approving authority has good idea of issues involved in particular case before hand i.e. much before the cases are sent to him for approval Under Section 153D of the Act. This guideline of CBDT is relevant piece of information, which throws light on the way search assessments are taken up by the filed officers. ; & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 Therefore, in light of such peculiar fact of instant case, it cannot be inferred that the Joint CIT was not in a position to independently apply his mind injudicial manner to the case of assessee on the same day.

4. In this regard, it is further submitted that on perusal of case laws on the issue of requirements for proper approval under section 153D, it is found that Hon’ble jurisdictional high court has emphatically held that such an issue is essentially a question of fact and has to be decided based of factual matrix of a particular case. Further, it has been held that approval cannot be reduced to a mechanical exercise and approving authority is required to apply his/her independent mind while granting such an approval. Thus, all the cases have been decided on this point by Hon’ble Tribunal and Hon’ble High court in light of peculiar facts of those cases only. Some of such peculiar facts of such cases are outlined here in under to emphasize upon distinguishing nature of facts of instant cases from those cases. : Case Name and Peculiar Facts of cases Distinguishing facts of Citation in mentioned in first col. the instant case HIGH COURT OF -No Assessment records Appellant has not been DELHI in the case were sent along with able to prove that its of PCIT vs. Anuj draft assessment order case and facts are in Bansal ITA alliance with the cited 368/2023 Dated -There were infirmities case. July 13,2023 in the figures of Original Return of income and Further, there is nothing Assessed income. on the record to suggest that in the instant case -Addl. CIT did not apply of the assessee, there his mind as he did not were some factual notice such infirmities in the order errors/infirmities. granting approval. None of the peculiar factual aspects are present in the instant case. Therefore, the case of Anuj Bansal had distinguishable facts than those of instant case. HIGH COURT OF The approval order Further, in the instant DELHI in the case failed to make any case, approval is given of Principal mention of the fact that for the case of assessee 8 & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 Commissioner of the draft assessment only. Income-tax v. Shiv orders were perused at Kumar Nayyar all, much less perusal of Therefore, facts of the [2024] 163 the same with an instant case are taxmann.com 9 independent application distinguishable. (Delhi) of mind. Also, in this case of Shiv Kumar Nayyar, there was no fact brought on the record by the Revenue to prove that identical issues (involving similar facts) were involved in different cases submitted for approval by the AO. It was in absence of such factual information that granting of approval for 43 cases in a single day was viewed by the Hon’ble High Court. ITAT NEW DELHI The approving authority In the instant case, in the case of Seh had granted approval in approval is given for the Realtors Pvt. Ltd. 232 cases in a single case of assessee only v. ACIT Central day. Therefore, issue of and that too in single Circle-8 ITA judicious approval for case. Therefore, facts of no.2503/Del/2017 such large number of the instant case are Dated 23.07.2024 cases from the angle of distinguishable. human limitations was an issue before Hon’ble Bench. Reliance is placed in the case of Home Finders Housing Ltd. v Income-tax Officer Ward 2(3), Chennai [2018] 93 taxmann.com 371 (Madras) wherein it was held that in case an order is passed without following a prescribed procedure, the entire proceedings would not be vitiated.

26. We therefore make the position clear that non-compliance of the procedure indicated in the GKN Driveshafts (India) Ltd. ’s case (supra) would not make the order void or non-est. Such a violation in & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. Later, the Hon’ble Supreme Court also dismissed the SLP raised in the matter. Further, reliance is also placed on the judgement of Hon’ble Kerala High Court in OP(C) No. 340 of 2019 against the order in IA 3123/2018 in OS 125/2018 of II Additional Sub Court, Ernakulam dated 23.06.2022, wherein it is held that the “5 Courts should endevour to dispose of a case on merits rather than on default. ” The Apex Court in the case of Improvement Trust, Ludhiyana vs Ujagar Singh & Ors on 09.06.2010 in Civil Appeal NO. 2395 of 2008 also held that “ After all, justice can be done only when the matter is fought on merits and in accordance with law rather to dispose it of on such technicalities and that too at the threshold. Both sides had tried to argue the matter on merits but we refrain ourselves from touching the merits of the matter as that can best be done by the Executing Court which had denied an opportunity to the appellant to lead evidence and to prove the issues so formulated. In our opinion, ends of justice would be met by setting aside the impugned orders and matter is emitted to the Executing Court to consider and dispose of appellant’s objections filed under Order 21 Rule 90 of CPC on merits and in accordance with law, at an early date. It is pertinent to point out that unless malafides are writ large on the conduct of the party, generally as a normal 1 rule, delay should be condoned. In the legal arena, an attempt should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities.”

5. It is submitted that Central Ranges are specialized ranges designated for assessment of search and seizure cases. The structure ensures deep involvement of the Joint Commissioner with each case. These are not routine assessments; the number of cases is limited, and the JCIT plays a crucial role throughout the lifecycle of the case. The assumption by the assessee that the JCIT was a stranger to the assessment work is factually erroneous and perverse. It is further 10 & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 submitted that there cannot be any presumption drawn against the approving authority with regard to application of mind merely on the ground that number of cases approved in a day were high. There cannot be any threshold limit set for the same. How many cases will be considered unreasonably high and how many cases will be considered reasonable? It is submitted that every approval needs to be examined in light of its peculiar facts such as number of issue involved, nature of issue involved, modus-operandi involved, number of cases involved and inter-relationship among facts of such cases. If identical issues are involved involving same modus-operandi and cases are of same search group only, it would not be unreasonable to consider that an approving authority will be able to apply its independent mind judiciously to relatively larger number of cases in a single day. Ultimately, it boils down to factual matrix of the cases sent for approval. In the instant case, in light of the factual matrix that additions were made in different cases of the group on the same ground based on same factual position with regard to same accommodation entry provider and involving same modus-operandi, it would be justified to consider that the approving authority would have been in a position to apply his mind to all such cases sent for approval by the AO on the same day, particularly when number of such cases is not too high and facts/issues involved are in the knowledge of approving authority beforehand i.e. before receiving proposal for approval.

6. It is submitted that Section 153D does not prescribe any specific procedure or method for the grant of approval. As long as Ld. JCIT is satisfied with the draft assessment order and conveys his approval, the mandate of law stands fulfilled.

7. In the present case, the approval was in fact granted under Section 153D. There is no finding that the assessment was so fundamentally flawed as to render it unfit for any reasonable authority to approve it. This is not a case where Approval has not been granted. Although this Hon’ble Tribunal has decided the said issue of approval u/s 153D against the Revenue in several cases including the cases of Brij Kishore (ITA 8878,8788,8879/DEL/2019) and other connected matters and the case of Metro Tyres Ltd. (ITA 103 l/DEL/2013) and other connected matters. It is apprised that Hon’ble Delhi High Court is considering the issue of Approval u/s 153D in ITA 160/2025 and & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 ITA 251/2025 where in Hon’ble Court has issued notice in the Revenue Appeal. Next date of hearing in these matters is 04.09.2025.

8. It is relevant to point out that approval u/s 153D of the Act needs to be put at a different pedestrian in comparison to sanction u/s 151 of the Act. Section 151 deals with prior approval for issuing notices for reopening assessments (such as under section 148). The approval here is for cases where the Assessing Officer believes income has escaped assessment; higher authorities’ consent is required before such notices are issued. If the sanction u/s 151 is not proper, the jurisdictional notice issued u/s 148 has been held to be void. However, the approval u/s 153D has to be granted by the Ld. JCIT once the draft assessment order is prepared by the Ld. Jurisdictional Officer making the assessments u/s 153A/153C of the Act. In these cases, there is no challenge to the validity of search, procedure followed by the Department in search, however the only challenge raised by the assessee in the additional ground before this Hon’ble Tribunal is that the approval granted by Ld. JCIT is mechanical. If the said approval is held to be mechanical, then the submissions of the Revenue is that the matters may be remanded back to the Assessing Officer at the stage of Draft Assessment order which shall not prejudice the assessee and also protect the interest of Revenue.

6. Therefore, it is submitted that even if there were any procedural infirmities, the same do not constitute jurisdictional defects. The Hon’ble Tribunal may kindly remand the matter for fresh approval rather than annulling the entire assessment. In view of the above it is respectfully submitted to kindly take on record the above objections and reject the contention of the assessee on this ground and uphold the order of assessing officer.”

8. The same view is expressed by the Hon'ble Delhi high court in other cases relied upon by the ld.AR. The Hon'ble Orissa High court in the case of Serajjudin & Co reported in [2023] SCC Online Ori 992 which has also been approved by the Hon'ble Supreme Court by dismissal of the SLP vide order dated 28.11.2023 in SLP (C) Diary no. 44989/2023 under identical circumstances has held the approval granted as invalid. Thus by respectfully following the ratio laid down by the Hon'ble jurisdictional high court in the case of Shiv Kumar Nayyar, reported supra, and also in the case of Serajjudin & Co, supra, the approval granted in this case is without application of mind and consequently the assessment order is annulled. The ground of appeal No. 5 of the assessee is allowed.

7.1 Further, reliance can be placed on the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Shiv Kumar Nayyar reported in 2024 (6) TMI 29, dated 15.05.2024 wherein the Hon’ble High Court held as under:-

15. A similar view was taken by this Court in the case of Anuj Bansal (supra), whereby it was reiterated that the exercise of powers under section 153D cannot be done mechanically. Thus, the salient aspect which emerges from the abovementioned decisions is that grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind.

12. As far as the issue of presumption u/s 114(e) of the then Indian Evidence Act is concerned, the ld AR relied on the judgement of the Hon'ble Supreme Court in the case of Suresh Budharmal Kalani alias Pappu Kalani Vs. State of Maharashtra reported (1998) 7 SCC 337, wherein, it was held that presumption can be drawn only from facts, not from other presumptions and only through a process of probable and logical reasoning.

13. We find that if a consolidated approval given by the ld. Addl. CIT for various assessees‟ for various assessment years is to be considered as a approval given for "each assessment year", then it would render the requirement of passing an order for "each assessment year" with prior approval u/s 153D of the Act, nugatory. Therefore, the obligation on the approving authority is to verify the draft assessment order of each assessment year together with the related seized document to ascertain whether it complies with law as well as the procedure laid down. Hence it is established that the action of the ld Additional CIT in granting common approval for all the assessment years for various assessees‟ in a mechanical manner without application of mind is writ large. The relevant observations & 5560/Del/2012, 3935/Del/2014 & 3953/Del/2014 of the Hon‟ble Jurisdictional High Court in the case of PCIT Vs. Shiv Kumar Nayyar reported in 163 taxmann.com 9 (Del HC) are as under:- "11. A plain reading of the aforesaid provision evinces an uncontrived position of law that the approval under Section 153D of the Act has to be granted for "each assessment year" referred to in clause (b) of sub-section (1) of Section 153A of the Act. It is beneficial to refer to the decision of the High Court of Judicature at Allahabad in the case of Pr. CIT v. Sapna Gupta [2023] 147 taxmann.com 288/[2022 SCC OnLine All 1294] which captures with precision the scope of the concerned provision and more significantly, the import of the phrase- "each assessment year" used in the language of Section 153D of the Act. The relevant paragraphs of the said decision are reproduced as under:- "13. It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of the Act, requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise of power. *** 19. The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A."