Income Tax Appellate Tribunal - Delhi
Jbm Auto Ltd,New Delhi vs Acit Central Circle-25, New Delhi on 20 April, 2026
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, DELHI
SHRI VIKAS AWASTHY, JUDICIAL MEMBER (THIRD MEMBER),
MS. MADHUMITA ROY, JUDICIAL MEMBER
& SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER
ITA Nos.252 to 261 & 294/Del/2021
(Assessment Year: 2008-09 to 2018-19)
Deputy Commissioner of Vs. M/s JBM Auto System
Income Tax, Central No.1, Ford Supplier's
Circle-25, Room No. 322, Park, S.P. Koil Street,
3 r d Floor, E-2, ARA Chengalpet Taluk
Centre, Jhandewalan Kanchipuram District
Extension, Tamil Nadu - 603204
New De lhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ9630N
Appellant .. Respondent
ITA Nos. 233 to 236/Del/2021
(Assessment Year: 2015-16 to 2018-19)
JBM Auto Ltd. Vs. Assistant Commissioner
601, Hemkunt of Income Tax, Central
Chambers, 89, Nehru Circle - 25, Jhandewal
Place, New Delhi Extension, New Delhi
Delhi - 110019 Delhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ9630N
Appellant .. Respondent
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
ITA No.237/Del/2021
(Assessment Year: 2018-19)
Jay Bharat Maruti Ltd. Vs. Assistant Commissioner
601, Hemkunt of Income Tax, Central
Chambers, 89, Nehru Circle - 25, Jhandewal
Place, New Delhi Extension, New Delhi
Delhi - 110019 Delhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ2021K
Appellant .. Respondent
ITA Nos.262 to 271/Del/2021
(Assessment Year: 2008--09 to 2018-19)
Deputy Commissioner of Vs. Jay Bharat Maruti Ltd.
Income Tax, Central 601, Hemkunt Chambe rs,
Circle-25, Room No. 322, 89, Nehru Place,
3 r d Floor, E-2, ARA New Delhi
Centre, Jhandewalan Delhi - 110019
Extension,
New De lhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ2021K
Appellant .. Respondent
ITA Nos.862 to 272/Del/2022
(Assessment Year: 2008-09 to 2018-19)
Deputy Commissioner of Vs. Sunil Kumar Aggarwal
Income Tax, Central C/o RC Rai and
Circle-25, Room No. 317, Associates, 203,
3 r d Floor, E-2, ARA Akashdeep Building, 26A
Centre, Jhandewalan Barakhamba Road,
Extension, Delhi - 110001
New De lhi - 110055
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
ायीले खासं ./जीआइआरसं ./PAN/GIR No:ACEPA8974F
Appellant .. Respondent
ITA Nos.1313 to 1322/Del/2022
(Assessment Year: 2008-09 to 2018-19)
Deputy Commissioner of Vs. M/s Neel Industries Pvt.
Income Tax, Central Ltd, 11, Kuthambakkam
Circle-25, Room No. 317, Village Padur Road,
3 r d Floor, E-2, ARA Thirumazhisai,
Centre, Jhandewalan Tamil Nadu - 602107
Extension,
New De lhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AABCN1516C
Appellant .. Respondent
ITA No.486/Del/2024
(Assessment Year: 2018-19)
JBM Industries Ltd. Vs. Deputy Commissione r of
601, Hemkunt Income Tax, Ce ntral
Chambers, 89, Circle-25, Room No. 317,
Nehru Place 3 r d Floor, E-2, ARA
New De lhi - 110019 Centre, Jhandewalan
Extension,
New Delhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ8038J
Appellant .. Respondent
ITA Nos.1323 to 1328, 2645 & 2646/Del/2022
(Assessment Year: 2010-11 to 2015-16, 2017-18 & 2018-19)
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
Deputy Commissioner of Vs. M/s JBM Industries Ltd.
Income Tax, Central 601, Hemkunt Chambe rs,
Circle-25, Room No. 317, 89, Nehru Place,
3 r d Floor, E-2, ARA New Delhi - 110019
Centre, Jhandewalan
Extension,
New De lhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ8038J
Appellant .. Respondent
ITA Nos.2649 to 2659/Del/2022
(Assessment Year: 2008-09 to 2018-19)
Deputy Commissioner of Vs. M/s JBM Auto Ltd.
Income Tax, Central (Amalgamated Company M/s JBM
Auto Systems Pvt. Ltd. and JBM
Circle-25, Room No. 317, MA Auto Motive Pvt. Ltd.)
3 r d Floor, E-2, ARA 601, Hemkunt Chambe rs,
Centre, Jhandewalan 89, Nehru Place,
Extension, Delhi - 110019
New De lhi - 110055
ायीले खासं ./जीआइआरसं ./PAN/GIR No:AAACJ9630N
Appellant .. Respondent
Appellant by : Sh. Salil Aggarwal, Sr. Adv, &
Sh. Shailesh Gupta, CA &
Sh. Pradeep Jha, CA
Sh. Madhur Aggarwal, Adv.
Respondent by : Sh. Dayainder Singh Sidhu,
CIT, DR
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
Date of Hearing 20.04.2026
Date of Pronouncement 20.04.2026
ORDER
PER BENCH:
This bunch of cross appeals preferred by the respective parties
are against the orders passed by the Ld. Commissioner of Income
(A) of the respective zones, arising out of the orders passed by the
Assessing Officer under Sections 153A/143(3) of the Income Tax
Act, 1961, (hereinafter referred to as 'the Act') for Assessment Years
2008-09 to 2018-19 respectively in respect of different assessees.
Since, common question of law and common grounds of appeals are
raised in all the matters, these are heard analogously and are being
disposed of by a common order for the sake of convenience.
2. The respondents/assessees herein in the appeals preferred by
the revenue, made applications under Rule 27 of the Income Tax
Appellate Tribunal Rules, 1962 to this effect that the orders passed
by the Ld. CIT(A) are to be upheld on the ground that the
assessment so framed is without jurisdiction since approval
accorded under Section 153D of the Act is a mechanical and
arbitrary one without there being any application of mind and also
without satisfying the statutory preconditions of the Act and as
such the assessment so framed are null and void and deserves to be
quashed. Relevant to mention, that this particular ground of
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
appeal/Rule 27 application covers the entire bunch of appeals
before us on the point of maintainability and since, it goes to the
root of the matters, this is required to be addressed at the very
threshold.
ITA No.252/Del/2021 for AY: 2008-09
[DCIT, CC-25 Vs. JBM Auto Systems]
3. The brief facts leading to the case are that the assessee
company has filed its return of income under Section 139 of the Act
on 30.09.2008 declaring income at Rs. 80,49,714/- as per normal
provisions and book profit of Rs.8,96,55,513/- under Section
115JB of the Act. Subsequently, a search and seizure operation was
conducted under Section 132 of the Act in JBM Group of cases on
05.10.2017 and the case of the assessee namely M/s JBM Auto Ltd.
was also covered under Section 132 of the Act.
4. A notice under Section 153A of the Act was issued on
25.07.2019 directing the assessee to furnish its return of income
within 15 days from the date of the receipt of the same return
whereof was filed on 26.11.2019 as per the old return filed by the
assessee declaring income at Rs.80,49,714/- as per normal
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67 Appeals,
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provisions and book profit of Rs.8,96,55,513/- under Section
115JB of the Act. Such assessment was ultimately finalized upon
making addition by the Ld. AO on various counts which was further
partly confirmed by the First Appellate Authority. Hence, the
instant appeal preferred by the revenue is before us. The assessee
has also since, being aggrieved by some of the additions made by
the Ld. AO in turn confirmed by the First Appellate Authority, filed
appeals before us.
5. In the instant case, the ACIT, Central Circle-25, New Delhi
sought for approval under Section 153D of the Act from the
Additional Commissioner of Income Tax, Central Range-7, New
Delhi, on 29.12.2019. The said approval was sought for in respect
of 11 assessment years, details whereof is mentioned in the
approval so accorded by the Additional CIT on the same date i.e.
29.12.2019 a copy whereof has duly been submitted before us. The
same is reproduced hereinbelow for the sake of convenience:
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67 Appeals,
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6. Likewise in the case of other assessees similar type of approval
were granted by the ACIT, Central Range-7 New Delhi, one of which
is reproduced as follows:
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
7. The Ld.AR also filed all the copies of approvals of each of the
matters contents whereof has not been able to be controverted by
the Ld. DR.
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67 Appeals,
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8. The assessee joins issue here to this effect that the approval so
granted by the Additional Commissioner of Income Tax is totally
silent about the merit of the case; the said approval has been given
on a single letter dated 29.12.2019 on the same day when the
approval was sought for. Moreso, the approval is a consolidated one
in respect of all the assessment years 2008-09 to 2018-19. Neither
there is any indication that the order approving authority has
examined the draft orders and finds that it meets requirement of
law without which the approval cannot be said to be a valid one.
Such approval was, thus, granted mechanically, without application
of mind and, therefore, vitiates the entire proceeding and the same
deserves to be quashed as was the ultimate submissions made by
the Ld. Senior counsel Mr. Salil Agarwal appearing for the assessee.
9. The Ld. Sr. Counsel appearing for the assessee relied upon the
following judgments in support of the case made out:-
1. Principal Commissioner of Income-tax Vs. Anuj Bansal, reported
in 165 taxmann.com 3
2. Principal Commissioner of Income-tax (Central)-2 Vs. Anuj
Bansal, reported in ITA 368/2023 (Hon'ble High Court of Delhi)
[13.07.2023)
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3. (i) Principal Commissioner of Income-tax Vs. Shiv Kumar
Nayyar, reported in 163 taxmnan.com 9 (Hon'ble High Court of
Delhi) [15.05.2024]
(ii) Shiv Kumar Nayyar Vs. ACIT, reported at 1282 to
1285/Del/2020; 1078/Del/2021 and ACIT Vs. Shiv Kumar
Nayyar reported in 1867/Del/2021 (Hon'ble ITAT, Delhi 'H'
Bench) [26.07.2023]
4. ACIT Vs. M/s. Serajuddin& Co., reported in ITA Nos. 39 to 45 of
2022 (Hon'ble High Court of Orissa at Cuttack [25.03.2023]
5. Principal Commissioner of Income-tax Vs. Sapna Gupta,
reported in 147 taxmann.com 288 (Hon'ble High Court of
Allahabad) [12.12.2022]
6. ITAT Delhi in the case of Millenium Vinimay Pvt. Ltd. Vs. ACIT in
ITA No.458/Del/2022 and ITA No. 827/Del/2022 dated
31.05.2024.
10. Thus, the crux of the submission of the Ld. AR is this that the
Assessment Order passed under Section 153A/143(3) of the Act is
void-ab-initio as the same was based on consolidated approval
granted by the Additional CIT, Central Range-7, New Delhi, without
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
any reference of the order sheet/draft order or requisite documents,
a mechanical approval and therefore, the same is liable to be
quashed.
11. On the other hand, the Ld. Departmental Representative
submitted that there is no infirmity in the approval granted under
Section 153D of the Act and the Ld. Additional CIT has applied his
mind. However, he has failed to refer any judgment contrary to the
ratio laid down by the Hon'ble High Court and confirmed by the
Hon'ble Apex Court holding such consolidated approval granted by
the concerned authority, not applying independent mind to the
materials on record for each assessment year separately is, liable to
be quashed. Moreso, the approval was granted on the same day
when the same was sought for.
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
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
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.
13. Initially the matter was heard on 04.09.2024 and then again
on 29.10.2024. Thereafter, the matter was fixed for clarification on
20.12.2024 on the following issue:
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."
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67 Appeals,
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14. Thereafter, the matter could not be taken up on 09.01.2025 as
the Bench was not sitting and finally, the matter was taken up on
15.01.2025 when the Ld. DR in reply, to the Bench's direction dated
20.12.2024 filed a communication dated 08.01.2025 issued by the
ACIT, CC-25, New Delhi submitting that office note is a matter of
internal record prepared for the change of incumbency and
deviation is intradepartmental communication between the officers
of Investigation Wing and the Assessment Unit and hence, not liable
to be shared. It was further submitted that all the findings arising
from the assessment proceedings have already been mentioned in
the assessment orders of the respective assessee. The Copy of the
said communication dated 08.01.2025 is reproduced hereinbelow:
"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,
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
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]"
15. Today before us the Ld. CIT, DR again submitted a copy of the
communication dated 15.01.2025 reiterating the stand to this effect
that the office note is a matter of internal report prepared for the
change of incumbency and deviation is an intradepartmental
communication between the officers of the Investigation Wing and
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JBM Auto Ltd. Vs. ACIT, CC-25
assessment unit and hence, not liable to be shared Further, it was
submitted that all the findings arises from the assessment
proceedings have already been mentioned in the assessment order
of the assessee. Apart from this, it was mentioned that the Ld.
JCIT/Addl. 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 questionnaire to the assessee. Further, JCIT/Addl. Central
Range also examined seized documents in details immediately after
receipt of the appraisal report and provides able assistance to the
AO about the interpretation of the seized documents while issuing
questionnaire to assessee, examining the replies filed by the
assessee and by conclusions thereon, all of which proves that there
is an application of mind by the JCIT before the grant of approval,
as approval is not just a one day process but involves approvals and
discussions over a period of time. A copy of the said communication
dated 15.01.2025 is reproduced herein below:
"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,
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
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."
16. At this juncture, it has been indicated by the Ld. Sr. Counsel
appearing for the assessee that the same plea was taken by the Ld.
DR in the case of Shiv Kumar Nayyar Vs. ACIT, CC-20 before the
Coordinate Bench when the matter was taken up and it was duly
recorded in the order itself and upon considering the same finally
the Coordinate Bench was pleased to quash the entire proceedings
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JBM Auto Ltd. Vs. ACIT, CC-25
holding the approval granted by the concerned authority under
Section 153D of the Act mechanical in nature. The relevant
observation as made by the Co-ordinate Bench as indicated above
appearing at page 59 of the paper book filed before us is reproduced
hereinbelow:
"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."
17. The observation made by the Coordinate Bench in respect to
such submissions made by the Ld. DR is as follows:
"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
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JBM Auto Ltd. Vs. ACIT, CC-25
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."
18. We find that para 7 hereinabove is verbatim copy of the plea
taken by the Ld. DR as reproduced from his communication dated
15.01.2025 filed before us. When the matter was taken up
yesterday after going through the report filed by the Ld. DR, the Ld.
AR relied upon the judgment passed by the Madras High Court in
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the case of CIT Vs. Krishna Veni Ammal dated 27.01.1983. It was
vehemently argued by the Sr. Counsel Mr. Salil Agarwal that the
department is not in possession of any document in support of the
case made out in order to justify the approval granted by the
concerned authority under Section 153D of the Act is upon due
application of mind upon perusal of the search materials and other
documents including the draft assessment orders in order to meet
the requirement of the Court. Thus, if the best evidence is not
placed before the Court even if, such direction is given an adverse
inference can be drawn as against the person who ought to have
produced it before the Court. It was further submitted by him that
had there any document been placed before us by the Revenue that
would have caused much prejudice to the Revenue itself. In fact, it
appears that in almost on the identical situation the Hon'ble
Madras High Court has been pleased to observe as follows:
"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."
19. In this regard the Ld. AR also relied upon the judgment passed by
the Hon'ble Apex Court in the matter of Hindustan Ferodo Ld. Vs. the
Collector of Central Exc., passed on 04.12.1996 considering which we
find that the Hon'ble Apex Court has been pleased to remind the
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
Tribunal about its area of operation to this effect that it is not function of
the Tribunal entering into the arena and make suppositions that are
tantamount to the evidence that a party before it has failed to lead. The
relevant observation is as follows:
"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."
20. It appears that though number of occasions
opportunity was granted to the department as to whether
there was any movement of file to the concerned
authorities from the Ld. AO prior to the grant of approval
the same has not been able to be demonstrated by the Ld.
DR with supporting documents. On the contrary, the note
prepared by the revenue department which has been
placed on record yesterday and today too speaks otherwise.
We, thus, conclude that the department is not in
possession of any record to establish that the approval has
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67 Appeals,
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been granted by the concerned authority upon due
application of mind and upon examining the documents
those are liable to be examined prior to approval granted
under Section 153Dof the Act and we also accept the
submission made by the Ld. AR.
21. The provision of Section 153D of the Act envisages
prior approval of JCIT before passing the assessment order.
Having regard to the provision of law, it is found that it is
the duty of incumbent upon the statutory authority to
discharge its application not mechanically, neither even
formlly but after due application of mind. The obligation
granting approval acts as an inbuilt protection to the tax
payer against arbitrary or unjust exercise of discretion by
the AO. It should reflect necessarily due application of
mind and if, the same is subjected to judicial scrutiny, it
should stand for itself and should be self defending. It is
evident from the approval dated 29.12.2019 that the
Additional CIT, Central Range-7, NewDelhi, did not
mention anything in the approval memo towards his
process of deriving satisfaction so as to exhibit his due
application of mind. Further, that the approval letter so
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67 Appeals,
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issued by the Additional CIT clearly speaks of granting
such approval is subjected to certain conditions. Thus, it
has granted approval routinely to the AO to pass the orders
that too only on the basis of the letter of the AO without
due application of mind. The sanctioning authority has in
effect abdicated its statutory functions and delightfully
relegated its statutory duty to the subordinate AO whose
action the Additional CIT was supposed to supervise. Thus,
the said approach of the Additional CIT has rendered the
approval to be a mere formality and cannot be sustained in
the eyes of law.
22. Under this facts and circumstances of the matter, we
have further considered the judgment relied upon by the
Ld. A.R passed by the Coordinate bench in the case of Neel
Metals being identical in nature wherein the draft
assessment order was forwarded to the ACIT for grant of
approval and the approval was accorded on the same day
in 100 cases and the final orders even also were passed on
the same day i.e. 31.12.2019 which gives rise that there
was complete non-application of mind and the approval so
granted by the higher authority is in a mechanical manner
and relying upon the judgment passed by the Hon'ble
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67 Appeals,
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Orissa High Court in the case of ACIT Vs. Serajuddin& Co.,
reported in 454 ITR 312, the judgment passed by the
Hon'ble Delhi High Court in the case of PCIT Vs. Anuj
Bansal, reported in (2024) 165 taxmann.com 2 (Delhi), the
judgment passed by the Allahabad High Court in the case
of PCIT Vs. Sapna Gupta, reported in 147 taxmann.com
288 (Allahabad), the impugned approval herein granted by
the Additional CIT Range-4, New Delhi was quashed.
23. Upon perusal of the entire set of documents, it appears
that the order of approval granted under Section 153D of
the Act by the ACIT, Central Range 7, New Delhi dated
29.12.2019 is a common and consolidated approval which
does not bear year wise reasoning reference to letter
bearing No. F ACIT/CC-25/2019-20/1122 dated
29.12.2019 and no reference in regard to the draft
assessment order being sent for approval to the said ACIT
Central Range-7, New is Delhi forthcoming from the said
approval dated 29.12.2019. We further find that the
approval was sought for on 29.12.2019 and the same day
the same was granted by the ACIT Central Range 7, New
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67 Appeals,
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Delhi. Moreso, the ACIT needs to approve each assessment
years separately.
24. In a search matter before the order of assessment or
reassessment is passed, requirement of prior approval of
superior officer is a mandatory requirement in term of the
provisions of law particularly under Section 153D of the
Act.
25. The same equally must contain the reasons for such
approval and further that reflection of due application of
mind made by the approving authority on the draft
assessment orders in respect of search and seizure
operation as placed before him is also necessary, in the
absence of which the approval is nothing but a mechanical
approval, vitiates the entire assessment proceeding.
26. In this regard, we have further considered the
judgment relied upon by the Ld. AR passed by the Hon'ble
Orissa High Court in the case of PCIT Vs. Serajuddin and
Co. whereby and whereunder the appeal preferred by the
revenue was dismissed whereupon SLP was preferred and
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67 Appeals,
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the same was not admitted. Thus, order passed by the
Orissa High Court on the identical issue attained finality as
argued by the Ld. Senior Counsel appearing for the
assessee.
27. In this regard, the observation made by the Orissa
High Court is as follows:
"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.
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67 Appeals,
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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.
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67 Appeals,
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(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.
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67 Appeals,
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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:
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
"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."
14. The requirement of prior approval under Section 153D of the Act is
comparable with a similar requirement under Section 158BG of the Act. The
only difference being that the latter provision occurs in Chapter-XIV-B relating
to "special procedure for assessment of search cases" whereas Section 153D is
part of Chapter-XIV.
15. A plain reading of Section 153D itself makes it abundantly clear that the
legislative intent was to be obtaining of "prior approval" by the AO when he is
below the rank of a Joint Commissioner, before he passes an assessment order
or reassessment order under Section 153A(1)(b) or 153B(2)(b) of the Act.
16. That such an approval of a superior officer cannot be a mechanical exercise
has been emphasized in several decisions. Illustratively, in the context
of Section 142 (2-A) which empowers an AO to direct a special audit. The
obtaining of the prior approval was held to be mandatory. The Supreme Court
in Rajesh Kumar v. Dy. CIT (2007) 2 SCC 181 observed as under:
"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."
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67 Appeals,
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17. It is therefore not correct on the part of the Revenue to contend that the
approval itself is not justifiable. Where the approval is granted mechanically, it
would vitiate the assessment order itself. In Sahara India (Firm) Lucknow v.
Commissioner of Income Tax (supra), the Supreme Court explained as under:
"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."
18. The contention of the Revenue in those cases that the non- compliance of
the said requirement does not entail civil consequences was negatived.
Reiterating the view expressed in Rajesh Kumar (supra), the Supreme Court
in Sahara India (Firm) Lucknow v. Commissioner of Income Tax (supra) held as
under:
"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).
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67 Appeals,
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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."
19. To the same effect, are the decisions of the Delhi High Court in Yum!
Restaurants Asia Pte. Ltd. v. Deputy Director of Income Tax (supra) which dealt
with the requirement under Section 151 (2) of the Act for initiating proceedings
under Section 147 read with 148 of the Act. It was observed as under:
"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."
20. The non-compliance of the requirement was held to have vitiated the notice
for reopening of the assessment. Likewise, in SyfoniaTradelinks Private Limited
v. Income Tax Officer (supra) the Delhi High Court disapproved of the rubber
stamping by the superior officer of the reasons furnished by the AO for issuance
of the sanction.
21. It is seen that in the present case, the AO wrote the following letter seeking
approval of the Additional CIT:
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,
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
>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 Section under which order passed
assessee Asst. Year
1. M/s Serajuddin& Co. 19A, u/s 2003-04
153A/143(3)/144/145(3) British India Street,
Kolkata
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.
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67 Appeals,
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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
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.
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
23. In the present case, it is an admitted position that the assessment orders
are totally silent about the AO having written to the Additional CIT seeking his
approval or of the Additional CIT having granted such approval. Interestingly,
the assessment orders were passed on 30th December 2010 without
mentioning the above fact. These two orders were therefore not in compliance
with the requirement spelt out in para 9 of the Manual of Official Procedure.
24. The above manual is meant as a guideline to the AOs. Since it was issued
by the CBDT, the powers for issuing such guidelines can be traced to Section
119 of the Act. It has been held in a series of judgments that the instructions
under Section 119 of the Act are certainly binding on the
Department. In Commissioner of Customs v. Indian Oil Corporation Ltd. 2004
(165) E.L.T. 257 (S.C.) the Supreme Court observed as under:
"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."
25. For all of the aforementioned reasons, the Court finds that the ITAT has
correctly set out the legal position while holding that the requirement of prior
approval of the superior officer before an order of assessment or reassessment
is passed pursuant to a search operation is a mandatory requirement of Section
153D of the Act and that such approval is not meant to be given mechanically.
The Court also concurs with the finding of the ITAT that in the present cases
such approval was granted mechanically without application of mind by the
Additional CIT resulting in vitiating the assessment orders themselves.
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
26. The question of law framed is therefore answered in the affirmative i.e., in
favour of the Assessee and against the Department.
27. The appeals are accordingly dismissed, but in the circumstances, with no
order as to costs."
28. Subsequently, the SLP preferred by the revenue
against the said order was dismissed by and under the
judgment dated 20.11.2023. Needless to mention, that the
case before us is nothing but on the same footing. The
revenue has failed to place any iota of evidence in order to
justify that approval was granted upon due application of
mind, outcome of examination of requisite documents
particularly the assessment records. More so, they have
failed to place the movement of file from the Ld. AO to the
CIT(A) for grant of approval under Section 153D of the Act.
29. We have further considered the judgment passed by
the Hon'ble Apex Court in the case of PCIT Vs. Anuj Bansal
whereby and whereunder the order passed by the Hon'ble
Dehli High Court quashing the assessment order on the
ground of mechanical approval granted under Section
153D of the Act has been upheld. The Hon'ble Delhi High
Court passed orders in the following manner:
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
"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:
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
"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
P a g e | 39
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
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."
30. The SLP preferred by the revenue, was dismissed by the
Hon'ble Apex Court.
31. We have further considered the judgment passed by the
Hon'ble Delhi High Court in the case of Arvind Kumar Jain as relied
upon by the Ld. AR wherein approval granted by the same Addl. CIT
in the same manner has been held to be mechanical and without
application of mind copy whereof has also been annexed to the
paper book at page 18 along with the order passed by the Co-
ordinate Bench. With the following observations the Hon'ble Bench
held that approval granted by the Addl.CIT under Section 153D of
the Act as bad in law:
"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
P a g e | 40
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
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.
32. Similarly, approval granted by the same officer in the same
manner in the case of Millenium Vinimay Pvt. Ltd. Vs ACIT, in ITA
458/Del/2022 was challenged before ITAT, Delhi Benches and the
Coordinate Bench by and under its order dated 31.05.2024 pleased
to hold that the approval was nothing but product of non
application of mind on the part of the ACIT which is found to be bad
in law and vitiates the entire proceedings; the Bench has been
pleased to quash the entire assessment proceedings initiated
against the assessee with the following observations:
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
"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."
33. Upon considering the entire aspect of the matter, we find that the
approval has not been granted separately for the assessment year where
the provision of law under Section 153D of the Act stipulates conditions
that no order of assessment or reassessment shall be made by Assessing
Officer below the rank of Joint Commissioner in respect of which
assessment year referred to clause (b) to sub-section (1) of Section 153A
of the assessment year refer to clause (b) of Sub-Section 153B of the Act
P a g e | 42
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
except the prior approval of the Joint Commissioner. We find that the
approval dated 29.12.2019 is a common and composite order whereas
the Addl.CIT is required to verify and approve that each of assessment
year is complied with statutory formalities. Such fact clearly reveals non
application of mind on the part of the Addl. CIT. Thus, grant of approval
for all the years instead of approval granting in each assessment years
separately dehors the prescribed rules.
34. Having regard to the facts and circumstances of the case the order
of approval appearing at page No. 1 of the paper book filed before us is
found to be invalid in law for this particular reason that the same does
not speak movement of any file, neither issued for each assessment year
separately, nor assigned any reason for such approval; the same is found
to be a product of total non application of mind by the order approving
authority. We also note that the approval has been given on the same
day i.e. 29.12.2019 when the approval was sought for by the AO to the
Addl.CIT Central Range 7, New Delhi which clearly establishes the fact of
non review of the assessment records or search materials by the Addl.CIT
too. The statutory duty cast upon the Ld. Addl. CIT since not discharged
to the minimum degree of appreciation, the approval so granted is,
therefore, totally mechanical and thus, liable to be quashed. The
judgments relied upon by the Ld. AR are found to be squarely applicable
on the identical facts and circumstances of the matter. Such invalid
approval vitiates the entire proceedings and thus, the same is also liable
to be quashed. With the aforesaid observation, we therefore, quash the
entire assessment proceedings. The appeal preferred by the assessee is,
thus, allowed. This order will also be applied mutatis mutandis in all the
P a g e | 43
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
appeals preferred by the assessee before us having regard to the identical
facts and circumstances of the cases.
35. We note that since the ground of maintainability of the proceeding
as challenged by the assessee has been decided in favour of the assessee
by quashing the order of approval and consequentially the assessment
proceeding itself, other grounds raised by the assessee before us become
academic. No order needs to be passed.
36. The appeals filed by the revenue wherein the same issue has been
raised by way of applications under Rule 27A by the assessee which has
also been considered and having regard to the identical facts of the
matter, the challenge against issuance of approval by the ACIT Central
Range -7, New Delhi made by the assessee is found to be acceptable and
thus, in these cases also the approval granted is found to be bad in law
and thus, quashed. Hence, the Revenue's appeals have no leg to stand
on and thus, dismissed.
37. In the result, the appeals of the assessee are allowed and appeals of
the revenue are dismissed.
BRAJESH KUMAR SINGH, AM
I have perused the order of my learned Sister but I am unable to
persuade myself with her decision in holding that the approval given by the
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
Addl. CIT, Central Range-7, New Delhi in ITA No.252/Del/2021 for A.Y. 2008-
09 in the case of DCIT, CC-25, Vs. JBM Auto Ltd.(which has been discussed as
the lead case in the group of 67 appeals involving six assessees ) is bad in law
and consequently quashing the approval letter and the assessment proceedings
and thereby holding that other grounds by the department becomes academic
and no order needs to be passed. Further, I am also unable to persuade myself
with her view that her decision in ITA No.252/Del/2021 will also apply mutatis
mutandis in all the appeals preferred by the assessees having regard to the
identical facts and circumstances of the cases in view of identical approval
granted by the Addl. CIT, Central Range-7, New Delhi in all such cases.
Further, I am also unable to persuade myself with her decision that in view of
her decision to hold that the approval given by the Addl. CIT, Central Range-7,
New Delhi was bad in law in all the cases and allowing the applications under
Rule 27A filed by the assessee on identical facts and dismissing the appeals of
the Revenue as figuring in the above 67 appeals. In this regard, for the reasons
as discussed below, I do not agree with her above decisions and the basis for
arriving the said decisions.
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
2. My learned Sister, on perusal of the approval letter as reproduced on
page 7 of the order in the case of the case of the assessee and on page no.8 in
the case of M/s Jai Bharat Maruti Limited made following observation about
the said approval in para 12 of her order which is reproduced as under:-
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.
2.1. Thereafter, my ld. Sister discussed about the
submissions made by the ACIT, Central-25, New Delhi, the
present AO of this case vide reports /emails dated
08.01.2025 and 15.01.2025, wherein, it was stated that
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
the JCIT/Addl. 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 questionnaire to
the assessee. Further, it was stated that JCIT/Addl.
Central Range also examines seized documents in details
immediately after receipt of the appraisal report and
provides able assistance to the AO about the interpretation
of the seized documents while issuing questionnaire to
assessee, examining the replies filed by the assessee and
the conclusions thereon, all of which proves that there is
an application of mind by the JCIT before the grant of
approval, as approval is not just a one day process but
involves approvals and discussion over a period of time.
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
This according to my ld. Sister was identical to the
submissions of the Department as reproduced in para no.
7 of the order dated 26.07.2023 in the case of Shiv Kumar
Nayyar vs ACIT, CC-20 of the ITAT Delhi Bench in ITA
No.1282 to 1285/Del/2020 wherein, the Bench did not
accept the said plea and held that approval u/s 153D was
not proper.
2.2. Further, my ld. Sister on the basis of the letters dated
08.01.2025 and 15.01.2025 of the present AO filed through
the CIT(DR) ITAT, noted the stand of the Department to the
effect that 'office note' to the assessment order,
materials/correspondence folder showing discussion notes
of the AO with Addl. CIT with respect to assessment orders
and the 'deviation note' sent if any to the Investigation
P a g e | 48
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
Wing by the AO in respect of assessment orders in appeal
pending in appeal before this Tribunal were matter of
internal record prepared for the change of incumbency
between the officers of Investigation Wing and Assessment
Unit and hence not liable to be shared.
2.3. My ld. Sister, thereafter referring to the judgment of
the Hon'ble Madras High Court in the case of CIT vs
Krishna Veni Ammal dated 27.01.1983 and the decision
of the Hon'ble Supreme Court in the case of Hindustan
Ferodo Ltd. vs Collector of Central Excise passed on
04.12.1996 agreed with the contention of the ld. AR that
despite opportunities given to the Department to show
whether there was any movement of file to the concerned
authorities from the ld. AO prior to the grant of approval,
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
the same was not demonstrated by the Ld. DR with
supporting documents. My ld. Sister noted that on the
contrary, the note prepared by the Revenue Department
which was placed on record and reproduced on page
nos.13 to16 and discussed in paras no.13 to 20 of her
order, noted that the Department could not demonstrate
that there was any movement of the file from the AO to the
concerned authorities from the AO prior to grant of
approval despite number of opportunities given. On these
facts, my ld. Sister concluded that the Department was not
in possession of any record to establish that the approval
has been granted by the concerned authority upon due
application of mind and upon examining the documents
those are liable to be examined prior to approval granted
P a g e | 50
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
u/s 153D of the Act and accepted the submissions made
by the Ld. AR in this regard.
2.4. My ld. Sister, further considered the judgment relied
upon by the Ld. A.R passed by theCoordinate bench of the
Tribunal in the case of Neel Metals Products Ltd. belonging
to JBM group, being identical in nature wherein the draft
assessment order was forwarded to the Addl. CIT for grant
of approval and the approval was accorded on the same
day in 100 casesandthe final orders even also were passed
on the same day i.e.31.12.2019 wherein it was held by the
Tribunal that there was complete non-application of mind
and the approval so granted by the higher authority was in
a mechanical manner and the Tribunal relying upon the
judgments passed by the Hon'ble Orissa High Court in the
case of ACIT Vs. Serajuddin& Co., reported in 454 ITR 312,
the judgment passed by the Hon'ble Delhi High Court in
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
the case of PCIT Vs. Anuj Bansal, reported in (2024) 165
taxmann.com 2 (Delhi) and the judgment passed by the
Allahabad High Court in the case of PCIT Vs. Sapna Gupta,
reported in147taxmann.com 288 (Allahabad) held that, the
impugned approval herein granted by the Additional CIT
Range-4, New Delhi was mechanical and was quashed.
2.5. My ld. Sister further observed thaton perusal of the
entire set of documents, it appears that the order of
approval granted under Section 153D of the Act by the
Addl. CIT, Central Range 7, New Delhi dated 29.12.2019 is
a common and consolidated approval which does not bear
year wise reasoning reference to letter bearing No. F
ACIT/CC-25/2019-20/1122 dated 29.12.2019and no
reference in regard to the draft assessment order being
sent for approval to the said Addl. CIT Central Range-7,
New Delhi is forthcoming from the said approval letter
dated 29.12.2019. Further, my learned Sister observed that
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
the approval was sought for on 29.12.2019 and the same
day the same was granted by the Addl. CIT Central Range
7, New Delhi and more so the Addl. CIT needs to approve
each assessment years separately.
2.6. My learned Sister also observed that in a search
matter before the order of assessment or reassessment is
passed, requirement of prior approval of superior officer is
amandatory requirement in terms of the provisions of law
particularly under Section 153D of the Act.
2.7. My ld. Sister also observed that the approval must
contain the reasons for such approval and further that
reflection of due application of mind made by the Approving
Authority on the draft assessment orders in respect of
search and seizure operation as placed before him is also
necessary and in the absence of same, the approval is
nothing but a mechanical approval which vitiates the entire
assessment proceeding.
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
2.8. Further, my learned Sister considered the judgment
relied by the assessee passed by the Hon'ble Orissa High
Court in the case of PCIT Vs. Serajuddin and Co. whereby
and whereunder the appeal preferred by the revenue was
dismissed whereupon SLP was preferred and the same was
not admitted and thus, according to my ld. Sister, this
order passed by the Orissa High Court on the identical
issue attained finality as argued by the Ld. Senior Counsel
appearing for the assessee.
2.9. Further, my learned Sister relied upon the judgment
passed by Hon'ble Delhi High Court in the case of PCIT vs
Anuj Bansal, whereby the order passed by the Co-Ordinate
Bench of the Tribunal quashing the assessment order on
the ground of mechanical approval granted under section
153D of the Act has been upheld by the Hon'ble Delhi High
Court.
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
2.10. Similarly, my learned Sister relied upon the
decision passed by the Co-ordinate Bench of the Tribunal
in the case of Shri Arvind Kumar Jain, [ACIT in ITA
Nos.1373 to 1377/Del/2022] wherein, approval granted by
the same Addl. CIT in the same manner has been held to
be mechanical and without application of mind and the
same to be bad in law.
2.11. Further, my learned Sister relied upon the
decision of the Co-ordinate Bench of the Tribunal in the
case of Millenium Vinimay Pvt. Ltd. vs ACIT in ITA
No.458/Del/2022, wherein it was held that approval was
nothing but product of non application of mind on the part
of the Addl. CIT, which was found to be bad in law and
vitiates the entire proceedings and the Tribunal was
pleased to quash the entire proceedings.
2.12. After considering the entire aspect of the matter,
my learned Sisterheld that in the case of the assessee the
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67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
approval has not been granted separately for each
assessment year where the provision of law under Section
153D of the Act stipulates conditions that no order of
assessment or reassessment shall be made by Assessing
Officer below the rank of Joint Commissioner in respect of
which assessment year referred to clause (b) to sub-section
(1) of Section 153A of the assessment year or referred to
clause (b) of Sub-Section 153B of the Act except with the
prior approval of the Joint Commissioner. My learned
Sister also observed that the approval dated 29.12.2019 is
a common and composite order whereas the Addl.CIT is
required to verify and approve that each of assessment year
is complied with statutory formalities and such fact clearly
reveals non application of mind on the part of the Addl. CIT
and thus, grant of approval for all the years instead of
approval granting in each assessment years separately de-
hors the prescribed rules.
P a g e | 56
67 Appeals,
JBM Auto Ltd. Vs. ACIT, CC-25
2.13. She also held that having regard to the facts and
circumstances of the case the order of approval appearing
at page No. 1 of the paper book filed before us was found to
be invalid in law for this particular reason that the same
does not speak movement of any file, neither issued for
each assessment year separately, nor assigned any reason
for such approval and therefore, the same was found to be
a product of total non application of mind by the order
Approving Authority. My ld. Sister further noted that the
approval has been given on the same day i.e. 29.12.2019
when the approval was sought for by the AO to the
Addl.CIT Central Range 7, New Delhi which clearly
establishes the fact ofnon -review of the assessment
records or search materials by the Addl.CIT and therefore,
the statutory duty cast upon the Ld. Addl. CIT was not
discharged to the minimum degree of appreciation and
therefore, the approval so granted was totally mechanical
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and thus, liable to be quashed. She also held that
judgments relied upon by the Ld. AR are found to be
squarely applicable on the identical facts and
circumstances of the matter and since it vitiates the entire
proceedings and therefore my ld. Sister quashed the entire
assessment proceedings. Accordingly, my learned Sister
held that the appeal preferred by the assessee was, thus,
allowed and this order will also be applied mutatis
mutandis in all the appeals preferred by the assessee
before us having regard to the identical facts and
circumstances of the cases.
2.14. My learned Sister further held that since the
ground of maintainability of the proceeding as challenged
by the assessee has been decided in favour of the assessee
by quashing the order of approval and consequentially the
assessment proceeding itself, other grounds raised by the
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assessee before us become academic and no order needs to
be passed.
2.15. Regarding the appeals filed by the revenue
wherein the same issue has been raised by way of
applications under Rule 27A by the assessee which has
also been considered and having regard to the identical
facts of the matter, the challenge against issuance of
approval by the Addl. CIT Central Range -7, New Delhi
made by the assessee is found to be acceptable and thus,
in these cases also the approval granted is found to be bad
in law and thus stands quashed and therefore the appeals
filed by the Department were dismissed.
3. The above findings by my learned Sister have been
carefully considered but in view of the discussion as below,
I am not in agreement with the same.
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4. The Hon'ble Allahabad High Court in the case of PCIT
vs Sapna Gupta 147 taxmann.com 288 observed in para-
14 that the obligations of the approval of the Approving
Authority u/s 153D of the Act serve two purposes.
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.
4.1. Further, the Hon'ble Court held about the mechanism and
purpose of granting approval and held that the approval given in
the case was mechanical exercise of approval as under in para
no.19 to 21 as under:-
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
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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."
4.2. The Hon'ble Court held that the approval given by the Approving
Authority (the Approving Authority) in this case was a mechanical exercise of
power. In this regard the Hon'ble Court also considered the fact about the
humanly impossible task of perusing draft assessment orders in 85 cases, i.e.
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for 85 assessment years placed before the Approving Authority on 30.12.2017
and also approved on the same day i.e. 30.12.2017, which not only included
the cases of the respondent assessees but the cases of other groups as well.
The Hon'ble Court also held that 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.
5. In this regard, I would like to furnish certain facts about the functioning
of the Department regarding initiation of search proceedings and the
preparation of the appraisal report in a search case by the ADIT/DDIT(Inv.)
and its forwarding by the ADIT/DDIT(Inv.) to the AO, the Approving Authority
(Addl. CIT/JCIT/Approving Authority) (Central) and the PCIT(Central) and the
interaction/discussion between the AO and the Approving Authority in the
framing of search & seizure assessment based upon the findings in the
appraisal report and considering the explanation of the assessee, if any, on the
basis of my personal experience of working as ADIT(Inv.), Kolkata (w.e.f.
14.05.1992 to 20.03.1997), ACIT/DCIT(Central) Kolkata (w.e.f. 21.03.1997 to
31.08.2000) and thereafter working as PDIT(Investigation)-2, Mumbai (w.e.f.
19.12.2019 to 30.08.2021), PDIT (Inv.) Kanpur (w.e.f. 10.09.2021 to
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20.12.2021) and as PCIT(Central)-3, Mumbai (w.e.f. 21.12.2021 to 25.09.2022).
In this regard, I am very much conscious of the fact that I am no longer
working in the Income Tax Department but I will be failing in my duties if the
functioning of the Department as described below in the Investigation Wing
and the Central Charges is not placed before the Tribunal and higher judicial
authorities for appreciating the facts in order to arrive at the decision regarding
the validity of approval given u/s 153D of the Act by the Approving Authority in
the search and seizure cases by a combined standard type letter and the
approval being granted either on the same day (or with a very small gap) on
which the draft assessment order is put up before the Approving Authority by
the AO.
5.1. In a search case after the conduct of search, an appraisal report is
prepared by the respective ADIT/DDIT(Inv.), which conducts the search. The
appraisal report is the indicative material to guide the AO for framing of search
and seizure assessment in that particular case. The appraisal report is
prepared with the approval of the Pr. DIT(Investigation). Upon its preparation,
the said appraisal report is submitted in the office of the AO i.e. ACIT/DCIT
(Central),(where the case of the assessee is centralized) along with the
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Panchnama, seized records and other relevant documents. On the said date,
the copy of the appraisal report is submitted in the office of the respective
JCIT/Addl. CIT (Central) and the PCIT (Central) having jurisdiction over the
above ACIT/DCIT (Central). The appraisal report is an indicative report for the
consideration of the AO in framing the assessment order and since the
approval of the JCIT/Addl. CIT(Central) is required in a search case under
Section 153D of the Act, like the present case, a copy of the appraisal report is
also given in his office simultaneously with the AO, so that proper guidance to
the AO and the monitoring of the search assessment case is done by the
JCIT/Addl. CIT (Central) from the very beginning of the case till the time the
approval is granted in the particular case by him.
5.2. The search and seizure assessment are the most important cases for the
department and the initiation of the search assessment proceedings by the AO
from the issue of first show cause notice and the final show cause notice till the
final order passed by him, which includes the examination of the seized
documents, considering the reply/explanation of the assessee is done by the
AO under the active guidance and supervision of the JCIT/Addl. CIT to see that
the twin purposes as mentioned by the Hon'ble Allahabad High Court in the
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case of PCIT vs Sapna Gupta(Supra) as discussed above are complied with.
The JCIT/Addl. CIT while granting approval takes full responsibility that the
above twin purposes have been satisfied and it's a huge responsibility which is
taken by him while granting the said approval. In granting the said approval,
he is exposing himself to the risk of departmental proceedings by way of
vigilance proceedings (in case of under assessment in a particular case) and a
complaint by the assessee to the 'High pitch Assessment Committee' (in case of
over-assessment in a particular case). This 'High Pitch Assessment Committee'
is set up under each Pr. CCIT jurisdiction for the redressal of grievance of any
assessee against any high pitch assessment made by the AO in any particular
case. Therefore, he is very much conscious of the huge responsibility and its
consequences, if he fails to see that the above twin purposes are not complied
with in the draft assessment order, which he was going to approve. At this
moment, it has to be kept in mind that the approval granted by the JCIT/Addl.
CIT(Central) does not imply that the additions made by the AO in the
assessment order and approved by him will stand the ultimate test of appeal,
but the test to examine the validity of the approval order will be as to whether
by giving the approval, the said twin conditions as observed by the Hon'ble
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Allahabad High Court in the case of PCIT vs Sapna Gupta(Supra) as referred
above are satisfied or not in the particular case.
5.3. While granting approval, the JCIT/Addl. CIT(Central), is of the bonafide
view that the draft assessment order has been framed in a reasonable and in a
fair manner and as per law and adhering to the above twin purposes as
observed by the Hon'ble Allahabad High Court in the cited case. Prior to the
grant of approval, the matter is discussed between the AO and JCIT/Addl. CIT
(his Approving Authority) as many times as required for the case and since it's
the same set-up of the team, it does not necessarily require any minutes or
recording of the proceedings because each is aware of their respective role i.e.
the AO will do all the basic work i.e. examining all the seized materials and
other incriminating materials and discussing all the vital incriminating
materials with the Approving Authority from time to time. Further, if need
arises, the Approving Authority also calls for the seized and incriminating
materials as referred in the Appraisal Report and discusses with the AO as per
the requirement of the case. To have the proper monitoring of the work done by
the AO including the Search and Seizure assessment by the Approving
Authority at the end of each reporting year, the AO has to submit his self
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appraisal report in his Annual Performing Appraisal Report (APAR), on which
hisApproving Authority gives his reporting comments which is finally reviewed
by the PCIT of the AO. And if either the AO or his Approving Authority are not
doing their duty as required, then they are liable to be transferred from the
said post. Therefore, a full proof mechanism of the working procedure is there
for the monitoring of the work being done by the AO by the Approving
Authority and the approval granted by the Approving Authority whose work is
again reported by his PCIT and reviewed by the DGIT (Inv.)CCIT(Central) as the
case may be.Therefore to say that unless the discussion/monitoring is recorded
by way of movement of file or the same being recorded by way of 'minutes of
meeting',willnot substantiate that the prior discussion between the Assessing
Officer and his Approving Authority has taken place or the proper monitoring
by the Approving Authority has been done is not correctapproach to appreciate
the functioning of the AO and his Approving Authority in framing of the search
and seizure assessments . In fact the granting of the approval by the Approving
Authority by way of the approval letter is the formalization of the process of his
involvement in the search & seizure assessment from the beginning of the
assessment proceedings till the finalization of the assessment order and its
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approval because the assessment is a continuing process and, therefore, the
discussion also continues continuously to discuss the various issues emerging
out during the ongoing assessment proceedings. In view of the officers of the
Department working in the above set-up, the approval letter is not considered
as formality but a procedure to be completed by reducing the approval in
writing to evidence the fulfillment of the requirement of section 153D of the Act
because the draft assessment order that is put up for approval is a pre-
discussed order between the AO and his Approving Authority (Addl. CIT/JCIT)
before its submission by the AO to his Approving Authority . So, there may be
certain issues in drafting of the said approval letters but it does convey about
the discussion process between him and the AOand his supervision and overall
responsibility taken by him in signing the approval letter. It is a common
knowledge that any authority be it in the government or in private will not sign
any approval letter unless he was convinced about its correctness. It is even
more onerous in a government functioning, where there are legal implications
in case of any omission and commission in the discharge of duties of the role
assigned to him. This is even more onerous in the Income Tax Department,
where the job of the officer/official is to collect the due taxes as per law.
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5.4 A view may be taken that by discussing the draft order prior to its
submission for approval will dilute the independence of the AO as he being the
quasi-judicial authority. But, the independence of the AO has to be factored
with the scheme of the provisions of section 153A of the Act where the approval
of Approving Authority is statutorily provided in section 153D of the Act. In
view of this fact, the independence of the AO will be regulated as per the
scheme of the Act. Moreover, the AO and the Approving Authority are not a
disconnect team but a team that has to work in perfect co-ordination to frame
the search and seizure assessment order as per law as required under the
provisions of section 153A of the Act.
5.5 Therefore, with utmost responsibility, I would like to submit that the
Approving Authority i.e. the Addl. CIT/JCIT(Central) grants approval to the
draft assessment order only when he has ensured and has a bona fide belief
that by granting approval the twin objectives as laid down by the Hon'ble
Allahabad High Court in the case of Sapna Gupta (supra) are satisfied in the
said case. In case of any improper approval, it is for the assessee to
demonstrate that the Approving Authority has malfunctioned in granting the
approval in the particular case by pointing out apparent material errors in the
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assessment order or that the Approving Authority has failed to do justice with
the taxpayer by not granting protection against arbitrary or creating baseless
tax liability on the 'assessee' as held by the Hon'ble Allahabad High Court in
the case of PCIT vs Sapna Gupta(Supra).
5.6 In this regard, my learned Sister referred to the submissions of the ld.
DR in the case of Shiv Kumar Nayyar vs ACIT, CC-20 in ITA No.1282 to
1285/Del/2020, as referred in para no.7 of the said Tribunal order, where
similar submissions regarding the role of the Addl. CIT/JCIT was mentioned
and the same is reproduced as under:-
"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."
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5.7 Thereafter my learned Sister reproduced the observation of the Co-
ordinate Bench rejecting the above submissions made by the Ld. CIT(DR), in
para no. 8of the said order, which is reproduced as under:-
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
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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)
5.8 The aforesaid view (as per the emphasis given by me in the
above order ) particularly that (i)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 and (ii) 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
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assessment proceedings right from the receipt of copy of appraisal
report, as argued by the DR, has no substance,has been carefully
considered, but in view of the facts as discussed below, I am of the
view that the same is not the correct view to appreciate the
functioning of the Investigation Wing, the purpose of the Appraisal
Report and its utilization in the framing of the search and seizure
assessment and the assistance it provides both to AO in framing
the assessment and to the Addl. CIT in granting his approval. The
Investigation wing is an integral wing of the Income Tax Department
and is governed by the same Income Tax Act, 1961 ( as the AO and
the Approving Authority) and its role in preparing the Appraisal
Report can be loosely compared to that of diagnostic report of
patient to assist the doctor to help the doctor in treating the
patient. The doctor may or may not accept the findings of the said
report but to say that he has to act de-hors the report is not the
correct way to look at the whole issue and the whole set up and the
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mechanism and working of the investigation wing in conducting the
search and gathering of evidence/materials in the course of search
and post-search and analyzing the evidences gathered during the
search and post-search and preparing the Appraisal Report for the
guidance of the AO in framing the search and seizure assessment
and also be of great assistance to the Approving Authority in
granting the approval. I would like to state with full responsibility
that both the AO and his Approving Authority will be totally clueless
to proceed with the search and seizure assessment in absence of
the Appraisal Report. A similar comparison can be made with the
judiciary deciding the matters in respect of any chargesheet filed
before it. The Court has to independently see the merits of the
charge-sheet filed before it but to say that it will decide the case de-
hors the charge sheet is not the correct way to appreciate the
process of filing of the charge sheet by the State and the
adjudication of the said charge sheet by the Judiciary. Therefore,
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the appraisal though being an indicative report is the most
important report for the framing of the search and seizure
assessment as it contains the analysis of all the seized materials
and other materials gathered during the course of search and post-
search Investigation. In this background, the copy of the Appraisal
Report is made available simultaneously to the Approving Authority
and the AO to study the appraisal report contemporaneously and to
proceed with the assessment proceedings accordingly, because the
Approving Authority knows it from the very beginning that he has to
give the approval order under Section 153D of the Act in the search
and seizure assessment case before the final assessment order is
passed by the AO. Moreover as held earlier by the Hon'ble Delhi
High Court in the case of Kabul Chawla (2016) 380 ITR 573 (Del)
and later on affirmed by the Hon'ble Apex Court in the case of Pr.
CIT vs. Abhisar Buildwell P. Ltd. (2024) 2SCC 433 that the
additions in search & seizure assessment under Section 153A of the
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Act can be made only on the basis of incriminating materials and
since the appraisal report is the analysis of the incriminating
materials only and, therefore, the Approving Authority and AO can't
work de-hors the appraisal report in framing the search and seizure
assessment. It is also stated here that the ADIT/DDIT(Inv.) who
processes and conducts the particular search is involved from the
beginning of the case i.e. from identification of the case i.e. the
writing of the satisfaction note, supervising the search under the
supervision of his seniors and thereafter analyzing the seized
documents and doing the post search enquiry and then preparing
the appraisal report. Therefore, the ADIT/DDIT (Inv.) is the officer
who is most conversant with the facts of the search case and
therefore his report is the most relevant report for initiating the
search and seizure assessment proceedings and the framing of
assessment order but not without issuing the show cause notice to
the assessee by the AO with respect to materials relied upon and
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also giving copies of the materials relied upon to the assessee and
thereafter to consider the explanation of the assessee and thereafter
to pass the search and seizure assessment order after taking the
necessary approval of the Approving Authority. In this regard, the
AO is conscious of his quasi-judicial role and can take a different
view of not agreeing with the findings in the Appraisal Report, either
suo-moto or on the basis of the explanation of the assessee, for
which he makes an 'office note' in the assessment order, as to why
he was not making the said addition. Further, he has also a right to
send a 'deviation note' to his counterpart ADIT/DDIT(Inv.) that he is
not in agreement with the particular finding in the Appraisal Report
and in case of any disagreement, the matter can be escalated by his
Addl. CIT to his counterpart Addl. DIT(Inv.) or by his PCIT (Central)
to his counterpart PDIT(Inv.) as the case may be. Therefore, all the
checks and balances are in place for the AO to exercise his
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independent view after analyzing the findings contained in the
Appraisal Report.
5.9 Therefore, in view of the above discussion, the findings of the
Co-ordinate Bench of the Tribunal in the case of Shiv Kumar Nayar
Vs. ACIT, CC-20 (supra) in para no. 8 as reproduced above is not
acceptable and my views in para no. 5.5 as above is reiterated.
6. Further, the case laws relied by my learned Sister and the
reason why in my view will not be applicable to the facts of the
present case are discussed below.
6.1 In the case of PCIT vs. Serajuddin& Co.(supra), the Hon'ble
Orissa High Court had noted that in that particular case, approval
of the Addl.CIT was not mentioned in the body of the assessment
order. Further, the Hon'ble Court in para no.22 of its order noted at
Sr. no.(ii) that final approval must be in writing and (iii) the fact
that the approval has been obtained should be mentioned in the
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body of the assessment order. Further in para no.23 of the said
order, it is mentioned that it is an admitted position that the
assessment orders are totally silent about the AO having written to
the Additional CIT seeking his approval or of the Additional CIT
having granted such approval and the assessment orders were
passed on 30th December 2010 without mentioning the above fact
and these two orders were therefore not in compliance with the
requirement spelt out in para 9 of the 'Technical Manual of Official
Procedure'. Para 9 of the said manual is reproduced 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."
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6.2. However, in the case before us, both the above conditions are
satisfied as the approval has been granted in writing vide letter
dated 29.12.2019 by the Addl. CIT, Central Range-7, New Delhi and
the fact that the approval has obtained by the Assessing Officer
before passing the assessment orderhas been mentioned in para
no.9 on page no.150 of the assessment order which is reproduced
as under:-
"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."
6.3 Therefore, this vital fact in this case is distinguishable from
the facts of the cited case.
6.4 Further, the Hon'ble Orissa High Court referred to the decision
of the Hon'ble Supreme Court in the case of Rajesh Kumar vs Dy.
CIT (2007) 2 SCC 181, wherein, the Hon'ble Apex Court made its
observation with respect to the approval given by the CIT u/s
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142(2-A) of the Act in cases of assessees where special audit of the
accounts is proposed by the AO in a particular cases or group of
cases. . The relevant observations of the Hon'ble Supreme Court in
para no.58 is reproduced as under:-
"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."
6.5 The same has been carefully perused. In the case of special
audit under section 142(2A) of the Act, the Approving Authority will
come to know about the proposal of the Assessing Officer to have
special audit in a particular case or group of cases as the case may
be onlywhen it is put up before him or before putting up (by way of
consultation between the AO and the ApprovingAuthority), whereas,
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in the search and seizure assessment cases, the Approving
Authority from the very beginning of the case knows very well that
he has to approve the order under section 153D of the Act and he
gets involved with the assessment proceedings right from the word
go and, therefore, the context of approval in both the situations is
quite distinct and different. As stated earlier, the Approving
Authority receives the appraisal report simultaneously with the AO
where the Assessing Officer apart from the appraisal report receives
all other documents like the Panchama/seized document and post
search information collected by the Investigation Wing. But all of
these materials have the relevant reference in the Appraisal Report
which has a bearing on the critical aspects of the case and,
therefore, the Approving Authority is also aware about the critical
aspects of the case from the very initiation of the search and seizure
assessment proceedings.
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6.6 Further, the Hon'ble Orissa High Court in the cited case
referred to the decision of the Hon'ble Supreme Court in the case of
Sahara India (Firm) Lucknow vs Commissioner of Income Tax,
wherein, the Hon'ble Court held that the approval under section
151(2) of the Act must reflect the application of the mind of the
Approving Authority to the facts of the case since it being an inbuilt
protection against any arbitrary or unjust exercise of power by the
AO and it 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 empty ritual. The Hon'ble
Orissa High Court also referred to the decision of the Hon'ble Delhi
High Court in the case of YumRestaurants Asia Pte. Ltd. vs Deputy
Director of Income Tax to the same effect. Further, the Hon'ble
Orissa High Court also referred to the decision of the Hon'ble Delhi
High Court in the case of SyfoniaTradelinks Private Limited vs ITO,
wherein, the Hon'ble Delhi High Court disapproved of the rubber
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stamping by the superior officer of the reasons furnished by the AO
for issuance of the sanction.
6.7 The above view of the Hon'ble Orissa High Court has been
carefully perused. As noted in the case of grant of approval u/s
142(2A) of the Act, where the Approving Authority will come to
know about the proposal of the Assessing Officer to have special
audit in a particular case or group of cases as the case may be only
when it is put up before him or before putting up (by way of
consultation between the AO and the Approving Authority), the
same situation is in the case of re-opening of the assessment
wherein the Approving Authority invariably sees the reasons
recorded for reopening of the assessment alongwith the materials
for the first time when the file is put up before him for giving
sanction u/s 151(2) of the Act. However, as discussed above, in the
search and seizure assessment cases, the Approving Authority from
the very beginning of the case knows that he has to approve the
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order under section 153D of the Act and he gets involved with the
assessment proceedings right from the word go and peruses all the
relevant materials from the very beginning till the grant of the
approval and, therefore, the context of approval in both the
situations is quite distinct and different.
6.8 Further, Hon'ble Orissa High Court held that "Technical
Manual of Office Procedure" as spelt out in para no.13 of the order,
referring to para no.9 of the Manual held in para no.24 that such
guidelines issued by the CBDT under section 119 of the Act for
passing of search and seizure assessments u/s 119 of the Act was
certainly binding on the Officers of the Department. This was noted
in the context of similarapproval by the Approving
Authority/CIT/JCIT/Addl.CIT(Central) of search and seizure u/s
158BG of the Act. Under Section 158BG of the Act, the draft
assessment orders required theapproval of the CIT (after
30.06.1995 but before the 1st Day of January, 1997) and thereafter
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the JCIT/Addl. CIT u/s 158BG of the Act was required before the
final assessment orders were passed in respect of search and
seizure assessments. In para-9 of the Office Manual, it is stated
that the AO has to submit the draft assessment order (well in time)
and in view of the para-9, the Hon'ble Court held that the two
orders in the said case were not in compliance with requirement
spelt out in para no.9 of the 'Technical Manual Of the Office
Procedure' as both the draft assessment orders were submitted vide
letter dated 27/29 December, 2010 by the Assessing Officer, Circle-
9(2) Bhubaneswar and the same was approved by the Addl. CIT,
Range-1, Bhubaneswar on 30.12.2010. As discussed in detail later
in this order, in this case, before us, the return of income was filed
on 26.11.2019 by the assessee in respect of the notice under
Section 153A of the Act dated 25.07.2019 for filing the return of
income within 15 days of the receipt of the notice under Section
153A of the Act and the submissions were finally made by the
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assessee on 20.12.2019 in respect of questionnaire dated
07.10.2019 issued by the AO under Section 142(1) of the Act,
whereas, the time barring date for completing the search and
seizure assessmentunder Section 153A of the Act, expiring on
29.12.2019. Therefore, in the given facts and circumstances, the
draft assessment order could not have been submitted ("well in
time") as per the procedure laid down in the Technical Manual
Office Procedure as there was hardly 11 days left for completion of
the search and seizure assessment in this case from the date on
which the assessee made its final submissions. Therefore, in the
given facts, the submission of the draft assessment order to his
Approving Authorityon 29.12.2019 is held to be submitted in time.
Further, the most vital and the critical job by the AO is to pass the
assessment order within the limitation period as the AO has no
remedy when the assessment proceedings gets time barred. This
does not mean that the AO will carry not out and plan his work
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diligently, but in this case, it is seen there are more latches on the
part of the assessee rather than the AO as discussed later in this
order. As discussed earlier in my part of order in para no. 5 to5.9
that when the draft assessment is put up for approval, it is a pre-
discussed order and all the discussion about the addition/or not
making the addition of the issues as recommended in the appraisal
report and other materials,the consideration of explanation of the
assessee are discussed which includes disagreement, if any
between before the Assessing Officer and the Approving Authority
across the table and or over other means of communication as the
case may be when the Assessing Officer and the Approving
Authority are not in the same station as the case may be or as per
the requirement of the situation.Further as stated in the approval
letter dated 29.12.2019 of the Addl. CIT, Central Range-7, Delhi, in
this case, this fact has been stated by him that he had detailed
discussion with the AO from time to time.
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6.9 Similarly, in the case of PCIT vs Anuj Bansal (supra) at para
nos.9.1, 10 and 11, it was noted that there was a glaring mistake in
the assessment order that the assessee had declared income
amounting to Rs.87,20,500/- but while making the addition, the
AO noted the returned income was Rs.11,00,460/-. Further, it was
noted by the Hon'ble Court, despite making the two additions firstly
addition made qua cash deposit in the bank account amounting to
Rs.15,04,35,000/- and the second addition with regard to the cash
introduced by an entry operator was pegged at Rs.1,54,07,100/-
but when the AO finalized the assessed income, it was taken at
Rs.1,65,07,560/- and the Addl. CIT failed to notice the error.
However, in the case of the assessee no such error was
demonstrated by the Ld. AR despite specific query put to him
during the course of hearing. Therefore, on this fact, this case is
distinguishable.However, as per experience, such mistakes do
happen and goes undetected in the draft order and also while in
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giving the approval by the Approving Authority, (the impression
being in mind of the Assessing Officer/Approving Authority that
these mistakes being apparent from record are rectifiable mistakes
u/s 154 of the Act) and the focus/concentration of both the AO and
his Approving Authority is much more on the substantive
matters/issues involved in the search and seizure assessment
under Section 153A of the Act.
6.10 For similar propositions, my learned Sister has relied upon the
decision of the Hon'ble Delhi High Court in the case of PCIT vs Shiv
Kumar Nayyar 163 taxman.com 9 and of the Co-ordinate Bench of
the Tribunal in the case of Arvind Kumr Jain (supra) and Millenium
Vinimay Pvt. Ltd. (supra).
6.11 Further, Hon'ble Orissa High Court in para no.22 of its order
that bare minimum requirement of the Approving Authority is to
indicate what the thought process involved was is missing in the
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said approval letter.As per the observations of the Hon'ble High
Courts and the Co-ordinate Benches of the Tribunal in the cases
relied upon by my learned Sister, it should be indicated in the
approval letter , but as discussed earlier, the draft assessment
order submitted by the AO for approval before the Approving
Authority is a pre-discussed order between the AO and the
Approving Authority and therefore these things even if missing in
the approval letter as in the letter dated 29.12.2019 of the Addl.
CIT, Central Range-7, New Delhi in this case is to be appreciated in
view of the discussion made by me in para nos. 5 to 5.9 of my
order, wherein, it is submitted that the Approving Authority takes
the full responsibility that the twin objectives as held by the Hon'ble
Allahabad High Court in the case of PCIT vs. Sapna Gupta (supra)
is satisfied and the discharge of the said responsibilityis
constructively placed on the Approving Authority as soon as the
Approving Authority signs the approval letter and there is no excuse
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or escape from his responsibility if something goes wrong in
adhering to the twin objectives as stated above. In this context and
in view of the above facts, the said approval letter in this case is not
to be mere 'rubber stamping' even though it looks like one being a
stereo type letter for all the approvals. However, in view of the
analysis later in this order, it is stated that the approval letter dated
29.12.2019 signed by the Approving Authority i.e. Addl. CIT,
Central Range-7, New Delhiindicates the reasoning and the basis of
the approval of the Approving Authority.
6.12 In a similar situation, in all the orders of the Co-ordinate
Benches of the Tribunal, the other Member who is not the author of
the order signs the order without any comments except in cases
wherein the other Member disagrees with the view of the author
Member and writes a dissenting note. In such a situation, the
answer would be categorical 'No' to the inference if any drawn to the
effect that the other Member has signed the order of the other
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Member without appreciation of facts and the decision taken by the
other Member. Even though, the signing of the order by the other
Member shows an agreement between the two members but the
same is also a kind of an approval though in a little lesser degree
than approval. Therefore, what I am trying to persuade is that while
signing any order as a co-author or signing an approval letter shows
that the Member putting in his signature agrees with the decision
making process of the co-author and in similar way the Approving
Authority by signing the approval letter approves the draft
assessment order placed before him which indicates his view that
he approves the contents of the draft assessment order and the
decision making process of the AO in framing the said draft
assessment order.
6.13 As regards the observation of the Hon'ble High Courts in the
decisions relied upon by my Ld. Sister where it held that the
approval given by the Approving Authority should be separate for
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each assessment year, as per my understanding it appears that the
Hon'ble Courts making the above observation were more concerned
with the fact, that no fact of the perusal of the seized
records/materials was mentioned by the Approving Authority or
that the fact that the draft orders were examined and it meets the
requirement of law was mentioned in the approval letter. As
discussed above, the draft order submitted for approval is a pre-
discussed order between the AO and his Approving Authority before
its submission and in the combined approval letters, all the
Assessment Years being approved are also mentioned separately.
Therefore, in my view the Hon'ble High Court Courts did not quash
the such type of approval letters on this fact by itself but mainly for
the reason that the thought process of the Approving Authority and
the fact of having examined the draft assessment order and that it
was in accordance with law was not mentioned in the said approval
letter.
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6.14 My Ld. Sister, in para no. 23 of her order, also observes that
on the perusal of the approval letter dated 29.12.2019 of the Addl.
CIT, Central Range-7, New Delhi, no reference in regard to the draft
assessment order being sent for approval to the said Addl. CIT is
forthcoming from the said approval letter.However, this was a
matter of verification and my Ld. Sister could have ascertained this
fact by obtaining the forwarding letter of the AO as to whether the
draft assessment orders were forwarded along with the forwarding
letter of the AO or not. The Approving Authority in the present
casehas specifically mentioned in his approval letter that he has
approved the draft assessment orders.
6.15 Further, in this case, a search and seizure u/s 132 of the Act
was conducted in the case of the assessee and the JBM group cases
on 05.10.2017. Thereafter, a notice u/s 153A of the Act was issued
on 25.07.2019 asking the assessee to furnish its return of income
within 15days from the date of the receipt of the same. The return
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was, however, filed on 26.11.2019 almost after four months from
the issue of notice u/s 153A dated 25.07.2019. After the receipt of
the return, the notice u/s 143(2) of the Act was issued on
15.12.2019 fixing the case for hearing on 17.12.2019. The AO noted
in the assessment order that on the basis of findings of search and
seizure in this group, a detailed questionnaire under Section 142(1)
of the Act for AY 2008-09 to 2017-18 was issued in the name of the
assessee company on 07.10.2019 fixing the case for hearing on
18.10.2019.According to the AO, the assessee after repeated
adjournments and also noting the fact that the assessee did not
make compliance to the summons issued u/s 131 of the Act and
also did not participate in the post search investigation before the
Investigation Wing finally submitted its reply on 20.12.2019 to the
questionnaire dated 07.10.2019 in order to escape detailed scrutiny
and examination of relevant facts. The AO further noted that since
beginning the assessee has made all out efforts to corner the AO to
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the fag end of limitation period so that assessment may be finalized
without application of mind. The relevant observation of the AO in
para no.3 of the assessment order is reproduced as under:-
"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"
6.16 Further, the details of the non-compliance by the assessee
before the Investigation Wing as noted by the AO on page 102 of the
assessment order is reproduced as under:-
"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
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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 No.
Sh. Surendra Kumar 24.10.2017 259 Not complied
Arya 18.01.2018 536
29.03.2019 3177
2. Shri Nishant Arya 06.04.2018 35 Not complied
3. Sh. Anand Swaroop 24.10.2017 258 Not complied
Khandelwal 06.04.2018 34 Not complied
01.03.2019 2858 Not complied
12.03.2019 2948 Not complied
29.03.2019 3176 Not complied
4. Sh. Suresh Kumar 24.10.2017 259 Not complied
Mishra 26.12.2018 1983 Not complied
01.03.2019 2815 Not complied
12.03.2019 2945 Not complied
09.04.2019 12 Not complied
5. Sh. Prasahesh Arya 10.12.2018 1788 Not complied
01.03.2019 2862 Not complied
12.03.2019 2974 Not complied
29.03.2019 3175 Not complied
09.04.2019 11 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.
6.17 During the hearing on 20.12.2024 before us, on a specific
query, the Ld. AR submitted that there was no compliance during
the post search and seizureproceedings before the Investigation
Wing. During the said hearing, the ld. Counsel for the assessee was
informed that the reply to the questionnaire dated 07.10.2019 of
the AO during the 153A assessment proceedings was filed by the
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assessee on 20.12.2019, when the assessment was getting time
barred on 31.12.2019 leaving about 10 days time for the completion
of the time barring assessments andtherefore, the Ld. AR was
requested to inform how the case laws relied upon by the assessee
would be applicable to the facts of the case of the assessee
regarding the grant of mechanical approval u/s 153D of the Act by
the Addl. CIT to the respective assessment orders when there was
so little time left for finalizing the respective assessment orders. In
reply, the ld. AR submitted that the notice u/s 153A of the Act was
issued on 25.07.2019 and therefore the AO was in receipt of the
seized documents in July itself, whereas, the show cause notice was
issued on 07.10.2019 and therefore the delay was on the part of the
AO in issuing the questionnaire and the assessee needed
considerable time for the submission of the reply and the delay in
submission of the reply could not be attributed to the assessee.
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6.18 The above explanation of the assessee has been carefully
considered but not found to be acceptable. As noted above, the
assessee had made total non-compliance before the investigation
wing during the post search investigation.Further, it also delayed in
filing the return (filed on 26.11.2019)which was almost four months
after the issue of notice u/s 153A of the Act on 25.07.2019 and also
took almost 40 days to submit the reply to the detailed
questionnaire issued under Section 142(1) of the Act by the AO on
07.10.2019 leaving about 10 days time for completion of the time
barring of search and seizure assessment in the case of the
assessee. Normally, the AO waits for the return of income to be
filed by the assessee to see if the assessee discloses any undisclosed
income on the basis of incriminating materials found during the
course of search. Further, the AO is invariably busy with too many
time barring matters simultaneously but it cannot be denied that
the assessee will also not be busy in managing its own business
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affairs but on a trade off the assesseeknows its facts the best
because the incriminating materials are seized from the assessee's
premises and there is a presumption u/s 132(4A) of the Act and
section 292C of the Act that the books of accounts, other
documents, money, bullion jewellery or other valuable article or
thing belong or belongs to the person on whom the search was
conducted and the contents of such books of accounts were true.
Even though it is not mentioned in the said sections but if the
above two provisions are read together then the fact is the assessee
is the best person to know the contents and the implications of said
incriminating materials and the delay in submission of the reply
will raise a presumption that it is making an attempt to escape the
taxation of the undisclosed income on the basis of said
incriminating materials and to thwart any further enquiry in its
case by the AO during the search and seizure assessment
proceedings. In view of the above discussion, it is held that the
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assessee made non -compliance in order to escape scrutiny in this
case and this is also a distinguishing fact of this case and in view of
the fact that only 10 days was left for the completion of the
assessment proceeding from the date on which the assessee made
its final submission and therefore its plea that the approval u/s
153D given by the Approving Authority was mechanical can't be
accepted as similar facts were not before the Tribunal or the
Hon'ble Courtsin the cases relied upon by my Ld. Sister.
6.19 Moreover, on a closer look, the 67 assessment orders subject
matter of the present appeal and the 21 other appeals in Neel Metal
Products Ltd. decided by the Co-ordinate Bench of the Tribunal vide
order dated 09.07.2024 in ITA Nos.295 & others/Del/2021 shows
that there are mainly two issues which is common in all the orders
based on incriminating materials as per the facts stated in the
submission made by the assessee in its submission before us i.e.
addition on account of under invoicing and suppression of scrap
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sales. This is evident from in Para No.13 & 13.1 on page no.102
and 103 of the assessment order in the case of JBM Auto Systems
for Assessment Year 2008-09 where the computation of undisclosed
income for all the Assessment Years falling within the period of
section 153A has been calculated at a single place in a combined
manner. The said working on page nos. 102 and 103 of the
assessment order is reproduced as below:
"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:
Financi Entity Invoiced Value in Rs. Rate Unrecorded Actual Qty in ActualPr Under Under Unrecorded Total Addition
al Name Quantity in in Rs. Quantity kg. ice in invoicin Invoicing Sales (Qty) Rate + Qty
Year kg. @12% Rs. g @ 20% Value (Rate)
2007-08 IBM Auto 6348965 6802380 10.71 865768 7214733 13.39 2.68 17005952 11594967 28600920
Limited 9
2008-09 IBM Auto 5110084 7979149 15.61 696830 5806914 19.52 3.9 19947874 13600823 33548698
Limited 8
2009-10 JBM Auto 9778988 14931810 15.27 133349 1111248 19.09 3.82 37329527 25451950 62781476
Limited 6 8 7
2010-11 JBM Auto 1352860 26258111 19.41 184481 1537341 24.26 4.85 65645279 44758144 110403423
Limited 4 4 0 3
2011-12 JBM Auto 1487630 37398466 25.14 202858 1690489 31.42 6.28 93496167 63747387 157243554
Limited 7 8 7 4
2012-13 JBM Auto 1583855 40399328 25.51 215980 1799835 31.88 638 10099832 68862492 169860812
Limited 5 3 3 8 1
2013-14 JBM Auto 1651254 38062938 23.05 225171 1876425 28.81 5.76 95157347 64880009 160037356
Limited 8 7 1 9
2014-15 JBM Auto 1730850 41972900 24.25 2360250 1966875 30.31 6.06 10493225 71544716 176476967
Limited 1 2 1 1
2015-16 JBM Auto 1680012 30303296 18.04 2290926 1909105 22.55 4.51 75758240 51653345 127411585
Limited 5 0 1
2016-17 JBM Auto 2030599 33468159 16.48 2768999 2307499 20.6 4.12 83670398 57047999 140718396
Limited 5 2 4
2017- JBM Auto 2250137 48465122 21.54 30683702556974 26.92 5.38 12116280 82611003 203773808
18 Limited 5 0 6 5
158910047 3260416639 21669552 180579600 81510416 555752835 1370856995
1
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6.20 Therefore, though the number looks very large, but the
addition based on the incriminating materials as relied by the AO in
all the 67 appeals is common to all the assessee for all the
Assessment Years except for the variation in the figures/amounts.
This is also a distinct feature in the 67 appeals involved before us.
6.21. The approval letter of the Addl. CIT, Central Range-7, New
Delhi as reproduced on page nos. 7 and 8 of this order in the case
of M/s. JBM Auto Ltd. and M/s. Jai Bharat Maruti Ltd. which is
held to be mechanical approval by my learned sister is analyzed
below to show that the Approving Authority has mentioned the
relevant facts before signing the aforesaid two approval letters in
the said two cases. The relevant extracts of the said letter and my
analysis of the relevant contents in the said approval letter is
discussed as below:
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JBM Auto Ltd. Vs. ACIT, CC-25
Sr. Contents of the approval letter My remarks
No.
1. Approval is hereby accorded u/s 153D of The Approving Authority
the Income Tax Act, 1961 to the draft confirms giving approval
assessment orders to the draft assessment
order.
2. As amended in the following cases on the It happens during the
basis of the detailed discussion with you ongoing assessment
time to time proceedings because
very rarely the first draft
of any assessment order
becomes final in the first
draft.
3. Information available on record, The Approving Authority
is confirming that the
information available on
record has been taken
cognizance by him.
4. Facts mentioned in the Appraisal Report The AO is the custodian
and relevant seized documents seized of the seized records and
documents perused by you and brought to other material and it is
the notice of undersigned. his basic role that the
same will be perused by
him and will be brought
to the notice of the
Approving Authority for
necessary discussion.
5. Copies of the final assessment orders For record purposes.
should be forwarded to thisoffice
immediatelyafter passing the orders.
6. Proposal for retention of seized material For ensuring compliance
should also be forwarded to this office
within time as per IT Act, 1961.
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7. Before passing the final order, in case, For ensuring compliance
there is requirement of protecting the
interest of revenue, permission u/s 281B
from Pr. CIT(C)-3. New Delhi should be
taken
8. Office note indicating additions in relevant Normally, the 'office
assessment years should be indicated in all note-not for the assessee'
Assessment Years. is written by the AO at
the end of the
assessment order in
appropriate cases
wherein the AO gives the
reasons for not making
any addition which has
been recommended in
the appraisal report or if
any further inquiry was
required in that case or
for sharing of relevant
information available on
record which has a
bearing on the income in
the case of other
assessee(s) to their
respective AOs.
9. You have certified about perusal and To protect the security
verification of data seized in electronic and the sanctity of the
format through working copies having seized data .
certified hash values as that of original
hard drives/CDs/ pen drives/mobile data
& any other electronic data.
10. You have also certified to the undersigned For ensuring compliance
that all information available in
AIR/CIB/from other Law Enforcement
Agencies have been properly scrutinized by
you before finalizing the draft assessment
order.
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11. Please ensure that penalty is levied under For ensuring compliance
proper section of the Income Tax Act, 1961.
7. As per my understanding, my Learned Sister in holding the
view that the approval granted by the Addl. CIT, Central Range-7 in
this case was mechanical and bad in law is based upon her
impression that the draft assessment orders and the seized
materials and the other relevant materials are submitted by the AO
before the Approving Authority for the first time on the date on
which the AO submits the draft assessment orders for approval and
the Approving Authority has to see the correctness of the draft
assessment orders on the basis of the seized and other
incriminating material and to consider the explanation of the
assessee from ground zero which makes my Ld. Sister believe that it
is a humongous task and humanly impossible as in the present
case where the submission of the draft assessment orders by the
AO and the approvals by the Approving Authority happened on the
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same date which are the subject matters of the present 67 appeals.
However, as discussed above, the AO and the Approving Authority
are involved in the search and seizure assessment from the very
beginning of the case and even though the approval has been given
on the final day (or on the date on which the approval letter is
signed) but the thought process of framing the assessment order on
the issue(s) in a particular way after considering the findings in the
appraisal report and the materials available on record and after
considering the explanation of the assessee is a continuous
discussion process between the AO and the Approving Authority
before the final draft assessment order is put up by the AO before
the Approving Authority. Therefore, the view that the same being
approved by the Approving Authority on the same day or on a very
close by date and, therefore,it was a mechanical approval is not
acceptable since the Approving Authority knows before hand the
contents of the draft assessment order with respect to the addition
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being proposed in the draft assessment order or otherwise on a
particular issue which he and his AO firms up during the series of
discussion made between them before the submission of the draft
assessment order and its approval by the Approving Authority. It is
also quite well known to the assessees and their authorized
representative that the assessment units of the Income Tax
Department works very late beyond its office hours to complete its
time barring assessment, wherein the discussion between the AO
and his Approving Authorityhappens before the submission of the
draft assessment order in a search and seizure assessment case
and its approval by the Approving Authority and thereafter the
passing of the final assessment order before the limitation period in
a particular case.
8. In view of facts and discussion made hereinabove and more
particularly bringing the facts about the working of the
investigation and central charges and role of the AO, Appraisal
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Report and the role and the interaction of the AO and his Approving
Authority in putting up the draft assessment orders and its
approval and its passing of the final order more particularly
discussed in para nos. 5 to 5.9 of the order which were not before
the Hon'ble High Courts and the Co-ordinate Benches of the
Tribunal and, therefore, the judgements/orders based on non-
appreciation of the above facts relied upon by Ld. Sister is not
acceptable in the present case. Therefore, I do not agree with the
findings of my Ld. Sister and hold that the approval granted by the
Addl. CIT, Central Range, New Delhi vide letter dated 29.12.2019
has been given in a valid manner and in accordance with the
provisions of section 153D of the Act and as per law in the lead case
and other remaining cases which are subject matters of 67 appeals
before us.
9. Therefore, in view of the above facts and discussion, I don't
agree with decision arrived at by my learned sister in holding that
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the approval given by the Addl. CIT, Central Range-7, New Delhi
vide letter dated 29.12.2019 in all the cases which are subject
matters of 67 appeals before us are mechanical and bad in law and
consequently quashing the relevant assessment orders and treating
the issues raised in the assessee's appeals and the department's
appeal as academic and for which no orders are required to be
passed. Since, I have held that the approvals given by the Addl.
CIT, Central Range-7, New Delhi vide respective letters dated
29.12.2019 in all the cases which are subject matters of 67 appeals
before us are valid approvals under Section 153D of the Act and as
per law and, therefore, the other grounds raised in the 67 appeals
of the assessees as well as of the department on the merits of the
confirmation/deletion of the additions made in the respective
assessment orders do not remain academic and needs to be
deliberated upon and decided on its merits and, therefore, the case
may be fixed for hearing accordingly in due course of time.
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10. In the result, the applications made by the assessees under
Rule 27A challenging the validity of the respective approvals given
under Section 153D of the Act by the Addl. CIT, Central Cricle-7,
New Delhi vide his respective letters in all the 67 appeals are
dismissed.
PER VIKAS AWASTHY, JM
By the order of President, ITAT vide U.O. No.F.28- Cent.Jd(AT)/2025 dated 3rd July, 2025, the undersigned has been nominated as Third Member to adjudicate the difference of opinion between the ld. Judicial Member (JM) and ld. Accountant Member (AM) on the following questions:-
"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?"
2. Facts of the case in brief as emanating from records are: A search and seizure action u/s.132 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was carried out in the case of JBM Group on 05.10.2017. Consequent to the search action, P a g e | 112 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 assessments in the case of all group concerns, which inter alia include JBM Auto Ltd., Jay Bharat Maruti Ltd., Sunil Kumar Aggarwal, Neel Industries Pvt. Ltd., JBM Industries Ltd., and JBM Auto Ltd. (amalgamated company of M/s JBM Auto Systems Pvt. Ltd. and JBM MA Automotive Pvt. Ltd.), were made under sections 153A/153C of the Act for multiple assessment years. In the present set of 67 appeals by various group entities, 61 appeals are by the Department and 6 cross-appeals have been filed by the assessees. The details of the appeals are already given in the cause title.
3. The respondents/assessees in appeals by the Department have made Applications under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1962, raising a legal ground challenging validity of the assessments, alleging that approval accorded u/s.153D of the Act in the respective cases is mechanical, arbitrary and without there being any application of mind. Thus, the assessees are seeking quashing of the assessment orders for the impugned assessment years being null and void. Both sides have unanimously stated that the facts germane to the legal ground raised in the applications under Rule 27 are identical in all the appeals.
4. In so far as admission of the legal ground raised by the assessees/respondents under Rule 27 is concerned, the ld. Members were at consensus-ad idem thus, the legal ground raised by the assessees/respondents was admitted for adjudication. The difference of opinion between the ld. JM and the ld. AM is with regard to the manner of approval accorded by the Additional P a g e | 113 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 Commissioner of Income Tax (Addl. CIT) u/s.153D of the Act. The ld. JM, after examining the approval letters and referring to decisions of various Hon'ble High Courts on the issue, held the approval accorded by the Addl. CIT u/s. 153D to be mechanical in nature. Based on the said opinion, it was held that the assessment orders are liable to be quashed.
5. Au contraire, the ld. AM, after examining the same approvals was of the opinion that the same are valid and in accordance with the provisions of section 153D of the Act. Hence, there arose a difference of opinion on the issue of validity of approval u/s. 153D accorded by the Addl. CIT.
6. Shri Salil Aggarwal, Senior Advocate, appearing on behalf of the assessees, submits that the approvals u/s.153D of the Act in respect of 67 appeals under consideration are placed at page 1 to 7 of the paper book. The ld. Counsel submitted that a perusal of the approvals u/s.153D of the Act granted by the Addl. CIT would show that the approvals have been accorded on the same date on which the Assessing Officer (AO) forwarded the letters seeking approval. For example, in the case of JBM Auto Ltd., the AO forwarded a bunch of 11 cases for different assessment years on 29.12.2019 for approval and on the same date, the Addl. CIT accorded approval u/s.153D of the Act. Likewise, in the case of other assessees, the Addl. CIT granted approval under section 153D of the Act on the same date on which the AO forwarded the letters seeking approval. It is humanly impossible to examine the seized material, appraisal P a g e | 114 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 report in each case in such a short span of time and to accord approval under section 153D of the Act with proper application of mind.
7. The ld. Counsel submitted that the mechanical approval u/s.153D of the Act accorded by Addl. CIT is also evident from the fact that search was carried out in the case of JBM Group on 05.10.2017 and the AO sought approval for making assessment u/s.153A of the Act for AY 2008-09 which clearly falls beyond the period of six years from AY 2008-09 and the Addl. CIT(A) has granted approval for making assessment for AY 2008-09.
8. The ld. Counsel submitted that in the case of assessees group concern i.e. Neel Metal Products Ltd. in ITA No. 295/Del/2021 for AY 2010-11 and other group appeals, the assessee in appeal by the Revenue before Tribunal had moved an Application under 27 Rule, raising a legal ground challenging validity of approval accorded u/s.153D of the Act by the Addl. CIT, on identical ground that the approval is mechanical and without there being application of mind by the Superior Authority. The Coordinate Bench vide order dated 09.07.2024 after examining the approval came to the conclusion that since approval was accorded on the same date and even the final order was passed on the same date gives arise to a valid apprehension that there was complete non-application of mind and mechanical approval was granted by the higher authority. Accordingly, the issue was decided in favour of the assessee.
P a g e | 115 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25
9. The ld. Counsel submits that approval u/s.153D of the Act for multiple assessment years granted by the competent authority vide single non-speaking order on the same date on which the application is made by the AO for seeking approval is mechanical and without proper application of mind and thus, is liable to be quashed. To buttress his multi-faceted arguments on the issue, the ld. Counsel placed reliance on following decisions:-
(i) PCIT vs. Shiv Kumar Nayyar; 163 taxmann.com 9;
(ii) PCIT vs. Anuj Bansal; 165 taxmann.com 2;
(iii) PCIT vs. Sapna Gupta; 147 taxmann.com 288;
(iv) ACH vs. Serajuddin& Co.; 454 ITR 312;
(v) PCIT vs. Anuj Bansal; 165 taxmann.com 3;&
(vi) ACIT vs. Serajuddin& Co.; 163 taxmann.com 118.
10. He further pointed that in the case of Deeraj Chaudhary vs. ACIT in ITA Nos. 6158/Del/2018, 6159/Del/2018, 6160/Del/2018, 6214/Del/2018, 6215/Del/2018 & 6216/Del/2018, AYs. 2009-10 to 2014-15, decided on 12.09.2025, wherein identical issue assailing approval u/s.153D of the Act was raised by way of legal ground and their was difference of opinion between the Members, the Third Member concurring with the Judicial Member held that approval granted by the Addl. CIT u/s.153D of the Act is not sustainable in the eye of law being mechanical.
11. On the other hand, Shri Shlok Chandra, Special Counsel representing the Department, vehemently defending the approval under section 153D of the Act, submits that the approval was granted by the Competent Authority after examining appraisal report on 10.05.2019. The seized material was furnished by the AO P a g e | 116 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 before the Addl. CIT on 22.05.2019, and thereafter, the approval was granted on 29.12.2019. It is not a case where the approval was granted on the same date on which the letter was written by the AO seeking approval. The AO and the Addl. CIT were having constant discussion on seized material and appraisal report. It is thereafter, the approval was accorded by the Addl. CIT and the assessment order was passed by the AO. The ld. Special Counsel for the Department placing reliance on the decision in the case of PCIT vs. Agroha Fincap Ltd. in ITA No. 60/2024, decided on 16.10.2024 submitted that the Hon'ble Delhi High Court has distinguished between the approval granted in a single word "approved" and where the approval has been granted with the expression "Yes I am satisfied". The Hon'ble High Court has held that the use of mere expression "approved" says nothing and cannot be considered as application of mind, whereas, the satisfaction recorded with the words "Yes I am satisfied" shows application of mind. The said expression satisfies the mandate of section 151A of the Act. Hence, such approval cannot be held to be mechanical. The ld. Special Counsel further placed reliance on the decision rendered in the case KK Leisure & Tourism International (P) Ltd. vs. DCIT, (2025) 8 TMI 541, ITAT Cochin and in the case of Yamini Kapoor vs. DCIT, 171 taxmann.com 247 (Delhi-Trib.) where the approval u/s.153D of the Act was held to be valid.
11. The ld. Special Counsel further submitted that initial burden to prove that the approval is improper lies on the assessee. In the present case, the assessee has failed to discharge such onus. The P a g e | 117 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 Addl. CIT while according approval u/s.153D of the Act has considered information available on record, appraisal report and the seized material. It is thereafter, the Addl. CIT has granted approval u/s.153D of the Act. Therefore, it cannot be said that the Addl. CIT has not examined the relevant material or has not applied mind before granting the approval.
11.2. The ld. Special Counsel submitted that the facts in the case of PCIT vs. Anuj Bansal (supra) are distinguishable. In the said case, there were blatant errors in the approval granted u/s. 153D of the Act; hence, the approval was rightly held to be invalid. Whereas, in the present case, there are no such errors in the approval. The ld. Special Counsel for the Department, while concluding his submissions placed reliance on findings of the ld. AM in paras 7 to 9 of his dissenting opinion.
12. Rebutting the submissions made on behalf of the Department, Shri Salil Aggarwal asserted that the decision referred to by the ld. Special Counsel for the Department in the case of Agroha Fincap Ltd. (supra) is distinguishable. It is also per incuriam, as while rendering the judgment in the case of Agroha Fincap Ltd.(supra), the Hon'ble High Court has not consider the prior judgment in the case of Vinod Kumar Solanki vs. ACIT, reported as 166 taxmann.com 71 (Delhi). The Hon'ble High Court, in the said case, has held that granting of approval/sanction by the competent authority is neither an empty formality nor a mechanical exercise. Where there is no whisper as to what material had weighed with the authority in P a g e | 118 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 granting approval, such sanction or approval does not fulfil the requirement of section 151 of the Act. With regard to the submissions made by the ld. Special Counsel that, before passing the assessment order, the competent authority granting approval had examined the appraisal report, seized material, etc., the ld. Counsel pointed that during the course of hearing of appeal, an opportunity was granted to the Department to furnish any material or correspondence containing discussion notes between the AO and the Addl. CIT with respect to the assessment order approved by the Addl. CIT. However, the Department failed to produce such material, stating that it forms part of internal records and cannot be shared. Now, the Department in absence of any cogent material cannot argue that there was discussion between the AO and the Addl. CIT before granting approval under section 153D of the Act and that the seized material was examined by the Addl. CIT before granting approval. He further pointed that, in any case, the Department, during the course of hearing of appeal, never raised this plea that the appraisal report/seized material, etc. was examined by the Addl. CIT before according approval under section 153D of the Act. The ld. Counsel for the assessee, while concluding his submissions, placed reliance on findings of the ld. JM in paras 13 to 15 of the proposed order.
13. A specific query was raised by the Bench to the ld. Special Counsel for the Department regarding his arguments that the assessment order was passed by the AO in consultation with the Addl. CIT, juxtapose to the law explained by the Hon'ble High Court P a g e | 119 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 in the judgment rendered in the case of FinDoc Finevest Pvt. Ltd. vs. DCIT, 172 taxmann.com. 773 (Punjab & Haryana High). In response to the said query, the ld. Special Counsel furnished written submissions as under:
"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."
14. The issue under reference is the validity of the approval under section 153D of the Act granted by the Addl. CIT. Before proceeding further, it would be relevant to refer to one such approval accorded by the Addl. CIT u/s. 153D of the Act on 29.12.2019. The same is reproduced herein below:-
P a g e | 120 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 The approvals under section 153D of the Act in the cases of other respondents/assessees are identically worded and are in identical manner i.e. single approval for multiple assessment years.
15. Submissions made by rival sides heard, documents and decisions on which both sides have placed reliance considered. A P a g e | 121 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 bare perusal of the approval u/s.153D of the Act reproduced here in above would show that Addl. CIT has not examined or perused the appraisal report, seized material and any other document available on record. The Addl. CIT in the said approval has categorically stated, "on the basis of detailed discussion with you time to time, information available on record, facts mentioned in the Appraisal Report and relevant seized documents perused by you and brought to the notice of undersigned". This clearly shows that the relevant seized documents and Appraisal Report were never examined by the Addl. CIT. The Addl. CIT only on the basis of information brought to his notice by the AO has accorded approval. To put it in other words, the Addl. CIT merely on the basis of hearsay has accorded the approval without examining relevant seized documents, facts mentioned in the appraisal report and the information available on record. The manner in which approval has been accorded clearly shows that the approval has been reduced merely to the level of formality instead of a structural safeguard against arbitrary exercise of power as envisaged under the Act. The Courts have repeatedly emphasized that the competent authority granting approval must considered the relevant material placed before it and form an independent opinion. A meaningful safeguard as provided under the provisions of section 153D of the Act has been reduce to ritualistic exercise by the Addl. CIT while granting the approval.
16. In the case of ACIT vs. Serajuddin& Co. (supra), the Department assailed findings of the Tribunal in holding approval P a g e | 122 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 u/s.153D of the Act invalid, as the approving authority had not applied its mind for giving approval. Following submissions were made on behalf of the Department as under:-
"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 P a g e | 123 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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."
The Hon'ble High Court after examining provisions of section 153D of the Act held, that a plain reading of section 153D of the Act itself makes its abundantly clear that the legislative intent was to obtain "prior approval" by the AO when he is below the rank of a Joint Commissioner, before he passes an assessment order or reassessment order u/s. 153A or 153B of the Act. Such an approval of a Superior Officer cannot be a mechanical exercise. Where the approval is granted mechanically it would vitiate the assessment order itself. The Hon'ble High Court further after considering Manual of Office Procedure issued by the CBDT in February 2003 and the decisions rendered by the Hon'ble Supreme Court of India in the case Sahara India (Firm) vs. CIT, 169 Taxman 328, Rajesh Kumar vs. DCIT, 157 Taxman 168 and the decision of Hon'ble Delhi High Court in the case of Yum Restaurant Asia Pte. Ltd. Vs. DIT, 99 taxmann.com 457 held as under:
"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 P a g e | 124 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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] The aforesaid decision of Hon'ble Orissa High Court was upheld by the Hon'ble Apex Court, as the SLP filed by the Department i.e. ACIT vs. Serajuddin& Co., 163 taxmann.com 118 against the said decision was dismissed.
17. The Hon'ble Jurisdictional High Court in the case of PCIT vs. Anuj Bansal (supra) in a similar case where validity of approval u/s.153D of the Act was held to be invalid by the Tribunal for want of application of mind by the approving authority, and the Department carried the issue in appeal before the Hon'ble High court, the Hon'ble Court held that where the ACIT granted approval u/s.153D of the Act without noticing discrepancy in the assessment order or search material such a mechanical approval without application of mind would be in valid in eyes of law. In the instant case, the Addl. CIT has granted approval without realizing the fact P a g e | 125 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 that the AO has sought approval in some of the case which are beyond period of limitation.
Thus, the approval granted by the Addl. CIT u/s.153D of the Act was absolutely without application of mind and mechanical.
18. In the case of PCIT vs. Shiv Kumar Nayyar (supra), the substantial question of law for consideration of Hon'ble Delhi High Court was:-
"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?"
The Hon'ble High Court after examining provisions of section 153D of the Act held as under:
"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 P a g e | 126 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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]
19. The Hon'ble High Court also placed reliance on the decision rendered in the case of ACIT vs. Serajuddin& Co. (supra) and also noted the fact that the SLP preferred by the Revenue in the case of Serajuddin& Co. (supra) was dismissed by the Hon'ble Supreme Court of India. The Hon'ble High Court noted that the approval was granted on the same day when the draft assessment order was sent for approval by the AO, as are the facts in the present set of appeals. The Hon'ble High Court on such single approvals for multiple assessment years observed as under:-
"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 P a g e | 127 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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."
20. The Third Member decision in the case of Deeraj Chaudhary vs. ACIT in ITA Nos. 6158/Del/2018, 6159/Del/2018, 6160/Del/2018, 6214/Del/2018, 6215/Del/2018 & 6216/Del/2018, AYs. 2009-10 to 2014-15, decided on 12.09.2025, wherein there was difference of opinion on similar set of facts, the Third Member opined as under:-
"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 P a g e | 128 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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 P a g e | 129 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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."
21. The law as emerges from the decisions referred above is unambiguous that approval u/s.153D of the Act is not merely a formality but substantive condition ensuring exercise of power by the superior competent authority for independent scrutiny at a higher level. The provision of section 153D of the Act casts responsibility on the approving authority to accord approval only after examination of the relevant material and not as an ornamental approval. The provisions of section 153D of the Act are inbuilt jurisdictional safeguard which should not be reduced merely to a ritualistic exercise.
22. The ld. Special Counsel for the Department has argued that the AO before passing assessment order was in constant discussion with the Addl. CIT. Thus, the Addl. CIT was always in the loop and was aware of the facts of the case. I find that similar submissions P a g e | 130 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 were made by the Revenue in the case of PCIT vs. Shiv Kumar Nayaar (supra) and in the case of FinDocFinvest (P) Ltd. vs. DCIT (supra). Though, the ld. Special Counsel has tried to distinguish the aforesaid decision, but I am of considered opinion that the ratio laid down in the case of FinDocFinvest (P) Ltd. vs. DCIT (supra) squarely applies on the facts of the case and the arguments raised on behalf of the Department. The Hon'ble High Court emphasizing independence of Assessing Officer in passing the assessment order held as under:-
"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 P a g e | 131 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 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."
[Emphasized by us] Thus, the argument by Special Counsel for the Department that the assessment order was passed in consultation/coordination with the Addl. CIT would itself makes the assessment order invalid. as such assessment order is passed in violation of fundamental concept of independence of the AO in framing the assessment.
23. The ld. Special Counsel for the Revenue has placed reliance on the decision in the case of PCIT vs. Agroha Fincap Ltd. (supra), to contend that the expression "Yes I am satisfied" are sufficient to show that the approving authorities has applied its mind and approval is not mechanical. In the instant case, it is apparent from the approval u/s.153D of the Act accorded by the Addl. CIT that there is no whisper that he has examined the documents and has nowhere in the approval u/s.153D of the Act has expressed his satisfaction while granting the approval. Therefore, the decision rendered in the case of PCIT vs. Agroha Fincap Ltd. (supra) does not support the cause of Revenue.
The ld. Special Counsel for the Revenue has also placed reliance on decision in the case of KK Leisure & Tourism International (P) Ltd. vs. DCIT (supra). I find that the Division Bench of the Tribunal in the said case has not expressed any opinion on the issue. In fact, the Bench has expressed its inability to judge P a g e | 132 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 whether the approval was mechanical or not in the absence of relevant material. Further, the Special Counsel has placed reliance on the decision in the case of Smt. Yamini Kapoor vs. DCIT (supra). I find that complete facts are not emerging from the said order of the Division Bench on the basis of which approval has been held to be valid. Hence, no reliance can be placed on the said decisions.
24. In the present case, the ld. JM after examining approvals u/s.153D of the Act accorded by the Addl. CIT, judicial precedents on the issue and the other material available on record has quashed the approval and the consequent assessment proceedings. Whereas, the ld. AM has expressed his dissenting opinion primarily emphasizing on the procedural aspect of granting approval and inter-se communication between AO and the Addl. CIT before grating approval. As recorded in the preceding paragraphs, the Revenue has not brought on record any material whatsoever to substantiate that at any point of time appraisal report or the relevant seized material was forwarded by the AO to the Addl. CIT before according approval u/s. 153D of the Act. Nor it is emanating from the records made available to the Bench that the Appraisal Report, relevant seized material or other relevant documents were examined/perused by the Addl. CIT before according approval.
29. In light of above discussion and the legal position, I answer the question referred as under:-
Question framed by the Bench Answer to the Questions
1. As to whether under the present In the given facts of the case and the facts and circumstances of the legal position, I am of considered matters whether the assessment opinion that the approvals u/s.153D P a g e | 133 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 orders based on the erroneous, non- of the Act accorded by the Addl. CIT speaking orders of approval under on 29.12.2019, 30.12.2019, section 153D of the Income Tax Act, 26.02.2021. 07.04.2021 dated 29.12.2019 issued by the Ld. &19.04.2021 are mechanical and Addl. CIT are sustainable in the eyes fails to qualify the test of valid of law or not. approval u/s.153D of the Act. Hence,
2. Whether in the facts and the approvals (supra) are not in circumstances of the case, the accordance with law.
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?
30. In view of the above, I concur with the view of ld. JM in quashing the impugned assessments.
31. The matter now be placed before the regular Bench for passing appropriate orders, in accordance with the majority opinion.
PER MUDHUMITA ROY, JM This bunch of cross appeals preferred by the respective parties are against the orders passed by the Ld. Commissioner of Income (A) of the respective zones, arising out of the orders passed by the Assessing Officer under Sections 153A/143(3) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act') for Assessment Years 2008-09 to 2018-19 respectively in respect of different assessees.
P a g e | 134 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 Since, common question of law and common grounds of appeals are raised in all the matters, these are heard analogously and are being disposed of by a common order for the sake of convenience.
2. After hearing the appeals preferred by the respective parties theJudicial Member allowed the legal issue as supported by the assessees in their applications under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1962 preferred in the appeals filed by Revenue on which the assessees were granted relief by the order passed by the Ld. CIT(A) raising the ground of approval under Section 153D of the Act is not sustainable since the same is mechanical in nature and consequently upheld the order passed by the Ld. CIT(A).
3. The Accountant Member opined otherwise and wrote a separate order dismissing such ground as raised by the assessees before the Ld. CIT(A). On account of difference of opinion between the Members constituting the Bench, a reference was made to the P a g e | 135 67 Appeals, JBM Auto Ltd. Vs. ACIT, CC-25 Hon'ble President ITAT under Section 255(4) of the Act. The Hon'ble President by and under the order dated 03.07.2025 nominated the Third Member to decide the reference. The Ld. Third Member by and under the order dated 13.04.2026 concurred with the view of the Judicial Member. Consequent to the opinion of the Third Member, appeals of the assesseesare allowed by quashing the impugned assessments and the Revenue appeals, therefore, having no legs to stand on are dismissed.
Order pronounced in the open on 20.04.2026
Sd/- Sd/-
(Brajesh Kumar Singh) (Madhumita Roy )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated 20.04.2026
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI