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TMI Blog2024 (9) TMI 1661X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and 2017-18. The grounds raised by the assessee in both the appeals are common, except the difference in amount. For the sake of reference, the grounds raised by the assessee in ITA No.679/LKW/2019 are reproduced hereunder: 1. That the Ld. AO has erred in law and on facts in completing the assessment under Section 153A of the Income Tax Act, 1961 in gross violation of Section 153C of the Income Tax Act, 1961, therefore the impugned assessment order is illegal, void-ab-initio and liable to be quashed. 2. That the Ld. Commissioner of Income Tax(Appeals) has erred in law and on facts in sustaining the addition of Rs.1,12,00,000/- made by the Ld. A.O., solely on the basis of document(s) seized during the course of search conducted in the case of third person, without recording satisfaction as contemplated u/s 153C of the Income Tax Act, 1961 and without issuing notice u/s 153C of the Income Tax Act, 1961, hence the addition of Rs.1,12,00,000/- made u/s 153A of the Income Tax Act, 1961on account of alleged receipt of cash from M/s Bharat Engg. Works u/s 69A of the Income Tax Act, 1961, is illegal, bad in law and liable to be quashed/deleted. 3. That the Ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) has erred in law and on facts in sustaining the arbitrary additions made by the Ld. A.O. in the income of the appellant which are contrary to the principles of natural justice and equity, unsustainable and deserve to be deleted. 10. That any other relief or reliefs as may be deemed fit on the facts on record, be granted. 2. For the sake of convenience, first we will deal with the issue involved in ITA No.679/LKW/2019. 3. Arguing ground No.6 first, the ld. counsel for the assessee submitted that the brief facts of the case are that the assessee is a Private Limited company engaged in the business of manufacturing of Steel Tublar. A search and seizure operation was carried out by the Department under section 132 of the Income Tax Act, 1961 in Premier/Sigma group of cases on 23.8.2016 and the assessees were required to file income tax returns under section 153A of the Act. In response to the notices, the assessees, vide letter dated 26.4.2018 enclosed the copy of return for the year under consideration filed on 30.10.2015, declaring a total loss of Rs.3,694/- and stated that the return filed on 30.10.2015 be treated as the return filed in compliance to the notice issued under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup, there were seized documents belonging to other Groups also, the approval of which has also been given through the same approval letter. It is humanly not possible to examine colossal numbers of loose papers in one single day. Whenever a superior authority grants approval to an order of a subordinate authority, the superior authority must apply his mind to all the material on record, and the basis of the order made by the subordinate authority, and the superior authority must ensure that the subordinate authority has followed due process of law and has not taken arbitrary decisions. The obligation of the approving authority is of two fold, i.e., on the one hand, he has to apply his mind to ensure the interest of the Revenue being watched against any omission or negligence by the Assessing Officer in taxing the right income in the hands of the right person, and in right Assessment Year and, on the other hand, the superior authority is also responsible and duty-bound to do justice with the tax payer by granting protection against arbitrariness or creation of baseless tax liability on the assessee. 6. The ld. Counsel for the assessee has further invited our attention to the CBDT m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on the basis of such approval is illegal and deserves to be annulled. 9. The ld. CIT, D.R., on the other hand, has argued that proper approval, as required under the provisions of section 153D of the I.T. Act, has been obtained by the Assessing Officers. It was submitted that the approval was taken well within the time before limitation and the higher authority has fully applied his mind while granting the approval. It was submitted that though the Jt. CIT has not written in so many words about his satisfaction for granting approval, the fact remains that he has granted approval to the draft assessment order and only after that, the Assessing Officer has passed the final assessment order and therefore, ground No. 6 of the appeals be dismissed and appeals be heard on merits. 10. We have heard the rival parties and have gone through the material on record. We find that in this case, in view of a search carried out on the Sigma Group, the assessments of various assessees were reopened and various assessees were required to file income tax returns as required under the provisions of section 153A of the Act. The search was started on 23.8.2016 and it continued upto 25.8.2016, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on record. We find that in these cases, in view of a search carried out on the Sigma Group, the assessments of various assessees were reopened and various assessees were required to file income tax returns as required under the provisions of section 153A of the Act. The search was conducted on 23/08/2016 which continued upto 25/08/2016 and therefore, assessment year 2017-18 became the search year and the years preceding the search year became the subject matter of reopening u/s 153A of the Act. The issue raised by Learned counsel for the assessee is that the approval granted by the Addl. CIT is bad in law as it is humanly impossible to go through documents exceeding 17,800 in a single day and then grant approval on the same day. Since the controversy involved here is with respect to approval u/s 153D of the Act, it would be appropriate to first visit the provisions of section 153D of the Act, which for the sake of completeness are reproduced below: SECTION 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 assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record in regard to the compensation payable. Otherwise, it would tantamount to blurring the distinction between Approving Authority and Appellate Authority''. 9.4 Further Hon'ble Gauhati High Court in the case of Dharampal Satyapal Ltd., vs., Union of India [2019] 366 ELT 253 (Gau.) Manu/GH/07070/2018 in para-28 has held as under : When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must co- exist and, therefore, where an Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements. Therefore, from the definition of approval as per above authorities, its meaning with respect to approval u/s 153D means that the superior authority should apply his mind on the material on the basis of which the Assessing Officer is making or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n effective/proper meaning so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. The meaning of 'approval', as contemplated u/s 153D of the Act, is that the Jt. CIT is required to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind and to ascertain as to whether the entire facts have been properly appreciated by the Assessing Officer. The Jt. CIT is also required to verify whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. Thus, the approval cannot be a mere discretion or formality but quasi judicial function based on reasoning. In our view, when the Legislature has enacted the provision to be exercised by the higher authority to pass assessment order in the search cases then it is the duty of the Jt. CIT to exercise such power by applying his judicious mind. The obligation of the approval of the approving authority is of two fold i.e. on one hand, he has to apply his mind to ensure the interest of the Revenue against any omission or negligence by the Assessing Officer in taxing right income in the hands of right person an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 148 of the I.T. Act was given absolute primacy therefore, in the context of Section 153D of the I.T. Act (where each word is expressly used and which is a year centric special scheme of assessment with concept of abated/non-abated assessments) there is absolute necessity of separate approval for each year and for each assessee. In the present cases Jt. CIT has given approval u/s 153D of the Act for all the years altogether involved in search and the approving authority in a mechanical manner and as an idle formality has granted approval. In one line the approving authority has given blank go ahead to pass order under section 153A without even taking minimum possible pains to take appropriate note of year-wise income as computed. The legislative intent behind Section 153D can be discerned/gathered from the CBDT Circular No.3/2008 dated 12.03.2008 in which it is highlighted that approval of the approving authority is mandatory. For the sake of completeness, the contents of Circular No. 3/2008 are reproduced below: 50. Assessment of search cases Orders of assessment and reassessment to be approved by the Joint Commissioner. 50.1 The existing provisions of making assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the impugned assessment orders, question which arises for our consideration is whether the approval granted by the Additional CIT, Central, Kanpur vide his order dated 30.12.2018 can be held to be granted after due application of mind and can be held to be valid in the eyes of law. Learned counsel for the assessee, during the proceedings before us had filed a chart showing number of documents seized during search belonging to the group totaling 15,800 pages. Besides the above documents, replies filed by assessees belonging to the group consisted of about 200 pages and in fact there were documents belonging to other group also, the approval of which has also been granted along with assessees on the same day through the same approval letter. Therefore, keeping in view huge number of documents involved, it is humanely impossible for a person to apply his mind on all cases individually and that too in a single day. For the sake of completeness, the said approval dated 30/12/2018 has been made part of this order and is reproduced below: The contents of the approval speaks for itself loud and clear. The following inferences are inevitable from the bare reading of the said order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment or re-assessment, if any, relevant to any assessment year falling within the period of six assessment years referred to in this Section pending on the date of initiation of the search under section 132 or making of requisition under section 132A as the case may be, shall abated. Thus, when provisions of Section 153A are applicable in a case of assessee, A.O. shall have to give separate notice of each assessment year and assessee shall have to be directed to file return of income for each year and separate orders shall have to be passed for each assessment year. In Section 153A of the I.T. Act, the A.O. shall have to see whether there are abated or non-abated assessments which was not provided in earlier provisions for block assessments. The Hon'ble Delhi High Court in the case of CIT vs., Kabul Chawla [2016] 380 ITR 573 (Del.) considered the issue of abated and non-abated assessments and with regard to completed assessments held that the same can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ab initio and as such all assessments under section 153A got vitiated and as such A.O. was not having jurisdiction to pass the assessment orders under section 153A of the I.T. Act, 1961. 11.2. The meaning of the word Approval as defined in Black Law Dictionary is - The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or 'consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with. 11.3. The Hon'ble Supreme Court of South Carolina in State vs., Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that Approval implies knowledge and, the exercise or discretion after knowledge. 11.4. The Hon'ble Supreme Court in the case of Vijayadevi Naval Kishore Bharatia vs., Land Acquisition Officer [2003] 5 SCC 83 wherein it has been held that : Whenever there is an administrative approval given by higher authority, higher authority applies its mind to see whether the proposed Award is acceptable to the Government or not ? Such Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it should be based on reasoning. In our view, when the legislature has enacted some provision to be exercised by the higher Revenue Authority enabling the A.O. to pass assessment order or reassessment order in search cases, then, it is the duty of the JCIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of two folds ; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the A.O. in taxing right income in the hands of right person and in right assessment year and on the other hand, JCIT is also responsible and duty bound to do justice with the tax payer [Assessee] by granting protection against arbitrary or unjust or unsustainable exercise and decision by the A.O. creating baseless tax liability on the assessee and thus, the JCIT has to discharge his duty as per Law. Thus, granting approval under section 153D of the I.T. Act is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the JCIT on the application of mind and this exercise should be discernable from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his 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. 153 A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed. 13. The ld. Departmental Representative has strongly relied upon the decision of the Tribunal Mumbai Bench in the case of Rafique Abdul Hamid Kokani Vs DCIT 113 Taxman 37, Hon'ble High Court of Karnataka in the case of Rishabchand Bhansali Vs DCIT 136 Taxman 579 and Hon'ble High Court of Madras in the case of Sakt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises. 9.11 Similar are the findings of I.T.A.T. Jodhpur Bench in the case of Indra Bansal Ors. vs. ACIT in I.T.A. Nos. 321 to 324 in which the Tribunal held as under: 6. We have heard the rival contentions and have perused the material on record. The main contention of learned Authorised Representative is that reasonable time was not available with the Joint Commissioner for the grant of necessary approval as envisaged under section 153D of the Act. We have perused the forwarding letter dt. 30-3-2013 seeking approval of the draft assessment order. The date of receipt of this letter in the office of Joint Commissioner is indisput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act on the same day and Tribunal, Mumbai Bench held that the approval granted by Addl. CIT was mechanical and had been passed without considering the material on record and was, therefore, devoid of any application of mind. The impugned assessment order was annulled. Similarly, Tribunal, Allahabad Bench in Verma Roadways v. Asstt. CIT (2001) 70 TTJ (All) 728; (2000) 75ITD 183 (All) held that while granting approval, Commissioner is required to examine the material before approving the assessment order. In this case, Tribunal, Allahabad Bench was examining the issue of approval under section 158BG of the Act and it opined that the object for entrusting the job of approval to a superior and a very reasonable (sic-responsible) officer of the rank of Commissioner is that he with his ability, experience and maturity of understanding can scrutinize the documents, can appreciate its factual and legal aspects and can properly supervise the entire progress of assessment. Tribunal, Allahabad Bench held that the concerned authority while granting the approval is expected to examine the entire material before approving the assessment order and further that whenever any statutory obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co-ordinate Benches of Mumbai and Allahabad as afore-mentioned and also applying the ratio of the judgment of the Hon'ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained. Accordingly, assessments in three COs and nineteen appeals of the assessee(s), on identical facts, are liable to be annulled as suffering from the incurable defect of the approval not being proper. Accordingly, we annul the assessment orders in CO Nos. 8 to 10/Jodh/2016 and ITA Nos. 325 to 331/Jodh/2016. Thus, all the three COs and the nineteen appeals of the assessee, as aforesaid, are allowed. 10. Similarly we find that Hon'ble Supreme Court in the case of 'Sahara India vs. CIT Others' [2008] 216 CTR 303 (S.C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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