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TMI Blog2021 (10) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... application of mind, purely in a mechanical manner, without appreciating the facts and not following the provisions/mandate of the section, which makes the order passed u/s 153A nonest, void abinitio bad in law, the same be quashed." 3. Learned CIT, D.R. had no objection to the admission of additional ground and since the ground is purely a legal ground and goes to the root of the matter, the same was admitted and assessee was asked to proceed with his arguments. 4. Learned counsel for the assessee, at the outset, submitted that a search & seizure operation u/s 132 of the I.T. Act was conducted on 31/08/2015 on Goldiee Group as well as Santosh Kumar Agarwal Group of cases and the assessee was required to file income tax return u/s 153A of the Act. In response to the notice, the assessee filed return u/s 153A of the Act on 17/04/2017 which was originally e-filed on Form ITR-2 on 04/04/2017. The assessment in this case was completed u/s 153A/143(3) of the Act by Dy. CIT, Central Circle-1, Kanpur vide order dated 31/12/2017 and various additions were made. It was submitted that as per the provisions of law, in search cases, the Assessing Officer, before passing assessment order fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must ensure that the subordinate authority has followed due process of law and has not taken arbitrary decisions. It was submitted that under similar facts and circumstances, the Lucknow Bench of the Tribunal in the case of Shri Navin Jain vs. DCIT in I.T.A. No. IT(SS)A No. 639 to 641, vide order dated 31/08/2021 has decided the issue in favour of the assessee and therefore, it was prayed that in the present case also the additional ground of appeal may be allowed and assessment order be quashed. 6. Learned CIT, D.R., on the other hand argued that proper approval, as required under the provisions of section 153D, has been obtained by the Assessing Officer. It was submitted that the approval was taken well within the time before limitation and the higher authority has fully applied his mind to grant approval. It was submitted that though the Jt. CIT has not written in so many words about his satisfaction for granting approval but 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, the additional ground of the appeal be dismissed and appeal be heard on merits. 7. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.]" 9.1 The above provisions of section 153D of the Act were inserted by Finance Act, 2007 with effect from 01/06/2007. In our humble understanding of the said provisions, we are of the opinion that the Legislature wanted the assessment/reassessment of the search cases should be made and order should be passed with the prior approval of superior authority. The word approval has not been defined in the Income Tax Act but the general meaning of word approval can be understood from Black Law of Dictionary which defines approval as: "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." 9.2 The Hon'ble Supreme Court of South Carolina in State vs. Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in search cases. The approval u/s 153D of the Act cannot be treated mere formality only and the purpose of inserting this provision is two fold i.e. one before approving the senior authority will ensure that the assessee should be protected against the undue and irrelevant addition and disallowances and the approving authority will also ensure that proper enquiry or investigations are carried out by the Assessing Officer on the relevant materials including material in the hands of the Department. Secondly, the Assessing Officer also keeps in mind the interest of Revenue. Therefore, the said provision provides application of mind by the approving authority of the Department. Therefore, the provision of section 153D of the Act cannot be treated as mere formality and mandate therein is required to be followed by the approving authority in a judicious manner by due application of mind in a manner of a quasi judicial authority. We are cautious about the fact that reasons for granting approval may not be a subject matter of challenge or not required to be mentioned in the order of approval but the manner and material on the basis of which approval has been granted can be challenged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the assessee is to be given separate notice for assessment for each year as specified u/s 153A of the Act. Secondly, the assessee has to file separate ITR for each year as specified in section 153A of the Act. Thirdly, separate assessment orders are to be passed for each year as specified in section 153A of the Act. There is an important concept mentioned in section 153A of the Act, abated and non abated which is peculiar to the scheme of section 153A of the Act. Keeping in view the above basic fundamental features of Section 153A, if Section 153D is scrutinized, then, it would become manifest that very important phrase as deployed in text of Section 153D, is "Each" assessment year. The word "Each" has been used extensively and this word needs to be given due weightage and adequate meaning and as such for each year separate approval is to be given under section 153D of the I.T. Act which is lacking in the present cases. There are many other provisions where statutory approval is required from higher authorities. Few of them are noted like in Section 151 and Section 274 etc., respectively dealing with the approvals on reopening cases and penalty cases. When Section 153D is juxta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. 50.3 Applicability-These amendments will take effect from the 1st day of June, 2007." 9.5 It is evident from the CBDT Circular that the legislature in its highest wisdom made it compulsory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority could apply his mind on the materials and other circumstances on the basis of which the officer is making the assessment and after due application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the approval. The Additional CIT without any consideration on merits in respect of the issues on which addition was made, granted the approval and such approval is an eyewash and idle formality and such a mechanically granted approval is no approval in the eyes of law. The entire gamete of law, as contemplated u/s 153D of the Act, has been considered by Delhi Bench of the Tribunal in a bunch of 52 appeals in I.T.A. No.1813/Del/2019 in the case of Sanjay Duggal and Others wherein the Hon'ble Bench vide order dated 19/01/2021 has quashed the assessment orders by holding that the approval granted u/s 153D of the Act was in a mechanical manner and thus cannot be held to be an approval as required u/s 153D of the Act. The relevant findings of the Tribunal are contained in para 11 onwards, which for the sake of completeness are reproduced below: "11. We have considered the rival submissions and perused the written submissions filed by the parties and considered the material on record. It is an admitted fact that search and seizure action were carried-out in the cases of the assessees on 29.12.2015. Section 153A have been inserted into the Income Tax Act w.e.f. 01.06.2003. Prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each assessment year on the basis of the findings of the search and any other material existing or brought on record by the A.O. Therefore, these were the mandatory provisions contained in Section 153A which shall have to be satisfied by the A.O. before proceeding to frame assessment in the cases of persons searched under section 132 of the I.T. Act, 1961. Further safeguard have been provided for framing the assessments under section 153A that prior approval shall be necessary for assessments in the cases of the search or requisitioned, under section 153D of the IT. Act. Section 153D of the I.T. Act is reproduced as under : "153D - No Order of assessment or re-assessment 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 Sub- Section (1) of Section 153A or the assessment year referred to in Clause (b) of sub-section (ii) 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 appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Authority. Further, the Approving Authority also cannot exercise its power of prior approval to give directions to the Adjudicating Authority in what beneficial to accept/ appreciate tine material on record in regard to the compensation payable. Otherwise, it would tantamount to blurring the distinction between Approving Authority and Appellate Authority''. 11.5. The 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." 11.6. Therefore, in the cases of search, assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, the provisions contained in Section 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 are 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 investigation 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 important provision laid down by the legislature cannot be treated as a mere empty formality. The same view was expressed by the Pune Benches of the Tribunal in the case of Akil Gulamali Somji vs ITO, in IT Appeal Nos.455 to 458 (Pune) of 2010 order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. The Hon'ble Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late to the issue whether the Joint CIT/CIT has to give an opportunity of being heard to the assessee before granting the approval. This is not the issue before us as the Ld. Counsel has never argued that the assessee was not given any opportunity of being heard. These decisions therefore would not do any good to the Revenue. 14. Since we have annulled the assessment order, we do not find it necessary to decide the issues raised on merits of the case." 9.9 In this case, the Addl. Commissioner has showed his inability to analyze the issues of draft order clearly stating that no much time was left as the draft order was placed before him on 31/12/2010 and approval was granted on the same day. In the case before us the Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible. If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day. 9.10 The Hon'ble Bombay High Court has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within one day of each other. This lends credence to the contention of the learned Authorized Representative that the draft assessment order was approved without much deliberation by the Joint Commissioner. Further, the time of the fax granting approval is 6.56 a.m. on 31-3-2013 which is prior to the office hours and, thus, it brings out a reasonable doubt that the approval was granted even before the letter requesting the approval was received in the office of the Joint Commissioner. Further, the response received by the assessee in response to his application under Right to Information Act, 2005 also establishes the correctness of the claim of the assessee that the assessment records were not before the Joint Commissioner when the approval was granted as the records were with the Range Office in Jodhpur whereas the approval was sent by fax on the morning of 31-3-2013 from Udaipur. Thus, it is our considered opinion that the Joint Commissioner had granted approval in a mechanical manner without examining the case records because the approval has been granted at 6.56 a.m. on 31-3-2013 from Udaipur wherein it has already been mentioned that the assessment records were being returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia (Firm) v. CIT & Anr. (2008) 216 CTR (SC) 303 : (2008) 7 DTR (SC) 27: (2008) 300 ITR 403 (SC), while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high-ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held 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. Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 2 cases was completed in one single day itself i.e., 31-3-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high-ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held 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. 11. In view of these facts and circumstances and in view of judicial precedents relied on by Learned A. R. Ground No.5 in appeals is allowed and the assessments orders are annulled. Rest of the grounds were not argued by Learned A. R. therefore, rest of the grounds are dismissed as not pressed. 8. The Lucknow Bench of the Tribunal has further followed this order in the case of Naresh Kumar Jain in I.T.(SS)A. No.650/Lkw/2019 wherein the Tribunal has quashed the assessment order vide order dated 20/09/2021. The relevant findings of the Tribunal are reproduced below: "5. The ld. Counsel for the assessee further submitted that all the above fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ritual. The Hon'ble Apex Court held 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 11. In view of these facts and circumstances and in view of judicial precedents relied on by Learned AR Ground No. 5 in appeals is allowed and the assessments orders are annulled ". 11. We find that at page 19 of the aforesaid Tribunal order dated 3.8.2021 in the case of 'Shri Navin Jain vs. Dy. CIT' in IT(SS)A Nos.639 to 641/LKW/2019, wherein the approval dated 30.12.2018 of the ACIT, Central, Kanpur has been reproduced, the name of the assessee, i.e., 'Naresh Kumar Jain' appears at serial number 24. 12. Therefore, as contended by the ld. Counsel for the assessee, the facts of this case are exactly similar to the facts involved in 'Shri Navin Jain vs. Dy. CIT', in IT(SS)A Nos.639 to 641/LKW/2019, wherein also the approval u/s 153D of the Act was given through the same letter F. No. Addl. CIT(CR)/KNP/Approval u/s 153D/2018-19 by the ACIT, Central, Kanpur and the Ground in this regard raised by the assessee was allowed, and the assessment orders were annulled by the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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