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TMI Blog2019 (12) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... only stating that Approval is hereby accorded as per the provisions of section 153D of the I.T.Act for passing the assessments in respect of the following cases . In this approval, we are unable to see any mention by the approving authority that he has perused the relevant assessment records and draft assessment orders proposed to be passed by the Assessing Officer. - the approving authority i.e. the ld JCIT has not even bothered to mention that he has perused the relevant assessment records and draft assessment orders for which he has granted approval u/s.153D of the Act as per the mandatory requirements of the said provisions of the Act. The ld JCIT has granted approval under section 153D of the Act in a mechanical manner without application of mind to the relevant assessment records and draft assessment orders submitted before him by the AO for grant of approval u/s.153D of the Act before passing the relevant assessment orders u/s.153A r.w.s 143(3) of the Act. In our considered and humble opinion, no procedure for grant of approval has been provided u/s.153D of the Act and the Income tax Rules, 1962. However, when legislature has enacted some provision to be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. In the case of Shilpa Seema Constructions Pvt Ltd., the assessee has filed appeals for the assessment year 2010-2011 and 2012-13 against the separate orders of ld CIT(A) dated 28.6.2018. 3. The revenue has filed appeals for the assessment years 2015-16 2016-17 in IT(SS) A No.133/CTK/2018 and ITA No.387/CTK/2018 and the assessee has filed cross objections in the case of M/s. Shilpa Seema Constructions Pvt Ltd. Application of assessees/appellants for admission of additional ground. 4. Both the assessees have also filed common additional ground of appeal for all the assessment years under consideration as under: That the assessment order passed u/s.153A r/w section 143(3) is not sustainable in view of the fact that the proper procedure of law has not been followed by the ld authorities below while granting the approval u/s.153D of the Act. Therefore, the assessment order is liable to be quashed. Adjudication of application of additional ground of appellants in IT(ss) Nos.66 to 71/CTK/2018 and ITA No.292/CTK/2018 in the case of Dilip Construction Pvt Ltd., and in IT(SS) A Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been raised before the AO during assessment proceedings. 8. On consideration of rival submissions and perusal of relevant appeal files, impugned assessment and first appellate order, paper book of the assessee spread over 440 pages, another paper book containing case laws spread over 293 pages and third paper book containing panchanama spread over 58 pages, we are of the considered view that from Form No.35 as well as assessment order, it is clearly discernible that the assessee has not raised legal issue pertaining to grant of approval of section 153D of the Act and thus, the same has been raised for the first time before the Tribunal. This is also not in dispute. In the case of NTPC (supra), as vehemently relied on by ld counsel for the assessee, Their Lordships speaking for the Apex Court has held thus: . Under s. 254 of the IT Act the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) 128 ITR 388 (Del) : TC 8R.1021, CIT vs. Karamchand Premchand (P) Ltd. (1969) 74 ITR 254 (Guj) : TC 8R.547 and CIT vs. Cellulose Products of India Ltd. (1985) 44 CTR (Guj) 278 (FB) : (1985) 151 ITR 499 (Guj)(FB) : TC 8R.965]. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 6. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits. 9. In view of above, it is incumbent upon the Tribunal and considering the powers of the Tribunal, Hon ble Supreme Court has held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to section 153A(1)(b) or Section 153B shall be passed by an Assessing Officer not below the rank of Joint Commissioner or by an AO with prior approval of the Joint Commissioner or the Additional Commissioner. He submitted that provisions of section 153D implies that the meaning of approval is not simple approval or approval of the order in the mechanical manner. While granting approval u/s.153D of the Act, almost same principle and procedure has to be adopted and followed as required for grant of approval u/s.151 of the Act. The Joint Commissioner must have to go through the seized documents, notices issued by the AO, submissions made by the assessee and also documents submitted by the assessee and then he had to apply his judicious mind to all the relevant records and thereafter he should proceed to grant approval to the AO to pass orders accordingly. He vehemently submitted that in the case of the assessee, the ld Jt. CIT has granted approval to pass the orders mechanical manner. In the said approval letter, it can be seen that JCIT has simply mentioned that approval is hereby accorded as per the provisions of section 153D of the Act for passing the assessment orders in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Smt. Shreelekha Damani(supra). Ld A.R. submitted that when the approving authority exercises power u/s.153D of the Act recorded that he did not have enough time to examine the issues arising out of the draft order thus, same is said to be a mechanical exercise and, the Hon ble High Court held that the approval is without application of mind and, therefore, the approval is invalid. 15. Further, placing reliance on the decision of ITAT Delhi in the case of M/s. M3M India Holdings vs DCIT ITA.No.2691/Del/2018 Assessment Year 2012-2013 dated 15.3.2019 and drawing our attention to paras 13 to 14, ld A.R. submitted that the approving authority did not mention in the approval if he has gone through assessment records or whether the assessment records were produced before him before granting approval u/s.153D of the Act in the matter, then it was held that the requirement of section 153D of the Act has not been satisfied. He submitted that in the identical and similar situation, the Tribunal held that the requirement of section 153D of the Act is not satisfied and also held that entire assessment order is vitiated and is null and void. 16. Reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of mind is not sustainable being baseless in view of the approval letter dated 23.11.2017 and recent report/letter of approving authority i.e. JCIT dated 4.1.2019. 18.. Ld CIT DR also referred to letter dated 19.12.2018 of Jt. CIT (BPU), Bhubaneswar, wherein, it is stated that the draft assessment orders as forwarded by the AO were examined by him and the issues involved were discussed with him in detail. After satisfying himself with the draft orders, he had given approval u/s. 153D of the Act for passing the order u/s.153A read with section 143(3) of the Act. By relying this letter, ld CIT DR submitted that it cannot be inferred that proper procedure has not been followed in this case while granting approval u/s.153D of the Act. 19.. Placing rejoinder to above, ld counsel for the assessee submitted that the Assessing Officer has passed assessment orders u/s.153A r.w.s 143(3) of the Act on 23.11.2017 after receipt of letter from JCIT on 23.11.2017. Thus, the subsequent official correspondence i.e. letter dated 19.12.2018 has no relevance with the procedure adopted by JCIT for grant of approval u/s.153D of the Act and this commu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question which arises for our consideration is whether the said Approval granted by the ld. Joint CIT u/s.153D of the Act vide his order dated 23.11.2017 can be held to be granted after due application of mind and can be held to be valid in the eye of law as per intention of the legislature and mandate of the provision of section 153D of the Act? 22. Since we are adjudicating the controversy regarding validity of procedure and approval granted by the JCIT vide letter dated 23.11.2017, therefore, we find it necessary and appropriate to reproduce the relevant provisions of section 153D of the Act, which reads as under: 153D. Prior approval necessary for assessment in cases of search or requisition.-No order 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 subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised at any time and the Tribunal was justified in holding that there was no application of mind on the part of the authority granting approval and, therefore, approval was invalid. The relevant paras 4 5 of this judgement read as follows: 4. This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. The Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record. 5. The learned Counsel for the Revenue submitted that the question of legality of the approval was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re granting approval. The Addl. CIT, Chandigarh has merely gone through the draft assessment order as per PB-47. Therefore, the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion, we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. We, accordingly, set aside the orders of the authorities below and quash the assessment order in the matter. Resultantly all additions stand deleted. In the result, Ground No.1.3 of the appeal of Assessee is allowed. 27. Furthermore, ITAT Cuttack Bench in the case of Geetarai Panda (supra) in paras 24 to 26 held that when the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date: 23.11.2017 To The Assistant Commissioner of Income Tax, Central Circle-1, Bhubaneswar Sub: Approval of the Assessment orders u/s 153D of the LT. Act, 1961 in respect to the cases of M/s Dillip Construction P Ltd- Reg Ref: Your letter no. ACIT/CC-l/BBSR/Report/2017-18/7 dated 17.11.2017 seeking approval of draft assessment orders u/s 153D Approval is hereby accorded as per the provisions of section 15 3D of the I.T.Act tor passing the assessment orders in respect to the following cases. SI. No Name of the assessee PAN AY. Total Asessed Income (Rs.) Section under which order passed. 1 M/s Dillip Construction PLtd AABCD1417E 2010-11 18,25,68,000/- u/sl53A/143(3) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 M/s Shilpa Seema Construction PLtd AAKCS 2712 E 2010-11 41,43,750/- u/sl53A/143(3) 2 2011-12 5,71,290/- u/s 153A/143(3) 3 2012-13 83,61,660/- u/s 153A/143(3) 4 2013-14 5,37,450/- u/s 153A/143(3) 5 2014-15 Nil u/s 153A/143(3) 6 2015-16 4,59,65,350/- u/s 153A/143(3) 7 2016-17 7,64,70,720/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT), Bhubaneswar is merely a covering letter supplying copy of the approval dated 23.11.2017, which cannot be treated as an explanation to the approval dated 23.11.2019 curbing the mistake in the procedure adopted by the JCIT while granting approval u/s.153D of the Act. On these subsequent letters/correspondences, we are of the considered view that for adjudicating legal ground of assessees challenging the validity of approval u/s.153D of the Act dated 23.11.2017, we have to evaluate said approval apparently by considering the totality of facts and circumstances and the manner in which such approval has been granted. This cannot be improvised by way of subsequent exercise or correspondence between the approving authority and the AO or other officers. 33. In view of foregoing discussion, we are inclined to hold that the ld JCIT has granted approval under section 153D of the Act in a mechanical manner without application of mind to the relevant assessment records and draft assessment orders submitted before him by the AO for grant of approval u/s.153D of the Act before passing the relevant assessment orders u/s.153A r.w.s 143(3) of the Act. 34. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstanding the provisions of section 153D of the Act has been introduced by the legislature in its cautious wisdom to make it mandatory on the supervisory authority/approving authority to discharge the duty towards both the assessee as well as revenue to follow the proper procedure and to apply his mind on the material, relevant evidences and other documents including materials found during search post search investigations and explanation supporting documents of the assessee to the issue show caused to him by the AO, on the basis of which the AO wants to pass or frame assessment or reassessment orders and after such exercise by perusing and going through the relevant assessment folders/files alongwith proposed draft orders and also by applying his mind has granted approval u/s.153D of the Act. This is the minimum required exercise by the approving authority before granting approval u/s.153D of the Act. The approving authority has undertaken any such exercise should be discernible from the order of the approval and the subsequent internal correspondence between the lower authorities have no relevance and the defects or omissions or non-application of mind cannot be cured or rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng post search investigations and enquiries. Therefore, said provision provides and requires application of mind by the approving authority of the department which, in turn, provides safeguard to the both the parties i.e. revenue and the assessee. Therefore, the provisions of section 153D of the Act cannot be treated as a mere formality and mandate therein required to be followed by the approving authority in a judicious manner by due application of mind in a manner of cautious judicious or quasi judicial authority. This view has also been expressed by Pune Bench of the ITAT in the case of Akil Gulamali somji, in ITA Nos.455 to 458(Pune) of 2010 vide order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. We also take respectful cognizance of the fact that the Hon ble Bombay High Court in the case of Akil Gulamali Somji (supra) has concurred with the said findings and view taken by the Pune Tribunal that not following the provisions of section 153D of the Act will render the related order of assessment void. 39. In view of foregoing discussion, we reach to a logic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h assessments/reassessment orders have been perused or any discussion or consultation has been made with the AO prior to granting of approval u/s.153D of the Act. Accordingly, we are compelled to hold that the approval granted by the ld JCIT in the appeals under consideration has been granted in a mechanical manner without application of mind and that the assessments/reassessment orders passed by the AO on such approval are declared to be void and bad in law. We hold so. 41. In view of aforesaid discussion, we clearly find that approving authority has not applied his mind to the relevant assessment records and draft assessment orders prior to granting approval to the Assessing officer for passing assessment orders u/s.153A/143(3) of the Act. Therefore, the contention of ld A.R. of the assessee is justified and sustainable that the approval was granted in most mechanical manner without application of mind and respectfully following the proposition rendered by Hon ble Bombay High Court in the case of Smt. Shreelakha Damani (supra), the order of ITAT Delhi Bench in the case of M3M India Holdings (supra) and decision of ITAT Cuttack Bench in the case of Geetarani Panda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions Pvt Ltd. 45. Ld representatives of both the parties agreed that in the cross objection No.3 for assessment years 2015-16 and 2016-17, the assessee has raised similarly worded ground of appeal as that of the additional ground raised by the assessee for assessment years 2010-11 2012-13. Both the parties have also agreed that facts and circumstances for both the assessment years are identical to the appeal of other assessment years on grant of approval u/s.153D of the Act. Therefore, our findings and conclusion recorded in the earlier part of this order would apply mutatismutandis to the cross objection No.3 of the assessee for A.Y. 2015-16 and 2016-17. Hence, we allow the Ground No.3 of cross objection filed by the assessee as the same falls within the ambit of approval granted by the JCIT u/s.153D of the Act on 23.11.2017. Revenue s appeals in ITA Nos. 134 135/CTK/2018: AYs; 2010- 2011 2011-12 in the case of Dilip Construction. 46. Since, we have quashed the assessment orders while adjudicating additional ground of the assessees, the grounds raised by the revenue have become academic infruc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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