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TMI Blog2019 (12) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... me returned in absence of any material corresponding to the additions made having been found during the course of search. 2. BECAUSE, on due consideration of facts and in the overall circumstances of the case the Ld 'CIT(A)' had fallen in error both on facts and in law in sustaining disallowance of Rs. 31,51,200/- alleging the payment to be bogus revenue expenditure without any evidence or basis in support of his assumption. 2.1 BECAUSE, while doing so the Ld 'CIT(A)' omitted to consider that the Commission was duly paid by account payee cheques, subjected to Tax Deduction at Source, Parties are identifiable, and payment were duly made in respect of services utilized by the 'appellant' and addition has been made without discrediting the evidences brought on records. 2.2 BECAUSE, the whole basis of disallowance been that the amount of Commission re-routed to the 'appellant' by way of introduction of Unsecured Loan is based on incorrect presumption of facts and is based on no evidence. 2.3 BECAUSE, while confirming the disallowance the Ld 'CIT(A)' has wrongly observed that no evidence was brought on records regarding the proof of service rendered ignoring the documentary evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed at any time. Similar view was taken by the Agra Bench in the case of Shri Saurabh Agarwal Vs DCIT, Central Circle, Agra (2019) (9) TMI 866- Agra Bench. Parties were heard, and in view of the legal position as discussed above, the Ground being raised is purely a legal ground and goes to the root of the matter therefore, the same is admitted. 4.2. The Ld. Counsel of the assessee Shri Anurag Sinha, Advocate submitted that the so-called approval as granted by the Learned Additional Commissioner of Income Tax, Central Range, Kanpur under section 153D of the Act, which has led the foundation for passing impugned Assessment order dated 31.03.2015 under section 153A of the Act is no Approval in the eye of law as the purported Approval been granted without due application of mind and such a mechanically granted Approval vitiates the Assessment order rendering it to be held illegal and void ab-initio. He invited attention to section 153D of the I.T Act, 1961, which mandates that no order of Assessment shall be passed except with the prior approval of the Joint Commissioner of Income Tax. It was further submitted by the Ld. A.R that in the case at hand the Assessment order, though has ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; R.K Chaturvedi Addl. Commissioner of Income Tax 26/03/2014 (Central Range), Kanpur 4.3. Ld. Counsel of the assessee placed reliance to the following case laws: (a) AAP Paper Marketing Ltd. Vs ACIT (2017) (4) TMI 1371 (b) Smt. Shreelekha Damani Vs DCIT (2015) 173 TTJ (Mumbai) 332 (c) CIT Vs. Smt. Shreelekha Damani (2019) 307 CTR (Bom.) 218 (d) Geeta Rani Panda Vs ACIT (2018) 194 TTJ (Ctk) 915 (Cuttack) (e) Shri Saurabh Agarwal Vs DCIT (2019) (9) TMI 866-Agra Bench (f) Shri. Ghanshyam Vs ITO (2018) 194 TTJ UO (Agra) 25 (g) State Bank of India Vs ACIT in W.P No. 53 of 2018 (Bom.) (h) Sabh Infrastructure Ltd Vs ACIT in W.P No. (C) 1357/2016 (Del) (i) Sahara India (Firm) Vs CIT (2008) 300 ITR 403 (SC) 5. On the other hand, the Department represented by Ld. CIT D.R Shri Sunil Bajpayee and Sr. D.R Shri. Waseem Arshad. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of machinery section will not render the assessment order void. Reliance was also placed to the Hon'ble Delhi High Court in the case of Dr. Pranoy Roy Vs DCIT in W.P (C) 4742/2018 & CM Appl.18248-18249/2018 to demonstrate as to what constitutes Judicial order is and what is Administrative order. Attention was drawn to Bangalore Bench of the ITAT in the case of M/s Toyota Kirloskar Motors (P) Ltd. Vs ACIT in ITA No. 828/Bang/2010 for the proposition that power of granting or not granting previous approval cannot be equated with appellate power. The DR's thus, submitted that the subject matter of the challenge in the present appeal is assessment order for which the jurisdictional fact is the existence of Approval, therefore, the Approval itself cannot be the subject matter of adjudication. It was submitted by the DR's that once the superior authority is agreeing to the finding of the lower authority then it is not required to record the reasons for so agreeing. It was further submitted that the recording of sanction or Approval is not required to be made in a particular manner. The same is discernible from the reasons recorded in the Assessment order. It was submitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 151 of the Act before issuing Notice under section 148 of the Act to the assessee is Administrative in character and not quasi-judicial. The Agra Bench rejected the submission of the revenue, by preferring to place reliance upon subsequent Judgement of Hon'ble Supreme Court in the case of 'Chhugamal Rajpal Vs S.P Chaliha', 79 ITR 603(S.C) and therefore, in that case held Approval granted to be based on total non-application of mind. In this view of the matter since the issue raised in this appeal specifically stood dealt with by the Agra Bench in Ghanshyam (supra) in its right perspective, therefore, the contention raised by the revenue deserves to be rejected. Revenue has placed reliance upon K.M Bansal (supra) wherein the Hon'ble Jurisdictional High Court after being duly apprised of view held in the cases of S. Narayanappa (supra) & Presidency Talkies Ltd. (supra) has held that before the Notice is issued under section 148 of the Act the proceedings are Administrative proceedings but once such a Notice is served upon the assessee such Administrative proceedings becomes quasi-judicial in nature and assessee has a right to challenge such proceedings since the stage of its init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om challenge before the Tribunal, cannot be sustained and is hereby rejected. 10. The Ld. D.R's have also contended that in the cases of Saurabh Agarwal (supra) this Bench in Para- 4.11 has referred and relied upon 'Verma Roadways Vs ACIT', 75 ITD 183 mentioning it be from Jurisdictional High Court order whereas it was delivered by the Allahabad Bench of ITAT and which in further appeal stood reversed by the Allahabad High Court. We have gone through the order passed in the case of Saurabh Agarwal (supra) and given careful thought to the Hon'ble Allahabad High Court Judgment in 'CIT Vs Verma Roadways', (Supra) delivered on 11.01.2018. We found that though vide Ground No.8 the Department had raised a specific ground challenging the order passed by the ITAT on the issue of grant of Approval by the CIT, in that case. However, the Hon'ble High Court through a detailed Judgment decided the Ground regarding validity of search and held proceedings under section 158BC of the Act to be validly initiated. In the referred case no argument was advanced by either party regarding validity of approval accorded by the Ld. CIT and no such issue was decided by a speaking order therefore, to our und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-These amendments will take effect from the 1st day of June, 2007." 13. The legislature in its highest wisdom made it compulsory that the assessments of search cases should compulsorily be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority have to approve the Assessment order. Object of entrusting the duty of Approval of assessment in search cases is that the Additional CIT, with his experience and maturity of understanding should scrutinize the seized documents and any other material forming the foundation of Assessment. It is an elementary law that whenever any statutory obligation is casted upon any statutory authority such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of issues on which addition was made granted the Approval on the undertaking of the AO, in view of stated paucity of time with him for granting Approval. This approach of the Additional CIT, Central has rendered the Approval to be an eyewash and idle formality and such a mechanically granted Approval is no approval in the eyes of law. 16. The Lucknow Bench of the ITAT in the case of 'Aap Paper Marketing Limited Vs ACIT', (2017) (4) TMI 1371-ITAT Lucknow, (APB, Pg. 122-129) coincidentally where the ITAT had the occasion to consider the validity of approval granted by the same Additional CIT, Central Circle, Kanpur while quashing the assessments in Para-14 held as under: "In the present case Addl. CIT has granted impugned approval halfheartedly without application of mind and without considering and perusing the material on record. Thus, we are inclined to hold that there has been no application of mind by the Addl. CIT before granting the approval. Consequently, we hold that the assessment orders made u/s 143(3) of the Act r.w.s 153A of the Act in the case of M/s Siddhbhumi Alloys Ltd. for Assessment Year 2006-07 is bad in law and deserve to be annulled, thus, we ordered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. Commissioner before granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/s. 143(3) of the Act r.w. sec. 153A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed." 19. The above order so passed by the ITAT was subjected to judicial scrutiny in appeal before the Hon'ble Bombay High Court and the Hon'ble High Court approved the order passed by the Mumbai Bench of the ITAT which is found reported as 'PCIT Vs Smt. Shreelekha Damani', (2019) 307 CTR (Bom.) 218(APB, Pg. 145-146) wherein in Para-7 the Hon'ble High Court held as under: 7. In plain terms, the Addl. CIT recorded that the draft order for approval under s. 153D of the Act was submitted only on 31st Dec. 2010. Hence, there was not enough time left to analyze the issue of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to go through and analyse the same vis-a-vis the appraisal report and seized records. It also goes without saying that you never cared even to discuss these cases with the undersigned for guidance and line of investigation to be taken. However, despite all this, I have gone through the material available on records and some of the observations, in respect of the following cases are given in subsequent paras." 24. In our considered view, the provisions contained in s. 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. It is apparent that the purpose behind the enactment of the above provision in the statute by the Parliament is two-folds. Firstly, the approval of the senior authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by senior authority will also ensure that proper enquiry or investigations are carried out by the assessing authority. Thus, the above provision provides for mental application of a senior officer of the Department, which in turn, provides safeguard to both i.e., Revenue as well as the assessee. Therefore, this importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the decisions relied upon by the Ld. DR's was that the assessee was not entitled to any hearing or representation at the time of grant of approval. As mentioned hereinabove the scope and ambit in the present litigation is not that of grant of hearing or representation at the time of Approval but whether the Approval can be granted by the superior authority without application of mind even without examining the draft assessment order and that on the basis of undertaking of the AO to the effect that the AO has looked into seized material, investigation report, etc. can be held sustainable in the eyes of law. We had already answered that such an approval is bad in law and cannot be sustained. 23. The last submission made by the Ld. DR's was that the matter may be sent back to the AO to pass a fresh assessment order after seeking the approval from the competent authority. In this regard we are of the opinion that the Revenue is not entitled to second inning, for correction of its own mistake. Assessee cannot be made to run again for many more years for contesting the litigation. Hon'ble Supreme Court also in the case of Parashuram Pottery Works Co. Ltd. v. ITO 106 ITR 1 ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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