M/S SHRI GURMUKHDAS CONTRACTORS P LTD,BHOPAL vs. DCIT-CENRRAL-1, BHOPAL

PER BENCH:

The bunch of cross appeals and cross objections filed by the respective parties are directed against the common order dated 27.01.2020 passed by the CIT(A)-3, Bhopal, arising out of the common assessment order passed by the DCIT, Central-1, Bhopal under Section 153A r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for A.Y. 2011-12 to 2016-17 and under Section 143(3) of the Act for A.Y. 2017-18 all dated 30.12.2018. A.Ys. 2011-12 to 2015-16 are unabated assessments. In A.Y. 2017-18, assessee filed penalty appeal against order dated 20.03.2020 passed by CIT(A)-3, Bhopal under Section 271AAB (1A)(b) of the Act.

(i) Firstly, the approval granted by the Ld. Addl.CIT dated 29.12.2018 under Section 153D of the Act is not in terms of the statutory provision neither in consonance with the CBDT Circular dated 12.03.2008 in all assessment years commencing from A.Ys. 2011-12 to 2017-18.

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(ii) Secondly, in the absence of incriminating material found during the course of search, addition in respect of unabated assessment i.e. from A.Ys. 2011-12 to 2015-16 is not sustainable in the eye of law. It is relevant to mention that where the assessee has not filed the cross objection, the assessee has filed an application under Rule 27 of the IT Rules raising this particular ground that the approval granted by the Addl.CIT, Central, Bhopal under Section 153D of the Act dated 29.12.2018 is in mechanical and routine manner, without application of mind and therefore, the entire proceeding is vitiated. The same is, therefore, liable to be quashed.

On this count, he has relied upon the judgment passed by the Hon’ble Supreme Court in case of National Thermal Power Co Ltd., reported in (1998) 229 ITR 383 (SC), whereby and whereunder it was held that the assessee is entitled to urge question of law on the basis of facts already available on record particularly when the Tribunal is having jurisdiction to examine such question of law which never raised before the authorities below but raised before it for the first time.

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members, their related cocnerns and other associates on 20.12.2016 where the assessee company was also covered under Section 132 of the Act. The case was centralized in the jurisdiction of DCIT, Central-1, Bhopal by the CIT, Bhopal under Section 127 of the Act. Notices under Section 153A of the Act for six assessment years commencing from A.Ys. 2011-12 to 2016-17 were issued on 24.09.2018 and the copies of all seized materials have been served and provided to the assessee whereupon written reply dated 19.11.2018 was filed informing the fact of filing of return on 20.10.2018 in compliance to the notice under Section 153 of the Act for the said six assessment years. The returns were duly examined and the relevant details were as follows:

A.Y. Date of Total income Date of filing Total Income Additional filing of (in Rs) of return declared in income return u/s 153 A Return u/s 153 A offered (In u/s (In Rs.) 139(1) Rs)

2011-12 31.03.2012 2,63,25,890/- 20.10.2018 2,63,25,890/- Nil

2012-13 31.03.2013 2,20,55,760/- 20.10.2018 2,20,55,760/- Nil

2013-14 31.10.2013 2,58,43,9407- 20.10.2018 2,58,43,940/- Nil

2014-15 28.11.2014 1,73,19,8307- 20.10.2018 1,73,19,8307- Nil

2015-16 29.10.2015 3,79,56,990/- 20.10.2018 3,79,56,9907- Nil

2016-17 16.10.2016 9,56,23,770/- 20.10.2018 9,56,23,7707- Nil

2017-18 30.03.2018 17,72,45,780/- Not Applicable Not Applicable Nil (Current Year)

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4.1 Subsequently, notice under Section 143(2) of the Act for A.Y. 2017-18 dated 24.09.2018 followed by notice under Section 143(2) r.w.s. 153A of the Act dated 31.10.2018 for A.Ys. 2011-12 to 2016-17 were issued and served upon the assessee. Needless to mention that questionnaires were duly issued for the said assessment period on 31.10.2018. Further, notice under Section 142(1) of the Act containing the detailed questionnaire on the found and seized material and other relevant issues were also issued on 12.11.2018. The assessment was concluded by the DCIT, Central-1, Bhopal under Section 153A r.w.s. 143(3) of the Act for A.Ys. 2011-12 to 2016-17 and under Section 143(3) of the Act for A.Y. 2017-18 on 30.12.2018. Prior to that, the DCIT, Central, sent the proposal for obtaining approval under Section 153D of the Act to the Addl.CIT, Central, Bhopal on 28.12.2018 appearing at page 10 of the paper book filed before us. The draft assessment order was duly enclosed for approval of the same. The Addl.CIT, Central, Bhopal, thereafter, granted approval on the very next day i.e. 29.12.2018 under Section 153D of the Act appearing at page 9 of the paper book filed before us. The assessee joins issue here on two counts; (i) Ld. Addl.CIT has not recorded any satisfaction in the approval order, (ii) the same is a product of non-application of mind; approval has been drawn in mechanical manner without due diligence. The same is nothing but empty formality and thus not a valid approval as mandated under Section 153D of the Act.

4.2 Since, the issue raised by the assessee is on the maintainability of the assessment proceeding itself, we find it fit and proper to address the same at the very threshold of the matter.

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4.3 The proposal for obtaining approval of the draft order under Section 153D of the Act issued on 28.12.2018 by the DCIT has been perused by us and same is appearing at page 10 of the paper book filed before us, the contents whereof is as follows:

“F.No. DCIT-l/Central/BPL/lS3D/2018-19/3031 Date : 28/12/2018 To, The Additional Commissioner of Income Tax (Central), Bhopal Sir, Sub:- Approval u/s 153D of the Income Tax Act, 1961 in assessment proceedings u/s 153A in the case of Vaswani Group -regarding- Kindly find enclosed herewith the draft assessment order u/s 153 A of the Income Tax Act, 1961 in the case of following assessee for your kind perusal and approval u/s 153D of the IT Act, 1961. A composite order for seven years is being passed in these cases. Due care has been taken to ensure that:- 1. Proper opportunity of being heard was given to the assessee on all the issues. 2. All the issues emanating from the material available on record have been examined properly and are incorporated in the draft orders. 3. Relevant seized documents were verified before passing the draft orders and are kept in safe custody. S.NO. Name of the Assessee PAN A. Yrs. 1 Prakash Assudani AEFPA8202H 2011-12 to 2017-18 2 Lokesh Vaswani ADRPV6829J 2011-12 to 2017-18 3 Shri Gurumukhdas Contractors Pvt. Ltd. AAHCS4756R 2011-12 to 2017-18 4 Suresh Vaswani AAKPV6009J 2011-12 to 2017-18 5 Sushl Vaswani AAKPV5987D 2011-12 to 2017-1 8 It is requested that approval may kindly be accorded.”

4.4 In turn, on the very next day i.e. 29.12.2018, the Addl.CIT, Central, Bhopal granted approval under Section 153D of the Act appearing at page No.9 of the Paper Book filed before us; the contents whereof is as follows:

“F. No. Addl.CIT (C)/BPL/153D/2018-19/1290 Date: 29.12.2018

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To The Dy. Commissioner of Income Tax (Central)-I, Bhopal

Sub:- Approval u/s 153D of the Income Tax Act, 1961 in the case of - Vaswani Group - reg- Please refer to your office letters in F.No, DCIT-I/Central/BPL/153D/2Q18-19/3031 dated 28.12,2018 seeking approval u/s 153D of the IT Act, 1961.

4.5 From a bare reading of the approval granted by the Ld. Addl.CIT, Central, Bhopal, dated 29.12.2018, it appears that Ld. AO has certified before

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the said authority while sending the draft assessment order that; (i) proper opportunity of being heard was provided to the assessee on all the issues; (ii) These issues emanating from the materials available on record have been duly examined and were incorporated in the draft orders; & (iii) Further that, relevant seized documents were verified before passing the draft orders and are kept in safe custody. It was further mentioned in the said approval dated 29.12.2018 that subject to the above observation, the draft assessment order had been approved in terms of the provisions laid down under Section 153D of the Act. It was further mentioned that the final assessment orders are to be passed and served upon the assessee well in time.

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Central-1, Bhopal adopting a shortcut method. Merely, an undertaking given by the Ld. AO was considered to be adequate for the Addl.CIT to accord approval in all assessments involved without considering any merit in proposed adjustment with reference to appraisal report, incriminating material collected in search etc.; this is nothing but an approval by way of mere mechanical exercise accepting the draft order without any independent application of mind by the said Addl.CIT. It is clearly evident that the Addl.CIT has not verified and / or examined the relevant materials on record as already discussed by us hereinabove. The power to grant approval as mandated under Section 153D of the Act is not to be exercised casually or any routine manner rather the concerned authorities expected to grant approval upon examination of the entire materials before approving the draft order and the authority is legally required to apply due application of mind.

5.1 On this aspect, we have considered followings judgments relied upon by the Ld. AR:

5.1.1 In case of Navin Jain & Ors. Vs. DCIT, reported in [2021] 91 ITR 682 (Luck.-Trib.). The said Bench on identical issue has been pleased to observe as follows:

“7. It was submitted that the rationale of word ‘ each’ as specifically referred to in s.153D and s.153A deserves to be given effective/proper meaning so that the underlying legislative intent as per the scheme of assessment of ss.153A to 153D is fulfilled. It was submitted that Addl. CIT in these cases has granted approval for all the assesses for all assessment years through a single approval letter which is against the intent of law and therefore, also the approval given by Addl. CIT is non-est and consequential assessment made on this basis of such approval is illegal

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and deserves to be annulled. Learned counsel for the assessee in this respect relied on a judgment of Hon’ble Allahabad High Court in the case of Mohd. Ayub vs. ITO 346 ITR 30 where non issue of separate notice under s.148 for each year where held to be invalid. Learned counsel for the assessee submitted that granting of approval under s.153D is a huge task which involves the verification by the approving authority to examine as to which year is unabated and which year is abated and the relevance vis-à-vis seized material. Learned counsel for the assessee further invited our attention to CBDT manual of Office Procedure Volume-II (Technical) placed at pp. 995 and 996 of paper book wherein the CBDT has directed that AO should submit the draft assessment order for approval from the approving authority authority to examine as to which year is unabated and which year is abated and the relevance vis-à-vis seized material. Learned counsel for the assessee further invited our attention to CBDT manual of Office Procedure Volume-II (Technical) placed at pages 995 and 996 of paper book wherein the CBDT has directed that Assessing Officer should submit the draft assessment order for approval from the approving authority well in time. Such manual says that the Assessing Officer should seek approval from the approving authority at least one month before the time barring date. While going through CBDT manual placed at paper book pages 995 & 996, it was observed that this manual was printed in February 2003 and therefore, Learned counsel for the assessee was asked as to how it is applicable to the provisions of section 153D of the Act which came into existence w.e.f. 01/06/2007. Learned counsel for the assessee in this respect submitted that this manual is applicable to the provisions of section 158BG of the Act and which are para materia to the provisions of section 153D of the Act. It was further submitted that Mumbai Tribunal in the case of Shreelekha Damani, vide order dated 19/08/2015, while deciding similar issue u/s 153D, has relied on the case laws relied for deciding the issue of approval u/s 158BG of the Act and therefore this manual is applicable to provisions of Section 153D also. Learned counsel for the assessee further placed reliance on Circular No. 3 of 2008 dated 12/03/2008 issued by CBDT whereby the CBDT has issued instructions regarding mandatory approval u/s 153D if the order is to be passed by Assessing Officer below the rank of Jt. CIT. It was submitted that the present cases were becoming time barring on 31/12/2018 and draft assessment orders has been made on 30/12/2018 and approval has been taken on 30/12/2018 and on the same day final assessment order has been passed and, therefore, clearly the CBDT instructions have been violated. In view of these facts and circumstances, it was submitted that approval has been given in a most mechanical manner without any application of mind and without any independent examination of seized material and other material on record. There is no mention about any incriminating material forwarded to Jt. CIT and there is no mention of the statements recorded at the time of search. It was submitted that the approval is granted in a hurried manner without looking into the serious lapses committed by the Assessing Officer and therefore, the approval u/s 153D is invalid and bad in law and consequent

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assessment order needs to be quashed and reliance in this respect was placed on the order of Delhi Bench of the Tribunal in the case of Sanjay Duggal and Others vs. ACIT in I.T.A. No.1813/Del/2019 wherein vide order dated 19/01/2021 the entire law relating to section 153D has been discussed and after relying on a number of case laws, the Tribunal has allowed the appeals of the assessees and has quashed the assessment order. It was submitted that in that case also, through a single letter, the approval was granted in a number of cases. Further reliance was placed on the order of Ranchi Bench of the Tribunal in the case of Rajat Minerals Pvt. Ltd. vs. DCIT wherein sanction u/s 153D was granted in 28 cases and Tribunal allowed the appeals of the assessees by quashing the assessment orders. Further reliance was placed on the order of Mumbai Tribunal in the case of Pr. CIT vs. Shreelekha Damani wherein the provisions of section 158BG has been discussed and it was held by the Tribunal that approval granted u/s. 153D of the Act was de void of application of mind and without considering the material on record and hence Tribunal annulled the assessment. It was submitted that Hon'ble Bombay High Court has also dismissed the appeal of the Department filed against the above order of the Tribunal. Further reliance was placed on an order of Mumbai Bench of the Tribunal in I.T.A. No.4916 in the case of Sumer Associates wherein under similar circumstances, vide order dated 26/12/2018 the issue was decided in favour of the assessee. Reliance was also placed on the judgment of Tribunal in the case of Indra Bansal decided by Jodhpur Bench in I.T.A. No.321 to 324 vide order dated 23/02/2018. Reliance was also placed on the judgment of Cuttack Bench of Tribunal in I.T.A. No.01 and 02 in the case of Geeta Rani Poddar and Manju Simite Dash where vide order dated 05/07/2018 similar issue has been decided in favour of assessee.

7.1 In view of these facts and circumstances and judicial precedents, it was argued that the assessment orders passed in these cases are illegal and need to be quashed.

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were required to file income tax returns as required under the provisions of section 153A of the Act. The search was conducted on 23/08/2016 which continued upto 25/08/2016 and therefore, assessment year 2017-18 became the search year and the years preceding the search year became the subject matter of reopening u/s 153A of the Act. The issue raised by Learned counsel for the assessee is that the approval granted by the Addl. CIT is bad in law as it is humanly impossible to go through documents exceeding 17,800 in a single day and then grant approval on the same day. Since the controversy involved here is with respect to approval u/s 153D of the Act, it would be appropriate to first visit the provisions of section 153D of the Act, which for the sake of completeness are reproduced below:

"SECTION 153D. Prior approval necessary for assessment in cases of search or requisition [No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [sub-section (1) of section 153A] or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner.] [Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the [Principal Commissioner or Commissioner] under sub-section (12) of section 144BA.]"

9.1 The above provisions of section 153D of the Act were inserted by Finance Act, 2007 with effect from 01/06/2007. In our humble understanding of the said provisions, we are of the opinion that the Legislature wanted the assessment/reassessment of the search cases should be made and order should be passed with the prior approval of superior authority. The word approval has not been defined in the Income Tax Act but the general meaning of word approval can be understood from Black Law of Dictionary which defines approval as:

"The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or 'consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with."

9.2 The Hon'ble Supreme Court of South Carolina in State vs. Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that approval implies knowledge and, the exercise or discretion after knowledge. ……………………… ………………………

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Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 2 cases was completed in one single day itself i.e., 31-3-2013. Thus, it is I.T.(SS)A. Nos.639, 640, 641, 649, 642 & 651 apparent that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co-ordinate Benches of Mumbai and Allahabad as afore- mentioned and also applying the ratio of the judgment of the Hon'ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained. Accordingly, assessments in three COs and nineteen appeals of the assessee(s), on identical facts, are liable to be annulled as suffering from the incurable defect of the approval not being proper. Accordingly, we annul the assessment orders in CO Nos. 8 to 10/Jodh/2016 and ITA Nos. 325 to 331/Jodh/2016. Thus, all the three COs and the nineteen appeals of the assessee, as aforesaid, are allowed."

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basis of material available on record and the approval must reflect the application of mind to the facts of the case.

5.1.2 In case of Sanjay Duggal (2021) (Del-Trib.) dt. 19.01.2021, the said Bench on identical issue has been pleased to observe as follows:

“12. It may be noted that provisions of Section 153D provides for approval in case of [“Each”] the assessment year. Therefore, each of the assessment year is required to be verified and approved by the JCIT being Approving Authority that it complies with Law as well as the procedure laid down. The assessee has filed details on record regarding returns filed under section 139 (1) for A.Ys. 2010- 2011 to 2015-2016. It is also explained that there are unabated assessments except A.Y. 2015-2016 in which the assessments have been abated. Therefore, for each unabated and abated assessments, the authorities below and the Approving Authority [JCIT] shall have to verify the incriminating material found during the course of search or the seized material if pertain to the same assessment year and its basis. The assessee has explained above that these cases are coming up because of the assessments framed in the case of M/s. JIL and others prior to the search in the case of assessee. Therefore, all material was within the knowledge of the Income Tax Authorities prior to the search in the cases of the assessees. Therefore, for granting approval under section 153D of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments and their effect, if any. But, in the present case, the Approving Authority i.e., JCIT has granted common approval for all the assessment years in respect of the single assessee. Thus, there is no application of mind on the part of JCIT while granting approval for all the common years instead of granting approval under section 153D for each assessment years separately. 13. In the present cases various approvals were granted by the JCIT, Central Range-1, New Delhi, and forwarding letter of the A.O. are placed on record in all the cases. In all the cases as per the forwarding letter of the A.O. only assessment records were forwarded to the JCIT, Range-1, New Delhi at the time of granting approval. Therefore, it is evident that the JCIT

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being the Approving Authority was neither having seized material nor the appraisal report or other material at the time of granting approval. In the approval under section 153D there is a reference to the A.O. letter only. There is no reference to the seized material or record or notice under section 142 and reply of the assessee and if procedure for its inspection or perusal is there. There is no material considered by the JCIT. Learned Counsel for the Assessee has pointed out that assessee has suffered serious prejudice because of non- application of mind on the part of the JCIT while granting approval under section 153D of the I.T. Act because the A.O. has made several double or triple additions on account of share capital, investments, FDRs purchased, loans, capital gains because these were created out of bank deposits made in the bank accounts of the assessees after the money transferred from the account of M/s. Alfa India. No telescopic benefit have been given as it was out of the source deposited in the bank accounts of the assessees. Netting of the money left have also not been considered and even the Ld. CIT(A) without considering the same has enhanced the assessments in some of the cases of the assessee. No steps have been taken by the A.O. for rectifying their mistakes when assessee filed petition for rectification under section 154 of the I.T. Act. Thus, there was inconsistencies and double additions made by the A.O. in various assessment years. It may also be noted that in the present case the facts stated in the impugned orders are that the sales of liquor are made by M/s. JIL to M/s. MAPSCO and Singla Group of cases and that part of the sale proceeds have been transferred to the account of M/s. Alfa India instead of paying the entire sale consideration to M/s. JIL. Thus, the nature of total receipt/addition is the sale proceeds originally to be received by M/s. JIL. If the part of the sale proceeds which were to be received by M/s. JIL and when transferred to the account of M/s. Alfa India Ltd., the entire part sale receipts cannot be the income either in the hands of M/s. JIL or M/s. Alfa India or the Assessees who may be the conduit as argued before us. The A.O. has failed to consider the concept of real income for the purpose of determining the correct tax liability and correct determination of income of the assessees. We rely www.taxguru.in 258 ITA.No.1813/Del./2019 Shri Sanjay Duggal, Faridabad etc., & 51batch appeals upon the Judgment of the Hon’ble Supreme Court in the case of Godhra Electricity Co. Ltd., 225 ITR 746 (SC). This fact is also not verified and considered by the JCIT while granting approval under section 153D of the I.T. Act. It may be noted here that entire sale proceeds when cannot be added in the hands of M/s JIL as income which is also not done in the case of M/s. JIL, rightly so, how the same sale proceeds could be added as income in the hands of assessees under section 68 of the I.T. Act is not understandable. Thus, the Approving Authority without application of mind and in a most mechanical and technical manner granted approval under section 153D even without reference to any reason in the Order under section 153D of the I.T. Act. We, even, otherwise failed to understand that in search cases how an approval can

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be granted to an assessment year which is required to be based only on incriminating material without verification of those material and its reference in the appraisal report. The JCIT even in approval did not mention if assessment record is seen by him. Another interesting aspect that has come to the notice on the basis of various documents submitted for approval as well as request for approval by the A.O. to the JCIT. We make a specific reference to letter dated 29.12.2017 written by ACIT, Central Circle-4, New Delhi, which is placed at page-144 of the PB. This letter Dated 29.12.2017 is a request for obtaining approval under section 153D of the I.T. Act in the case of Shri Rajnish Talwar and family wherein the approval in the case of Shri Rajnish Talwar for A.Ys. 2010-2011 to 2016-2017 is sought for. The A.O. send the draft assessment order along with assessment records of the above named assessee. In paragraph-4 of the letter, A.O. stated as under : “It is certified that all issues raised in the appraisal reports have been duly examined with reference to the seized impounded material.” 15. Thus, the JCIT acted on certificate given by the A.O. without satisfying himself to the record/seized material etc., The A.O. sent only assessment records to the JCIT for appeals his approval. The identical is fact in the case of all the request for approval made by the A.O. but factual position noted above established that even assessment records have not been seen by the JCIT. The A.O. sent draft assessment orders for 07 assessment years on 29.12.2017 which were got approved on 30.12.2017 merely on the basis of draft assessment order. The JCIT in the approval Order Dated 30.12.2017 also mentioned that A.O. to ensure all the assessment proceedings are conducted as per procedure and Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O. as per Law and records. 16. In some of the cases the approval was granted on the date the request was made for approval by the A.O. In all those cases merely draft assessment order and the assessment folders were available with the A.O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT. It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various

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observations made by the Investigation Wing in appraisal report. Thus, we hold the approval under section 153D have been granted without application of mind and is invalid, bad in Law and is liable to be quashed. Since we have held that approval under section 153D is invalid and bad in law, therefore, A.O. cannot pass the assessment orders under section 153A of the I.T Act against all the assessees. Therefore, all assessment orders are vitiated for want of valid approval under section 153D of the I.T. Act and as such no addition could be made against all the assessees. In view of the above, we set aside the Orders of the authorities below and quash the assessment orders passed under section 153A of the I.T. Act as well as the impugned appellate Order. Resultantly, all additions are deleted. The additional grounds are allowed. In view of the above findings, the other issues on merits are left with academic discussion only. Accordingly, all the appeals of the Assessees are allowed.”

5.1.3 In the case of Arch Pharmalabs Ltd. (2021) (Mum-Trib), the Hon’ble Bench held as under:

“11. We have carefully considered the rival submissions and material placed on record and case laws cited. The legal objection of transgression of requirements of approval under section 153D is in controversy. Pursuant to search carried out in the premises of the Assessee and other connected group cases, the assessment was carried out under S. 153A/ 143(3) of the Act. The Assessing officer has forwarded the draft assessment orders for 7 years ( AY 2003-04 to AY 2009-10) for endorsement and approval of the superior authority at the fag end of the limitation period on 29/12/2010 to meet the legal requirement imposed by section 153D of the Act. The Addl. CIT i.e. the superior authority has, in turn, granted a combined and consolidated approval for all 7 assessment years in promptu on 31/12/2010. 11.1 It may be pertinent to observe at this stage that the impugned assessment orders were passed u/s. 143(3) rws 153A of the Act for the AY 2003-04 to AY 2008-09 and for the AY 2009-10 u/s. 143(3) of the Act pursuant to search carried out under s.132 of the Act. For passing such assessment orders, the Assessing Officer is governed by s.153D of the Act whereby the Assessing Officer should complete the assessment proceedings and prepare a draft assessment order which need to be placed before the approving authority i.e. Joint / Addl. Commissioner (designated authority giving approval to search assessments u/s. 153D of the Act). The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive

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his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement. 11.2 In the backdrop of facts narrated in the preceding paras, it is the contention on behalf of the asssessee that approval granted under S. 153D does not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law. The assessment orders thus passed is vitiated in law which illegality cannot be cured. In support of charge of nonest approval, several contentions have been raised viz (i) the approval accorded under section 153D is without any occasion to refer to the assessment records and seized material, if any, incriminating the assessee and hence such approval is in the realm of an abstract approval of draft assessment orders which was unsubstantiated and unsupported and consequently suffered from total non-application of mind (ii) approval granted hurriedly in a spur involving voluminous assessments spanning over 7 assessment years and thus only a symbolic exercise to meet the requirement of law (iii) Total lack of objectivity in drawing satisfaction on objective material while giving a combined approval for 7 assessments and also without evaluating the nuances of each assessment year involved (iv) the mundane action of Addl. CIT under S. 153D in a cosmetic manner gives infallible impression of approval on dotted line and thus defeats the purpose of supervision of search assessments (iv) initialed draft assessment orders not available in office records. 11.3 As observed, Section 153D bestows a supervisory jurisdiction on the designated authority in respect of search related assessment and thus enjoins a salutary duty of statutory nature. The designated superior authority is thus expected to confirm to the statutory requirement in letter and spirit. It is evident from the communication of AO and consequent approval thereon under S. 153D that no assessment record for any assessment year in question or any seized material had traveled to the authority concerned for his objective consideration of the same qua the draft assessment orders. No reference in this regard is made in the approval note either which may discard such allegation as untrue. No other material or order sheet in assessment proceedings etc. were placed before us either to establish otherwise. Except these two documents namely, a solitary communication from AO to the Addl. CIT dated 29/12/2010 and an in turn approval by Addl. CIT dated 31/12/2010, there is nothing else before us to gauge the facts differently. A bare glance at the approval so

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accorded makes it evident that such approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect of any of the 7 assessment years. Apparently, the approval has been granted on a dotted line without any availability of reasonable time which firms up the belief towards non application of mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which volumnous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking / intials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity applied owing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 for the first time. It is axiomatic from the plain reading of approval memo that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 29.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval the respective Assessment order. Solemn object of entrusting the duty of Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard.

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11.5 At the cost of repetition, it may be reiterated that in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that Para 2 of the above approval letter merely says that "Approval is hereby accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders..."which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at and/or other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the said order was approved, solely relying upon the implied undertaking obtained from the Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. 11.6 There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the co-ordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332(Mum.) and approved by jurisdictional High Court subsequently as reported in 307 CTR 218 affirms the plea of the Assessee. 11.7 Very recently, the co-ordinate bench in Sanjay Duggal & ors (ITA 1813/Del/2019 & ors; order dated 19.01.2021 has also echoed the same view after a detailed analysis of similar facts and also expressed a discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the plea raised by the Assessee against maintainability of hollow approval under S. 153D totally

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devoid of any application of mind. The approval so granted under the shelter of section 153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments relatable to search in captioned appeals are non est and a nullity and hence quashed.”

5.1.4 The Ld. AR relied upon the judgment passed by the Raipur Bench in Goyal Energy & Steel (P) Ltd. vs. ACIT, reported in [2021] 214 TTJ (Asr) 058 (Amritsar-Trib.). The said Bench on identical issue has been pleased to observe as follows:

“10. Now adverting to the adjudication of additional grounds of appeal and the Ground No. 3 of main grounds of appeal. The additional grounds of appeal relates to validity of approval under section 153D and Ground No. 3 of main grounds of appeal relates to validity of the additions under section 68 in absence of incriminating evidence found during search. The ld AR for the assessee submits that it is a matter of fact that the AO had passed a single consolidated order for all the years under assessment rather than passing separate orders for “each year” under section 153A. Further, the AO sought a consolidated approval for about 14 different assessee from different groups under her single letter dated 14.12.2018. At the time of assessment, the assessee furnished its reply on 14.12.2018 before the AO, wherein the assessee raised several objections and contentions against the proposed additions in show cause notice. The assessee was directed to file reply by 07.12.2018. The assessee filed its reply on 14.12.2018, which was duly accepted by AO, which is otherwise clearly discernable in para 3.7 of the assessment order. In the said reply the assessee explained the concept of abated and unabated assessment, proof of identity and existence of the investor Company, importance of cross-examination, etc. The ld AR for the assessee further submits that mere perusal of contents of approval granted under section 153D, it can be inferred from the approval sought by AO, from the Ld. JCIT was without considering such reply of the assessee dated 14.12.2018. The copy of the same is placed on record before the Hon’ble bench. The ld.AR for the assessee submits that the Ld. Joint Commissioner of Income-tax (JCIT) granted approval for finalizing the assessment on the request of the assessing officer without indicating any perusal of records, replies and material gathered in the course of search. Rather JCIT categorically mentions that even with respect to orders to be passed by the assessing officer he

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has ‘presumed’ that necessary records have been perused and legal mandate had been complied.

* Mumbai Tribunal in case of Arch Pharmalabs Ltd & Arch Impex P. Ltd. (I.T.A. No. 6656/Mum/2017 & others) (dated 07.04.2021), * Ranchi Tribunal in Rajat Minerals Pvt. Ltd. Vs DCIT (Central Circle 1) ([2020] 181 ITD 368 (Ranchi-Trib.), * Cuttack Tribunal in Dilip Constructions Private Limited Vs. ACIT IT(SS)A Nos. 66 to 71/CTK/2018.

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surrender of share capital. The statement of the Deepak Aggarwal was not recorded in the presence of Panchas. Mr. Deepak Aggarwal retracted from his statement by filing affidavit before Sub-Divisional Magistrate, copy of which is filed. The ld.AR for the assessee retreated that no incriminating evidence qua the share capital was found during the search. The authorised officer has not recorded even single evidence on the Panchnama about such evidence. The assessment order stands void-ab-initio for unabated assessment years in absence of incriminating evidence. The ld AR for the assessee furnished the year wise last date for issuing notice under section 143(2) for all Assessment Years in the following manner;

AY Last date for issuing notice u/s 143(2) 2011-12 30.09.2012 2012-13 30.09.2013 2014-15 30.09.2015 2015-16 30.09.2016

* CIT Vs Kabul Chawla (Delhi High Court) (ITA Nos. 707, 709 and 713 of 2014), * M/s All Cargo Logistics Ltd. Vs DCIT (ITA 5018 to 5022 & 5059/M/10) (Special Bench), * R.R. Energy (ITA No. 225/RPR/2015 and * Sanjay Duggal vs. ACIT, ITA 1813/Del/2019 dated 19.01.2021

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Office of the Jt.CIT (Central), Raipur

Aayakar Bhawan, Civil Lines, Raipur 492001

Email: Raipur.addlcit.cen@incometax.gov.in Tel/Fax 2331044

F.No.JCIT(C)/RPR/153D/2018-19 Dated: 22-12-2018

To,

The Asst. CIT (Central)-2, Raipur

Subject – Approval under u/s 153D of the I.T.Act – Goyal, Satya & Gumber Group – Regarding.

Please refer to your letter in F.No. ACIT(C)-2/RPR/153D/Goyal & Satya/2018-19 dated 05/12/2018, F.No. ACIT(C)-2/RPR/153D/ Goyal & Sriram Gumber/ 2018-19 dated 07/12/2018 and F.No.ACIT(C)/RPR/153D/Goyal & Satya/2018-19 dated 14/12/2018.

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S.No. Name of the assessee PAN AY 1 Arun Agrawal ACJPA4642B 2011-12 to 2017-18 2 Deepak Agrawal ACJPA4646F 2011-12 to 2017-18 3 Goyal Energy and Steel P Ltd AACCG2758E 2011-12 to 2017-18 4 Goyal Traders AACFG1974F 2011-12 to 2017-18 5 Ratanlal Agrawal ACJPA4620R 2011-12 to 2017-18 6 Goyal Enterprises AAMFG4058J 2011-12 to 2017-18 7 Satya Power and Ispat Ltd AAHCS4472N 2011-12 to 2017-18

O Given proper opportunity of hearing has been given to the assessee O thoroughly verified the seized material and that there are no adverse findings O satisfied himself that all the issues emanating from the records have been verified and the additions wherever required have been proposed.

Encl: case records Sd/- (R.M. Mujumdar) Joint Commissioner of Income tax, Range- Central, Raipur.

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opportunity has been given to the assessee and all the records, evidences and materials have been thoroughly verified. The JCIT granted bulk approval of 95 assessment orders which clearly defeats the intent and purpose behind insertion of section 153D brought in the statute by the Finance Act, 2007.

“11.5 At the cost of repetition, it may be reiterated that in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that Para 2 of the above approval letter merely says that "Approval is hereby accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders..."which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at and/or other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the said order was approved, solely relying upon the implied undertaking obtained from the Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed

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adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be countenanced in law.

5.1.5 In the case of Inder International (2021) (Chandigarh-Trib) dtd. 7-6-21, the said Bench held as under:

“14. In view of the above decision and the fact that in the present case before us also the Addl.CIT has accorded the approval u/s!53D only on 29-6-17 when the AO placed the assessment order on that very date i.e., 29-6-17. The relevant approval by the Addl.CIT reads as under: "Necessary statutory approval u/s!53D is given to pass the above assessment order as such. Assessment record in this case is returned herewith." 15. From the above, it is clear that this is totally non application of mind by the Addl.CIT, who is the supervising authority of the AO while granting statutory approval u/s!53D, the issue stands covered in favour of the assessee by various decisions cited above. In the present case before us, we noted that the Addl.CIT did not mention anything in the

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approval memo towards his process of deriving satisfaction so as to exhibit his due application of mind. We noted that the Addl.CIT merely approved the letter and the relevant para is noted in above paras. We noted that the relevant para of the above approval letter merely says that "Necessary statutory approval u/s!53D is given to pass the above assessment order as such. Assessment record in this case is returned herewith..." which clearly proves that the Addl.CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at because that was not available before him at the time of granting of approval to the draft assessment order and other enquiry and examination was never carried out. From the said approval, it can be easily inferred that the said order was approved solely relying upon the implied undertaking obtained from the AO in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination/ investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his statutory functions and delightfully relegated his statutory duty to the subordinate AO, whose action the Addl.CIT was supposed to supervise. The Addl.CIT in short appears to have adopted a short-cut in the matter and an undertaking from AO was considered adequate by him to accord approval in all assessments involved. Manifestly, the Addl.CIT, without any consideration of merits in proposed additions with reference to incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Addl.CIT, Central has rendered the approval to be a mere formality and cannot be considered as actual approval in law. Hence, we quash the assessment framed u/s!53A on this additional ground alone. 16. Needless to say that we need not adjudicate the grounds raised on merits by the assessee as we have already quashed the assessment on jurisdictional issue that the statutory approval granted u/s!53D is without application of mind by the Addl.CIT. 17. In the result, the appeal of the assessee is allowed.”

5.1.6 We have further carefully considered the judgment in case of Dharampal Satyapal Ltd. vs. UOI, reported in (2019) 366 ELT 253. While dealing with the identical issue, the Hon’ble Gauhati High Court has been pleased to observe as follows:

"28. When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must coexist and, therefore, where an Authority grants an approval it is also

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to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements."

5.1.7 The crux of the judgment as relied upon as mentioned hereinabove is this that the required approval should satisfy all the statutory requirements having independent due application of mind and satisfy all the legal and procedural requirements which is in our considered opinion is absent in the case in hand.

5.1.8 We have further considered the judgment relied upon by the assessee in the case of Sahara India (Firm) (2008) 300 ITR 403 (SC), wherein, it is held that prior approval by the CIT or CCIT in terms of Section 142(2A) of the Act is an inbuilt protection against arbitrary or unjust exercise of power by the Ld. AO. Casting upon a serious duty upon the high ranking authority to take care of this particular aspect of the matter on account of approval envisaged in Section has now turned into an empty ritual. The approval is required to be granted only on the basis of documents available on record and that must reflect proper application of mind on the facts and circumstances of the case as of the ultimate ratio laid down by the Hon’ble Supreme Court.

5.1.9 On this aspect, we have also relied upon the CBDT Circular No. 3/2008, dtd. 12.03.2008, whereby and whereunder, the CBDT has issued instructions regarding mandatory approval u/s153D of the Act in the event, the order is passed by an AO below the rank of JCIT. The same is also in reiterating the view taken by us. We would like to note that the essence of the judgment passed by the Hon’ble Supreme Court in the matter of Sahara India

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(supra) in regard granting of approval under Section 142(2A) of the Act is also applicable in the instant case in regard to granting approval under Section 153D of the Act. The statutory requirement as envisaged and further upheld by the Hon’ble Supreme Court in the said judgment is equally applicable in the case in hand.

5.2 The Revenue has failed to place any cogent evidence to the effect of granting approval of the draft assessment order upon exercising adequate time and upon examining the materials needs to be considered in terms of the statutory provision. We do not find any proper application of mind by the Addl.CIT rather he has carried out exercise in utmost haste and that too in mechanical manner, not in terms of the mandate prescribed under Section 153D of the Act. The same is, therefore, not found to be sustainable. We have also discussed different judgments passed by different judicial forums on the identical issue and has been inspired to come to the conclusion as made by us hereinabove. We, therefore, set aside the approval granted by the ACIT (Central), Bhopal. The consequential impugned assessment orders on this nonest approval under Section 153D of the Act are, thus, void-ab-initio and on this score alone, the entire proceeding is, thus, quashed. This covers both abated and unabated assessments. Cross Objection Nos. 13 to 17/Ind/2021 and IT(SS)A Nos. 36 & 37/Ind/2020 filed by the appellant stand allowed. Consequently, departmental appeals become infructuous and thus dismissed as infructuous. Since, the additions have been deleted by us on the ground of non-compliance of mandate prescribed under Section 153D of the Act, the

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other grounds raised by the assessee have become academic. No further adjudication is required.

ITA No. 208/Ind/2020 (A.Y. 2017-18)

This Order pronounced on 14 /12/2022

Sd/- sd/- (BHAGIRATH MAL BIYANI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; Dated 14/12/2022 S. K. Sinha, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

(Sr. PS) ITAT, Indore

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1.Date of dictation on 23 & 24.11.2022 2.Date on which the typed draft is placed before the Dictating Member 24.11.2022 & 14.12.2022 3.Date on which the approved draft comes to the Sr.P.S./P.S. 4.Date on which the fair order is placed before the Dictating Member for pronouncement 5.Date on which the fair order comes back to the Sr.P.S./P.S 6.Date on which the file goes to the Bench Clerk 7.Date on which the file goes to the Head Clerk…………. 8.The date on which the file goes to the Asstt. Registrar for signature on the order…………………… 9.Date of Despatch of the Order………Date on which the typed draft is placed before the Dictating Member 19.12.2019 1. Other Member………………Date on which the approved draft comes to