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TMI Blog2023 (5) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... if he has gone through the assessment record or that assessment record, about the mode, through which, assessment record was transmitted by AO at Bilaspur to JCIT, Raipur and vice-versa. It is also noted that the AO had time till September 2019 for passing the assessment order, why the approvals were granted within 24 hours and order also was passed. The approval given was a conditional approval and on the basis of presumption only The action of the JCIT granting approval in this case was a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. Assessment orders passed u/s 153A r.w.s. 143 (3) stand cancelled. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... f that all the issues emanating from the records have been verified and the additions wherever required have been proposed. 4. You may act accordingly. The copy of the final order may be submitted for record purpose in this office. Encls. : case records sd/- (R.M. Mujumdar) Joint Commissioner of Income tax, Range - Central, Raipur." 6. Assailing the above approval, ld. Counsel of the assessee made following submissions :- "I. Approval granted by the Joint Commissioner of Income Tax, Range Central, Raipur ("JCIT") was devoid of application of mind and without considering material on record; assessment order passed under section 153A r.w.s 143(3) is null and void. 1. In the present case, the Ld. Assessing Officer. Bilaspur, has sent the draft assessment order in the case of 7 assessees from Bilaspur to the office of the Joint Commissioner of Income Tax, Range Central, Raipur, (hereinafter referred to as "JCIT") on 08.02.2019 for approval as is evident from the copy of approval attached at page 24-25 of the common paper book. 2. The approval was granted by the Ld. JCIT on 09.02.2019. 3. Defects or illegalities in the approval: We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the additions wherever required have been proposed. 4. These facts clearly show that the action of the JCIT granting approval in this case was. Thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. 5. As per the provisions of section 1530 of the Act, no assessment order under section 153A or 153C can be framed without prior approval of the prescribed authority under section 153D of the Income Tax Act 1961. 6. The relevant provisions of section 1530 of the Act are 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 sub- section (1) of section 153B. except with the prior approval of the Joint Commissioner. " 7. Hon'ble Supreme Court in the case of Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the revenue, recourse to the said provision can be had. The word "complexity" used in section 142(2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 (All.), it is a nebulous word. Its dictionary meaning is: "The state or quality of being intricate or complex, or that is difficult to understand. However, all that is difficult to understand should not be regarded as complex. What is complex to one may be simple to another. It depends upon one's level of understanding or comprehension. Sometimes, what appears to be complex on the face of it, may not be really so if one tries to understand it carefully." Thus, before dubbing the accounts to be complex or difficult to understand, there has to be a genuine and honest attempt on the part of the Assessing Officer to understand accounts maintained by the assessee; appreciate the entries made therein and in the event of any doubt, seek explanation from the assessee. But opinion required to be formed by the Assessing Officer for exercise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) 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. In the present case, the assessment order has been passed by an Income Tax Officer, who admittedly is an officer below the rank of joint Commissioner; therefore, the provisions of section 153D of the Act would be applicable. Section 153D starts with the words "No order of assessment or reassessment shall be passed .... ". In other words, the language employed in the provision is couched in the negative and therefore, there is a prohibition against passing of an assessment or reassessment order, except with the prior approval of the Joint Commissioner. 10. In Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [2005] 7 SCC 234. the Supreme Court has observed that if the requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language. that is to say, if the statute enacts that it shall be done in such a manner and in no other manner. it has been laid down that those requirements are in all cases. absolute. and that neglect to attend to them will invalidate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Only writing the word "approved" does not fulfil the requirement of section 153D of the Act c. Hon'ble High Court of Orissa in the case of ACIT vs. M/S. Serajuddin & Co. (ITA no. 39- 45 of 2022) has held that: 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 thought 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 orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, 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. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act it would equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 was approved on same day i.e. 30-12-2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of85 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. 14. Inability to analyse the issues in draft assessment order by the approving authority is no approval and renders the assessment order null and void f. Hon'ble Bombay High Court (ITA No. 668 of 2016) and ITAT Mumbai in the case of Smt. Shreelekha Damani vs. Dell (173 ITI 332) has held that: 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the JCIT, Meerut is juxtaposed against the directions and provisions of the Income Tax Act pertaining to completion to assessment u/s 153B(l) of the Act, it can be said that the approval given by the JCIT is invalid. The Act envisages that the JCIT's approval before passing of the final order. There is no provision to alter, change, modify, adjust, amend or rework the order once the approval has been accorded. The approval to be given is statutory in nature and legally binding. In the instant case, the approving authority has clearly mentioned that the approval given is a technical approval. Moreover, he has directed the DCIT to ensure the seized materials and the findings of the appraisal report to be incorporated in the final assessment order. This clearly goes to proves that the approval given by the JCIT is not a final approval as required u/s 153D of the Act but a conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. This is not the mandate of the Act. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the Dart of the Addl. CIT before 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 Add!. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT. We also rely on following decisions: k. MG Metalloy Pvt. Ltd. (ITA No. 3306/D/2018)- ITAT Delhi l. MDLR Hotels Pvt. Ltd. (3076/D/2016) - ITAT Delhi m. Shri Subash Dabas (ITA No. 2399/D/2016) - ITAT Delhi n. Ajay Sharma (ITA No. 3554/D/2015) - ITAT Delhi o. M/s Akshata Realtors Pvt. Ltd. (IT(SS)A No. 09/RPR/2018)- ITAT Raipur p. M/s. Goyal Energy & Steel Pvt. (ITA No. 240 to 243/RPR/2019) - ITAT Raipur q. Arch Pharmalabs Ltd. (ITA No. 6656/Mum/2017) -ITAT Mumbai r. Navbharat Refrigeration & Industries Limited vs. DCIT in ITA No 136/Mum/2013 - ITAT Mumbai s. AAA Paper Marketing Ltd. (ITA No. 167 /Lkw/2016)-ITAT Lucknow t. Shri Naveen Jain (IT(SS)A No. 639 to 641/Lkw/2019) -ITAT Lucknow u. Dilip Constructions Pvt Ltd. (ITA No. 66 to 71/CTK/2018)- ITAT Cuttack v. Geetarani Panda (ITA No. 01/CTK/2017)- ITAT Cuttack w. M/s. Rajat Minerals Pvt. Ltd. (41 to 47/Ran/2019) - ITAT Ranchi x. Rajesh Ladhani (106, 107 and 108/Agra/2019) - ITAT Agra y. Shri Tarachand Khatri (2020 (1).TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the interest of justice, equity and fair play, it was imperative that the Range head/ supervisory authority of the Assessing Officer(AO) must give his approval prior to the passing of the Assessment Order, after going through the seized materials upon which the AO is relying whilst making his Order and most importantly, after due and proper application of mind, give his prior approval that the Order proposed by the Officer is as per law and the facts of the case. The judicial pronouncements of Various Courts cited by the ld. AR suggest the same and on this there is no dispute. 3. The Revenue objects to the allegation cast by the Ld. AR that, just because draft orders were prepared by the AO, Bilaspur, which were forwarded to the office of the Jt. CIT Range- Central, Raipur (Hereinafter refer to as JCIT) on 08.02.2019 for approval and thereafter approval was given by the Ld. JCIT on 09.02.2019, this means that the common approvals given were mechanical, without going through the seized materials and without due application of mind. Further, he states that the approval given does not indicate what material and facts have been perused before granting the approval and the appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayed that ultimately the finding of mechanical approval u/s 153D is a factual finding. In this current case, the arrival of such a finding cannot rest on the interpretation of a few lines written by the Range Head. It will be imperative to examine the assessment records, the records of meetings/ discussion of AO with range head, order sheet entries etc. before a factual finding can be made." 8. We have carefully considered the submissions and perused the records. We note that the issue raised by the assessee is that whether the assessment framed by the AO u/s 153A r.w.s. 143(3) of the Act after getting approval from the JCIT, Range - Central, Raipur in view of the provisions of section 153D of the Act is valid and sustainable or not. The defects as pointed out by the ld. Counsel for the assessee are enumerated in the initial part of his submissions. We are not repeating the same. We note that on identical approval in the case of M/s. Akshata Realtors Pvt. Ltd. vs. ACIT, Central Circle 2, Raipur in IT(SS)A No.09/RPR/2018 vide order dated 27.03.2023, ITAT Raipur Bench has quashed the assessment order on the ground that approval u/s 153D of the Act has been granted in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 15. Reliance can be placed on the case law relied on by the ld. AR of the assessee, in the following cases :- (i) Pr.CIT v. Subodh Agarwal in I.T.Appeal No.86 of 2022 (Date of Judgment: 12.12.2022) (Allahabad HC): "The approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval of superior authority means that it should appraise the material before it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the Assessing Authority b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val of superior authority means that it should appraise the material before it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the approving authority before preparing the draft assessment order-In the instant case, the draft assessment orders in 123 cases placed before the approving authority on 30th Dec., 2017 and 31st Dec., 2017 were approved on 31st Dec., 2017, which not only included the cases of assessee but the cases of other groups as well-It is humanly impossible to go through the records of 123 cases in one day to apply independent mind to appraise the material before the approving authority-Conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record-No substantial question of law arises for consideration (iii) M/s.Goyal Energy & Steel Pvt. Ltd. v. ACIT, CC- 2, Raipur in ITA No.240 to 243/RPR/2019 (Date of Order : 17.09.2021) (ITAT Raipur), wherein the approval granted by the JCIT was identical to the approval granted in the case of the present assessee, held as under : 22. On careful perusal of the approval order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that Para 2 of the above approval letter merely says that "Approval is hereby accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3) r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment orders..."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 and/or 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 state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Tribunal are as under :- 11. On perusal of the above two approvals given in the case of two different assessees, we found that both the approvals are similar to each other. In both the approval letter, the JCIT has simply mentioned that approval is hereby accorded as per provisions of Section 153D of the Act for passing the assessment order, therefore, the arguments of the ld. CIT-DR that facts and circumstances along with the approval given in Dilip Construction Pvt. Ltd. and in the case of Ritanjali Khatai are different, cannot be accepted. Accordingly, we are in complete agreement with the contention of ld. AR of the assessee that the issue is covered by the decision of coordinate bench of the Tribunal in the case of Dillip Construction Pvt. Ltd.(supra), wherein the relevant observations of the Tribunal are as under :- 31. Before we proceed, we find it appropriate to consider the contention of ld CIT DR wherein, he submitted that as per letter dated 19.12.2018, the JCIT, the approving authority had given approval for passing order u/s.153A r.w.s 143(3) in both the cases after satisfying himself with the draft assessment orders. This letter has been written to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of mandate of section 153D of the Act that the approving authority must apply his mind to the relevant assessment records and draft assessment order before granting approval u/s.153D of the Act. As the requirement of grant of approval by the Superior authority is not merely a formality but it is a mandate and requirement of provisions of the Act. 35. 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 by a higher revenue authority enabling the AO to pass assessment or reassessment orders in the search cases, then, it is the duty of the approving authority to exercise such power by applying his judicious, vigilant and cautious efforts. We are of the view that the obligation on the approval granting authority is of two folds, one the one hand, he has to apply his mind to secure inbuild for the department against any omission or negligence by the AO in taxing right income in the hands of right person in the right assessment year and on the other hand he is also responsible and duty bound to do justice with the taxpaye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legislature wanted the assessment/reassessment of search and seizure cases should be made and orders should be passed with the prior approval of superior authority, which also means that the superior authority should apply his mind on the materials on the basis of which the AO is making or passing assessment orders and after due application of mind to material in the hands of department while initiating search proceedings, material found & seized during the course of search and also material or information unearthed or gathered during post search investigation and enquiry alongwith explanation, documentary evidence and other relevant material or information submitted by the assessee during search and assessment proceedings, the superior authority has to grant the approval u/s.153D of the Act for passing assessment/reassessment orders in the search cases. 38. Further, in our considered view, the approval u/s.153D of the Act cannot be treated as an official formality but the provision has been inserted by the legislature with some specific and useful purpose. It is apparent that the purpose behind enactment of the said provision in the Statute by the legislature are of two folds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenge or are not required to be mentioned in the order of approval but the manner and the material on the basis of which approval has been granted can be challenged by the assessee and following proper procedure and application of mind by the approving authority should be discernible from the order of approval. No other evidence or documents is required to be considered or appreciated as the approval should be self-speaking that it has been granted by the ld JCIT by following due procedure and due application of mind to the relevant records and orders. The scope and issue agitated by the assessee by way of legal ground in the present case is not that of grant of hearing or representation to the assessee at the time of granting approval but the main grievance and legal objection of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized materials and investigation report and draft assessment/reassessment orders and this fact should be clearly discernible from the approval order and no other extraneous material/document can be seen in this regard. 40. In view of above, we are inclined to hold that if an appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad in law. The requirement of mandate of section 153D of the Act has not been satisfied in both the cases and accordingly we hold that the all assessment orders are vitiated and thus same are void being bad in law. We, accordingly set aside the impugned orders of lower authorities and quash the assessment orders by allowing additional ground of the assessees in all appeals filed by both the assessees having identical and similar facts and circumstances. 12. Thus, respectfully following the above observations of the Tribunal and especially the fact that the approval u/s.153D of the Act given by the JCIT for passing assessment orders in case of assessee and other group concern is without application of mind as the JCIT has not mentioned in the approval orders that he has gone through the relevant assessment records/files/folders and draft assessment orders for granting approval, therefore, we hold that the impugned order passed by the CIT(A) affirming the assessment order passed by the AO, is not unsustainable. Accordingly, we allow the ground No.2 of the assessee and cancel the assessment order framed u/s.153A/143(3) of the Act. 16. In the present appeal, the JCIT, Range-Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of Ld AO u/s.153A r.w.s.143(3) of the Act is unsustainable and derives to be quashed and we do so. Accordingly, the assessment order in the case of the assessee u/s.153A r.w.s.143(3) of the Act stands cancelled. Thus, the legal ground raised by the assessee in the form of additional ground is allowed. Since, we have allowed the legal ground of the assessee, other grounds, though not argued by the ld AR, are not adjudicated upon. 19. In the result, the appeal of assessee is allowed." 9. We note that facts and approval in that case are identical to the present cases. We may recap the features in present case already mentioned earlier. In this case also, a common approval was given for 7 assessees with the same comments and the approval given does not indicate what material and facts have been perused before granting the approval. The approval given does not even indicate that any material was supplied by the Assessing Officer to the approving authority for its perusal. It is mentioned that draft assessment orders u/s 153A and 143(3) in the following cases submitted vide above mentioned letter are hereby approved u/s 153D of the I. T. Act and this shows only orders were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. Counsel of the assessee also support the case of the assessee. 11. Ld. DR for the Revenue could not make any cogent rebuttal of the submissions of the case laws cited by the ld. Counsel of the assessee. His plea shows that section 153D approval is proper and that there is lack of appreciation of the Income-tax Department. He further submitted that as per section 153D, there is no specific format for granting the approval. As regards various case laws cited by the assessee, ld. DR for the Revenue did not rebut the same but only stated that judicial pronouncements cited by the assessee are factual finding. Thus, it is clear that there is no cogent rebuttal by the ld. DR for the Revenue of the submissions and case laws relied upon by the ld. Counsel of the assessee and as discussed by us herein above. 12. In view of the above and respectfully following the order from the coordinate Bench of the Tribunal, we also hold that legal ground raised in the cross objections deserves to be allowed and accordingly, the assessment orders passed u/s 153A r.w.s. 143 (3) stand cancelled. Since we have allowed the legal ground of the assessee, consideration of other grounds are now only of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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