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Facts
The assessee's appeal challenges an assessment order passed under Section 143(3) r.w.s 153B(1)(b) of the Income Tax Act, 1961. The core issue is the validity of the approval granted under Section 153D by the Additional CIT, which the assessee claims was mechanical and lacked independent application of mind.
Held
The Tribunal held that the approval granted under Section 153D was mechanical and not a product of proper application of mind, as evidenced by case law and the specific facts presented. This vitiated the entire assessment proceedings.
Key Issues
Whether the approval granted by the Additional CIT under Section 153D of the Income Tax Act was valid, or if it was granted mechanically without application of mind, thereby vitiating the assessment.
Sections Cited
143(3), 153B(1)(b), 153D, 132A, 69A, 153A
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Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: MS. MADHUMITA ROY&
The instant appeal filed by the assessee is directed against the order passed by the Ld. CIT(A)-3, Gurgaon, dated 12.09.2024 arising out of the Assessment Order dated 10.12.2018 passed by the ITO, Ward-1, Rewari, under Section 143(3) r.w.s 153B(1)(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2017 -18.
The assessee has challenged the maintainability of assessment under Section 143(3) r.w.s 153B(1)(b) of the Act as bad in law and void- ab-initio as the approval under Section 153D of the Act granted by the Ld. Add.CIT in a mechanical manner without any independent application of mind. Cash amounting to Rs.9,72,000/- in new currency was requisitioned and seized under Section 132A of the Act from assessee on 23.12.2016 by the DDIT, Investigation Wing-1, Gurgaon. It is the case of the Revenue that assessee stated on 17.12.2016 and 19.12.2016 that such seized cash belonged to the proprietorship firm namely M/s Rajendra Kumar, Hemant Kumar Rewari, Rewari dealing with wholesale cloth merchant owned by his elder brother Mahesh Kumar. He could not show any authorization but later could furnish that he was authorized from the firm for all the cash related work for his job profile and it included all cash related workers. Further that, the assessee replied to the authorities that he took his mother who was suffering from spine and tumor problems to Max Hospital Gurgaon for her treatment and surgery. The cash was carried by him for that purpose only. Such assessment was finalized by making addition in the hands of the assessee treating the same as unexplained money under Section 69A of the Act which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us.
Before us, the assessee raised a ground on the point of the maintainability that the approval granted under Section 153D of the Act by the Addl. CIT, Rewari Range, Rewari, before passing the assessment order under Section 143A of the Act order of assessment in terms of Section 153B(1)(b) of the Act not in compliance of the statutory obligation cast upon it as the same was done mechanically and without application of mind. In this regard he has drawn our attention to page 1 of the paper book filed before us being the approval dated 06.12.2018 issued by and under the signature of the Addl.CIT, Rewari Range, Rewari, whereby and whereunder simply referring the office letter No. 2316 dated 04.12.2018 an approval under Section 153D of the Act in the case of the assessee for Assessment Year 2017-18 has been granted. He has further drawn our attention to such letter dated 04.12.2018 issued by the ITO, Ward-1, Rewari requesting the Addl.CIT, Rewari Range, Rewari for grant of approval under Section 153D of the Act wherein draft assessment order was enclosed for ready reference. It is the argument advanced by the Ld. Counsel appearing for the assessee that the mandate of Section 153D necessitates a conscious consideration and deliberation/examination of all the assessment records, seized materials, appraisal report relating to the issue involved in the assessment placed before the order approving authority under Section 153D of the Act. Admittedly, except the draft assessment order none of these aforesaid materials are appears to have been placed before the order approving authority as the same is not reflecting from page 2 of the paper book filed before us issued by the ITO, Ward 1, Rewari dated 4.12.2018 requesting approval by the ACIT, Rewari Range, Rewari. Further that, the order of approval dated 06.12.2018 appearing at page 1 of the paper book filed before us issued under the signature of Addl.CIT, Rewari Range, Rewari, does not reflect any examination done by him on the documents even the draft assessment order was furnished before him. As the same cannot said to be a product of proper application of mind by the Addl.CIT, Rewari Range, Rewari, such approval is not in terms of the statutory compliance neither in terms of the judgment passed by the different High Courts including in the case of ACIT Vs. Serajuddin & Co. [2023] 150 taxmann.com 146 (Orissa) passed by the Hon’ble Orissa High Court subsequently confirmed by the Hon’ble Supreme Court in SLP (Civil) diary No.(s) 44989 of 2023 dated 28.11.2023. The Ld. Counsel appearing for the assessee prays for quashing of the same as the same is bad in law. As the approval under Section 153D is the foundation of the order of assessment of addition in the hands of the assessee is found to be void, the entire proceeding is vitiated and therefore, liable to be quashed as was the crux of the submission of the ld. AR. In this regard he has relied upon the following judgments:
i. ACIT VS. Serajuddin & Co. [2023] 150 taxmann.com 146 (Orissa). ii. ACIT Vs. Serajuddin & Co. [2024] 163 taxmann.com (SC). iii. Kavita Jain Vs. DCIT Central Circle, Karnal in for A.Y. 2017-18 order dated 31.12.2024 & others. iv. M/s Inder International Vs. ACIT, Central Circle-II, Ludhiana in for AY: 2016-17 order dated 07.06.2021.
On the other hand, the ld. DR has relied upon the orders passed by the authorities below but failed to controvert the submissions made by the Ld. AR, neither been able to rely upon any judgment contrary to the observation made by the Hon’ble Orissa High Court further confirmed by the Hon’ble Supreme Court in the case of ACIT Vs. Serajuddin & Co. (surpa).
We have heard the rival submission made by the respective parties and we have also perused the relevant materials available on record. Having regard to the order of approval granted by the ACIT, the ground raised by the assessee and argument advanced challenging the said approval as mechanical issued under Section 153D of the Act is found to be acceptable for the reason as already discussed in the foregoing paragraph.
Under this facts and circumstances of the matter we have further considered the judgement passed by the Orissa High Court in the case of ACIT Vs. Serajuddina & Co. (Supra) wherein the approval granted by the Addl.CIT Range -1 Bhubaneshwar was under challenge. The same was found to be mechanical, without application of mind and thus, vitiates the entire assessment proceedings as held by the Hon’ble Orissa High Court with the following observation:
“22. As rightly pointed out by learned counsel for the Assessee there is not even a token mention of the draft orders having been perused by the Additional CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the though 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 order and finds that it meets the requirement of the law. As mentioned in the notices, the mere repeating of words of the statutes, 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....”
We have further considered the judgment passed in the matter of Kavita Jain Vs. DCIT Central Circle, Karnal by the Coordinate Bench in for Assessment Year 2017-18 wherein the the view taken by the Orissa High Court was adopted. Relevant to mention that the judgment passed by the Orissa High Court was further confirmed by the Hon’ble Apex Court by dismissing the SLP filed by the Revenue. The judgment passed by the Chandigarh Bench in the case of M/s Inder International Vs. ACIT, Central Circle II, Ludhiana in for A.Y. 2016-17 was also considered wherein under the identical facts and circumstances of the matter the ITAT concluded as follows:
“15. From the above, it is clear that this is totally non application of mind by the Addl. CIT, who is the supervising authority of the AO, while granting statutory approval u/s 153D of the Act, the issue stands covered in favour of the assessee by various decisions cited above. In the present case before us, we noted that the Addl. CIT did not mention anything in the 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 is noted in above paras. We noted that the relevant Para of the above approval letter merely says that "Necessary statutory approval us 153D 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 Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his statutory functions and delightfully relegated his statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him to accord approval in all assessments involved. Manifestly, the Additional 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 Additional CIT, Central has rendered the Approval to be a mere formality and cannot be considered as actual approval in law. Hence, we quash the assessment framed u/s 153A of the Act on this additional ground alone.”
Thus, having regard to the entire aspect of the matter the order impugned under Section 143(3) r.w.s 153B(1)(b) of the Act is found to be void as the foundation being the approval itself is found to be a product of non application of mind; no reference has been made by the approving authority on the relevant documents which are required to be considered and not even the assessment records placed before him. Approval given without application of mind is palpably bad in law, having no legal sanctity, void and therefore, liable to be quashed. In fact, the order impugned under Section 143(3) r.w.s 153B(1)(b) of the Act is found to have been passed on the basis of approval which is not sustainable in the eyes of law and therefore, the entire proceeding is vitiated. Thus, we find merit in the matter and with the above observations we quash the entire proceeding.
The appeal of the assessee is allowed.
Order pronounced in the open court on 25.09.2025