ASHU ASHOK,NEW DELHI vs. ACIT, CENTRAL CIRCLE-17, NEW DELHI

These appeals are filed by the assessee against the order of ld. Commissioner of Income-tax Appeals-27, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 23.03.2022 for Assessment Years 2013-14, 2014-15 and 2015-16. 2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. First, we take up AY 2013-14 as the lead case. 3. The assessee has taken the following grounds of appeal in AY 2013-14 :- “1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining the assessment order passed by Assessing Officer u/s 153A relying on search in Sukhija group, which was not on the assessee and also search action was not as per law.

That the learned Commissioner of Income Tax (Appeals) has erred in both law and on facts in sustaining the addition of Rs.44,41,956/- in regard to purchase of property being Plot no.A-220 at Sushant Lok on the basis of seized papers, which were not reliable.

1 The learned CIT(A) wrongly presumed that cash was received from two persons viz. Aman and Mr. Kaku without any evidence for the same.

That the learned Commissioner of Income Tax (Appeals) has erred in both law and on facts in sustaining the addition of entry of Rs.21,00,000/- from Chitra Gupta as unexplained cash credit u/s 68 of the Income Tax Act, 1961, even though confirmation and copy of PAN was filed and AO did not bring any adverse material on record.

That on facts and in the circumstances of the case and in law, the Learned Commissioner of Income-lax (Appeals) has erred in not cancelling the penalty proceedings initiated u/s 271( 1)( c) as there was no concealment of income.”

At the outset of the hearing, ld. AR for the assessee submitted that assessee has filed additional ground of appeal under Rule 11 of the Income Tax (Appellate Tribunal) Rules and it is purely legal issue and the same is reproduced below :- “That on facts and circumstances of the case the approval accorded under section 153D of the Act (if any) is a mechanical and arbitrary approval without there being independent approval for each assessment year, without any application of mind and also without satisfying the statutory preconditions of the Act and as such the assessment so framed is null and void and deserves to be quashed.”

Since the above grounds of appeal are purely legal, do not require fresh facts to be investigated and go to the root of the matter, ld. AR of the assessee prayed that the sam 7. In view of the relia of Hon’ble Suprem purely legal, we pr legal issue. 8. Before deciding th approval u/s. 153D under:- 8) 229 ITR 0383 (SC). ld. DR for the Revenue has no object of appeal being purely legal issue. ance made by the ld. AR for the asses me Court in the case of NTPC Ltd. (sup roceeded to admit the additional groun he legal issue in dispute, we may gai of the Income Tax Act (for short ‘the 44, 1045 & 1046/DEL/2022 udgement of NTPC tion of admitting the see on the judgment pra) and issue being nd of appeal being a nfully reproduce the Act’), which read as ITA Nos.1044, 1045 & 1046/DEL/2022

At the time of hearing, Ld. AR of the assessee referred to various case laws whereby the legal issue in dispute has been decided in favour of the assessee. However, more particularly, ld. AR drew our attention towards the ITAT Delhi Bench decision viz. M/s Millenium Vinimay (P) Ltd. vs. ACIT, ITA No.458/Del/2022 dated 31.5.2024 and Hon’ble juri ictional High Court decision in the case of PCIT vs. Shiv Kumar Nayyar in ITA No. 285/2024 (Del), dated 15.05.2024, and submitted that by following the ratio of the aforesaid two case laws, the legal issue involved in the instant appeals may be allowed. 10. Per contra, ld. DR of the Revenue relied upon the orders of the authorities below and objected to the submissions of the ld. AR. He submitted that the approval u/s 153D of the Act is administrative approval. The procedure to approval process has no relevance to the assessee and his proceedings. In this regard, ld. DR of the Revenue submitted written submissions and for the sake of brevity, the same is reproduced below :- “1. Preliminary Submissions

Role and Juri iction of the Approving Authority under Section 153D

Nature and Scope of Section 153D Approval

Presumption of Regularity and Burden of Proof

Examination of Facts in Light" of Jurisprudence

Reliance on Judicial Precedents

One-Day Approval Does Not Imply Mechanical Approval

Legal Position on Procedural Irregularity

Adjudication Should Be on Merits, Not Technicalities

Objection to Admission of Additional Ground on Section 153D

Principles of law and Jurisprudential Contentions

The approval under section 153D was granted after due consideration of assessment records and seized material.

The one-day approval cannot be termed mechanical given the limited factual matrix of few documents which could be examined in a single day.

The assessee has produced no evidence to substantiate its claim of non- application of mind.

The decisions cited by the assessee are distinguishable on facts, while recent authorities like KK. Leisure & Tourism International (P) Ltd. (ITAT Cochin) and Ramji Vaish v. DCIT (ITAT Allahabad) directly support the Department's stand. 5. The additional ground regarding section 153D is not maintainable and should not be admitted.

Considered the rival submissions and material placed on record. We have especially perused the approval granted u/s. 153D of the Act and the case laws cited by the ld. AR in the paper book. 12. We find that ITAT Delhi Bench in the case of M/s Millenium Vinimay (P) Ltd. vs. ACIT, (supra) has dealt the similar legal issue and decided the same in favour of the assessee. The relevant findings of the Coordinate Bench are reproduced as under:- “15. 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 of the Act. 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.) which has been approved by juri ictional High Court subsequently, reported in 307 CTR 218 affirms the plea of the Assessee, wherein the Hon'ble Bombay High Court held as under:- "1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015. 2. Following question was argued before us for our consideration: "Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval?

Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 2007- 08. This was on the ground that the mandatory statutory requirement of obtaining an Act, before passing the order of assessment, was not complied with.

This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record.

The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid.

Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks : "To, The DCIT(O )1, Mumbai Subject: Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref: No. DCIT (O )1/ CR7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analyze the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted. Approval to the above said draft order is granted u/s 153D of the I. T. Act, 1961." 7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises. 8. Accordingly, the Tax Appeal is dismissed." 16. In the case of ACIT, Circle-1 (2) Vs. Serajuddin and Co. the Hon'ble Supreme Court in SLP (Civil) Dairy No. 44989/2023 vide order dated 28/11/2023, dismissed the Appeal filed by the Department of Revenue against the order dated 15/03/2023 in ITA No. 43/2022 passed by the Hon'ble High Court of Orissa at Cuttack, wherein the Hon'ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. 17. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the arguments advanced by the Ld. the Assessee's Representative on the Additional Ground of Appeal. In our considered opinion the approvals so granted under the shelter of section 153D of the Act does not 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 orders in the captioned appeals are non-est and a nullity and hence the same are quashed. 18. In view of prima facie merits found in the legal objections raised in the Addl. Grounds of the Assessees, we do not consider it expedient to look into the aspects on merits of additions/disallowance as the legal objections on sanction granted under Section 153D of the Act has been answered in favour of the Assessee. Thus the other Grounds raised in the Appeals of the Assessee in both the Appeals have rendered in- fructuous, which do not need any separate adjudication. 19. In the result, the Appeals filed by the Assessee in ITA Nos. 294/Del/2022 and ITA No. 295/Del/2022 are allowed. 11. Upon considering the entire aspect of the matter, we find that the approval has been granted not separately for each assessment year for the assessment year referred to in Clause (b) of Sub Section (1) of Section 153A of the Act or the assessment year referred to in Clause (b) of Sub Section 153B of the Act except the prior approval of the Joint Commissioner. It further appears from the approval dated 08.06.2018 that the same was a common and composite order whereas the Addl. Commissioner is required to verify and approve that each of assessment year is complied with as well as procedural laid down under the Act. Such fact clearly reveals non-application of mind on the part of the Learned Addl. Commissioner of Income Tax, Central Range-7, New Delhi. Thus granting approval for all the common years instead of approval under Section 153B for each assessment year separately de horse the rules. The said approval is found to have been given in a mechanical and routine manner. We find that the order issuing authority has not discharged its statutory duties cast upon him even by assigning cogent reasons in respect of the issues involved in the matter. Thus granting approval in the absence of due application of independent mind to the material on record for each assessment year in respect of the assessee's case separately vitiates the entire proceedings; the same is found to be arbitrary and erroneous and therefore, liable to be quashed. We are also inspired by the ratio laid down in the Judgment narrated hereinabove passed by the Hon'ble Juri ictional High Court and respectfully relying upon the same with the above observation, we quash the entire proceeding initiated under Section 153C r.w.s 153A of the Act in the absence of a valid approval granted by the Learned Additional Commissioner of Income Tax, Central Range-7, New Delhi. 12. In the result, appeal of the assessee is allowed.”

We further find that Hon’ble juri ictional High Court in the case of PCIT vs. Shiv Kumar Nayyar (supra) has decided the similar legal issue in favour of the assessee and against the Revenue. The relevant findings of the Hon’ble Delhi High Court are reproduced 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 by the authority, rather it must reflect an appropriate application of mind. 16. In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under:- "10. We have gone through the approval granted by the ld. Addl. CIT on 30.12.2018 u/s 153D of the Act which is enclosed at page 36 of the paper book of the assessee. The said letter clearly states This is a digitally signed order.