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TMI Blog2025 (4) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... be quashed as no valid notice u/s. 143(2) of the Act was issued and the CIT(A) erred in not holding so. 4. On the facts and circumstances of the case and in law, the addition of Rs. 1,20,04,096/- made by the AO on account of disallowance of interest is beyond the scope of provisions of section 153C r.w.s. 153A of the Act and CIT(A) erred in not holding so. 5. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs. 1,20,04,906/- made by the AO on account of disallowance of interest. 6. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of rejecting the books of accounts. 7. On the facts and circumstances of the case and in law, the assessment order passed by the AO is contrary to provision of section 153D of the Act and CIT(A) in not holding so. 8. The appellant craves leave to add one or more ground of appeal or to alter / modify the existing round before or at the time of hearing of appeal. 2. The brief facts of the case are that a search & seizure operation u/s 132 of the Income Tax Act, 1961 was conducted on 11.11.2014 alognwith Apple Group of Companies cases. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has to act in a judicious manner by due application of mind in a manner of a quasi-judicial authority. If the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval under section 153D of the Act and the mandate of the enactment by the legislature will be defeated. 3. In the present case, the approval by JCIT is not valid in view of the following reasons:- i. As per section 153A of the Act, for making assessment notice is required to be issued for each year separately for which the assessment are to be made. The notice u/s. 142(1) is also issued separately for each of the years. The assessment order is also passed separately for each of the year. As per mandate of section 153D, the approval of JCIT is also required separately for each of the assessment year. In the present case, the JCIT has given combined approval for 7 years which is not in conformity with law. The issues stands covered in favour of the assessee by the decision of jurisdictional High Court. ii. The AO has sent the letter for approval of JCIT on 10.01.2018 and JCIT has granted approval on 11.1.2018. Thus, it was not possible for the JCIT to prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the approval of the Approving Authority serves two purposes: (i) On the 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 and in right assessment year. (ii) ii) On the other hand, superior authority is also responsible and dutybound to do justice with the tax-payer by granting 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval of superior authority means that it 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 subsection (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 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - -------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal was right that there was absence of application of mind by the ACIT in granting approval under Section 153D. It is not an exercise dealing with a immaterial matter which could be corrected by taking recourse to Section 292B of the Act. The aforesaid decision has been upheld by Hon'ble Apex Court reported at 466 ITR 254 SC. 7. In the case of Dilip Constructions Pvt Ltd. Versus ACIT and Shilpa Seema Constructions Pvt Ltd. Versus ACIT, 2019 (12) TMI 311 - ITAT CUTTACK it has been held as under: - 30. In this approval, we are unable to see any mention by the approving authority that he has perused the relevant assessment records and draft assessment orders proposed to be passed by the Assessing Officer. The Assessing Officer issued letter seeking approval on 17.11.2017 and approval has been granted on 23.11.2017 that after a passage of five days time from the approval order as reproduced hereinabove. From the above, it is very much clear that the approving authority i.e. the ld JCIT has not even bothered to mention that he has perused the relevant assessment records and draft assessment orders for which he has granted approval u/s. 153D of the Act as per the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den duty of the Id. JCIT to exercise this power by applying his judicious mind. The Ld. AR vehemently argued that the 40 draft assessment orders for 10 assessee's were sent for approval by the Ld. AO to the Id. JCIT on 29.12.2017 and the Id. JCIT had granted approval for all the cases on the very same day, i.e., on 29.12.2017. The Ld. AR reiterated the fact that 40 draft assessment orders u/s 153A of the Act were approved by the Id. JCIT u/s 153D of the Act on the single day i.e. the day on which the draft assessment orders were forwarded to the Id. JCIT by the Id AO. Based on this, the Ld. AR submitted that the Id. JCIT had granted approval by devoting very few minutes for each case in a mechanical manner u/s 153D of the Act without due application of mind. Moreover, the approval letter granted u/s 153D by the Id. JCIT for all the seven assessment years, clearly states that the draft assessment orders per se were placed by the Ld. AO before the Id. JCIT only on 29.12.2017 and they were approved on the very same day. Accordingly, he pleaded that this type of approval cannot be treated as a valid approval contemplated u/s 153D of the Act. Further, the Ld. AR submitted that a single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of appraisal report from the Investigation Wing, still, the Id. JCIT, while granting the approval u/s 153D of the Act has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Ld. AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Ld. AO and Id. JCIT are merely guidance to the Ld. AO and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the Ld. AO to frame the assessment after getting prior approval from Id. JCIT u/s 153D of the Act. The Id. JCIT getting involved in the search assessment proceedings right from inception does not have any support from the provisions of the Act as no where the Act mandates so. The scheme of the Act mandates due application of mind by the Ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the Ld. AO as well as the ld. JCIT to even ignore the conclusions d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val under section 153D, Ld. AR adverted our attention to the communication letter dated 29.12.10 forwarded by the AO (reproduced supra) addressed to the Addl. CIT and pointed out that the AO in the said letter neither makes any iota of reference as to what are the seized materials of incriminating nature found nor does he forwards any such material for consideration and reference of the Addl.CIT so as to apply his mind to such material enable him to grant statutory approval of search assessments in terms of sect ion 153D of the Act. It was pointed out that all that the AO mentions in the said letter is that tall seized materials and data on electronic devices seized during the search operation have been considered while framing assessment order' and thus contended that the designated authority has acted in oblivion while granting a consolidated & combined approval for all search assessment years in a summary manner and without the assessment records and without seized material placed before him/her and thus acted merely on the basis of an undertaking from the AO that all seized material has been considered while framing assessment order. - - - - - - - - - - - - - - - - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of draft assessment orders... *which clearly proves that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of contents mentioned in the draft assessment order without any application of mind and seized materials were not looked at and/or other enquiry and examination was never carried out. From the said approval, it can he easily inferred that the said order was approved, solely relying upon the implied undertaking obtained from the Assessing Officer in the form of draft assessment order that AD has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT. was supposed to supervise. The Addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al requirement imposed by section 153D of the Act. The Addl. CIT i.e. the superior authority, in turn, granted a combined and consolidated approval for all 5 assessment years in promptly on 30/12/2010 itself. For passing such assessment orders, the assessing Officer is governed by S.153D of the Act, whereby the Assessing Officer should complete the assessment proceedings and prepare a draft assessment order which need to be placed before the approving authority i.e. Joint/Addl. Commissioner(designated authority giving approval to search assessments u/s. 153D of the Act). The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/directions of the designated authority. Inevitably, this evaluation is to be made on the basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval prior to 30.12.2010. It is evident from the CBDT Circular No. 3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval of the respective Assessment order. Solemn object of entrusting the duty of Approval of assessment in search case is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be countenanced in law. 11. In the case of Shri Balwinder Singh Kohli Versus DCIT, 2023 (6) TMI 1333 - ITAT AMRITSAR wherein it has been held as under: - 10. In the instant cases, the AO has submitted the draft assessment order on 20/03/2015 before the Approving Authority who had approved on same day i.e. 20/03/2015. In our view, it was humanly impossible to peruse records of all 5 cases in one day to apply independent mind to appraise material records. Further, the approving authority has not mentioned any indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. Even the approving authority has not written or repeated the words of the statute, in granting the approval w/s 153D of the Act. We are therefore of the considered view that mere endorsing a list of cases by signature with "rubber stamping" of the letter without mentioning even the words like 'seen' or 'approved' will not satisfy the requirement of the law for approval or sanction u/s 153D of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval Order Dated 30.12.2017 also mentioned that A.O. to ensure all the assessment proceedings are conducted as per procedure and Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O. as per Law and records. Reliance in this regard is also placed on the following case law: - * Millenium Vinimay Pvt. Ltd. Versus ACIT Central Circle - 28 New Delhil 2024 (5) TMI 1494 - ITAT Delhi * Gulshan Kumar Sethi Versus DCIT, Central Circle, Ghaziabad 2024 (11) TMI 235 - ITAT Delhi * Veena Singh Versus ACIT Central Circle-25, DELHI * Shri Santosh Subhashappa Versus The Assistant Commissioner of Income Tax, Central Circle-2, Aurangabad And (Vice-Versa) 2024 (9) TMI 1663 - ITAT Pune * M/S. Infolance Software Solutions Pvt. Ltd. Versus Assistant Commissioner of Income Tax. Central Cirele-13 2024 (11) TMI 1307 - ITAT Delhi In view of the above, it is submitted that in the absence of valid approval u/s 1S3D, the assessment order passed by the assessing officer are liable to be quashed. 5. Per contra, Ld. CIT(DR) relied upon the orders of the authorities below. 6. We have carefully considered the submissions and perused the records. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the approving authority in a mechanical manner, the very purpose of obtaining approval u/s. 153D of the Act and the mandate of the enactment by the legislature will be defeated. However, JCIT without any consideration of merits in proposed additions with reference to the incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the JCIT has rendered approval to be a mere formality and cannot be countenanced in law. In view of the peculiar facts and circumstances of the case, we are of the considered view that approval by JCIT is not valid, hence, deserves to be quashed. In view of above, it is clear that Jt. Commissioner of Income Tax has given approval which is purely mechanical and without application of mind. In such cases, the assessment looses its validity. The case laws refereed by the Ld. Counsel for the assessee are germane and very much supports the case of the assessee. 8. We note that Delhi Bench of the Tribunal in the case of ACIT vs, Splendor Landbase ltd. and Vice Versa and ACIT vs. Hridey Vikram Bhatia and (vice versa) vide order dated 7.3.2025 reported in 2025 (3) TMI 599 has considered the exactly similar iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by application of mind. There is inherent fallacy in the belief of JCIT as mentioned in this letter that "there is no requirement in law creating any evidence for discussions before granting the approval u/s 153D." On the contrary this bench is of firm view that not only as quasi-judicial authority but even in administrative capacity, if an approval is to be granted under a statute for initiating any quasi judicial proceedings then such approval should be self contained piece of evidence that due process of law was followed in grant of approval. Which certainly is not the case here. Thus, approvals granted in case of both the assessee to be vitiated and deserve to be quashed - Decided in favour of assessee." (Heads Notes). 9. We further draw support from the decision of the Coordinate Bench of ITAT, Delhi in the case of Sanjay Duggal Versus ACIT, 2021 (1) TMI 909 - wherein on identical issue, it has been held as under: - "14. Another interesting aspect that has come to the notice on the basis of various documents submitted for approval as well as request for approval by the A.O. to the JCIT. We make a specific reference to letter dated 29.12.2017 written by ACIT, Central ..... X X X X Extracts X X X X X X X X Extracts X X X X
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