JBM Auto Ltd. vs ACIT, CC-25

ITA No.252/Del/2021 for AY: 2008-09

[DCIT, CC-25 Vs. JBM Auto Systems]

The Ld. DR is directed to produce the following:

(i)

Copy of office note, if any, in respect of AO's order pending in appeal before Hon'ble ITAT. Similar details regarding any material /correspondence folder showing/containing discussion notes of the AO with Addl.CIT with respect to the assessment orders, approved by Addl.CIT, pending in appeal before Hon’ble ITAT.

(ii)

Any Deviation Note sent to the investigation wing by the AO in respect of assessment orders in appeal pending before Hon’ble ITAT.

The above inputs/documents are requested to be provided by 07.01.2025 positively as the case is fixed for final hearing on 09.01.2025.”

“Subject: Re: Fwd: Pending appeals in JBM Group:

To: "Delhi CIT[DR] [ITAT]-3" <[email protected]>

Cc: "Pr.CIT, Central 3-Delhi" <[email protected]>, "Addl.CIT, Central Range-7, Delhi" <[email protected]

Date: 01/08/25 08:31 PM

From: "delhi.dcit.cen25" <[email protected]>

Madam/Sir,

Please refer to the trailing mail on the above captioned subject.

In the trailing mail dated 06.01.2025, office note prepared while framing the AO Order and Deviation note were sought by Hon'ble ITAT.

In this regard, it is submitted that office note is a matter of internal record prepared for the change of incumbency and deviation note is intradepartmental communication between the officers of Investigation Wing and Assessment Unit and hence, not liable to be shared. Further, it is also submitted that all the findings arising from the assessment proceedings have already been mentioned in the assessment orders of the assessees.

This is submitted with the prior approval of Ld. CCIT (Central)-2, New Delhi.

Regards, ACIT, Central Circle-25, New Delhi

On 06/01/25 13:51, "Delhi CIT[DR] [ITAT]-3" <[email protected]> wrote:

Reminder:

Sir/Madam,

The appeals (as per cause list attached) were fixed for hearing on 20.12.2024 before Hon'ble C-Bench, ITAT, New Delhi.

2.

During the course of hearing the Hon'ble members, C-Bench, ITAT, New Delhi, has directed to produce following documents/information and adjourned the case for 09.01.2025:

(i)

Copy of office note if any, in respect of AO's order pending in appeal before Hon'ble ITAT. Similar details regarding any material /correspondence folder showing/containing discussion notes of the AO with Addl.CIT with respect to the assessment orders, approved by Addi.CIT, pending in appeal before Hon'ble ITAT.

(ii)

Any Deviation Note sent to the investigation wing by the AO in respect of assessment orders in appeal pending before Hon'ble ITAT.

3.

The above inputs/documents are requested to be provided by 07.01.2025 positively as the case is fixed for final hearing on 09.01.2025.

Office of the CIT-DR/Sr. DR, ITAT, C-Bench, New Delhi Contact Nos. 9013851591 [ITO]

Office of the CIT-DR/Sr. DR, ITAT, C-Bench, New Delhi Contact Nos. 9013851591 [ITO]”

“Subject: Fwd: Pending appeals in JBM Group:

To: "Delhi CIT[DR] [ITAT-3" <[email protected]>

Cc: "CCIT(Central)-2, Delhi" <[email protected]>, "Pr.CIT, Central 3-Delhi" <[email protected]>, "Addl.CIT, Central Range-7, Delhi" <[email protected]

Date: 01/15/25 07:10 PM

From: "delhi.dcit.cen25" <[email protected]>

JBM AUTO LTD-06-01-2025.pdf (686KB) Cause List-24-12-2024.pdf (1.5MB)

Sir,

As per telephonic discussion with your goodself wherein your goodself had required the deviation note and office note in the case of JBM Auto Ltd., our reply is as under-

In this regard, it is submitted that office note is a matter of internal record prepared for the change of incumbency and deviation note is intradepartmental communication between the officers of Investigation Wing and Assessment Unit and hence, not liable to be shared. Further, it is also submitted that all the findings arising from the assessment proceedings have already been mentioned in the assessment orders of the assessees.

The JCIT/Addl. CIT is involved in the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and is involved with the AO from time to time while issuing various questionnaires to the assessee. Further, JCIT in Central Range also examine the seized documents in details immediately after receipt of the appraisal report and provides able assistance to the AO about the interpretation of the said seized documents while issuing questionnaires to assessee, examining the replies filed by the assessee and drawing conclusions thereon, all of which proves that there is application of mind by the ICIT before granting approval, as approval is not just a one-day process, but involves approvals and discussions over a period of time.

This is submitted with the prior approval of Ld. CCIT (Central)-2, New Delhi.

Regards,

ACIT, Central Circle-25,

New Delhi

------ Original Message ----

From: "Delhi CIT[DR] [ITAT]-3" <[email protected]>

Date: Jan 6, 2025 1:51:06 PM

Subject: Fwd: Pending appeals in JBM Group:

To: [email protected]

Cc: [email protected], [email protected]

Reminder:

Sir/Madam,

The appeals (as per cause list attached) were fixed for hearing on 20.12.2024 before Hon'ble C-Bench, ITAT, New Delhi.”

“7.

Per contra, the ld. DR vehemently argued that the role of Addl. CIT, Central Range is totally different from the role of an Addl. CIT in the normal range. She argued that in a Central Range, the ld. Addl. CIT is involved in the searchassessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and is involved with the ld. AO from time to time while issuing various questionnaires to the assessee. The ld. Addl. CIT in Central Range also examine the seized documents in detail immediately after receipt of the appraisal report and provides able assistance to the ld. AO about the interpretation of the said seized documents while issuing questionnaires to assessee, examining the replies filed by the assessee and drawing conclusions thereon. Hence, it is very easy for the ld. Addl. CIT to grant approval of the draft assessment order on the same day since he is involved with the assessment proceedings right from the inception. Accordingly, she argued that the objection raised by the ld. AR has no force.”

“We find, as per the scheme of the Act, for framing search assessments, the Id. AO can pass the search assessment order u/s 153A or u/s 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the ld. Addl. CIT in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the Id. Addl.CIT is a quasi judicial proceeding requiring application of mind by the Id. 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 Id. AO to seek to place the draft assessment order together with copies of the seized documents before the Id. AddI.CIT well in time much before the due date of completion of search assessment. The Id. Addl.CIT is supposed to examine the seized documents, questionnaires raised by the Id. 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 Id. AO and the conclusions drawn by the Id. 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 Id. Addl. CIT in a judicious way after due application of mind. Even though as vehemently argued by the Id. CIT-DR, the Addl. CIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the Id. Addl.CIT, while granting the approval u/s 153D has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Id. AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Id. AO and Id. Addl.CIT are merely guidance to the Id. AO and are purely internal correspondences on which the assessee does not have any access. The scheme of the Act mandates due application of mind by the Id. 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 Id. AO as well as the Id. Addl. CIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of Id. AddI. CIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the Id. DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the Investigation Wing, both the Id. AO and the Id. Addl.CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. The law provides only the Id. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the Id. Addi.CIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the ld. AO.”

“We have pointed out that in this case, the Tribunal acted on unworthy evidence and, therefore, such a finding has to be rejected as perverse. As a matter of fact, the law of evidence mandates that if the best evidence is not placed before the court, an adverse inference can be drawn as against the person who ought to have produced it. In this case, there were crossed cheques, but they were not produced. Then, the finding of the Tribunal resting solely on the interested statement of the assessee without available corroborating material, is hardly acceptable and the Revenue is, therefore, justified in contending that such a finding deserves to be set aside.”

“It is not the function of the Tribunal to enter into the arena and make suppositions that are tantamount to the evidence that a party before it has failed to lead. Other than supposition, there is no material on record that suggests that a small scale or medium scale manufacturer of brake linings and clutch facings "would be interested in buying" the said rings or that they are marketable at all. As to the brittleness of the said rings, it was for the Revenue to demonstrate that the appellants averment in this behalf was incorrect and not for the Tribunal to assess their brittleness for itself.

Articles in question in an appeal are shown to the Tribunal to enable the Tribunal to comprehend what it is that it is dealing with. It is not an invitation to the Tribunal to give its opinion thereon, brushing aside the evidence before it. The technical knowledge of members of the Tribunal makes for better appreciation of the record, but not its substitution.”

“2.

While admitting the present appeals on 4th August 2022, the following question was framed for consideration: "Whether on the facts and circumstances of the case, the ITAT was correct in holding that the Approving Authority has not applied his mind for giving approval under Section 153D?"

3.

The background facts are that a search and seizure operation under Section 132 of the Act was conducted in the case of the Assessee and various persons and concerns of the Assessee on 28th May, 2008. Notice dated 11th March 2010 under Section 153A of the Act was served on the Assessee. Notices under Section 142 (1) of the Act dated 19th May 2010 and reminders dated 1st July and 21st July 2010 were also issued. On 30th December 2010, the Assistant Commissioner of Income Tax (ACIT) Circle-1(2), Bhubaneswar (hereafter, the Assessing Officer-AO) passed assessment orders under Section 143(3)/144/153A of the Act making various additions/disallowances.

4.

The Assessee then filed appeals before the CIT (A). One of the grounds for challenge was the non-compliance with Section 153D of the Act which requires prior approval of the Additional Commissioner of Income Tax (Additional CIT). The stand of the Revenue was that such approval had been sought by the AO and granted by the Additional CIT prior to the passing of the assessment order.

5.

By an order dated 28th February 2013, the CIT (A) partly allowed the appeals. The CIT (A), however, held that it is not necessary that the fact of approval of the Additional CIT was required to be mentioned in the body of the assessment order. The CIT (A) observed that there was a consolidated approval order dated 30th December 2010 given by the Additional CIT for AYs 2003-04 and 2009-10 and therefore, this ground had no merit.

6.

The Assessee filed further appeals before the ITAT contending that the guidelines contained in Circular No.3 of 2008 dated 12th March 2008 issued by the Central Board of Direct Taxes (CBDT) had not been followed. It was further contended by the Assessee that the so-called approval of the Additional CIT under Section 153D of the Act had been granted in a mechanical manner without application of mind. Reference was made to the letter dated 29th December 2010 of the AO addressed to the Additional CIT Range-1 seeking approval under Section 153D of the Act and the letter dated 30th December 2010 of the Additional CIT addressed to the AO communicating the approval. Reference was also made to the decision dated 29th November 2019 of the ITAT in IT (SS) A Nos. 66 to 71/CTK/2018 (Dillip Construction Pvt. Ltd. v. ACIT) which held the guidelines contained in the aforementioned Circular to be mandatory and binding on the Department.

7.

The ITAT has, in the impugned order, referred to the decision of the Bombay High Court in Akil Gulamali Somji and other decisions of the ITAT to come to the conclusion that the approving authority did not apply his mind to the relevant assessment records or to the draft assessment orders prior to granting approval to the AO under Sections 143(3)/144/153A. The assessment orders were accordingly set aside. As a result, the cross appeals of the Revenue were held to be infructuous and disposed of as such.

8.

Mr. T.K. Satapathy, learned Senior Standing Counsel for the Revenue made the following submissions:

(i)

In the present case, prior approval had in fact been taken by the AO from the Additional CIT and there was no illegality in that regard.

(ii)

The approval of the superior officer was distinct from the assessment order. It was a mere administrative order and not open to challenge before a court of law. In other words, it was submitted that the approval granted by the Additional CIT was not justiciable and could not form the basis for challenging the assessment order.

(iii)

What could only be challenged is want of sanction. Reliance was placed on the decision of the ITAT, Mumbai in ITA No.3874/ Mumbai/2015(Pratibha Pipes & Structural Limited v. DCIT dated 10.04.2019)

(iv)

There was no requirement for any hearing to be given to the Assessee by the supervisory officer prior to giving approval although Clause-9 of the Manual of Office Procedure stipulates it. This, therefore, cannot be said to be mandatory. Reliance was placed on the decisions of the Karnataka High Court in Gopal S. Pandit v. CIT 96 taxmann.com 233 and Rishab Chand Bhansali v. DCIT 267 ITR 577 and of the Madras High Court in Sakthivel Bankers v. ACIT 255 ITR 144 which were all in the context of Section 158 BG of the Act.

(v)

The mere irregularity in granting approval in the context of Section 158BG of the Act was held not to be fatal to the assessment order. Reliance was placed on the orders of the Kolkata ITAT in Shaw Wallace & Co. Ltd. v. ACIT, 68 ITD 148 and of the Delhi ITAT in Kailash Moudgil v. DCIT, 72 ITD 97. Reliance was also placed on the decision of the Karnataka High Court in Gayathri Textiles v. CIT, 111 taxman 123 where it was held that for the purpose of Section 271 (1) (c) of the Act, the failure to obtain prior permission from the IAC for imposing penalty was only a procedural error and not fatal to the order of penalty.

(vi)

Since the entire documents were already available to the Additional CIT in the file sent for approval, there was no need for exchange of the said documents prior to the grant of formal approval under Section 153D of the Act.

(vii)

Lastly, it was submitted that even if there had been a violation of the principles of natural justice, unless prejudice were shown by the Assessee, no interference with the assessment orders was warranted. Reliance was placed on the decisions in Dharampal Satyapal Limited v. Deputy Commissioner of Central Excise Gauhati (2015) 8 SCC 519; Managing Director, ECIL v. B. Karunakar (1993) 4 SCC 727; Haryana Financial Corporation v. Kailash Chandra Ahuja (2008) 9 SCC 31; State Bank of Patiala v. S.K. Sharma (1996) 3 SCC 364; P.D. Agrawal v. State of Bank of India (2006) 8 SCC 776 and State of U.P. v. Sudhir Kumar Singh. It was then submitted that where initiation was valid but completion was not correct, the order may not be invalid but only irregular because the intervening irregularity is a curable one. Reliance was placed on the decision of the Kerala High Court in Panicker (CGG) v. CIT, (1999) 237 ITR 443 and CIT v. M. Krishnan (N) (1999) 235 ITR 386. It was submitted that mere technicality should not defeat justice.

9.

On behalf of the Assessee submissions were made by Mr. Ramesh Singh, Senior Advocate; Mr. Sidhartha Ray, Senior Advocate; Mr. Ashok Kumar Parija, Senior Advocate as well as Mr. S. Ganesh, Senior Advocate. They drew attention of the Court to the relevant clauses of the CBDT Circular dated 12th March 2008 and the decisions in Sahara India (Firm,) Lucknow v. Commissioner of Income Tax (2008) 14 SCC 151; Rajesh Kumar v. Deputy CIT, (2007) 2 SCC 181 and the decisions of the Delhi High Court in ESS Advertising (Mauritius) v. Assistant Commissioner of Income Tax, (2021) SCC OnLine Del 3613; Principal Commissioner of Income Tax-6 v. M/s. N.C. Cables Ltd., 2017 SCC OnLine Del 6533; Yum ! Restaurants Asia Pte. Ltd. v. Deputy Director of Income Tax, (2017) 397 ITR 665; SyfoniaTradelinks Private Limited v. Income Tax Officer; 2021 SCC OnLine Del 2692 and German Remedies Limited v. DCIT 2006 (1) Maharashtra Law Journal 517.

10.

At the outset, it requires to be noticed that many of the decisions referred to both on the side of the Revenue as well as the Assessee do not directly refer to Section 153D of the Act which was inserted with effect from 1st June, 2007. There is no doubt about the applicability of the said provision since the proceedings under Section 153A of the Act was initiated in the present case after that date.

11.

Among the changes brought about by the Finance Act 2007 was the insertion of Section 153D of the Act. The CBDT circular dated 12th March 2008 refers to the various changes and inter alia also to the change brought about by the insertion of a new Section 153D of the Act. Paragraph 50 of the said circular is relevant and reads as under:

“50. Assessment of search cases--Orders of assessment and reassessment to be approved by the Joint Commissioner.

50.1

The existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132A, does not provide for any approval for such assessment.

50.2

A new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by an Assessing 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 requisitioned is made under section 132A.

50.3

Applicability- These amendments will take effect from the 1st day of June, 2007.”

12.

It must be noted at this stage that even prior to the introduction of Section 153D in the Act, there was a requirement under Section 158BG of the Act, which was substituted by a Finance Act 14 of 1997 with retrospective effect from 1st January 1997, of the AO having to obtain a previous approval of the JCIT/Additional CIT by submitting a draft assessment order following a search and seizure operation.

13.

The CBDT issued the Manual of Office Procedure in February 2003 in exercise of the powers under Section 109 of the Act. Para 9 of Chapter 3 of Volume-II (Technical) of the Manual reads as under:

“9.

Approval for assessment: An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.). The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy 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.The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself.”

“58.

An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the assessing officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/ or the entries made therein. While exercising its power, the assessing officer has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given.”

“8.

There is no gainsaying that recourse to the said provision cannot be had by the Assessing Officer merely to shift his responsibility of scrutinizing the accounts of an assessee and pass on the buck to the special auditor. Similarly, 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. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the Assessing Officer. The approval must reflect the application of mind to the facts of the case.”

“29.

In Rajesh Kumar (2007) 2 SCC 181 it has been held that in view of Section 136 of the Act, proceedings before an Assessing Officer are deemed to be judicial proceedings. Section 136 of the Act, stipulates that any proceeding before an Income Tax Authority shall be deemed to be judicial proceedings within the meaning of Sections 193 and 228 of Indian Penal Code, 1860 and also for the purpose of Section 196 of I.P.C. and every Income Tax Authority is a court for the purpose of Section 195 of Code of Criminal Procedure, 1973. Though having regard to the language of the provision, we have some reservations on the said view expressed in Rajesh Kumar's case (supra), but having held that when civil consequences ensue, no distinction between quasi judicial and administrative order survives, we deem it unnecessary to dilate on the scope of Section 136 of the Act. It is the civil consequence which obliterates the distinction between quasi judicial and administrative function. Moreover, with the growth of the administrative law, the old distinction between a judicial act and an administrative act has withered away. Therefore, it hardly needs reiteration that even a purely administrative order which entails civil consequences, must be consistent with the rules of natural justice. (Also see: Maneka Gandhi v. Union of India (1978) 1 SCC 248 and S.L. Kapoor v. Jagmohan (1980) 4 SCC 379).

30.

As already noted above, the expression "civil consequences" encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. Anything which affects a citizen in his civil life comes under its wide umbrella. Accordingly, we reject the argument and hold that since an order under Section 142 (2A) does entail civil consequences, the rule audi alteram partem is required to be observed.”

“11.

The purpose of Section 151 of the Act is to introduce a supervisory check over the work of the AO, particularly, in the context of reopening of assessment. The law expects the AO to exercise the power under Section 147 of the Act to reopen an assessment only after due application of mind. If for some reason, there is an error that creeps into this exercise by the AO, then the law expects the superior officer to be able to correct that error. This explains why Section 151 (1) requires an officer of the rank of the Joint Commissioner to oversee the decision of the AO where the return originally filed was assessed under Section 143 (3) of the Act. Further, where the reopening of an assessment is sought to be made after the expiry of four years from the end of the relevant AY, a further check by the further superior officer is contemplated.”

GOVERNMENT OF INDIA OFFICE OF THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), BHUBANESWAR No. ACIT/C-1(2)//Approval/2010-11/5293 Dated, Bhubaneswar, the 27/29th December, 2010

To The Addl. Commissioner of Income-tax, Range-1, Bhubaneswar.

Sub: Approval of draft orders u/s 153D of the I.T. Act 1961 in the case of M/s. Serajuddin& Co. 19A, British India Street, Kolkata (in Serajuddin Group of Cases)- matter regarding.

Sir, >Enclosed herewith kindly find the draft orders u/s 153A of the I.T.Act, 1961 along with assessment records in the case of M/s Serajuddin& Co., 19A, British India Street, Kolkata for kind perusal and necessary approval u/s.153D.

No.	Name of the assessee	Section under which order passed Asst. Year
1.	M/s Serajuddin& Co. 19A, u/s 153A/143(3)/144/145(3) British India Street, Kolkata		2003-04
2.	-do-	-do-	2004-05
3.	-do-	-do-	2005-06
4.	-DO-	-DO-	2006-07
5.	-DO-	-DO-	2007-08
6.	-DO-	-DO-	2008-09
7.	-DO-	U/s. 143(3)/144/153B(B)/145(3)	2009-10

The above cases will be barred by limitation on 31.12.2010.

Encl: As above Yours faithfully, Sd/-Asst. Commissioner of Income-tax, Circle-1(2), Bhubaneswar of the Tribunal itself Government of India

OFFICE OF THE ADDL. COMMISSIONER OF INCOME TAX, 3 Floor, Range-1, Bhubaneswar No. Addl. CIT/R-1/BBSR/SD/2010-11/5350 Dated, Bhubaneswar, the 30th December, 2010 To The Assistant Commissioner of Income Tax, Circle-1(2), Bhubaneswar. Sub: Approval u/s 153D-in the case of M/s Serajuddin& Co., 19A, British India Street, Kolkata-Matter regarding. Ref: Draft Orders u/s 153A/143(3)/144 for the A.Y. 2003- 04 to 2008-09 u/s.143(3)/153B (b)/144 of the A.Y.2009-10 in the case of above mentioned assessee.

Please refer to the above The draft orders u/s 153A/143(3)/144 for the A.Y. 2003-04 to 2008-09 and u/s. 143(3)/153B(b)/144 for the A.Y. 2009-10 submitted by you in the above case for the following assessment years are hereby approved:

Assessment Year	Income Determined (Rs)
2003-04	11,66,22,771
2004-05	36,46,80,016
2005-06	65,70,12,805
2006-07	60,02,65,791
2007-08	130,03,13,307
2008-09	274,68,87,069
2009-10	301,17,05,952

You are requested to serve these orders expeditiously on the assessee, submit a copy of final order to this office for record. Sd/-Addl. Commissioner of Income Tax, Range-1, Bhubaneswar

“Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Central Board of Central Excise, Vadodara v. Dhiren Chemicals Industries: 2002 (143) ELT 19 where the view of the Constitution Bench regarding the binding nature of circulars issued under Section 37B of the Central Excise Act, 1944 was reiterated after it was drawn to the attention of the Court by the Revenue that there were in fact circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam 2003 (5) SCC 528. The principles laid down by all these decisions are: (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute.”

(2)

Despite 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."

“6.

The appellant/revenue via this appeal seeks to assail the order dated 29.04.2022 passed by the Income Tax Appellate Tribunal [in short, "Tribunal']

7.

The Tribunal has via the impugned order set aside the additions made qua the income of the respondent assessee inter alia, on the ground that there was no application of mind by the Additional Commissioner of Income Tax (In short, "ACIT"] in granting approval under Section 153D of Income Tax Act 1961 [in short, the Act'].

8.

To be noted, an assessment order was framed qua the respondent/assessee under Section 153A, read with Section 143(3) of the Act.

8.1.

This order was carried in appeal by the respondent/assessee, right up till the Tribunal.

9.

Insofar as the Assessing Officer (AO) was concerned, he made certain additions against the returned income.

9.1

The respondent had declared an income amounting to Rs 87,20,500/- However, while making the additions, strangely, the AO noted that the returned income was Rs. 11,00,460/-.

10.

There were two additions made by the AO. The first addition was made qua cash deposited in the bank amounting to Rs. 15,04,35,000/-. The second addition was made with regard to cash introduced via an entry operator i.e. one, Mr. Vipin Garg The amount added qua this aspect was pegged at Rs.1,54,07,100/-.

11.

Despite these additions, which would have taken the assessed income well beyond what was crystallised by the AO i.e. 1.65,07,560, the ACIT failed to notice the error.

12.

This aspect was brought to the fore by the Tribunal in the impugned order. The Tribunal thus concluded there was a complete lack of application of mind, inasmuch as the ACIT who granted approval, failed to notice the said error.

12.1

More particularly, the Tribunal notes that all that was looked at by the ACIT, was the draft assessment order.

13.

In another words, it was emphasised that the approval was granted without examining the assessment record or the search material. The relevant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter:

“17.1

However, in the present case, we have no hesitation in stating that there is complete non application of mind by the Learned AddI. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs.87,20,580/-. Similarly, when the total assessed income as per the AO comes to Rs.16,69,42,560/-, the Addl. CIT could not have approved the assessed income at Rs. 1.65,07,560 had he applied his mind The addition of Rs.15,04,35,000/- made by the AO in the instant case is completely 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 Duggal (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 income 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 AddI. CIT, in our opinion, is not valid in the eyes of low. 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 low 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. 43(3) has to be quashed, thus ordered accordingly. The ground raised by the Assessee is accordingly allowed” [Emphasis is ours]

14.

In this appeal, we are required to examine whether any substantial question of law arises for our consideration.

15.

Having regard to the findings returned by the Tribunal, which are findings of fact, in our view, no substantial question of law arises for our consideration. 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.

16.

We are not inclined to interdict the order of the Tribunal.”

“9.

Coupled with this, we are of the considered view that the assessee’s latter legal plea challenging validity o f the impugned assessment once again for want o f Section 153D valid approval(s) also deserves to be accepted. This is for the precise reason that Mr. Agarwal has taken us to the assessee’s paper book-III pages 1 to 4 wherein the learned Additional Commissioner , Central Range-7 , New Delhi had not only granted his assessee wise common approval but also he had not examined the earlier case records, which had never been sent to him. Learned counsel invited our attention to various judicial precedent i.e. PCIT Vs . Shiv Kumar Nayyar (163 taxmann.com 9), PCIT Vs. Anuj Bansal (165 taxmann.com 2), PCIT Vs. Sapna Gupta (147 taxmann.com 288) and ACIT Vs. Serajuddin& Co (454 ITR 312) to buttress the point that such Section 153D approval is no t a mere mechanical exercise.

10.

Learned CIT-DR, on the other hand, submits that there is no provision in the Act which prescribing any approval to be granted in a particular manner. And that even if a combined approval is granted assessee wise qua all the relevant corresponding assessment year, it could not be held as bad in law.

11.

We find no merit in the Revenue’s foregoing objections once it has come on record that the learned Additional CIT’s corresponding four approvals had no t been granted after examining the entire assessment records and that too , separately for each and every assessment year , as per the foregoing case laws. We thus, accept the assessees instant Section 153D approval ground as well in very terms. This lead appeal ITA No. 1373/Del/2020 as well as all other assessee’s identical appeals succeed on the instant twin legal issue s and there fore, the corresponding assessments herein forming subject matter thereof are hereby quashed.

11.1

All other pleading on merits in the instant thirty one appeals stand rendered academic. 12. To sum up, these four assessee’s nineteen appeals i.e. Sh. Arvind Kumar Jain’s cases ITA Nos. 1373 to 1377, 1701/Del/2020 , second assessee Ms. Jaya Jain’s appeal ITA Nos. 1378 to 1383 & 1702/Del/2020, third assessee M/s Star Educational Books Distributor Pvt. Ltd.’s four case s i.e . ITA Nos. 1384 to 1387/Del/2020 and last assessee M/s STM Trader Pvt. Ltd.’s twin appeals ITA No. 1388 & 1389/Del/2020; respectively are allowed and Revenue’s corresponding 12 appeals hereinabove and dismissed in above terms. A copy o f this common order be placed in the respective case files.

“11.

Upon considering the entire aspect of the matter, we find that the approval has been granted not separately for each assessment year for the assessee whereas the provision of Section 153D of the Act stipulates conditions that no order of assessment or reassessment shall be made by an Assessment 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 of the Act or the assessment year referred to in Clause (b) of Sub Section 153B of the Act except the prior approval of the Joint Commissioner. It further appears from the approval dated 08.06.2018 that the same was a common and composite order whereas the Addl. Commissioner is required to verify and approve that each of assessment year is complied with as well as procedural laid down under the Act. Such fact clearly reveals non-application of mind on the part of the Learned Addl. Commissioner of Income Tax, Central Range-7, New Delhi. Thus granting approval for all the common years instead of approval under Section 153B for each assessment year separately de horse the rules. The said approval is found to have been given in a mechanical and routine manner. We find that the order issuing authority has not discharged its statutory duties cast upon him even by assigning cogent reasons in respect of the issues involved in the matter. Thus granting approval in the absence of due application of independent mind to the material on record for each assessment year in respect of the assessee's case separately vitiates the entire proceedings; the same is found to be arbitrary and erroneous and therefore, liable to be quashed. We are also inspired by the ratio laid down in the Judgment narrated hereinabove passed by the Hon'ble Jurisdictional High Court and respectfully relying upon the same with the above observation, we quash the entire proceeding initiated under Section 153C r.w.s 153A of the Act in the absence of a valid approval granted by the Learned Additional Commissioner of Income Tax, Central Range-7, New Delhi.”

12.

We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. On the plain reading of the said approval it appears that;

i.

it is a common and consolidated approval and it does not bear year wise reasoning.

ii.

it only made a reference to letter being F. No. ACIT/CC-25/2019/20/1122 dated 29.12.2019 neither reference in regard to the draft assessment order being sent for approval of the ACIT, Central Range-7, New Delhi appears.

iii.

the approval has been granted on 29.12.2019; the letter seeking approval was on the same day.

iv.

the impugned approval passed under Section 153D of the Act is apparently issued in a mechanical and in hot haste without assigning any reason and thus the same has been found to have been passed without due application of mind. Reference to any issue in respect of any of the 11 assessment years is also absent.

1.

On the one hand, he has to apply his mind to ensure the interest of the Revenue against any omission of negligence by the AO in taxing right income in the hands of the right person and in right assessment year.

2.

On the other hand, superior authority is also responsible and duty bound to do justice with the tax payer by granting protection against arbitrary or creating baseless tax liability on the assessee.

19.

The approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment 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 reassessment. 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 sub-section (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 years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years).

20.

The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A.

21.

In the instant case, the draft assessment order in 85 cases, i.e. for 85 assessment years placed before the Approving Authority on 30.12.2017 was approved on same day i.e. 30.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. 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 record.”

"7.

Per contra, the ld. DR vehemently argued that the role of Addl. CIT, Central Range is totally different from the role of an Addl. CIT in the normal range. She argued that in a Central Range, the Addl. CIT is involved in the searchassessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and is involved with the AO from time to time while issuing various questionnaires to the assessee. The Addl. CIT in Central Range also examine the seized documents in detail immediately after receipt of the appraisal report and provides able assistance to the AO about the interpretation of the said seized documents while issuing questionnaires toassessee, examining the replies filed by the assessee and drawing conclusions thereon. Hence, it is very easy for the ld. Addl. CIT to grant approval of the draft assessment order on the same day since he is involved with the assessment proceedings right from the inception. Accordingly, she argued that the objection raised by the AR has no force."

We find, as per the scheme of the Act, for framing search assessments, the ld.AO can pass the search assessment order u/s 153A or u/s 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the Addl. CIT in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the Addl.CIT is a quasi judicial proceeding requiring application of mind by the 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 AO to seek to place the draft assessment order together with copies of the seized documents before the Addi.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 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 AO and the conclusions drawn by the AO vis-a-vis the said seized documents after considering the reply of the assessee.All these functions, as stated earlier, are to be performed by the Addl. CIT injudicious way after due application of mind. Even though as vehemently argued by the CIT-DR, the Addl. CIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the Addl.CIT, while granting the approval us 153D has to independently apply his mind de hors the conclusions drawn either by the Investigation Wing in the appraisal report or by the AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the AOand Addl.CIT are merely guidance to the ld.AO and are purely internal correspondences on which the assessee does not have any access. The scheme of the Act mandates due application of mind by the AO to examine the seized documents independently de hors 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 AO as well as the Addl. CIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of Addl.CIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the Investigation Wing, both the AO and the Addl. CIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. The law provides only the 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 us 153D of the Act to the draft assessment orders placed by the AO." (emphasis supplied by me)

“9.

Approval for assessment: An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.). The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy 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. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself.”

“9.

The above order is passed with the prior approval of the Addl. Commissioner of Income Tax, Central Range-7, New Delhi as accorded vide letter No.1369 dated 29.12.2019.”

"58.

An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the assessing officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/ or the entries made therein. While exercising its power, the assessing officer has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given."

“3.

On the basis of the findings of search and seizure action a detailed questionnaire forA.Y. 2008-09 to A.Y. 2017-18 was issued in the name of assessee company on 07.10.2019fixing the case for hearing on 18.10.2019.The assessee continued taking repeatedadjournments and did not furnish the details and explanation required within time. Even before the investigation wing the assessee did not make compliance of the summons issued u/s 131 of the I.T. Act and did not participate in post search investigation. Similar delaying tactics have been adopted in assessment proceedings and after taking many adjournments the reply to detailed questionnaire issued well in time by the undersigned has been finally filed on 20.12.2019 in order to escape detailed scrutiny and examination of the relevant facts. Since beginning the assessee has made all out efforts to corner the Assessing officer to the fag end of limitation period so that the assessment may be finalized without application of mind”

“Compliance in post search investigation before the Investigation Wing

It has been intimated by the JDIT(OSD) (Inv.), Unit 1(1), New Delhi that during the course of post search investigation, summons u/s 131(1 A) of the Income Tax Act, 1961 were issued to Shri Surendra Kumar Arya, Chairman of the Group, Shri Nishant Arya, Shri Prasahesh Arya, Shri Anand Swaroop Khandelwal, Group CFO and to Shri Suresh Kumar Mishra, Finance Manager so as to verify and cross-examine the findings noticed and material seized during search operation at their residence and business premises of JBM Group of companies, as per the details given below:

s.No	Name	Date of summon issue Dispatch		Remarks
.1	Sh. Surendra Kumar Arya	24.10.2017 18.01.2018 29.03.2019	No. 259 536 3177	Not complied
2.	Shri Nishant Arya	06.04.2018	35	Not complied
3.	Sh. Anand Swaroop Khandelwal	24.10.2017 06.04.2018 01.03.2019 12.03.2019 29.03.2019	258 34 2858 2948 3176	Not complied Not complied Not complied Not complied Not complied
4.	Sh. Suresh Kumar Mishra	24.10.2017 26.12.2018 01.03.2019 12.03.2019 09.04.2019	259 1983 2815 2945 12	Not complied Not complied Not complied Not complied Not complied
5.	Sh. Prasahesh Arya	10.12.2018 01.03.2019 12.03.2019 29.03.2019 09.04.2019	1788 2862 2974 3175 11	Not complied Not complied Not complied Not complied Not complied

However, neither any request for adjournment was received nor anybody attended the proceedings in response to above summons. Thus, you have failed to avail the opportunity provided to explain the nature and nomenclature of the documents and the unaccounted income generated from under invoicing of scrap sales as well as unrecorded sale of scrap.

“13. Calculation of unaccounted income from sale of scrap

13.1

Keeping in view the facts discussed from para 1 to para 12, it is clear that M/s Neel Auto Pvt. Ltd. has earned unaccounted income by resorting to under-invoicing and unaccounted sale of quantity of scrap. The details of income evaded by your company for the period from F.Y. 2007-08 to F.Y. 2017-18, in tabulated form, is given below:

“1.

As to whether under the present facts and circumstances of the matters whether the assessment orders based on the erroneous, non-speaking orders of approval under section 153D of the Income Tax Act, dated 29.12.2019 issued by the Ld. Addl. CIT are sustainable in the eyes of law or not.

2.

Whether in the facts and circumstances of the case, the respective approvals under section 153D of the Income Tax Act, 1961 dated 29.12.2019 granted by the Addl. CIT for the assessment orders subject matter of the appeals are as per law or not?”

“Applicability of FinDocFinvest (P) Ltd. v. Deputy Commissioner of Income Tax, Central to the facts of JBM Auto Ltd.

1.

It is respectfully submitted that FinDocFinvest (P) Ltd. v. Deputy Commissioner of Income Tax, Central ("FinDocFinvest") was passed by the Punjab & Haryana High Court in the context of passing of assessment order u/s 143(3) by the assessing officer.

2.

In the present case, there was administrative oversight by the Addl CIT never any interference over the manner in which the assessment order was to be passed. Therefore, the case FinDoCFinvest has no applicability or relevant to the facts of the present case. The administrative supervision exercised by the Addl CIT cannot be said to exercising or wielding any influence over the manner in which the draft assessment order is passed. In fact, if there is any glaring error in the draft assessment order it would be very much within the domain of the Addl. CIT to point out such error to the assessing officer.

3.

Further, the issue whether the assessing officer was in any manner influenced by the Addl CIT is not only incorrect, there is no factual basis to make that assumption and lastly, such issue is beyond the scope of reference in the present case.”

“8.

Mr. T.K. Satapathy, learned Senior Standing Counsel for the Revenue made the following submissions:

(i)

In the present case, prior approval had in fact been taken by the AO from the Additional CIT and there was no illegality in that regard.

(ii)

The approval of the superior officer was distinct from the assessment order. It was a mere administrative order and not open to challenge before a court of law. In other words, it was submitted that the approval granted by the Additional CIT was not justiciable and could not form the basis for challenging the assessment order.

(iii)

What could only be challenged is want of sanction. Reliance was placed on the decision of the ITAT, Mumbai in Pratibha Pipes &Structurals Ltd. v. Dy. CIT [IT Appeal No. 3874 (Mum.) of 2015, dated 10-4-2019].

(iv)

There was no requirement for any hearing to be given to the Assessee by the supervisory officer prior to giving approval although Clause-9 of the Manual of Office Procedure stipulates it. This, therefore, cannot be said to be mandatory. Reliance was placed on the decisions of the Karnataka High Court in Gopal S. Pandit v. CIT [2018] 96 taxmann.com 233/257 Taxman 300 and Rishabchand Bhansali v. Dy. CIT [2004] 136 Taxman 579/267 ITR 577 and of the Madras High Court in Sakthivel Bankers v. Asstt. CIT [2002] 124 Taxman 227/255 ITR 144 which were all in the context of Section 158 BG of the Act.

(v)

The mere irregularity in granting approval in the context of Section 158BG of the Act was held not to be fatal to the assessment order. Reliance was placed on the orders of the Kolkata ITAT in Shaw Wallace & Co. Ltd. v. Asstt. CIT [1999] 68 ITD 148 and of the Delhi ITAT in Kailash Moudgil v. Dy. CIT [2000] 72 ITD 97 (SB). Reliance was also placed on the decision of the Karnataka High Court in Gayathri Textiles v. CIT [2000] 111 Taxman 123 where it was held that for the purpose of section 271(1)(c) of the Act, the failure to obtain prior permission from the IAC for imposing penalty was only a procedural error and not fatal to the order of penalty.

(vi)

Since the entire documents were already available to the Additional CIT in the file sent for approval, there was no need for exchange of the said documents prior to the grant of formal approval under section 153D of the Act.

(vii)

Lastly, it was submitted that even if there had been a violation of the principles of natural justice, unless prejudice were shown by the Assessee, no interference with the assessment orders was warranted. Reliance was placed on the decisions in Dharampal Satyapal Ltd. v. Dy. CCE [2015] 58 taxmann.com 90/51 GST 197 (SC)/8 SCC 519; Managing Director, ECIL v. B. Karunakar [1993] 4 SCC 727; Haryana Financial Corporation v. Kailash Chandra Ahuja [2008] 9 SCC 31; State Bank of Patiala v. S.K. Sharma [1996] 3 SCC 364; P.D. Agrawal v. State Bank of India [2006] 8 SCC 776 and State of U.P. v. Sudhir Kumar Singh [Civil Appeal No. 3498 of 2020, dated 16-10-2020] It was then submitted that where initiation was valid but completion was not correct, the order may not be invalid but only irregular because the intervening irregularity is a curable one. Reliance was placed on the decision of the Kerala High Court in (CGG) Panicker v. CIT [1999] 237 ITR 443 and CIT v. N. Krishnan [1999] 235 ITR 386. It was submitted that mere technicality should not defeat justice.”

“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 "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order.” [Emphasis supplied]

"Whether the ITAT has erred in law, in considering the Assessment Order under Section 153A of the Act, as invalid and bad in law by stating that the approval granted by the Range head under section 153D of the Act is void as the same was granted in a mechanical manner without application of mind?"

“11.

A plain reading of the aforesaid provision evinces an uncontrived position of law that the approval under Section 153D of the Act has to be granted for "each assessment year" referred to in clause (b) of sub-section (1) of Section 153A of the Act. It is beneficial to refer to the decision of the High Court of Judicature at Allahabad in the case of Pr. CIT v. Sapna Gupta [2023] 147 taxmann.com 288/[2022 SCC OnLine All 1294] which captures with precision the scope of the concerned provision and more significantly, the import of the phrase- "each assessment year" used in the language of Section 153D of the Act. The relevant paragraphs of the said decision are reproduced as under:-

"13.

It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of

"each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of the Act, requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise of power. ***

19.

The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A."

12.

It is observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that the authority granting approval has to apply its mind for "each assessment year" for "each assessee" separately. [Emphasis supplied]

“17.

Notably, the order of approval dated 30.12.2020 which was produced before us by the learned counsel for the assessee clearly signifies that a single approval has been granted for AYs 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above. 18. Therefore, under the facts of the present case, considering the foregoing discussion and the enunciation of law settled through judicial pronouncements discussed hereinabove, we are unable to find any substantial question of law which would merit our consideration.”

“21.

I note the above observations of learned Accountant Member and is of the view that assessment proceedings or any proceedings under the Act before the Assessing Officer which affect the levy of tax on the subject are judicial in nature. It is well-settled that the Assessing Officer upon whom jurisdiction has been conferred to make all orders judicially, has to act independently. The Assessing Officer, while framing assessment, cannot act on the advice given by an outsider even though he may be an authority higher in rank to him in official hierarchy. Higher authorities that include Additional CIT/JCIT under whom the Assessing Officer is administratively under control, are not entitled to give opinion or advice in regard to assessment proceedings being quasi-judicial in nature. This is, however, subject to the provisions of Section 144A of the Act, where the assessee or the Assessing Officer suo-moto can refer the matter but, for that, he has to invoke this provision. This view is supported by Hon'ble Bombay High Court in the case of Dinshaw Darabshaw Shroff Vs. CIT – [1943] 11 ITR 172 (Bom), wherein it is held that although the Assessing Officer making an assessment is not acting as a court of law, it is clear that while framing assessment is acting in quasi-judicial capacity, and he ought to conform to the more elementary rules of judicial procedure, and in particular to conduct the case himself, and not allow somebody else, even his superior officer, to interfere in the conduct of the case. What to talk of superior authority, Hon'ble Supreme Court in the case of Union of India Vs. Tata Engineering & Locomotive Co.Ltd. – AIR 1998 SC 287, 288, held that the Assessing Officer is entitled to complete the assessment as per the provisions of Section 143(3) of the Act and, for this purpose, he can call for and examine whatever document he considers relevant. Hon'ble Supreme Court held that, if the Assessing Officer fails to follow any judgment of the High Court or of the Supreme Court, the assessee has adequate statutory remedies by way of an appeal and revision against the assessment order but, the Court should not try to control the mode and manner in which an assessment should be made. Hence, the higher authority including the Additional CIT/JCIT or CIT or CCIT, being administrative controlling authorities of the Assessing Officer, are not entitled to interfere in the judicial process of the Assessing Officer while framing assessment. In view of the above, I am of the view that, while making an assessment, the Assessing Officer is solely to be guided by the provisions of law and he cannot avail of any instructions or directions given by his higher authority including CBDT in making a particular assessment in a particular way. While passing assessment orders, he is only bound by what, if any, has been directed under Section 144A of the Act by his Additional CIT/JCIT or the instructions issued by the CBDT under Section 119 of the Act or what has been decided by the appellate authorities as mentioned in the Act. He has also to follow the precedence established by Hon’ble High Courts or the Supreme Court. The proceeding under Section 153D for granting approval is entirely different from the process of making assessment. Once draft assessment is prepared, the process of approval starts under Section 153D of the Act. Then the authority prescribed under Section 153D i.e., the Additional CIT/JCIT has to apply his mind for grant of approval after verifying the assessment records, seized records, etc.

22.

I noted that the common thread discussed by Hon’ble Orissa High Court in the case of Serajuddin& Co. (supra), by Hon'ble Delhi High Court in the case of Anuj Bansal (supra) and by Hon’ble Allahabad High Court in the case of Sapna Gupta (supra) is that the requirement of previous approval of assessment by the Additional CIT/Joint CIT in terms of provisions of Section 153D of the Act 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 formality. Needless to say that before granting approval, the Additional CIT/Joint CIT, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the Assessing Officer and the approval must reflect the application of mind to the facts of the case. The CBDT itself recognized the importance of this provision and the above laid down principle and hence issued Manual of Office Procedure in February, 2023 in exercise of powers under Section 119 of the Act. Vide Para 9 of Chapter 3 of Volume-II (Technical), a clear procedure is devised i.e., how an approval is to be granted for draft assessment for passing of assessment order in search cases. According to the Manual, the Assessing Officer should submit the draft assessment order for such approval well in time along with docketed in the order sheet, a copy of the draft assessment order, covering letter filed in the relevant miscellaneous records folder. Even, it is noted that 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. It is further noted that once such approval is granted, it must be in writing and filed in the relevant folder indicating above after making due entry in the order sheet. This is the mandate provided in the office manual of the Department. In view of above, I am of the view that the ‘approval’, as mandated u/s 153D of the Act, signifies a product of human thoughts based on the given set of facts and interpretation of the applicable law. It provides equality in treatment and thus prevents bias, prejudice and arbitrariness. It also prevents and avoids inconsistent and divergent views. The power of approval to the specified authority i.e., Superior authority has been envisaged with the objectives that no illegality or biasness, to either of the sides i.e., the assessee or the Revenue, remains.”

“23.

Section 116 of the Act, defines the Income Tax Authorities as different and distinct authorities. Such different and distinct authorities have to exercise its powers in accordance with law in specified circumstances. Thus, the Assessing Officer would have to exercise its own discretion to reach a conclusion and would not be influenced by any other officer. In view thereto, we find force in the contention raised by the learned senior counsel for the petitioner that the concerned Assessing Officer was influenced by the consultation and discussion with his superior officers. In fact the order passed by the Assessing Officer appears to have been already prepared even before the reply was received as the consultations have been conducted on 26.10.2023, 11.01.2024 and 14.03.2024 by the Assessing Officer as mentioned by him in the order itself. Again after the reply was received and the order was passed by the Assessing Officer, the same has been approved by the Joint Commissioner. As such, we find that the Joint Commissioner has in fact comprehensively and actively participated in the making of the assessment order while his role was only limited to the approval of the assessment order in terms of the CBDT Circular. Thus, we find the order to be vitiated in law.

24.

In view of the above, the assessment order cannot be result of an independent application of mind and exercise of discretionary power by the Assessing Officer in terms of Section 143(3) of the Act and but is an order passed under the influence and directions of the superior officers. It is to be noticed that the consultation with a superior officer would be akin to directions of the superior. There is no room available for discretion where consultation is sought from a superior officer while if a superior officer consults his subordinates, the discretion continues to stay with him. He may choose not to follow the advice of his subordinate but the opposite would be untrue. We are, thus, of firm view that the order has been passed whereby the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law.”