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TMI Blog2024 (9) TMI 1679X X X X Extracts X X X X X X X X Extracts X X X X ..... ein and the decision rendered thereon shall apply mutatis mutandis for other assessment years except with variance in figures. 3. The assessee has raised the following grounds of appeal for AY 2012-13:- "1. That on the facts and in the circumstances of the case and in law, the Id CIT-A vide impugned first appellate order dated 26.12.2022 has grossly erred in sustaining the impugned action of ld. Assessing officer (AO) in invoking sec. 153C absent requisite /mandatory jurisdictional facts as evident from undisputed fact that there is no adverse inference drawn qua so called "seized material" as vaguely referred in purported /impugned satisfaction note u/s 153C; 1.1 That on the facts and in the circumstances of the case and in law, the Id CITA vide impugned first appellate order dated 26.12.2022 has grossly erred in sustaining the impugned action of ld. Assessing officer (AO) in invoking sec. 153C without valid jurisdictional notice u/s 153C: 1.2 That on the facts and in the circumstances of the case and in law, the Id CITA vide impugned first appellate order dated 26.12.2022 has grossly erred in sustaining the impugned action of ld. Assessing officer (AO) in invoking sec. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2016. After recording the satisfaction note in terms of Section 153C of the Act, notice u/s 153C of the Act dated 23.03.2018 was issued on the assessee and also served in the email ID of the assessee. After repeated follow-up by the ld. AO, the assessee furnished a written submission on 22.11.2018 and stated that return of income filed already on 29.09.2012 be considered as a return in response to notice u/s 153C of the Act. Search assessment was completed u/s 153C read with Section 143(3) of the Act for assessment year 2012-13 on 24.12.2018 in the hands of the assessee after concluding that the assessee company is only a shell company and operated and managed by Shri Deepak Agarwal, only for providing accommodation entries such as share capital, share application money, share premium, sales bills, purchase bills, unsecured loans, etc. in lieu of set amount of commission. This assessment was completed after obtaining prior approval of the Addl. CIT, Central Range-4, New Delhi u/s 153D of the Act on 24.12.2018. Accordingly the entries reflected in the balance sheet and profit and loss account of the assessee were considered not genuine. The ld. AO further alleged that assessee m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dl. CIT, who, being the range head is involved in the search proceedings right from the inception from issuance of questionnaire, replies filed by the assessee periodically and the seized materials found during the course of search. Hence, it cannot be said that he had not applied his mind while granting approval u/s 153D of the Act. Since he is involved from day one of the search assessment proceedings, it would be easier for him to accord his approval on the very same day on receipt of draft assessment order from the ld. AO. With the above observations, the ld. CIT (A) had dismissed the additional ground of the assessee. 7. Before us, the ld. DR vehemently argued that the assessee was not doing any business at all. Hence, it was not entitled to claim any expenditure as deduction. Per Contra, the ld. AR argued that assessee had declared business income in the return and the same has been taxed by the ld. AO. How the ld. DR could even say that the assessee is not engaged in any business activity. We find lot of force in the argument of the ld. AR. Even though the lower authorities had disputed the carrying on of any business by the assessee and treated the entire transaction refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally states that only draft assessment orders were placed by the ld. AO in all these cases. We find from the aforesaid table, the ld. CIT (A) had approved 138 files containing the draft assessment orders which include assessee herein u/s 153D of the Act dated 24.12.2018. 10. The ld. AR also submitted that the meaning of "approval" as contemplated u/s 153D of the Act is that the ld. Addl. CIT is required to verify the issues raised by the ld. AO in the draft assessment order, apply his mind and ascertain whether the entire facts have been appreciated properly by the ld. AO together with the supporting evidences. The said approval proceeding is a quasi judicial function to be performed by the ld. Addl. CIT based on sound reasoning on due examination of the seized documents, replies filed by the assessee and the draft assessment order of the ld. AO. It is highly impossible for the Ld. Addl. CIT to grant approval to all the assessment orders within a short span of time on receipt of draft assessment orders for various assessment years comprising various issues. Accordingly, the ld. AR submitted that the ld. Addl. CIT had granted approval by devoting very few minutes for each case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inception. Accordingly, he argued that the objection raised by the Ld. AR has no force. Further, the Ld. DR vehemently argued that bare reading of provisions of section 153D of the Act talks only about existence of approval from the ld. Addl. CIT. There is no mention of application of mind on the part of the ld. Addl. CIT or the approving authority in the said section. The expression "application of mind" is only provided by the judicial decisions and not provided in the statute. Hence the Ld. DR argued that literal interpretation is to be given to the provisions of section 153D of the Act which does not provide for application of mind of the approving authority and hence any other interpretation contrary to the same would only result in re-writing the law. The Ld. DR also argued that the assessee files details at the last moment and that is why the approval is obtained from ld. Addl. CIT in the last moment. The Ld. DR also argued that the ld. JCIT or ld. Additional CIT does not look into the figures and even if there are mistakes in the figures, the same would not vitiate the assessment proceedings. The ld. DR also relied on the decision of Hon'ble Karnataka High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 before the ld. Addl. CIT well in time much before the due date of completion of search assessment. The ld. Addl. CIT is supposed to examine the seized documents, questionnaires raised by the Ld. AO on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the questionnaires issued by the Ld. AO and the conclusions drawn by the Ld. AO vis-à-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the ld. Addl. CIT in a judicious way after due application of mind. Even though as vehemently argued by the Ld. CIT-DR, the ld. Addl. CIT is involved with the search assessment proceedings right from the time of receipt of appraisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee to furnish the details till the last moment, then no fault could be attributed to the assessee. In such circumstances, the only irresistible conclusion that could be drawn is that the ld. AO is not serious about the statutory deadlines provided in the Act. In our considered opinion, if the arguments of the Ld. CIT DR are to be appreciated that the ld. Addl. CIT need not apply his mind while granting approval of the draft assessment orders u/s 153D of the Act as it is not provided in section 153D of the Act, then it would make the entire approval proceedings contemplated u/s 153D of the Act otiose. The law provides only the Ld. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. Addl. CIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the Ld. AO. 15. 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. We have gone through the approval granted by the ld. Addl. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Dugga l (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 of original return of income as well as total assessed and the Addl. CIT while giving his approval has not applied his mind to the figures mentioned by the AO. Therefore, approval given in the instant case by the Addl. CIT, in our opinion, is not valid in the eyes of law. We, therefore, hold that approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D of the Act. In view of the above discussion, we hold that the order passed u/s 153A r.w.s. 143(3) has to be quashed, thus ordered accordingly. The ground raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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