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TMI Blog2024 (6) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... The brief facts of the case are that the assessee is a company, engaged in the business of manufacturing of TMT Bars. A search and seizure action was conducted at the business and residential premises of different members/associate concern of the Mantri-Soni Group of Jalna/Bhilwara and their family members and business concerns on 02- 05-2013 u/s. 132 of the Act. The AO issued notice u/s. 153A of the Act to the assessee on 13-02-2014 requiring to furnish the return of income for the year under consideration within 30 days from the date of receipt of notice. In response to the said notice, the assessee filed letter dated 20-03- 2014 requesting the AO to treat the return of income dated 28-09-2009 declaring a total income of Rs. 38,94,890/- in response to the notice u/s. 153A of the Act. 5. According to the AO, the assessee primarily engaged in the business of steel manufacturing in the Jalna/Wardha city and emerged as one of the leading group engaged in steel manufacturing. It has undertaken construction and erection work to setup its steel plant at Deoli Dist. Wardha, Maharashtra during the year under construction. The AR of the assessee attended assessment proceedings from time t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns nowhere deals with the merits of case relating to the additions made in the draft assessment order, is correct, after due reasoning or not. He argued that the said approval nowhere mentions any reason or justification as to why such approval is being granted and it amply proves beyond doubt the same is given in mechanical manner with a biased approach without any independent application of mind. 8. By referring to letter dated 18-03-2016 sent by the AO to Jt. CIT seeking approval, he submits that the AO sent such common letter enclosing draft assessment orders in case of multiple entities for multiple years, apart from the assessee on 18-03-2016. He argued that the distance between Aurangabad and Nashik approximately 200 Kms. and the entire voluminous record relating to 49 assessment orders would have reached only at fag end of working day on 18-03-2016. He submits that since the approval was granted on 21-03-2016 the period of time was available to Jt. CIT is only one day which is not enough to look into all the facts and details of search proceedings, the detailed and voluminous orders containing number of evidences, documents, statements of various persons etc. He submits th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he approval so granted by Jt. CIT in not an approval which can be sustained. 10. By referring to the judgment of Hon'ble High Court of Orissa in the case of M/s. Serajuddin & Co. in ITA Nos. 39, 40, 41, 42, 43, 44 of 2022 and vehemently contended there was no sufficient time for verification of voluminous seized material by the approving authority to give approval u/s. 153D of the Act which clearly infers that there was no application of mind by such authority. 11. The ld. AR referred to the decision of Hon'ble High Court of Madhya Pradesh in the case of CIT Vs. S. Goyanka Lime & Chemicals Ltd. reported in (2015) 56 taxmann.com 390 (Madhya Pradesh) submits that the Jt. CIT has to be satisfied with objectivity on objective material and the mechanical way of recording satisfaction is unsustainable under law. The Hon'ble High Court of Madhya Pradesh confirmed the order of ITAT for quashing the consequential assessment being passed without proper approval. He referred to page 162 of the paper book and argued that the Hon'ble Supreme Court in the case of CIT Vs. S. Goyanka Lime & Chemicals Ltd. reported in (2015) 64 taxmann.com 313 (SC) confirmed the decision of Hon'ble High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of draft assessment order based on seized documents, appraisal report and material gathered on records during assessment proceedings. The voluminous seized materials, issues involved therein, descriptions and instructions highlighted and compiled in appraisal report has already been seen by him at a number of occasions and each and every points have been discussed with AO from the date of initiation of the proceedings till preparation of draft order. He argued further that the AR has failed to understand and appreciate the fact that there is substantial role of JCIT/Addl. CIT in supervision, and guidance based on the materials available on record right from beginning to the completion of assessment proceedings. This is ongoing process involving day to day monitoring of assessment and sufficient application of mind throughout the assessment proceedings. The JCIT/Addl. CIT going through the draft assessment order as well as documents and his observations within 4 days is more than sufficient to understand the entire matter in this case and consider the same to be fit for approval since the he has already gone through the entire materials and applied his mind on regular basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). The relevant portion of the said judgment is reproduced here-in-below for ready reference : "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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars." 25. For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior 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. 16. On careful reading of the above judgment, we note that the Hon'ble High Court was pleased to observe that there should be some indication that the approving authority examined relevant material in detail while granting the approval u/s. 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 44989/2023 (Arising out of impugned final judgment and order dated 15-03-2023 in ITA No. 43/2022 passed by the High Court Of Orissa at Cuttack) ACIT, CIRCLE 1 (2) Petitioner(s) VERSUS M/S SERAJUDDIN AND CO. Respondent(s) (FOR ADMISSION and I.R. and IA No.232700/2023-CONDONATION OF DELAY IN FILING and IA No.232701/2023-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT ) Date: 28-11-2023 This petition was called on for hearing today. CORAM: HON'BLE MRS. JUSTICE B.V. NAGARATHNA HON'BLE MR. JUSTICE UJJAL BHUYAN For Petitioner(s) Mr. N Venkatraman, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Udai Khanna, Adv. Mr. H R Rao, Adv. Mr. Akshat Singh, Adv. For Respondent(s) Mr. S. Ganesh, Sr. Adv. Mr. Ramesh Singh, Sr. Adv. Mr. Gaurav Khanna, AOR Mr. Venugopal Mohapatra, Adv. Ms. Natasha Sahrawat, Adv. Ms. Deepali Bhanot, Adv. Mr. Rudraksh Pandey, Adv. Mr. Gautam Barnwal, Adv. UPON hearing the counsel the Court made the following ORDER Delay condoned. Having regard to facts and circumstances of the case, we are not inclined to interfere in the matter. The Special Leave Petition is dismissed. Pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CBDT issued from F. No. 286/161/2006/ IT Inv.lI) dated-22.12.2D06. The replies received should be kept on record. A noting on all such issues should be made in the office note. e) All the office notes (not for assessee) along with the copies of the final assessment orders issued be forwarded to this office for records. f) All references contemplated u/s. 153C of the L T. Act promptly be forwarded to the Assessing Officer having jurisdiction over such other person along with me respective books of accounts, documents or assets seized or requisitioned under intimation to this office. g) Wherever, penalty proceedings u/s271(1)(c) are initiated, proper explanation below that section shall be invoked. In case penalties initiated u/s. 271AAA, the same should be invoked under the respective issue itself as well as at the bottom of the order. h) The Computation interest u/s 234A, 234B, 234C will be a part of the assessment order itself. i) Wherever, the A.O. found the provisions of the section 269SS / 269T are violated, separate proposal for initiation of penalty proceedings u/s. 271D / 271E should be submitted. j) Wherever necessary, A.O. should forward third party informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed above, the approval was granted subjected to compliance of conditions therein. 21. In the light of the above, we note that the AO vide paras 6.1, 6.2, 6.3 and 7 of assessment order observed that the important findings noted during the course of search u/s. 132 and the post search inquiries regarding unsecured loans relating to 49 assessments. On perusal of the letter dated 18-03-2016 vide No.ABD/ACIT/CC-1/2015-16/1702 issued by the AO requesting approval from JCIT shows that the AO requested the approval u/s. 153D of the Act in 49 assessments involving A.Ys. 2008-09 to 2014-15. The said request letter shows no proof of number of evidences, documents, statements of various persons were annexed in support of draft assessment orders. In this regard, the Hon'ble High Court of Allahabad in the case of Sapna Gupta reported in (2023) 147 taxmann.com 288 (Allahabad) held "it is humanly impossible to go through the records of 85 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok. On a careful examination of the same, we note that in pursuance of search, the assessments processed u/s. 143(1) of the Act were reopened by issuing a notice u/s. 148 of the Act on the basis of certain reasons recorded. The assessee objected to the same before the Assessing Officer, which was rejected. The Assessing Officer completed the assessment u/s. 143(3) r.w.s. 147 of the Act. The CIT(A) quashed the said reassessment by holding the action of JCIT in according sanction was without application of mind which was done in a mechanical manner. The ITAT upheld the order of CIT(A). The Hon'ble High Court of Madhya Pradesh dismissed the appeal of Revenue by observing no question of law involved warranting reconsideration. The relevant extract of the said decision as under for ready reference : "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- "The Commissioner acted, of course, mechanically in order to dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is liable to be quashed. 24. Further, the Hon'ble Supreme Court in the case of Sahara India (Firm) reported in 300 ITR 403 (SC) at page No. 142 of the case laws paper book, while discussing the requirement of prior approval, opined that the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the Assessing Officer, casts a very heavy duty on the said high ranking authority to see to it that the requirement of the previous approval, envisaged in the Section is not turned into an empty ritual. The Hon'ble Supreme Court was pleased to hold 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. 25. In view of our discussion made here-in-above, considering the submissions of ld. AR, ld. DR, case laws relied on and respectfully following the decision of Hon'ble High Court of Orissa in the case of M/s. Serajuddin & Co. (supra) which was confirmed by the Hon'ble Supreme Court vide order dated 28-11-2023 in SLP(C) No. 026338/2023, we hold tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, wherein, we allowed ground No. 1 raised by the assessee and held approval dated 21-03-2016 is invalid for the reason of non-application of mind, consequently, quashed the final assessment order dated 30-03-2016 passed in pursuance of such invalid approval dated 21-03-2016. The view taken by us in ground No. 1 in IT(SS)A No. 56/PUN/2022 is equally applicable to ground No. 1 in IT(SS) No. 59/PUN/2022. Accordingly, ground No. 1 raised by the assessee is allowed. 35. In view of our decision in ground No. 1 in quashing final assessment order dated 30-03-2016, ground Nos. 2 to 6 becomes academic, requiring no adjudication. 36. In the result, the appeal of the assessee is allowed. IT(SS)A No. 60/PUN/2022 for A.Y. 2013-14 by the assessee. 37. We find ground No. 1 raised in this appeal is similar to ground No. 1 raised in IT(SS)A No. 56/PUN/2022 for A.Y. 2009-10, wherein, we allowed ground No. 1 raised by the assessee and held approval dated 21-03-2016 is invalid for the reason of non-application of mind, consequently, quashed the final assessment order dated 30-03-2016 passed in pursuance of such invalid approval dated 21-03-2016. The view taken by us in ground No. 1 in IT(SS)A No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal does not survive, as it becomes infructuous. Thus, ground Nos. 1 to 3 raised by the Revenue are dismissed. 46. In the result, the appeal of Revenue is dismissed. IT(SS)A No. 62/PUN/2022 for A.Y. 2009-10 by the Revenue. 47. We find the Revenue filed three grounds of appeal amongst which the only issue challenging the action of CIT(A) in deleting the addition made by the AO on account of protective basis. 48. We note that the issue raised in this appeal also covered by the approval granted by the JCIT dated 21-03-2016 u/s. 153D of the Act, wherein, we held the same as invalid and quashed the final assessment order dated 30-03-2016. In view of the same, the issue raised in ground Nos. 1 to 3 in this appeal does not survive, as it becomes infructuous. Thus, ground Nos. 1 to 3 raised by the Revenue are dismissed. 49. In the result, the appeal of Revenue is dismissed. IT(SS)A No. 63/PUN/2022 for A.Y. 2010-11 by the Revenue. 50. We find the Revenue filed three grounds of appeal amongst which the only issue challenging the action of CIT(A) in deleting the addition made by the AO on account of protective basis. 51. We note that the issue raised in this appeal also covered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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