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TMI Blog2023 (7) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... cal and can be disposed of by a common order. Accordingly, the appeal of the assessee for AY 2011-12 is taken as the lead case and the decision rendered thereon shall apply with equal force for other assessment years also except with variance in figures. 3. At the outset, we find that the assessee has raised an additional ground of appeal on 17.11.2022 for all the assessment years under consideration. The said additional ground is reproduced hereunder:- "That on the facts and circumstances of the case and the provision of law, the approval granted by the ld. Addl. CIT u/s. 153D is illegal and bad in law as for all the seven years, i.e., AYs 2011-12 to AY 2017-18 single approval has been granted." 4. We find that the facts and circumstances relevant for adjudication of this additional ground are already on record and the same being purely a legal issue, we are inclined to admit the additional ground raised for all the assessment years and proceed for adjudication of the same. 5. The brief facts pertaining to the aforesaid additional ground are narrated hereinbelow:- a) A search and seizure action u/s. 132 of the Act was conducted on 18.11.2016 in Nayyar group of cases wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Addl. CIT on 30.12.2018 and the ld. Addl. CIT had granted approval for all the cases on the very same day, i.e., on 30.12.2018. In this regard, the ld. AR drew our attention to page 36 of the paper book which contained the approval granted by the ld. Addl. CIT u/s. 153D for 14 cases i.e., for seven assessment years (Assessment years 2011-12 to 2017-18) in the case of the assessee and seven assessment years in the case of Smt. Neetu Nayyar. The ld. AR pointed out that the ld. Addl. CIT while granting the approval had not even mentioned that the draft orders have been perused by him which is a bare minimum requirement of the approving authority having to indicate what was the thought process involved in the said quasi judicial proceedings. He argued that while elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft assessment orders and finds that it meets the requirement of law. The ld. AR tried to buttress his stand by drawing our attention to pages 68 and 69 of the paper book which contained an order passed u/s. 7(1) of the Right to Information Act, 2005 dated 24.08.2022 in the case of Smt. Neetu Nayyar wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of the said seized documents while issuing questionnaires to assessee, examining the replies filed by the assessee and drawing conclusions thereon. Hence, it is very easy for the ld. Addl. CIT to grant approval of the draft assessment order on the same day since he is involved with the assessment proceedings right from the inception. Accordingly, she argued that the objection raised by the ld. AR has no force. 8. We find, as per the scheme of the Act, for framing search assessments, the ld. AO can pass the search assessment order u/s. 153A or u/s. 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the ld. Addl. CIT in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the ld. Addl. CIT is a quasi judicial proceeding requiring application of mind by the ld. Addl. CIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme of the Act, it is the bounden duty of the ld. AO to seek to place the draft assessment order together with copies of the seized documents befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ld. Addl. CIT to grant judicious approval u/s. 153D of the Act to the draft assessment orders placed by the ld. AO. 9. Let us now examine whether in the aforesaid background of the scheme of the Act, whether the approval in terms of section 153D of the Act has been granted by the ld. Addl. CIT in a judicious way after due application of mind or not, in the instant case. 10. We have gone through the approval granted by the ld. Addl. CIT on 30.12.2018 u/s. 153D of the Act which is enclosed at page 36 of the paper book of the assessee. The said letter clearly states that a letter dated 30.12.2018 was filed by the ld. AO before the ld. Addl. CIT seeking approval of draft assessment order u/s. 153D of the Act. The ld. Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30.12.2018 for seven assessment years in the case of the assessee and for seven assessment years in the case of Smt. Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. Neetu Nayyar from Central Public Information Officer who is none other than the ld. Addl. Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 'seen' 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 equally apply to Section 153D of the Act. There are three or four requirements that are mandated therein, (i) the AO should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (i) the final approval must be in writing; (i) The fact that approval has been obtained, should be mentioned in the body of the assessment order. 23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves. 26. The question of law framed is therefore answered in the affirmative i.e., in favour of the Assessee and against the Department. 27. The appeals are accordingly dismissed, but in the circumstances, with no order as to costs." 11. Further, we find that similar view was taken by the Hon'ble Allahabad High Court in the case PCIT vs. Subodh Aggarwal in Income-tax Appeal No. 86/2022 dated 12.12.2022. In this case, the draft assessment order was placed for approval before the ld. Addl. CIT on 31.12.2017. The approval u/s. 153D was granted by the ld. Addl. CIT on 31.12.2017. The final assessment order was passed by the ld. AO on 31.12.2017. The time limit for completion of search assessment was 31.12.2017. 38 cases were approved by the ld. Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of each assessment year referred to in clause (b) of [sub-section (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. 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 [Principal Commissioner or] Commissioner under sub-section (12) of section 144BA." The Tribunal while quashing the assessment order had relied upon its earlier decision in Navin Jain and Others (Supra) wherein a detailed discussion has been made with regard to the requirement of prior approval of superior authority on the draft assessment order under Section 153D, before passing the assessment order by the Assessing Officer. It was noted that the word 'approval' though has not been defined in the Income Tax Act but the general meaning of the word 'approval' in Black's Law Dictionary, 6th Edition was to be seen. The decision of the Apex Court in Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer (2003) 5 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranting protection against arbitrary or creating baseless tax liability on the assessee. The Tribunal has further noted that the provisions contained in Sections 153A to Section 153D provide for separate notice to be given to assessee for assessment for each year as specified in Section 153A of the Act; the assessee has to file separate ITR for each year as specified in Section 153A of the Act; separate assessment orders are to be passed for each year as specified in Section 153A of the Act. It was observed that this is an important concept mentioned in Section 153A of the Act, which is peculiar to the scheme of the said Section. Keeping in view of this basic fundamental features of Section 153A, if Section 153D is scrutinized, then, it would become manifest that an important phrase is employed in the text of Section 153D, which is "each assessment year". The reading of the provisions in Section 153A and 153D conjointly makes it clear that separate approval of draft assessment order for each year is to be obtained under Section 153D of the Income Tax Act. In its erudite judgement with the discussion on the legislative intent of Section 153A to 153D and the meaning of the "appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 before preparing the draft assessment order. It is trite in law that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. The requirement of approval under Section 153D is pre-requisite to pass an order of assessment or re-assessment. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of "each assessment year" referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of "each assessment year" falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: "17.1 However, in the present case, we have no hesitation in stating that there is complete non-application of mind by the Learned Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs. 87,20,580/-. Similarly, when the total assessed income as per the AO comes to Rs. 16,69,42,560/-, the Addl. CIT could not have approved the assessed income at Rs. 1,65,07,560/- had he applied his mind. The addition of Rs. 15,04,35,000/- made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes. 17.2 Even the factual situation is much worse than the facts decided by the Tribunal in the case of Sanjay Duggal (supra). In that case, at least the assessment folders were sent whereas in the instant case, as appears from the letter of the Assessing Officer seeking approval, he has sent only the draft assessment order without any assessment records what to say about the search material. As mentioned earlier, there are infirmities in the figures ..... X X X X Extracts X X X X X X X X Extracts X X X X
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