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TMI Blog2015 (11) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case and in law, the Hon'ble CIT (Appeals) erred in upholding the disallowance of Forwarding and Delivery charges of ₹ 1, 50, 0001- made on adhoc basis out of the total expenses of ₹ 11, 00, 542/- on the ground that since the expenditure was incurred in cash, it was not fully verifiable. (b) On the facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeals) erred in not considering the fact that the disallowance amounts to change of opinion as the assessing officer u/s 143(3) had already disallowed ₹ 1, 00, 0001-. 2. Repairs Maintenance Expenses: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeals) erred in upholding the disallowance made on adhoc basis to the extent of 20% of expenses of ₹ 2, 37, 2511- incurred at Farukhabad factory for cold storage repairs and maintenance on the ground that since the expenditure was incurred in cash, it was not verifiable to be wholly and exclusively for the purpose of the business. 3. Bad debts - ₹ 5, 05, 584/-: (a) On the facts and in the circumstances of the case and in law, the Hon'ble CIT (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee at ₹ 21. 44 lacs against the returned income of ₹ 7. 95 lacs. The AO had passed the order after obtaining the approval of Addl CIT, C. R. -7 Mumbai, vide his letter dated 31/12/ 2010. Challenging the order of the AO, it filed an appeal before the First appellate Authority (FAA), who partly allowed the appeal. 3. As stated earlier the assessee had raised additional grounds for all the AYs. including the AY. under appeal. The additional grounds deal with a jurisdictional issue, therefore, we would deal with the additional grounds first. In the additional grounds, it has been argued that the order passed by the AO was bad in law. During the course of hearing before us, the Authorised Representative(AR) stated that no incriminating material was found during the search regarding the additions made in the assessment order, that the additions were not justified, that the order passed by the AO was non-est, that the AO had not complied with the section 153D of the Act, that in the case of Smt. Shreelekha Damani (ITA No/4061/Mum/2012 AY 2007-08 dt. 19. 8. 2015) the Tribunal had deliberated upon the similar additional ground of appeal and had allowed the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of search and seizure operation, assessment was made u/s. 143(3) of the Act r. w. Sec. 153A and as per the endorsement on page-11 of the assessment order this order is passed with the prior approval of the Addl. Commissioner of Income Tax, Central Range-7, Mumbai. 6. The additional ground raised before us is against this endorsement in the assessment order as the claim is that the Assessing Officer has not complied with the provisions of Sec. 153D and hence the assessment made u/s. 153A of the Act is bad in law. 7. At the very outset, the Ld. Departmental Representative furnished the copy of the approval given by Addl. Commissioner of Income tax, Central Range-7, Mumbai which is also filed by the assessee in the paper book and the same is exhibited at page-1 of the paper book. 8. The Ld. Senior Advocate, Shri Jahangir Mistry vehemently submitted that the so called approval brought on record cannot be considered as an approval within the frame work of the provisions of Sec. 153D of the Act. The Ld. Sr. Counsel continued to argue that the approval granted by the Addl CIT is devoid of application of mind and by any stretch of imagination the order made u/s. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner. Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA. 11. 2. The Legislative intent can be gathered from the CBDT Circular No. 3 of 2008 dated 12. 3. 2008 which read as under: 50. Assessment of search cases Orders of assessment and reassessment to be approved by the Joint Commissioner. 50. 1 The existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132A. does not provide for any approval for such assessment. 50. 2 A new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require. In this section also the AO may direct the assessee to get the accounts audited by an Accountant with the previous approval of the Principal Chief Commissioner or Chief Commissioner. This provision has been elaborately considered by the Hon ble Supreme Court in the case of Sahara India Vs CIT 169 Taxman 328 wherein at para-6, the Hon ble Supreme Court observed as under: A bare perusal of the provisions of sub-section (2A) of the Act would show that the opinion of the Assessing Officer that it is necessary to get the accounts of assessee audited by an Accountant has to be formed only by having regard to: (i) the nature and complexity of the accounts of the assessee; and (ii) the interests of the revenue. The word and signifies conjunction and not disjunction. In other words, the twin conditions of nature and complexity of the accounts and the interests of the revenue are the prerequisites for exercise of power under section 142(2A) of the Act. Undoubtedly, the object behind e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the Hon ble Supreme Court has clearly laid down that the approval must reflect the application of mind to the facts of the case. 11. 6. Similarly, the Hon ble High Court of Calcutta in the case of Peerless General Finance Investment Co. Ltd. Vs DCIT 236 ITR 671 has made the following observations which are pertinent to the facts of the case in hand before us. The factual matrix of the matter clearly shows that a proposal was made on March 10, 1998, and no prior approval therefore was granted by the Chief Commissioner of Income-tax but merely one G. P. Agarwal was nominated. An argument has been advanced to the effect that by making such a nomination, approval will be deemed to have been granted. The answer to the said contention must be rendered in the negative. The Chief Commissioner of Income-tax before granting such approval must have before him the materials on the basis whereof an opinion had been formed. A prior approval can be granted only when the materials for appointment of the extraordinary procedure is required to be taken by the Assessing Officer. The Assessing Officer, therefore, was required to place all materials before the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases were made on 31-3-1997 and on the very same day, i. e. , on 31-3-1997 the Commissioner grants approval and that too without giving or recording any reasons whatsoever. The approval order does not disclose the points which were considered by the Commissioner and the reasons for accepting them. In our view, this is totally an unsatisfactory method of granting approval in exercise of judicial power vested in the Commissioner. 11. 9. This decision of the Tribunal was considered by Allahabad Bench of the Tribunal in the case of Verma Roadways Vs ACIT 75 ITD 183 wherein also the assessee- appellant has challenged the validity of approval to the assessment order accorded by the CIT Kanpur. The Tribunal at Para-47 has held as under: Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval pre-supposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas Co. (supra), the I. T. A. T Madras Bench A has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval . 12. Coming to the facts of the case in hand in the light of the analytical discussion hereinabove and as mentioned elsewhere, the Addl. Commissioner has showed his inability to analyze the issues of draft order on merit clearly stating that no much time is left, inasmuch as the draft order was placed before him on 31. 12. 2010 and the approval was granted on the very same day. Considering the factual matrix of the approval letter, we have no hesitation to hold that the approval granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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