ITO, WARD 28(1), NEW DELHI vs. SUDHA PAWA LH LATE SWATI PAWA, NEW DELHI

1. “Additional Ground No.1: That on the 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 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.”

The ld. DR has opposed the admission of this additional ground submitting that this ground cannot be raised by resorting to Rule 27 of the Rules. As, for convenience, the contentions of the ld. DR are reproduced below:-

We have considered the rival contentions and at the outset, would like to address the issue raised by the ld. DR and, in this regard, we find that in a coordinate Bench decision in which one of us i.e., the Judicial member, was in the quorum, has decided the controversy holding that the assessee has right to raise legal grounds by resorting to Rule 27 in case of appeals filed by the Revenue also. Thus we are inclined to admit these grounds of respondents by making reliance on the following and relevant findings in ACIT, Vs Splendor Landbase Ltd., ITAs No.2462 & 2463/Del/2016 and CO Nos.101 & 102/Del/2024 order dated 07.03.2025 are as follows:- “7. As with regard to the reasons for admissibility of the legal grounds under Rule 11 and Rule 27 of the Rules, we proceed to examine the issue on the basis of the scope of powers of this Tribunal which section 254(1) of the Act confers to pass an order "as it thinks fit". The Rule 11 only complements the wide powers conferred upon the Tribunal under section 254(1) to render substantive justice to the party before it. Thus we are inclined to accept the submission of ld. Counsel that a constructive reading of section 254(1) of the Act and Rule-11 of Rules makes it amply clear that Tribunal is competent to consider any ground or issue not taken by either of the parties, if the same is found relevant to decide the appeal pending before it. The Hon'ble Guwahati High Court in the case of Assam Co. (India) Ltd. v. Commissioner of Income-tax. [2003] 133 Taxman 159 (Gauhati) has laid the law straight and held has follows; "We are therefore not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. We find this view of ours also reinforced by the language of Rule 11 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. In taking this view, we are conscious about the observations of the Madras High Court and the Calcutta High Court made in the decisions relied upon by learned counsel for the Revenue but we are, in the facts and circumstances of the case, persuaded to accept the observations of the apex court made in this regard in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. We are therefore of the view that it is permissible on the part of the Tribunal to 4 & 3057 to 3059/Del/2022 2075 & 35/Del/2023; & entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party. We must however hasten to add that in order to enable either the assessee or the Department to urge a ground in the appeal filed by the other side, the relevant facts on which such ground is to be founded should be available on record. In the absence of such primary facts, in our opinion, neither the assessee nor the Department can be permitted to urge any ground other than those which are incorporated in the memorandum of appeal filed by the other party. In other words, if the assessee or the Department, without filing any appeal or a cross-objection seeks to urge a ground other than the grounds incorporated in the memorandum of appeal filed by the other side, the evidentiary facts in support of new ground must be available on record."

Ld. Counsel has further relied upon the decisions of Delhi Bench in the case of Dy. D.I.T Circle 2 (2) New Delhi Versus M/S Travelport L.P. USA, 2021 (3) TMI 208 and of Hon'ble Ahmedabad Bench in the case of Deputy Commissioner of Income-tax v. Suraj Ltd., [2024] 165 taxmann.com 410 (Ahmedabad - Trib.), wherein the Co-ordinate benches allowed the assessee/respondent to raise a legal and jurisdictional plea facts relating to which were already on record by invoking the powers of Tribunal under Rule 11 of the ITAT Rules irrespective of the fact that the assessee/respondent had not preferred an CO in the appeal filed by the Revenue. 8.1 Regarding right of respondent to raise an additional ground before ITAT under Rule 27 to support the order of the CIT(A), reference can be made to the decision of Hon'ble High Court at Delhi in the case of Sanjay Sawhney v. Principal Commissioner of Income-tax, [2020] 116 taxmann.com 701 (Delhi) wherein while allowing the right of assessee respondent to raise the jurisdictional ground under Rule 27 orally, it was held as under: "14. It emerges that Rule 27 ought not to be applied narrowly and therefore we cannot agree with Mr. Hossain, that by permitting the Appellant- Assessee (respondent before the Tribunal) to invoke Rule 27 before the Tribunal, to challenge the ground decided against him, scope of the subject matter of appeal would get expanded. We must also bear in mind that jurisdictional issue sought to be urged by the appellant under Rule 27 is interlinked with the other grounds of appeal

Per contra, the ld DR vehemently argued that very existence of high presumption of law which is also codified u/s 114(e) of the then Indian Evidence Act, 1872 that all official acts are regularly performed and therefore, the Tribunal had to accept that the presumption of approval are validly granted. The ld DR further stated that merely because the approvals were granted by one letter does not mean that it was not granted for each assessment year.

It is observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that & 3057 to 3059/Del/2022 2075 & 35/Del/2023; & the authority granting approval has to apply its mind for "each assessment year" for "each assessee" separately.

Reliance can also be placed upon the decision of the Orissa High Court in the case of Asst. CIT v. Serajuddin & Co. [2023] 150 taxmann.com 146/292 Taxman 566/454 ITR 312/SCC OnLine Ori 992 to understand the exposition of law on the issue at hand. Paragraph no.22 of the said decision reads as under:- *** 14. During the course of arguments, learned counsel for the assessee apprised this Court that the Special Leave Petition preferred by the Revenue against the decision in the case of Serajuddin & Co. (supra), came to be dismissed by the Supreme Court vide order dated 28.11.2023 in SLP (C) Diary no. 44989/2023.

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

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 that a letter dated 30.12.2018 was filed by the ld. AO before the ld. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The ld. Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30.12.2018 for seven assessment years in the case of the assessee and for seven assessment years in the case of Smt. Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. Neetu Nayyar from Central Public Information Officer who is none other than the ld. Addl. Commissioner of Income-tax, Central Range-S, New Delhi, under Right to Information Act, wherein, it reveals that the ld. Addl. CIT had granted approval for 43 cases on 30.12.2018 itself. This fact is not in dispute before us. Of these 43 cases, as evident from page 36 of the paper book which contains the approval u/s 153D, 14 cases pertained to the assessee herein and Smt. Neetu Nayyar. The remaining cases may belong to some other assessees, which information is not available before us. In any event, 10 & 3057 to 3059/Del/2022 2075 & 35/Del/2023; & whether it is humanly possible for an approving authority like ld. Addl. CIT to grant judicious approval u/s 153D of the Act for 43 cases on a single day is the subject matter of dispute before us. Further, section 153D provides that approval has to be granted for each of the assessment year whereas, in the instant case, the ld. Addl. CIT has granted a single approval for all assessment years put together."

Notably, the order of approval dated 30.12.2020 which was produced before us by the learned counsel for the assessee clearly signifies that a single approval has been granted for AYs 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above.

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 question of law which would merit our consideration."

In view of the aforesaid observations and respectfully following the judicial precedents relied upon herein above, we have no hesitation in holding that the approval u/s 153D of the Act has not been granted for each of the assessment year which is in violation of provisions of Section 153D of the Act itself thereby making the approval being granted in a mechanical manner without due application of mind. Hence, additional ground raised by the various assessees‟ before us in this regard is hereby allowed. Consequentially the assessment framed for these assessees‟ are hereby allowed for AY 2009-10. Since, the quantum assessments are quashed, the penalty appeals would have no legs to stand. Since, the assessments are quashed based on additional ground, the other grounds raised by the assessee as well as revenue need not be gone into and they are left open.

In the light of the aforesaid, all the appeals of the Revenue are dismissed and the appeal of the assessee in is allowed.

In regard to the appeal of the assessee in it comes up that primarily the issue was with regard to addition made to the income of the & 3057 to 3059/Del/2022 2075 & 35/Del/2023; & assessee u/s 50C of the Act and the ld. Sr. Counsel has submitted that without resorting to valuation report from a District Valuation Officer, the AO has disturbed the capital gain computation given by the assessee. We find that the assessment order was passed u/s 144 of the Act and the ld.CIT(A) has not entered into this aspect. Thus, we restore the issue to the files of the AO to call for a report from the DVO and adjudicate the issue afresh. Accordingly, is allowed for statistical purposes.