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M/S MAHESHWARI COAL BENEFICATION& INFRASTRUCTURE P. LTD,BILASPUR vs DCIT CENTRAL CIRCLE-1(1), NAGPUR | BharatTax

M/S MAHESHWARI COAL BENEFICATION& INFRASTRUCTURE P. LTD,BILASPUR vs. DCIT CENTRAL CIRCLE-1(1), NAGPUR

ITA 109/NAG/2024Status: DisposedITAT Nagpur26 December 2024AY 2010-11Bench: SHRI V. DURGA RAO (Judicial Member)85 pages

AI SummaryPartly Allowed

Facts

A search was conducted on a third party, M/s. RKTC Group, M/s. Rashi Steels P. Ltd., and Shri Suresh Kumar Agrawal, on 22/01/2019, where documents pertaining to the assessee were seized. Subsequently, notices under Section 153C were issued to the assessee for Assessment Years 2009-10 to 2013-14, and assessments were completed on 31/03/2022. The assessee challenged these assessments, arguing they were time-barred under the amended provisions of Section 153C read with Section 153A.

Held

The Income Tax Appellate Tribunal admitted the additional grounds of appeal raised by the assessee, which contended that the assessments for AY 2009-10 to 2012-13 were invalid and barred by limitation. The tribunal recognized these as legal grounds going to the root of the matter, requiring no further factual verification beyond the record.

Key Issues

The primary legal issue is whether the assessments made under Section 153C for Assessment Years 2009-10 to 2012-13 are barred by limitation, considering the amended provisions of Section 153C and Explanation-1 to Section 153A of the Income Tax Act, 1961, particularly regarding the 10-year block period.

Sections Cited

Section 153C, Section 153A, Section 132(4), Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR

Before: SHRI V. DURGA RAO, & SHRI K.M. ROY, ACCOUNTANT MMBER

For Appellant: Shri Sunil Kumar Agrawal

For Respondent: Shri Sandipkumar Salunke

Date of Hearing – 12/11/2024 Date of Order – 26/12/2024

O R D E R PER BENCH

These captioned appeals are filed by the assessee challenging the impugned orders of even date 18/01/2024 passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)–. Nagpur, [“learned CIT(A)”], for the assessment year 2009–10, 2010–11, 2011–12, 2012–13 and 2013–14 respectively.

2. Since all these appeals pertain to the same assessee, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order.

2 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 3. We first take up the issue for adjudication which relates to impugned assessment made under section 153C of the Act being barred by limitation. This issue is involved in the following appeals:-

./2024 for A.Y. 2009-10 ITA no.109/Nag./2024 A.Y. 2010-11 ITA no.110/Nag./2024 A.Y. 2011-12 and ITA no.111/Nag./2024 for A.Y. 2012-13

4. The facts of the issue are that whether or not it is beyond the 10 years block as per first proviso to section 153C and Explanation-1 to section 153A of the amended provisions of law by the Finance Act, 2017 w.e.f. 01/04/2017; whether, notice under section 153C of the Act and the assessment made under section 153C for the assessment year 2009-10 to 2012-13 is invalid as time barred by limitation, as per first proviso to section 153C and Explanation-1 to section 153A of the Act.

5. The assessee has raised additional ground of appeal in ITA No.108/Nag./2024, for the assessment year 2009–10 by relying on National Thermal Power Co. Ltd. v/s CIT, [1998] 229 ITR 383 (SC) which is as under:–

“Section 153A. Assessment in case of search or requisition- (1) Notwithstanding anything contained in sec139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated u/s132 or books of account, other documents or any assets are requisitioned u/s132A after the 31-5-03 but on or before the 31-3-21, the AO shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the ROI in respect of each AY falling within 6 AYs and for the relevant AY or years referred to in cl(b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished u/s139; (b) assess or reassess the total income of 6 AYs immediately preceding the AY relevant to the PY in which such search is conducted or requisition is made and of the relevant AY or years: Provided that the AO shall assess or reassess the total income in respect of each AY falling within such 6 AYs and for the relevant AY or years: Provided further that assessment or reassessment, if any, relating to any AY falling within the period of 6 AYs and for the relevant AY or years referred to in this sub-sec pending on the date of initiation of the search u/s132 or making of requisition u/s132A, as the case may be, shall abate: Provided also that the Central Govt may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the AO shall not be required to issue notice for assessing or reassessing the total income for 6 AYs immediately preceding the AY relevant to the PY in which search is conducted or requisition is made and for the relevant AY or years. Provided also that no notice for assessment or reassessment shall be issued by the AO for the relevant AY or years unless- (a) the AO has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs or more in the relevant AY or in aggregate in the relevant AYs; (b) the income referred to in cl(a) or part thereof has escaped assessment for such year or years; and (c) the search u/s132 is initiated or requisition u/s132A is made on or after the 1-4- 17.

6 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 Explanation-1.- For the purposes of this sub-sec, the expression “relevant AY” shall mean an AY preceding the AY relevant to the PY in which search is conducted or requisition is made which falls beyond 6 AYs but not later than 10 AYs from the end of the AY relevant to the PY in which search is conducted or requisition is made. Explanation-2.- For the purposes of the fourth proviso, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.” “Section 153C. Assessment of income of any other person- (1) Notwithstanding anything contained in sec139, 147, 148, 149, 151 and 153, where the AO is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the AO having jurisdiction over such other person for 6 AYs immediately preceding the AY relevant to the PY in which search is conducted or requisition is made and that AO shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that AO is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant AY or years referred to in section 153A(1): Provided that in case of such other person, the reference to the date of initiation of the search u/s132 or making of requisition u/s132A in the second proviso to section 153A(1) shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person: Provided further that the Central Govt may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the AO shall not be required to issue notice for assessing or reassessing the total income for 6 AYs immediately preceding the AY relevant to the PY in which search is conducted or requisition is made and for the relevant AY or years as referred to in section 153A(1) except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-sec (1) has or have been received by the AO having jurisdiction over such other person after the due date for furnishing the ROI for the AY relevant to the PY in which search is conducted u/s132 or requisition is made u/s132A and in respect of such AY- (a) no ROI has been furnished by such other person and no notice under sub-sec (1) of sec142 has been issued to him, or (b) a ROI has been furnished by such other person but no notice u/s143(2) has been served and limitation of serving the notice u/s143(2) has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person, such AO shall issue the notice and assess or reassess total income of such other person of such AY in the manner provided in section 153A. (3) Nothing contained in this sec shall apply in relation to a search initiated u/s132 or books of account, other documents or any assets requisitioned u/s132A on or after the 1-4-21.”

119.

We thus record our conclusions as follows: B. Both section 153A and 153C embody non-obstante clauses and are in express terms ordained to override sec139, 147 to 149, 151 and 153. By virtue of the 2017 Amending Act, significant amendments came to be introduced in section 153A. These included, inter alia, the search assessment block being enlarged to 10 AYs consequent to the addition of the stipulation of “relevant AY” and which was defined to mean those years which would fall beyond the 6 year block period but not later than 10 AYs. The block period for search assessment thus, came to be enlarged to stretch up to 10 AYs. The 2017 Amending Act also put in place certain pre-requisite conditions which would have to inevitably be shown to be satisfied before the search assessment could stretch to the “relevant AY”. The pre-conditions include the prescription of income having escaped assessment and represented in the form of an asset amounting to or “likely to amount to” Rs.50 lakhs or more in the “relevant AY” or in aggregate in the “relevant AYs”. D. The first proviso to section 153C introduces a legal fiction on the basis of which the commencement date for computation of the 6 year or the 10 year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the 6 and the 10 year period is governed by the first proviso to section 153C, which significantly shifts the reference point spoken of in section 153A(1), while defining the point from which the period of the “relevant AY” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the first proviso of section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the SC in Jasjit Singh (SC). The aforesaid legal position also stood reiterated by the SC in Vikram Sujitkumar Bhatia (SC). The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. F. While the identification and computation of the 6 AYs hinges upon the phrase “immediately preceding the AY relevant to the PY” of search, the 10 year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation-1 of section 153A requires us to reckon it “from the end of the AY”. This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology “immediately preceding” when it be in relation to the 6 year period and employing the expression “from the end of the AY” while speaking of the 10 year block.” ii) A.R. Safiullah v. ACIT, [2021] (Mad.) judgment dated 24/03/2021, W.P. (MD) no.4327 of 2021, concluded that- “2. The petitioner is an IT assessee. His premises were searched on 10-4-18. Pursuant to the said search, the respondent issued notices u/s153A requiring the petitioner to file his ROI for various AYs. One such notice issued for the AY09-10 is impugned in this WP. The only question that arises for my determination is whether the AO herein is possessed of the power to issue the same. The respondent has filed a detailed counter affidavit and the ld standing counsel took me through its contents.

21 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 of Rs.60 lakhs for impugned AY09-10 in the assessment order; in absence of a valid „satisfaction note‟ recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s153C, search assessment made u/s144 rws.153C would be invalid and is liable to be quashed.” ITA No.109/Nag./2024 Assessment year : 2010–11 Ground no.1: “On the facts & circumstances of the case and in law, assessment made u/s153C is invalid as there is no satisfaction recorded by the AO of the searched person (i.e., RKTC Group) and also by the AO of the assessee-Co, since both the AOs are different; there is no mention of any „satisfaction note‟ recorded for the alleged escaped income of Rs.4,43,55,000 for impugned AY10-11 in the assessment order; in absence of a valid „satisfaction note‟ recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s144 rws.153C, search assessment made u/s153C would be invalid and is liable to be quashed.” ITA No.110/Nag./2024 Assessment year : 2011–12 Ground no.1: “On the facts & circumstances of the case and in law, assessment made u/s153C is invalid as there is no satisfaction recorded by the AO of the searched person (i.e., RKTC Group) and also by the AO of the assessee-Co, since both the AOs are different; there is no mention of any „satisfaction note‟ recorded for the alleged escaped income of Rs.32,46,300 for impugned AY11-12 in the assessment order; in absence of a valid „satisfaction note‟ recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s153C, search assessment made u/s143(3) rws.153C would be invalid and is liable to be quashed.” ITA No.111/Nag./2024 Assessment year : 2012–13 Ground no.1: “On the facts & circumstances of the case and in law, assessment made u/s153C is invalid as there is no satisfaction recorded by the AO of the searched person (i.e., RKTC Group) and also by the AO of the assessee-Co, since both the AOs are different; there is no mention of any „satisfaction note‟ recorded for the alleged escaped income of Rs.22,46,300 for impugned AY12-13 in the assessment order; in absence of a valid „satisfaction note‟ recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s153C, search assessment made u/s143(3) rws.153C would be invalid and is liable to be quashed.” ITA No.112/Nag./2024 Assessment year : 2013–14 Ground no.1: “On the facts & circumstances of the case and in law, assessment made u/s153C is invalid as there is no satisfaction recorded by the AO of the searched person (i.e., RKTC Group) and also by the AO of the assessee-Co, since both the AOs are different; there is no mention of any „satisfaction note‟ recorded for the alleged escaped income of Rs.75,00,000 for impugned AY13-14 in the assessment order; in absence of a valid „satisfaction note‟ recorded, which is a pre-requisite, pre condition for assuming valid jurisdiction u/s153C, search assessment made u/s143(3) rws.153C would be invalid and is liable to be quashed.”

68. In terms of the aforesaid reasons, we are of the opinion that this appeal requires to be dismissed as being devoid of merits.” iii) Similar position of law laid down by the Hon‟ble Karnataka HC in the case of Smt G Lakshmi Aruna (2023) 150 taxmann.com 107 (Karnataka HC) dt.31-3-23; against which, SLP of the revenue has been dismissed by the Hon‟ble SC in the case of PCIT v. G Lakshmi Aruna (2024) 159 taxmann.com 183 (SC) dt.11-12-23. iv) Thereafter, the Hon‟ble Karnataka HC in the case of Sunil Kumar Sharma (2024) (Kar HC) dt.22-1-24, has concluded that- 28 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 “26. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, we are of the view that the action taken by the respondent Revenue against the Assessee based on the material contained in the diaries/loose sheets, are contrary to the law declared by the Hon'ble Apex Court. In that view of the matter, impugned notices issued under section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and illegal.” It is further held – “53. Further, satisfaction note is required to be recorded u/s153C for each AY and in the impugned proceedings, a consolidated satisfaction note has been recorded for different AYs, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the Revenue.” v) The Hon‟ble High Cuort of Delhi, in the case of SPCIT v. Pavitra Realcon Pvt. Ltd. (2024) 340 CTR (Del.) 225 (Del. HC) has concluded that- “34. Reliance can also be placed upon the decision in the case of CIT vs. Micron International Ltd. 2015 SCC Online Del 7321, whereby, it was held that the jurisdictional defects cannot be cured under s. 292B of the Act and they render the entire proceedings null and void.

42.

The learned A.R. for the assessee submitted that the alleged documents found in the searched premises of Shri Sresh Agrawal, Kolkata, which has been transmitted to the Assessing Officer of the assessee-Company, does not constitute asset as defined in the fourth proviso to section 153A(1) and Explanation-2 to section 153A, which is sine qua non for issuing notice under section 153C for the „relevant AY/ AYs‟ of section 153A(1) as amended by the 36 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 Finance Act, 2017 (w.e.f. 01/04/2017); assessment made under section 153C dated 31/03/2022 for the assessment year 2009-10 to 2013-14, which is „relevant AY/ AYs‟ as per section 153A(1) as amended by the Finance Act, 2017 (w.e.f. 01/04/2017) and additions have been made on account of unexplained loans and advances, share capital/share application money as unexplained cash credits under section 68 and the Assessing Officer has not made any addition on undisclosed asset which is sine qua non/pre-condition for assuming valid jurisdiction for making assessment under section 153C for the „relevant AY/ AYs‟ as per „fourth proviso‟ to section 153A(1) r/w Explanation-2 to section 153A as amended by the Finance Act, 2017 (w.e.f. 01/04/2017), the addition on account of unexplained cash credit could not have been made by the Assessing Officer, unless he first made the addition of undisclosed asset; as the Assessing Officer has not made any addition on account of undisclosed asset. There was no jurisdictional fact in the hands of the Assessing Officer or in his possession when he assumed jurisdiction under section 153C for the assessment year 2009-10 to 2013-14 in the first place itself. When the very usurpation of jurisdiction under section 153C is bad in law for want of jurisdiction, the Assessing Officer would be precluded from making any other addition in the relevant AY/ AYs, the action fo the Assessing Officer in making addition under section 68 in the relevant AY/ AYs would be invalid for want of jurisdiction. In support of these arguments, he relied on the judgments of the Hon‟ble Gauhati High Court in Fortune Vanijya (P) Ltd., [2023] 156 taxmann.com 191 (Gau.) and Goldstone Cements Ltd. [2023] 156 taxmann. com 529 (Gau.).

38 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 assess the income of the assessee for the extended period of relevant AY / AYs; It is therefore, incumbent upon the Assessing Officer to show that the key used for opening the lock for the concluded the extended period of relevant AY / AYs is the most appropriate key to unlock and thereby reopen the proceedings for bringing to charge any other items of escaped / unexplained income unearthed in the course of search. However in a case where, either the assessee demonstrates that the key used by the Assessing Officer for reopening the assessment is either incorrect or where the Assessing Officer himself abandons the jurisdictional fact in the course of assessment proceedings, then as a corollary, it has to be held that the key used by the AO for opening the lock was incorrect and thereby the lock placed earlier on the concluded assessment remained unopened and, therefore, the Assessing Officer could not enter upon the arena of reassessing the income of the assessee. So, when the Assessing Officer failed to make any addition for the undisclosed asset, then it tantamount to admission that there was no jurisdictional fact present before the Assessing Officer in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction under section 153C for the impugned assessment year 2009-10 to 2013-14 (i.e., the extended period of relevant AY / AYs) and therefore, Assessing Officer cannot proceed further to make other items of additions/ disallowances. In such a scenario, the Assessing Officer has no other option but to drop the assessment proceedings. He may, however, proceed again if there is any new / fresh jurisdictional fact before him, of–course, subject to limitation. For arrivintg at such conclusion by us, we rely on the judgement of the Hon‟ble Bombay High Court in CIT v/s Jet Airways India Ltd., [2011] 331 ITR 236 (Bom.) and Ranbaxy Laboratories Ltd. v/s CIT, [2011] 12 taxmann.com 74 (Del.). Though these judgments were rendered in the context of reopening under section 147 of the Act, however, the ratio decidendi will apply in the facts of the present case, because, like section 147 / 148, the Assessing Officer gets the authority to assess / reassess the income of a searched person or other person under section 153A / 153C of the Act for the extended AY / AYs (beyond the period of 6 assessment years) only if he has in his possession the jurisdictional fact, as discussed in the forgoing paragraphs. If 39 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 the Assessing Officer is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course of assessment) while framing the reassessment order, then the Assessing Officer cannot legally proceed further with the assessment/ reassessment and/ or make any other items of additions / disallowances, because the jurisdictional fact on the strength of which he assumed section 153C jurisdiction is absent or not in existence. In the light of the aforesaid discussion and in our considered opinion, this plea of learned A.R. for the assessee is well founded and deserves to be accepted. In view of the above and on a perusal of the impugned assessment order, we note that the only addition made by the Assessing Officer in the assessment year 2009–10 to 2013-14 was on account of unexplained cash credit represented by loans and advances and share capital / share application monies under section 68 of the Act are as under:–

49. In this case, as there was no addition made by the Assessing Officer on account of undisclosed assets, ex consequenti, an inference deserves to be drawn that there was no „jurisdictional fact‟ for the Assessing Officer to assume jurisdiction under section 153C for the assessment year 2009-10 to 2013-14. The usurpation of jurisdiction under section 153C is bad in law, for want of jurisdiction as the Assessing Officer was precluded from making any other addition in the assessments yeaer 2009-10 to 2013-14. Therefore, the action of the Assessing Officer in making addition under section 68 for the relevant assessment year 2009-10 to 2013-14 is untenable in the eyes of law. For coming to such conclusion, we rely on the following case laws:– i) CIT v. Fortune Vanijya (P) Ltd. [2023] 156 taxmann.com 191 (Gau.) wherein the Court concluded as under:– “19. As a consequence, we have no hesitation in holding that the AO did not have in his charge, any “Jurisdictional fact “(on or prior to 5-12-19) to invoke and issue notice u/s153C to the assessee. The extended jurisdiction to invoke/assess 7th to 10th AY is conferred on the AO by authority of law and the AO cannot confer to himself the jurisdiction in a casual manner by stating/substituting the specific jurisdictional fact. It is imperative that before issuance of notice u/s153C (for the extended period) the AO sets out his objective satisfaction from the seized material, the details of the specified/undisclosed assets in possession qua the assessee for AY11-12 valued at Rs. 50 lacs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law to invoke the jurisdiction u/s153A for 7th to 10th AY. At the cost of repetition, it is pertinent to mention that the assessee had disclosed the sale transactions and liquidation of shares in his regular books of accounts and the liquidation of shares were received in bank. Thus the aforementioned assets cannot be termed as undisclosed assets. It has been appositely concluded in the concurrent decisions of the CITA and ITAT that it cannot be held that the allegedly undisclosed assets have escaped assessment.

41 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 “8. While considering the appeals and the COs, the ld Trib framed pertinent ques for adjudicating the appeals. The Que No.(A), formulated by the ITAT, reads as below:- “(A) Whether, AO had validly assumed jurisdiction to issue notice u/s153A upon the assessee for AY11-12 in terms of fourth proviso to section 153A read with Explanation-2?” After discussing the material available on record, considering the submissions advanced on behalf of the revenue and the assessee, the ld Trib recorded the following findings on the above question:- “8.22. From our discussion it is clear that, only if any of specified „asset/s‟ as defined in Expl.-2 is unearthed during the course of search and the acquisition of such an „asset‟ being unexplained or undisclosed, which is valued Rs.50 lakhs or more, that the AO can be said to be in possession of the jurisdictional fact to initiate proceedings u/s153A for 7th-10th AY (AY11-12, in the instant case). Now, to understand the alternate gr.of argument of Shri Dudhwewala, let us for the sake of argument, assume that the AO had validly invoked the jurisdiction u/s153A for AY11-12.Then in such an event, it has to be borne in mind that, first the AO had to make addition in respect of the purported undisclosed asset valued at Rs.50 lakhs or more; and only thereafter the AO can venture to make any other additions/ disallowance which are not in the nature & character of „Asset‟ but represents undisclosed/ unexplained income/ expenditure/credit etc. Perusal of the assessment order impugned before us, shows that that AO did not make any addition/s in respect of escaped/ undisclosed asset in the relevant AY11-12. We therefore, find ourselves in agreement with Shri Dudhwe that, unless the AO made addition/s of Rs.50 lakhs or more in relation to escaped/ undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. liabilities like credit entry etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s153A, that he is in possession of the jurisdictional fact i.e., undisclosed asset valued Rs.50 lakhs or more has escaped assessment, which constitutes the key to open the lock and then re-assess the income of the assessee for the 7th to 10th AY. It is therefore, incumbent upon the AO to show that the key used for opening the lock for the concluded 7th to 10th AY is the most appropriate key to unlock and thereby reopen the proceedings for bringing to charge any other items of escaped/unexplained income unearthed in the course of search. However in a case where, either the assessee demonstrates that the key used by the AO for reopening the assessment is either incorrect or where the AO himself abandons the jurisdictional fact in the course of assessment proceedings, then as a corollary, it has to be held that the key used by the AO for opening the lock was incorrect and thereby the lock placed earlier on the concluded assessment remained unopened and therefore, the AO could not enter upon the arena of reassessing the income of the assessee. So, when the AO fails to make any addition for the „undisclosed asset‟, then it tantamount to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s153A for AY11-12 and therefore, AO cannot proceed further to make other items of additions/ disallowances. In such a scenario, the AO has no other option but to drop the assessment proceedings. He may however proceed again, if there is any new/ fresh jurisdictional fact before him, of course, subject to limitation. For this conclusion of ours, we rely on Jet Airways & Ranbaxy Laboratories Ltd. Though these judgments were rendered in the context of reopening u/s147, however the ratio decidendi will apply in the present case, because, like sec147/148, the AO gets the authority to assess/ reassess the income of a searched person or other person u/s153A/ 153C for the extended AYs (7th to 10th AYs) only if he has in his possession the jurisdictional fact, as discussed. If the AO is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course

I have perused the draft assessment order submitted by you in the case M/s. Maheshwari Coal Benfication & Infrastructure Pvt. Ltd. PAN: AAECM9298D for A.Y. 2012–13 vide above referred letter. Accordingly, an approval u/s 153D of the I.T. Act is hereby accorded to pass the assessment order u/s 143(3) r.w.s. 153C of the IT Act, 1961 for A.Y. 2012–13 in respect of the following case:– Sr. Name of the Assessee Section A.Y. no. M/s. Maheshwari Coal U/s 143(3) r.w.s. 1. Benefication & Infrastructure 153C of the I.T. Act, 2012–13 Pvt. Ltd. PAN: AAECM9298D 1961 Sd/– (MILIND V. PATIL) Addl. Commissioner of Income Tax Central Range–1, Nagpur” “F.No.Addl. CIT/CR–1/NGP/153D/2021–22 Date: 31.03.2022 To, The Deputy Commissioner of Income Tax Central Circle–1(1), Nagpur Sub: Approval U/s 153D of I.T. Act in the case of M/s. Maheshwari Coal Benefication & Infrastructure Pvt. Ltd., PAN:AAECM9298D for A.Y. 2013–14 reg. Ref: Letter F. no.DCIT CC–1(1)/Approval U/S 153D/MCBIPL/2021–22, dated 31.03.2022. 2. I have perused the draft assessment order submitted by you in the case M/s. Maheshwari Coal Benfication & Infrastructure Pvt. Ltd. PAN: AAECM9298D for A.Y. 2013–14 vide above referred letter. Accordingly, an approval u/s 153D of the I.T. Act is hereby accorded to pass the assessment order u/s 143(3) r.w.s. 153C of the IT Act, 1961 for A.Y. 2013–14 in respect of the following case:– Sr. Name of the Assessee Section A.Y. no. M/s. Maheshwari Coal U/s 143(3) r.w.s. 1. Benefication & Infrastructure 153C of the I.T. Act, 2013–14 Pvt. Ltd. PAN: AAECM9298D 1961 Sd/– (MILIND V. PATIL) Addl. Commissioner of Income Tax Central Range–1, Nagpur” 55. The learned A.R. for the assessee further argued that the separate approval dated 31/03/2022, granted under section 153D for each assessment year separately for assessment year 2009-10 to 2013-14 are invalid, as it is granted on the same day itself on 31/03/2022 on the basis of letter dated 31/03/2022 by the Assessing Officer for seeking approval from the Addl. CIT, though it is separate approval for each assessment year, but it is stereo-type/

47 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 DCIT, Central Circle-1, Nagpur). The Addl.CIT has not even perused the assessment records / files wherein date of transmitting the documents is 21/01/2021 and not applied his mind to the fact that it would be deemed date of search and therefore, on his part, the Addl. CIT has not pointed out the glaring mistake of the Assessing Officer for computation of block period of 10 assessment years as per Explanation–1 to section 153A by the Finance Act, 2017 (w.e.f. 01/04/2017) which is a jurisdictional fact / pre-condition / sine qua non for usurping / assuming jurisdiction under section 153C for the assessment year 2009–10 to 2011–12 (i.e., 3 consecutive years) and for issuing notice under section 153C for assessment year 2009-10 to 2011–12. The learned A.R. further argued that the Addl. CIT has not cared that in absence of this jurisdictional fact, whole proceedings for the assessment year 2009–10 to 2011–12 would be vitiated amd to be held as invalid, bad in law, and therefore, there would be futile exercise to give his mechanical approval dated 31/03/2022 under section 153D. Approval granted on the same day itself (i.e., letter seeking approval on 31/03/2022 by the Assessing Officer to Addl .CIT), itself proves that Addl. CIT has not even perused the assessment records and not even read the draft assessment order. For computation of 10 assessment years from the search year, the documents have been transferred on 21/01/2021 and thus, search year would be the assessment year 2021–22 for the assessee under section 153C, as the first year and the tenth year would be assessment year 2012–13 and thus the assessment year 2009–10 to 2011–12 would be clearly beyond the block of 10 assessment years. Had the Addl. CIT applied his mind on these vital facts of the case, he would have certainly not give approval under section 153D for the assessment year 2009–10 to 2011–12. Had there been application of mind, he would not have approved the draft assessment order for the assessment year 2009–10 to 2011–12, which is time barred as per Explanation-1 to section 153A of the Act by the Finance Act, 2017 (w.e.f. 01/04/2017). The Addl. CIT has not cared that the assessment made under section 153C on 31/03/2022 for the assessment year 2009-10 to 2011-12, is time barred as per first proviso to section 153C. The date of search shall be the date of receiving the documents / material by the Assessing Officer of the assessee. The date of receipt of the 48 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 documents is 21/01/2021 and this date shall be considered as the date of search and thus the assessment year 2009-10 to 2011-12 would be beyond the block of 10 assessment years as per Explanation–1 to section 153A. The learned A.R. further argued that the assessment made under section 153C for the assessment year 2009-10 to 2011-12 is time barred, as there is a complete violation of first proviso to section 153C and there is also violation of Explanation-1 to section 153A, which is not cared by Addl. CIT. b) Issue of „relevant AY/AYs‟ for the assessment year 2009–10 to 2013– 14; Explanation-1 to section 153A(1) of the Act; fourth proviso to section 153A(1) & Explanation-2 of the fourth proviso, has not been cared by Addl.CIT:

(a) The issue of “time barred by limitation” has not been cared by the Addl.CIT for the assessment year 2009-10 to 2011-12, since in this case, assessment has been made under section 153C due to search under section 132 was conducted upon a third party on 22/01/2019 and the Addl. CIT has not cared that the amended provisions of law under section 153A / 153C by the Finance Act, 2017 (wef 01/04/2017) would only be applicable in the case of the present-assessee, since search under section 132 has been conducted upon the searched person on 22/01/2019, amended section 153A/153C wef 01/04/2017 has been completely ignored by the Addl. CIT while granting such mechanical approval in routine manner/stereo type on the same day itself (i.e., 31/03/2022) without even perusing / reading / verifying the assessment records / files of the assessee, the Addl.CIT has not even seen / perused the assessment records files wherein date of transmitting the documents is 21/01/2021 and not applied his mind to the fact that it would be deemed date of search and therefore, on his part, he has not pointed out the glaring mistake of the Assessing Officer for computation of block period of 10 assessment years as per Explanation-1 to section 153A by the Finance Act, 2017 (w.e.f. 01/04/2017) which is a jurisdictional fact / pre-condition / sine qua non for usurping / assuming jurisdiction under section 153C for the assessment year 2009-10 to 2011-12 (i.e., 3 consecutive years) and for 52 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 issuing notice under section 153C for the assessment year 2009-10 to 2011-12, he has not cared that in the absence of this jurisdictional fact, the whole proceedings for the assessment year 2009-10 to 2011-12 would be vitiated and to be held as invalid, bad in law, and therefore, there would be a futile exercise to give his mechanical approval under section 153D for the assessment year 2009-10 to 2011-12. The approval granted on the same day itself (i.e., letter seeking approval on 31/03/2022 by the Assessing Officer to Addl.CIT), which itself proves that Addl. CIT has not even perused the assessment records and not even read / seen / perused the draft assessment order; for computation of 10 assessment years from the search year. The documents has been transferred on 21/01/2021 and thus, search year would be 2021-22 for the assessee under section 153C as the first year and the tenth year would be the assessment year 2012-13 and thus, the assessment year 2009-10 to 2011-12 would be clearly beyond the block of 10 assessment years. Had the Addl.CIT applied his mind on these vital facts of the case, he certainly would have not given approval under section 153D for the assessment year 2009-10 to 2011-12. Had there been application of mind, he would not have approved the draft assessment order for the assessment year 2009-10 to 2011-12 which is time barred as per Explanation-1 to section 153A by the Finance Act, 2017 (wef.01/04/2017), the Addl.CIT has not cared that the assessment made under section 153C dated 31/03/2022 for the assessment year 2009-10 to 2011-12 is time barred, as per first proviso to section 153C, date of search shall be the date of receiving the documents/ material by the Assessing Officer of the assessee, the date of receipt of the documents is 21/01/2021 shall be considered the date of search for the assessee company and thus, the assessment year 2009-10 to 2011-12 would be beyond the block of 10 assessment years as per Explanation-1 to section 153A, the assessment made under section 153C for the assessment year 2009-10 to 2011-12 is time barred and there is a violation of first proviso to section 153C. There is 53 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 also violation of provisions of Explanation–1 to section 153A which is not cared by the Addl.CIT.

60.

In the present case before us, we noted that the Addl.CIT did not mention anything in the approval order passed under section 153D dt.31/03/2022, even though for each year separately, towards his process of deriving satisfaction so as to exhibit his due application of mind. The Addl.CIT has failed to satisfactorily record its concurrence. Even the approval granted by the Addl.CIT does not refer to any seized material/assessment records/ satisfaction note or any other documents which could suggest that the Addl.CIT has duly applied his mind before granting approvals. 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 (i.e., for A.Y. 2013-14) merely says that “I have perused the draft assessment order submitted by you in the case of the assessee for AY13-14 vide above referred letter. Accordingly, an approval u/s153D is hereby accorded to pass the assessment order u/s143(3) rws.153C for AY13-14” which clearly proves that the Addl.CIT had routinely given approval to the Assessing Officer to pass the order only on the basis of contents mentioned/ dotted lines 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 granted on the same day itself on 31/03/2022, 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. Thus, the sanctioning authority has, in effect, abdicated his statutory functions and delightfully relegated his statutory duty to the subordinate Assessing Officer, by virtue of whose action, the Addl.CIT was supposed to supervise. The Addl.CIT, without any consideration of merits in proposed additions with reference to the satisfaction note/incriminating material collected in search etc., has proceeded to grant a simplicitor approval. This 56 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 approach of the Addl.CIT has rendered the approval to be a mere formality and cannot be considered as actual approval in law.

13. In another words, it was emphasised that the approval was granted without examining the assessment record or the search material. The relevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: “17.1. However, in the present case, we have no hesitation in stating that there is complete non-application of mind by the ld Addl.CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs. 87,20,580. Similarly, when the total assessed income as per the AO comes to Rs.16,69,42,560, the Addl.CIT could not have approved the assessed income at Rs.1,65,07,560 had he applied his mind. The addition of Rs. 15,04,35,000 made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. 17.2. Even the factual situation is much worse than the facts decided by the Tribunal in the case of Sanjay Duggal (Del Trib). In that case, at least the assessment folders were sent whereas in the instant case, as appears from the letter of the AO seeking approval, he has sent only the draft assessment order without any assessment records what to say about the search material. As mentioned earlier, there are infirmities in the figures of original ROI as well as total assessed income and the Addl.CIT while giving his approval has not applied his mind to the figures mentioned by the AO. Therefore, approval given in the instant case by the Addl.CIT, in our opinion, is not valid in the eyes of law. We, therefore, hold that approval given u/s153D has been granted in a mechanical manner and without application of mind and thus, it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s153D. In view of the above discussion, we hold that the order passed u/s153A rws.43(3) has to be quashed, thus ordered accordingly. The Gr. raised by the Assessee is accordingly allowed”.

16. We are not inclined to interdict the order of the Trib.” (v) PCIT v. Subash Dabas (2024) (Del HC) dt.17-5-24; & CNAPPL.20652/2023, concluded that- “11. Recently, in Shiv Kumar Nayyar (2024) (Del HC), we had an occasion to deal with an almost identical issue i.e., grant of approval u/s153D in a mechanical manner and without application of mind. The relevant discussion of the said decision in Para no.10 to 15, is reproduced hereunder as:- “13. Reliance can also be placed upon Serajuddin and Co (Ori HC) to understand the exposition of law on the issue at hand. Para no.22 of the said decision reads as under:- “22. As rightly pointed out by ld counsel for the assessee there is not even a token mention of the draft orders having been perused by the Addl.CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the 63 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere “rubber stamping” of the letter seeking sanction by using similar words like „see‟ or „approved‟ will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of sec158BG, it would equally apply to sec153D. There are 3 or 4 requirements that are mandated therein, (i) the AO should submit the draft assessment order “well in time”. Here it was submitted just 2 days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order.”

18. Therefore, under the facts of the present case, considering the foregoing discussion and the enunciation of law settled through judicial pronouncements discussed hereinabove, we are unable to find any substantial que of law which would merit our consideration.” (vii) PCIT v. Dilip Construction P Ltd (2023) 7 NYPCTR 892 (Ori HC) held as under: “4. We find similarity in facts found in the case by the Trib. The approval does not even say the Jt.CIT had perused the files. As such, the contention sought to be raised in the appeal is covered by Serajuddin & Co (2023) (Ori HC). In the circumstances, the appeal and applications are dismissed.” (viii) ACIT v. Serajuddin & Co (2023) 150 taxmann.com 146 (Ori HC) dt.15-3-23, concluded that- “16. That such an approval of a superior officer cannot be a mechanical exercise has been emphasized in several decisions. Illustratively, in the context of sec142(2A) which empowers an AO to direct a special audit. The obtaining of the prior approval was held to be mandatory. Rajesh Kumar (2007) 2 SCC 181 (SC) observed as under: “58. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the AO if he was found to have adopted a wrong approach or posed a wrong que unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/ or the entries made therein. While exercising its power, the AO has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief CIT or the CIT, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given.”

68 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 verified and/or examined by him as mandated u/s153D. In the absence of compliance of the above mandate, the approval order dt.25-12-18 passed u/s153D becomes an empty formality without due process of law and, thus, not sustainable. The ld Addl.CIT, in fact, abdicated his statutory functions and delightfully relegated the statutory duty to his subordinate being the Dy.CIT, Central-1, Bhopal adopting a shortcut method. Merely, an undertaking given by the ld AO was considered to be adequate by the Addl.CIT to accord approval in all assessments involved without considering any merit in the proposed adjustments 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 assessment-order without any independent application of mind by Addl.CIT. Ld AR submitted that the power to grant approval u/s153D is not to be exercised casually or any routine manner, rather the concerned authorities are expected to grant approval upon examination of the entire materials before approving the draft assessment-order and the authority is legally required to ensure due application of mind. Ld AR strongly contended that the Revenue does not have any evidence to show that the approval was granted with due diligence upon exercising adequate time and upon examining the materials needs to be considered in terms of the statutory provisions. Clearly, therefore, the approval is violative of the mandate of sec153D and therefore not sustainable at all. Ld AR argued that the case of assessee is fully covered by the decision of Hon‟ble Co-ordinate Bench in to 76/Ind/2020, Gurumukhdas Contractors (P) Ltd which is in fact a case of one of the group-entities part of the same search/ assessment proceeding and deal with by same AO and Addl.CIT in the same manner; therefore, the view taken therein by the Hon‟ble Co-ordinate Bench is applicable to assessee without any hesitation. Still to strengthen assessee‟s case, ld AR also relied upon the Trib, Cuttack Bench in to 28/CTK/2012, Serajuddin & Co, dt.21-1-22 where an identical issue was decided in favour of assessee and against revenue and the assessment orders passed by authorities on bad approval u/s153D has been quashed. With these vehement submissions, ld AR prayed to quash the assessment-order passed by AO.” (xi) Mysore Finlease P Ltd (2024) (Del-Trib) dt.10-1-24, ITA No.8821/del/2019 11-12, held as under: “8. Per contra, the ld DR vehemently argued that the role of Jt.CIT, Cen-Range is totally different from the role of a Jt.CIT in the normal range. He argued that in a Cen-Range, the Jt.CIT is involved in the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and is involved with the ld AO from time to time while issuing various questionnaires to the assessee. The Jt.CIT in Cen-Range also examine the seized documents in detail immediately after receipt of the appraisal report and provides able assistance to the ld AO about the interpretation of the said seized documents while issuing questionnaires to assessee, examining the replies filed by the assessee and drawing conclusions thereon. Hence, it is very easy for the Jt.CIT to grant approval of the draft assessment order on the same day since he is involved with the assessment proceedings right from the inception. Accordingly, he argued that the objection raised by the ld AR has no force. Further, the ld DR vehemently argued that bare reading of sec153D talks only about existence of approval from the Jt.CIT. There is no mention of application of mind on the part of the Jt.CIT or the approving authority in the said sec. The expression „application of mind‟ is only provided by the Judicial decisions and not provided in the statute. Hence, the ld DR argued that literal interpretation is to be given to the sec153D which does not provide for application of mind of the approving authority and hence, any other interpretation contrary to the same would only result in re-writing the law.

69 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 9. We find, as per the scheme, for framing search assessments, the ld AO can pass the search assessment order u/s153A or u/s153C only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the Jt.CIT in terms of sec153D. This is a mandatory requirement of law. The said approval granting proceedings by the Jt.CIT is a quasi judicial proceeding requiring application of mind by the Jt.CIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme, it is the bounden duty of the AO to seek to place the draft assessment order together with copies of the seized documents before the Jt.CIT well in time much before the due date of completion of search assessment. The Jt.CIT is supposed to examine the seized documents, quenaires raised by the ld AO on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the quenaires issued by the ld AO and the conclusions drawn by the ld AO vis- à- vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the Jt.CIT in a judicious way after due application of mind. Even though as vehemently argued by the ld DR, the Jt.CIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the Jt.CIT, while granting the approval u/s153D has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the AO and Jt.CIT are merely guidance to the AO and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the AO to frame the assessment after getting prior approval from Jt.CIT u/s153D. The Jt.CIT getting involved in the search assessment proceedings right from inception does not have any support from the provisions as no where the Act mandates so. The scheme mandates due application of mind by the ld AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/ clarifications from the assessee on the contents of the seized documents. When the scheme provides for a leeway to both the AO as well as the Jt.CIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of Jt.CIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the ld DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the Investigation Wing, both the AO and the Jt.CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. In our considered opinion, if the arguments of the ld DR are to be appreciated that the Jt.CIT need not apply his mind while granting approval of the draft assessment orders u/s153D as it is not provided in sec153D, then it would make the entire approval proceedings contemplated u/s153D otiose. The law provides only the AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the Jt.CIT to grant judicious approval u/s153D to the draft assessment orders placed by the ld AO.

15. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in holding that the approval u/s153D has been granted by the Jt.CIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions nor endorsed by the Hon‟ble Ori HC; Hon‟ble Alld HC and Hon‟ble Jurisdictional HC (Del HC) referred to supra. Hence, we find lot of force in the arguments advanced by the ld AR in support of the addl.grs raised for all AYs u/c before us for all the assessees. Accordingly, the Addl.grs raised by all the assessees for all the AYs u/c are hereby allowed.” (xii) Inder International v. ACIT (2021) 213 TTJ 251 (Chd-Trib) dt.7-6-21, Chd/ 2018; AY16-17, held that- “15. ….In the present case before us, we noted that the Addl.CIT did not mention anything in the 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/s153D 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/s153A on this Addl. Gr. alone.

“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/s153D to complete assessments u/s143(3) rws.153A 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 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/ her statutory functions and delightfully relegated his/ her 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/ her to accord approval in all assessments involved. Manifestly, the Addl.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 Addl.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/s153D. Such perfunctory approval has no legal sanctity in the eyes of the law. Shreelekha Damani (Mum-Trib) approved by jurisdictional HC subsequently as reported in 307 CTR 218 affirms the plea of the assessee. 11.7. Very recently, Sanjay Duggal (Del-Trib) dt.19-1-21 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 u/s153D. 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 u/s153D totally devoid of any application of mind. The approval so granted under the shelter of sec153D, does not, in our view, pass the test of legitimacy. The Assessment orders of various AYs 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.” (xiv) Sanjay Duggal v. ACIT (2021) (Del-Trib) dt.19-1-21, held as under: “11.5. Dharampal Satyapal Ltd (2019) (Gau HC) Manu/GH/07070/2018 in para-28 has held as under: “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 to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements.”

72 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 11.6. Therefore, in the cases of search, assessment orders whether framed u/s 153A or 153C, the Jt.CIT (Approving Authority) is required to see that whether the additions have been made in the hands of assessee are based properly on incriminating material found during the course of search, observations/ comments in the appraisal report, the seized documents and further enquiries made by the AO during the course of assessment proceedings. Therefore, necessarily at the time of grant of approval of the assessment made by the AO, the Jt.CIT is required to verify the above issues, apply his mind that whether they have been properly appreciated by the AO while framing the assessment orders or not. The Jt.CIT is also required to verify whether the required procedure have been followed by the AO or not at the time of framing of the assessments. Thus, the approval cannot be a mere discretion or formality, but, is mandatory being Quasi Judicial function and it should be based on reasoning. In our view, when the legislature has enacted some provision to be exercised by the higher Revenue Authority enabling the AO to pass assessment order or reassessment order in search cases, then, it is the duty of the Jt.CIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of 2 folds; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the AO in taxing right income in the hands of right person and in right AY and on the other hand, Jt.CIT is also responsible and duty bound to do justice with the tax payer (Assessee) by granting protection against arbitrary or unjust or unsustainable exercise and decision by the AO creating baseless tax liability on the assessee and thus, the Jt.CIT has to discharge his duty as per Law. Thus, granting approval u/s153D is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the Jt.CIT on the application of mind and this exercise should be discernable from the Orders of the approval u/s153D. 11.7. In the following Orders of various Benches of the Trib, it is held that while granting approval u/s153D, the Jt.CIT shall have to peruse all the incriminating material and other seized material on record and proper procedure if have been adopted by the AO and appraisal report as well. The Jt.CIT shall apply his mind to such material on record before granting his approval, otherwise, it will be invalid and bad in Law. We may refer to such Orders as under: 13. In the present cases various approvals were granted by the Jt.CIT, Central Range-1, New Delhi, and forwarding letter of the AO are placed on record in all the cases. In all the cases as per the forwarding letter of the AO only assessment records were forwarded to the Jt.CIT, Range-1, New Delhi at the time of granting approval. Therefore, it is evident that the Jt.CIT 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 u/s153D there is a reference to the AO letter only. There is no reference to the seized material or record or notice u/s142 and reply of the assessee and if procedure for its inspection or perusal is there. There is no material considered by the Jt.CIT. Ld Counsel for the assessee has pointed out that assessee has suffered serious prejudice because of non-application of mind on the part of the Jt.CIT while granting approval u/s153D because the AO 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 AO for rectifying their mistakes when assessee filed petition for rectification u/s154. Thus, there was inconsistencies and double additions made by the AO in various AYs. It may also be noted that in the present case the facts stated in the impugned orders 73 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 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 AO 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 upon Godhra Electricity Co Ltd (SC). This fact is also not verified and considered by the Jt.CIT while granting approval u/s153D. 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 u/s68 is not understandable. Thus, the Approving Authority without application of mind and in a most mechanical and technical manner granted approval u/s153D even without reference to any reason in the Order u/s153D. We, even, otherwise failed to understand that in search cases how an approval can be granted to an AY which is required to be based only on incriminating material without verification of those material and its reference in the appraisal report. The Jt.CIT even in approval did not mention if assessment record is seen by him.

16.

On careful reading of the above judgment, we note that the Hon‟ble HC was pleased to observe that there should be some indication that the approving authority examined relevant material in detail while granting the approval u/s153D. The approval u/s153D is a mandatory requirement and such approval is not meant to be given mechanically. Such approval granted mechanically without application of mind by the Addl.CIT resulting in vitiating the assessment orders. We find in the present case that the AO sought approval u/s153D on 18-3-16, the Jt.CIT granted approval on 21-3-16 and the final assessment order u/s143(3) rws.153A was passed on 30-3-16 which clearly indicates that the approving authority granted approval in one day mechanically without examining the relevant material. According to the AO, the case of the assessee was covered by search action u/s132 conducted at Bhilwara concerning Mantri-Soni Group of Jalna/ Bhilwara and their family members and business concerns at the business and resi-premises of different members/ associate which is evident from para 1 of the assessment order. Admittedly, the AO sought approval u/s153D in 49 assessment orders vide letter dt. 18-3-16 which is on record placed on by the ld DR on 9-10-23. The approving authority has to examine number of evidences, documents, statements of various persons etc. recorded which were necessarily to be taken into consideration while granting approval u/s153D by the Jt.CIT. On an examination of the approval dt.21-3-16 which is on record placed by the ld DR 75 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 on 9-10-23, we find no such indication of examination of evidences, documents, statements of various persons etc. at least, no reference whatsoever made by the Jt.CIT i.e., approving authority. Thus, we find the facts and circumstances in the present case are similar to the facts of the case before the Serajuddin & Co (2023) (Ori HC) and the ratio laid down therein is applicable to the present case. Therefore, the Jt.CIT granted approval u/s153D mechanically without application of mind which resulting in vitiating the present final assessment order dt.30-3-16 u/s143(3) rws.153A.

78 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 Ground no.5 (A.Y. 2010–11) “On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.4,43,55,000 made u/s68 on count of unexplained cash credits, while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY10-11; addition is not justifiable in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted.” Ground no.5 (A.Y. 2011–12) “On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.32,46,300 made u/s68 on count of unexplained cash credits, while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY11-12; addition is not justifiable in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted.” Ground no.5 (A.Y. 2012–13) “On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.22,46,300 made u/s68 on count of unexplained cash credits, while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY12-13; addition is not justifiable in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted.” Ground no.4, 5 and Additional Grounds no.3 & 4, in A.Y. 2013–14 Ground no.4 On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.1,30,00,000 made u/s68 on count of unexplained cash credits, while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY13-14; addition is not justifiable in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted.” Ground no.5 On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.35,00,000 made u/s68 on count of unexplained cash credits, while, it was opening balance as on 1-4-12 and there is no fresh credits appearing in the books of account of the assessee-Co in the impugned AY13- 14; addition is not justified; addition is liable to be deleted.” Additional Ground no.3 On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.5,00,000 made u/s68 on count of unexplained cash credits while, there is no such credit entry is appearing in the books of account of the assessee-Co in the impugned AY13-14; addition is not justified in absence of any corroborative material/ evidence brought on record by the AO; addition is liable to be deleted. Additional Gr.No.4: On the facts & circumstances of the case and in law, the ld CIT(A) has erred in sustaining addition of Rs.1,25,00,000 made u/s68 on count of unexplained cash

80 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 A.R. further submitted that there is no credit entry of ` 60 lakh is entered/ recorded in the books of account of the assessee-Company in the assessment year 2009–10 which relates to alleged party „Raj Roadways‟ as mentioned in the assessment order. The addition made of ` 60 lakhs under section 68 is not sustainable without there being a cash credit entry recorded in the books of account of the assessee-Company in the assessment year 2009–10. In the assessment order dated 31/03/2022 made under section 153C at Page–2, there is a mention of „Raj Roadways‟ against which the Revenue pleaded that a ledger account was found at third party premises of Shri Suresh Agrawal, Kolkata, the alleged accommodation entry provider as per the statement recorded under section 132(4) in respect of Shri Suresh Agrawal, Kolkata on 22/01/2019 to 25/01/2019 and on 14/03/2019, on a separate search action under section 132 conducted upon Shri Suresh Agrawal, Kolkata, the director of M/s.Rashi Steel & Power P. Ltd, Kolkata, on 22/01/2019 (i.e., Suresh Agrawal, Kolkata, who is director of the assessee-Company also but he is not involved in any of the affairs/ business of the assessee-Company since last 9- 10 years, he is not even in touch with the assessee-Company in any manner since last 9-10 years). The alleged party „Raj Roadways‟, which is not even transacted/ related/ linked/ pertain to the assessee-Company in the assessment year 2009-10 in any manner and on this count also, the Assessing Officer made addition of Rs.60 lakh under section 68 in assessment year 2009-10 on merely presumption and surmises, which is unjustified. In support of these argument, the learned A.R. relied on the decision of the Hon‟ble Delhi High Court rendered in Usha Stud Agricultural Farms Ltd (2008) 183 taxmann.com 277 (Del HC); and the decision of the Co–ordinate Bench of the Tribunal, Chennai Bench, in Ravindra Arunachala Nadar, reported as (2021) 129 taxmann.com 275 (Chen-Trib) wherein one of us Judicial Member of this Bench is one of the parties to this order.

82 Maheshwari Coal Benefication & Infrastructure Pvt. Ltd. A.Y. 2009–10 to 2013–14 ii) Ravindra Arunachala Nadar v. ACIT (2021) 129 taxmann.com 275 (Chen- Trib) dt.23-2-21, held as under: “9. Coming to invocation of sec68, the AO has simultaneously invoked sec68 in addition to sec41(1), to bring into tax, said credit for the impugned AYs, but fact remains is that all these credits were brought forward from earlier FYs for which necessary evidences has been placed on record. On perusal of evidences filed by the assessee, we find that the credits in the name of S/Shri ARKA. Karutha Pandian, KA Sekar and K. Sivasundarapappa and Late ARK Arunachala Nadar, was received in FY07-08. Similarly, credit in the name of Smt. Swarnalatha was received in the FY06-07, likewise credit on account of land advance from Shri Kumar was received in the FY05-06. From the above, it is very clear that none of the credits were received during the current FY. Therefore, in our considered view these credits cannot be brought to tax as unexplained cash credits u/s68, because in order to bring any credits within the ambit of sec68, said credits should be found in the books of accounts of the assessee maintained for any PY and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee in the hands of the AO is not satisfactory. In this case, none of the credits were received during the current FY and further, the assessee has offered explanation about source and nature of credits and further proved the identity/ creditworthiness and genuineness of transactions. Therefore, these credits cannot be brought to tax even u/s68. This view is fortified by Usha Stud Agricultural Farms Ltd (2008) (Del HC), where it was held as under:- “When the credit balance in the accounts of the assessee did not pertain to the year u/c, the AO was not justified in making the addition u/s68 and no fault could be found with the order of the Trib endorsing the decision of the CIT(A).” Sooraj Leathers (Chen-Trib) had considered an identical issue and after considering relevant facts held as under:- “If the liabilities are old, no credit has been made in so far those credits in the books of accounts in the AY u/c, sec68 cannot be applied. This view of ours is supported by Usha Stud Agricultural Farms Ltd (2008) (Del HC), cited supra wherein held that credit balance in the account of the assessee did not pertain to the year u/c, the AO was not justified in making the addition u/s68. Hence, in our opinion, the liabilities which were not credited in the PY relevant to the AY u/c, the the sec68 cannot be applied and the AO is directed to exclude the same from the addition u/s68 after duly verifying the same.”