Income Tax Appellate Tribunal - Raipur
Sharda Steel Traders, Raipur,Raipur vs Acit/Dcit, Central Circle-2, Raipur, ... on 21 May, 2025
आयकर अपीलीय अिधकरण, रायपुर ायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी पाथ सारथी चौधर , ाियक सद एवं ी अ ण खोड़िपया, लेखा सद के सम ।
BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI ARUN KHODPIA, AM
आयकर अपील सं . / ITA Nos: 111, 112, 113, 114, 115 & 116/RPR/2025
(िनधारण वष Assessment Years: 2008-09, 2009-10, 2010-11,2011-12, 2012-13, 2014-15 )
Sharda Steel Traders, v Assistant Commissioner of Income Tax/
Near Dena Bank, Jawahar Nagar, s Deputy Commissioner of Income Tax,
Raipur- 492 001, Chhattisgarh Central Circle 2, 8th Floor, Sector 21,
Naya Raipur, C.G. 492 101
PAN: AAKFS2592K
(अपीलाथ /Appellant) . ( थ / Respondent)
.
िनधा रती की ओर से /Assessee by : Shri Praveen Jain, CA &
Shri Divyavijay Singh Vaid, CA
राज की ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR
सु नवाई की तारीख / Date of Hearing : 22.04.2025
घोषणा की तारीख/Date of Pronouncement : 21.05.2025
आदे श / O R D E R
Per Bench:
The captioned appeals by the assessee are instituted to assail the orders of
Commissioner of Income Tax (Appeals), Raipur-3 [in short "Ld. CIT(A)"],
passed under section 250 of the Income Tax Act, 1961 (in short "the Act")
Assessment Years (AY) from 2008-09 to 2014-15, which in turn arises from
the common order passed by Assistant Commissioner of Income Tax
(Central)-2, Raipur u/s 153A/143(3) of the Act, dated 15.03.2016 for all the
referred AY's.
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ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
2. The details of impugned orders assailed before us, are as under:
Appeals No. AY's Dates of impugned Common order passed
orders passed by Ld. by Ld. AO
CIT(A)
ITA No. 2008-09 12.12.2024
111/RPR/2025
ITA No. 2009-10 12.12.2024
112/RPR/2025 ACIT, Central-2, Raipur,
ITA No. 2010-11 12.12.2024 u/s 153A/143(3) of the I.T.
113/RPR/2025 Act, 1961, dated
ITA No. 2011-12 13.12.2024 15.03.2016
114/RPR/2025
ITA No. 2012-13 16.12.2024
115/RPR/2025
ITA No. 2014-15 09.01.2025
116/RPR/2025
3. At the outset, it is apprised by the Ld. Counsel of the assessee that the
issues involved in the present appeals are common, interconnected and
interwoven, inter alia arises from common order passed by Ld. AO, having
identical facts for the years under consideration. Accordingly, for the sake of
brevity all these matters are taken up together for hearing and are disposed of
under this common order.
4. In order to adjudicate the issues involved in the aforesaid appeals, ITA
No. 111/RPR/2025 for the AY 2008-09 has been taken up as the lead matter,
wherein our observations and decision shall apply mutatis mutandis to the
remaining appeals, i.e., ITA No. 112 to 116/RPR/2025.
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ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
5. The grounds of appeal raised by the assessee in ITA No.
111/RPR/2025 For AY 2008-09, challenging the impugned order, are extracted
as under:
1. Ground 1: That Ld. AO erred in making adhoc addition of Rs. 56,500/- under
various heads without properly appreciating the submission of the Assessee
and CIT(A) erred in sustaining the same. The disallowance is bad in law,
against law of natural justice and uncalled for and may kindly be deleted.
2. Ground 2: That Ld. AO erred in making an addition of Rs. 80,660/- as
Commission income on the basis of presumptions without properly
appreciating the submission of the Assessee and CIT(A) erred in sustaining
the same. The addition is bad in law, against law of natural justice and
uncalled for and may kindly be deleted.
3. Ground 3: That Ld. AO erred in making an addition of Rs. 800/- on account
of difference in purchase from Prakash Industries Ltd. on the basis of
presumptions without properly appreciating the submission of the Assessee
and CIT(A) erred in sustaining the same. The addition is bad in law, against
law of natural justice and uncalled for and may kindly be deleted.
4. Ground 4: That on the facts and on the circumstances of the case,
disallowance/ addition made in Assessment Order passed by the Ld. AO is
opposed to facts and law on several grounds without Proper application of
Mind. The disallowance/ addition is bad in law, against law of natural justice
and uncalled for and may kindly be deleted.
5. Ground 5: That AO issuing the notice and AO making the assessment did
not had proper jurisdiction. Thus, entire assessment is bad in law and CIT(A)
erred in dismissing the case.
6. Ground 6: That Assessment has been done without proper approval, hence
entire assessment is bad in law.
7. Ground 7: That on the fact and on the circumstances of the case, Ld. AO
erred in initiating penalty proceedings u/s 271(1)(c).
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
8. Ground 8: The assessee craves leave to add, urge, alter or withdraw any
ground/s before or at the time of hearing of this appeal.
6. The brief facts of the case are that the assessee is a partnership firm,
engaged in trading of Iron and Steel items. During the financial year 2013-14, a
Search & Seizure Action u/s 132 of the Income Tax Act was conducted on the
business premises of the assessee firm on 29.03.2014. After completion of
Search & Seizure procedure, notices u/s 153A for the subjected AY's are issued
on 01.06.2015, in response to which assessee filed returns of income for the
subject AY's, detailed as under:
A.Ys. Date of Returned Date of Income Income Additional
filing of Income (Rs.) filing of declared in voluntarily Income
return u/s return by the return u/s disclosed offered by
139(1) assessee 153A(Rs.) during the the assessee
against search (Rs.) (Rs.)
notice u/s
153A
2008-09 29.09.2008 523240 20.10.2015 523240 Nil Nil
2009-10 30.09.2009 856060 20.10.2015 856060 Nil Nil
2010-11 27.09.2010 923110 20.10.2015 923110 Nil Nil
2011-12 29.09.2011 1270150 20.10.2015 1270150 Nil Nil
2012-13 30.09,2012 6984210 20.10.2015 6984210 Nil Nil
2013-14 27.09.2013 17597520 20.10.2015 17597520 Nil Nil
2014-15 30.11.2014 25060 - - - -
7. Subsequently, statutory notices u/s 143(2) and u/s 142(1) along with
detailed questionnaire are issued. In compliance, counsel of the assessee
attended the office of Ld. AO from time to time and have furnished written
submission with supporting documents, which were perused and placed on
record by the Ld. AO. After deliberating upon the submissions of assessee, Ld.
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AO observed certain discrepancies and have pointed out certain issues qua the
returned income of the assessee, therefore, have made following additions:
(i) Sustained the additions made in the regular assessment u/s 143(3),
which were not assailed by the assessee by way of an appeal before
the First Appellate Authority,
(ii) Addition on account of mismatch of the figures in the ledger account of
Prakash Industries Limited (PIL) viz-a-viz amounts furnished by the
assessee in its books of accounts,
(iii) Addition on account of difference in physical cash found during the
Search & Seizure Action and recorded cash as per books of accounts,
(iv) Addition on account of loose paper sheet (LPS) seized from the
business premises of the assessee, treated as incriminating
documents by the Ld. AO, and
(v) Interest reflecting in Form 26AS.
8. Specifying all the aforesaid reasons / disputes, the additions are made
in the returned income of the assessee for different assessment years, the same
have been summarised in the assessment order, as follows:
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
12. In view of the discussion made in the preceding paras, the income of the assessee
firm for A. Ys. 2008-09 to 2014-15 is computed as under:
A.Y. Section Returned Addition Para Assessed Round off
Income (Rs.) discussed Income (Rs.) (Rs.)
(Rs.) (Rs.)
2008-09 153A/143(3) 523240 56,500 6 6,61,200 6,61,200
80,660 11.3
800 11.4.1
2009-10 153A/143(3) 856060 10,10,152 11.3 27,50,684 27,50,680
8,84,472 11.4.1
2010-11 153A/143(3) 923110 25,000 6 29,66,078 29,66,080
20,17,968 11.3
2011-12 153A/143(3) 1270150 5,49,292 11.11 18,19,442 18,19,442
2012-13 153A/143(3) 6984210 18,19,953 11.3 88,11,115 88,11,120
6,952 11.10
2013-14 153A/143(3) 17597520 16,25,000 11.12 1,98,10,941 1,98,10,940
5,88,421 11.9
2014-15 143(3) 25060 17,91,475 11.3 2,26,65,058 2,26,65,060
3,07,790 11.5
69,33,535 11.6.1
65,00,000 11.7.1
71,07,198 11.8
9. Aggrieved with the aforesaid additions, assessee preferred an appeal
before the Ld. CIT(A), however, the submissions / contentions / explanations
furnished by the assessee could not found to be satisfactory or convincing by
the First Appellate Authority, therefore, the appeals of assessee are dismissed
and the additions made by the Ld. AO are sustained.
10. Being dissatisfied with the decision of Ld. CIT(A), assessee preferred
to avail the further remedial course of action available, therefore, had filed the
appeals before us, which are under consideration in the present matters.
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
11. While initiating the arguments, Shri Praveen Jain, C.A. representing
the assesse (in short "Ld. AR"), submitted and requested to first deliberate upon
the legal / technical ground raised by the assessee i.e., ground no. 6 of the
appeal which is common for all the years that the assessment was completed
without obtaining proper / valid approval u/s 153D. To explain the issue, Ld. AR
furnished a copy of approval u/s 153D along with synopsis regarding aforesaid
technical ground. The submissions of assesse are extracted hereunder for the
sake of completeness and to deliberate upon the issue:
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12. Ld. AR on the aforesaid issue have placed reliance on the following
judgments and have read out the observations of Hon'ble Courts therein, the
relevant part from the judgments referred to is extracted hereunder for the sake
of testing the applicability of the ratio laid down, on the facts in the present case:
Assistant Commissioner of Income Tax VS M/s Serajuddin Co.
Kolkata (2023) 454 ITR 0312 (Orissa), wherein Hon'ble Orissa High
Court in the present context have referred to the judgments by Hon'ble
Apex Court in the case of (i) Rajesh Kumar vs DCIT (2007) 2 SCC 181
(SC) and (ii) Sahara India (Firm) Lucknow v. Commissioner of
Income Tax (2008) 300 ITR 403 (SC) and have observed as under:
15. A plain reading of Section 1530 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
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required to consider the matter and not at a subsequent stage, viz., after the approval is
given."
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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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
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 Syfonia Tradelinks 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.
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 1588G 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
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
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.
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 30 th
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 378 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
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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.
M/s Akshata Realtors Private Limited vs ACIT, Central Circle-2,
Raipur in IT(SS)A No. 09/RPR/2018 dated 27.03.2023, wherein the
coordinate bench of ITAT, Raipur has decided this very issue after
discussing various judgments of the Hon'ble Courts and have observed
as under:
14. We have considered the rival submissions and perused the record carefully. The issue
before us is to decide as to whether the assessment framed by the AO u/s.153A r.w.s.143(3) of
the Act after getting approval from the JCIT, Range-Central, Raipur in view of the provisions
of Section 153D of the Act, is valid and sustainable or not, as has been raised by the ld. AR of
the assessee during the course of hearing in the form of additional ground. On perusal of the
assessment order we found that the AO has made addition u/s.56(2)(vii) of the Act under the
head income from other sources as the assessee could not explain the source and details of the
investment made by the assessee in M/s Crest Steel and Power Ltd. and Topworth Pipes and
Tubes Pvt. Ltd. in different financial years. Before passing the assessment order, the AO has
sought approval from the JCIT, Range-Central, Raipur vide letter dated 03.11.2016 in the case
of the assessee along with other assessees. The JCIT, Range- Central, Raipur has approved the
draft assessment orders u/s.153A r.w.s.143(3) of the Act vide letter dated 08.11.2016.
Consequently, the AO has passed assessment order on 08.11.2016. On perusal of the approval
given by the JCIT, Range-Central, Raipur, we found that the JCIT has given approval only on
the basis of presumption that the AO after giving proper opportunity to the assessee, thoroughly
verified the seized material and proposed for making addition, which in our opinion, without
looking into the complex facts of the search assessment has been approved in a mechanical
manner. Even the CIT(A) has also overlooked this technical error in the assessment order.
Further, it is not clarified as to whether the assessment record in the case of the assessee has
been seen by the JCIT or not. Therefore, the approval granted by the JCIT, Range-Central,
Raipur in the case of the assessee is merely technical approval just to complete the formality
and without application of mind as there was no examination of the seized documents, only on
the presumption the approval cannot be granted. Thus, we hold the approval under section
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153D of the Act has been granted in the case of the assessee was without application of mind,
the same is invalid, bad in law and liable to be quashed.
15. Reliance can be placed on the case law relied on by the ld. AR of the assessee, in the
following cases :-
(i) Pr.CIT v. Subodh Agarwal in I.T.Appeal No.86 of 2022 (Date of Judgment:
12.12.2022) (Allahabad HC):
"The approval of draft assessment order being an in-built protection against any arbitrary
or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical
exercise, without application of independent mind by the Approving Authority on the
material placed before it and the reasoning given in the assessment order. It is admitted by
Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is
an administrative exercise of power on the part of the Approving Authority but it is sought
to be submitted that mere fact that the approval was in existence on the date of the passing
of the assessment order, it could not have been vitiated. This submission is found to be a
fallacy, in as much as, the prior approval of superior authority means that it should appraise
the material before it so as to appreciate on factual and legal aspects to ascertain that the
entire material has been examined by the Assessing Authority before preparing the draft
assessment order. It is trite in law that the approval must be granted only on the basis of
material available on record and the approval must reflect the application of mind to the
facts of the case. The requirement of approval under Section 153D is pre-requisite to pass
an order of assessment or re- assessment.
Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint
Commissioner in respect of "each assessment year" referred to in Clause (b) of 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).
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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.
In the instant case, the draft assessment order in 38 cases, i.e. for 38 assessment years placed
before the Approving Authority on 31.12.2017 was approved on same day i.e. 31.12.2017,
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 38 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.
(ii) Pr.CIT v. Sapna Gupta in I.T.Appeal No.88 of 2022 (Date of Judgment: 12.12.2022) 2022
(12) TMI887 (Allahabad HC), wherein the similar findings were offered by the Hon'ble High
Court of Allahabad as in the case of Subodh Agrawal (supra) and held as under :-
Search and seizure-Assessment under s. 153A-Approval under s. 153D-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
approving authority before preparing the draft assessment order-In the instant case, the draft
assessment orders in 123 cases placed before the approving authority on 30th Dec., 2017 and
31st Dec., 2017 were approved on 31st Dec., 2017, which not only included the cases of
assessee but the cases of other groups as well-It is humanly impossible to go through the
records of 123 cases in one day to apply independent mind to appraise the material before the
approving authority-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-No
substantial question of law arises for consideration
(iii) M/s.Goyal Energy & Steel Pvt. Ltd. v. ACIT, CC-2, Raipur in ITA No.240 to
243/RPR/2019 (Date of Order : 17.09.2021) (ITAT Raipur), wherein the approval granted by
the JCIT was identical to the approval granted in the case of the present assessee, held as
under :
22. On careful perusal of the approval order of JCIT, we find that the JCIT while
granting approval on 22.12.2018 recorded that " it is presumed that the AO has - given proper
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
opportunity of hearing to the assessee, thoroughly verified the seized material and that there is
no adverse finding, satisfy himself that all issues emanating from the record have been verified
and additions wherever required have been proposed."
23. Before us, the ld AR for the assessee vehemently argued that JCIT has granted
approval under section 153D in a casual and mechanical manner and without any application
of mind and that from the communication made to the JCIT by AO vide letter dated 14.12.2018,
the AO had not made any iota of reference as to what are the seized materials nor furnishes any
assurance with respect to approval and appraisal of all evidences and corresponding reply by
the assessee. And that ld. JCIT approved the assessment order by presuming that the necessary
opportunity has been given to the assessee and all the records, evidences and materials have
been thoroughly verified. The JCIT granted bulk approval of 95 assessment orders which
clearly defeats the intent and purpose behind insertion of section 153D brought in the statute
by the Finance Act, 2007.
24. We find that the ld. JCIT while granting approval, presumed that Assessing Officer
has given proper hearing to the assessee and thoroughly verified seized material and there are
no adverse findings, satisfied himself that all the issues emanating from the records have been
verified and additions wherever required have been proposed. We further find that there is no
independent application of mind on the part of ld.JCIT while granting the approval.
25. We find that coordinate bench of Mumbai Tribunal while considering the similar
ground of appeal in granting bulk approval of the assessment under section 153A, in case of
Arch Pharmalabs Ltd Vs ACIT (supra) held that the approval accorded under section 153D is
without any occasion to refer to the assessment records and seized material, if any,
incriminating the assessee and hence such approval is in the realm of an abstract approval of
draft assessment orders which was unsubstantiated and unsupported and consequently suffered
from total non-application of mind. The relevant part of the order is extracted below;
"11.5 At the cost of repetition, it may be reiterated that in the instant case, approving
authority did not mention anything in the approval memo towards his/ her process of
deriving satisfaction so as to exhibit his/her due application of mind. We may observe
that Para 2 of the above approval letter merely says that "Approval is hereby
accorded u/s. 153D of the Income-tax Act, 1961 to complete assessments u/s. 143(3)
r.w.s. 153A of the I.T. Act in the following case on the basis of draft assessment
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
orders..."which clearly proves that the Addl. CIT had routinely given approval to the
AO to pass the order only on the basis of contents mentioned in the draft assessment
order without any application of mind and seized materials were not looked at and/or
other enquiry and examination was never carried out. From the said approval, it can
be easily inferred that the said order was approved, solely relying upon the implied
undertaking obtained from the Assessing Officer in the form of draft assessment order
that AO has taken due care while framing respective draft assessment orders and that
all the observations made in the appraisal report relating to examination /
investigation of seized material and issues unearthed during search have been statedly
considered by the AO seeking approval. Thus, the sanctioning authority has, in effect,
abdicated his/ her statutory functions and delightfully relegated his/her statutory duty
to the subordinate AO, whose action the Additional CIT, was supposed to supervise.
The addl. CIT in short appears to have adopted a short cut in the matter and an
undertaking from AO was considered adequate by him/ her to accord approval in all
assessments involved. Manifestly, the Additional CIT, without any consideration of
merits in proposed adjustments with reference to appraisal report, incriminating
material collected in search etc. has proceeded to grant a simplicitor approval. This
approach of the Additional CIT, Central has rendered the Approval to be a mere
formality and ca not be countenanced in law.
26. Similar view was taken by Coordinate bench of Delhi Tribunal in Sanjay Duggal &
others (supra).
27. So far as the contention of ld CIT-DR that the assessment under section 153A is passed
under the supervision of JCIT and that JCIT granted approval of the draft assessment after
considering the material placed before him. We do not find any such satisfaction in the approval
order that draft assessment after considering the material placed before him, rather the ld JCIT
recorded that it is presumed that the AO granted proper opportunity to the assessee etc...
28. In view, of aforesaid discussion and respectfully following the decisions of
coordinate benches in Sanjay Duggal & others (supra) and Archpharma Labs & Acrh Impex P
Ltd (supra), we find convincing force in the submissions of the assessee that the approval
granted by JCIT suffer from non-application of mind and depends on presumption of proper
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
performance of duty by A.O. such per functionary approval under section 153D cannot termed
as legitimate. The consequential assessment orders based on non- est approval under section
153D, thus are void-abinitio on this ground alone. Considering the facts that we have allowed
the appeal on the legal issues therefore, consideration of appeal on merit have become
academic.
(iv) Ritanjali Khatai & Ors. v. ACIT, CC-1, Bhubaneswar in IT(SS) A.No.51 to 53/CTK/2019
(Date of Order: 08.04.2022)(ITAT Cuttack), wherein the Tribunal has held that the assessment
framed u/s.153A/143(3) of the Act is not sustainable without proper approval u/s.153D of the
Act. The relevant observations of the Tribunal are as under :-
11. On perusal of the above two approvals given in the case of two different assessees, we found
that both the approvals are similar to each other. In both the approval letter, the JCIT has
simply mentioned that approval is hereby accorded as per provisions of Section 153D of the
Act for passing the assessment order, therefore, the arguments of the ld. CIT-DR that facts and
circumstances along with the approval given in Dilip Construction Pvt. Ltd. and in the case of
Ritanjali Khatai are different, cannot be accepted. Accordingly, we are in complete agreement
with the contention of ld. AR of the assessee that the issue is covered by the decision of
coordinate bench of the Tribunal in the case of Dillip Construction Pvt. Ltd.(supra), wherein
the relevant observations of the Tribunal are as under :-
31. Before we proceed, we find it appropriate to consider the contention of ld CIT
DR wherein, he submitted that as per letter dated 19.12.2018, the JCIT, the
approving authority had given approval for passing order u/s.153A r.w.s 143(3) in
both the cases after satisfying himself with the draft assessment orders. This letter
has been written to the JCIT (Central) by approving authority i.e. JCIT (BPU)
pertaining to the office communication regarding additional ground of appeal,
which are being adjudicated but in view of approval order dated 23.11.2017, thus
we are inclined to accept the contention of ld A.R. that this submission of approving
authority is mere an attempt to fill the gaps and procedural lacunas occurred in the
procedure adopted by JCIT while granting approval under section 153D of the Act
and, therefore, the contention of ld A.R. in this regard hold the field.
32. Similarly letter dated 4.1.2019 issued by JCIT (Central), Bhubaneswar to the
CIT (Audit & ITAT), Bhubaneswar is merely a covering letter supplying copy of the
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ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
approval dated 23.11.2017, which cannot be treated as an explanation to the
approval dated 23.11.2019 curbing the mistake in the procedure adopted by the
JCIT while granting approval u/s.153D of the Act. On these subsequent
letters/correspondences, we are of the considered view that for adjudicating legal
ground of assessees challenging the validity of approval u/s.153D of the Act dated
23.11.2017, we have to evaluate said approval apparently by considering the totality
of facts and circumstances and the manner in which such approval has been granted.
This cannot be improvised by way of subsequent exercise or correspondence
between the approving authority and the AO or other officers.
33. In view of foregoing discussion, we are inclined to hold that the ld JCIT has
granted approval under section 153D of the Act in a mechanical manner without
application of mind to the relevant assessment records and draft assessment orders
submitted before him by the AO for grant of approval u/s.153D of the Act before
passing the relevant assessment orders u/s.153A r.w.s 143(3) of the Act.
34. Considering the facts and circumstances of the case in the light of above
discussion, it is amply clear that the AO vide latter dated 17.11.2017 requested the
Approving Authority i.e. JCIT to grant approval u/s 153D of the Act and furnished
relevant assessment records and draft assessment order before him for
consideration prior to grant of approval. As we have already noted above that there
is no requirement of mandate of section 153D of the Act that an opportunity of
hearing should be allowed to the assessee before grant of approval u/s.153D of the
Act but at the same time, it is also a requirement of mandate of section 153D of the
Act that the approving authority must apply his mind to the relevant assessment
records and draft assessment order before granting approval u/s.153D of the Act.
As the requirement of grant of approval by the Superior authority is not merely a
formality but it is a mandate and requirement of provisions of the Act.
35. In our considered and humble opinion, no procedure for grant of approval has
been provided u/s.153D of the Act and the Income tax Rules, 1962. However, when
legislature has enacted some provision to be exercised by a higher revenue authority
enabling the AO to pass assessment or reassessment orders in the search cases, then,
it is the duty of the approving authority to exercise such power by applying his
judicious, vigilant and cautious efforts. We are of the view that the obligation on the
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
approval granting authority is of two folds, one the one hand, he has to apply his
mind to secure inbuild for the department against any omission or negligence by the
AO in taxing right income in the hands of right person in the right assessment year
and on the other hand he is also responsible and duty bound to do justice with the
taxpayer/assessee by granting protection against arbitrary or unjust or
unsustainable exercise and decision by the AO crating baseless tax liability on the
assessee and thus he has to discharge his duties as superior authority. Thus,
granting approval u/s.153D of the Act is not merely an official formality but it is a
supervisory act which requires proper application of administrative and judicial
skill by the authority on the application of mind and this exercise should be
discernible from the order of approval u/s.153D of the Act.
36. In our humble understanding the provisions of section 153D of the Act has been
introduced by the legislature in its cautious wisdom to make it mandatory on the
supervisory authority/approving authority to discharge the duty towards both the
assessee as well as revenue to follow the proper procedure and to apply his mind on
the material, relevant evidences and other documents including materials found
during search & post search investigations and explanation & supporting
documents of the assessee to the issue show caused to him by the AO, on the basis
of which the AO wants to pass or frame assessment or reassessment orders and after
such exercise by perusing and going through the relevant assessment folders/files
alongwith proposed draft orders and also by applying his mind has granted
approval u/s.153D of the Act. This is the minimum required exercise by the
approving authority before granting approval u/s.153D of the Act. The approving
authority has undertaken any such exercise should be discernible from the order of
the approval and the subsequent internal correspondence between the lower
authorities have no relevance and the defects or omissions or non-application of
mind cannot be cured or rectified by any other exercise or working undertaken by
the approving authority after grant of approval and after passing the assessment
orders u/s.153A of the Act by the Assessing officer.
37. The provisions of section 153D of the Act was inserted by the Finance Act, 2007
w.e.f. 1.6.2007. In our humble understanding of said provision, the legislative intent
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
for insertion of said provision is clear inasmuch as prior to insertion of provision
u/s.153D, there was no provision for taking approval in cases of assessment or
reassessment where search and seizure operation was conducted u/s.133A of the
Act. Therefore, in our considered view, the legislature wanted the
assessment/reassessment of search and seizure cases should be made and orders
should be passed with the prior approval of superior authority, which also means
that the superior authority should apply his mind on the materials on the basis of
which the AO is making or passing assessment orders and after due application of
mind to material in the hands of department while initiating search proceedings,
material found & seized during the course of search and also material or
information unearthed or gathered during post search investigation and enquiry
alongwith explanation, documentary evidence and other relevant material or
information submitted by the assessee during search and assessment proceedings,
the superior authority has to grant the approval u/s.153D of the Act for passing
assessment/reassessment orders in the search cases.
38. Further, in our considered view, the approval u/s.153D of the Act cannot be
treated as an official formality but the provision has been inserted by the legislature
with some specific and useful purpose. It is apparent that the purpose behind
enactment of the said provision in the Statute by the legislature are of two folds viz
(i) before approval, the Sr. Authority will ensure that the assessee should be
protected against undue or irrelevant addition & disallowances in the assessment
and (ii) the approving granting authority will also ensure that proper enquiry
investigations are carried out by the Assessing Officer on all the relevant materials
including material in hands of the department at the time of initiating search
proceedings, material or documents found and seized during search operation and
materials found and unearthed during post search investigations and enquiries.
Therefore, said provision provides and requires application of mind by the
approving authority of the department which, in turn, provides safeguard to the both
the parties i.e. revenue and the assessee. Therefore, the provisions of section 153D
of the Act cannot be treated as a mere formality and mandate therein required to be
followed by the approving authority in a judicious manner by due application of
mind in a manner of cautious judicious or quasi judicial authority. This view has
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ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
also been expressed by Pune Bench of the ITAT in the case of Akil Gulamali somji,
in ITA Nos.455 to 458(Pune) of 2010 vide order dated 30.3.2012, wherein, it was
held that when the approval was granted without proper application of mind, the
order of assessment will be bad in law. We also take respectful cognizance of the
fact that the Hon'ble Bombay High Court in the case of Akil Gulamali Somji (supra)
has concurred with the said findings and view taken by the Pune Tribunal that not
following the provisions of section 153D of the Act will render the related order of
assessment void.
39. In view of foregoing discussion, we reach to a logical conclusion that it is the
duty of the approving authority to act in accordance with the mandate and
provisions of law while granting approval and discharging statutory function lay on
his shoulders by following proper procedure and also by applying his judicious and
cautious mind to the relevant assessment folders/files and draft assessment orders
while granting approval u/s.153D of the Act. This is not a formality but a statutory
duty of the approving authority with a corresponding obligation on him to examine
relevant record and assessment orders and thereafter grant the approval. We are
cautious about that the reasons for granting approval may not be a subject matter
of challenge or are not required to be mentioned in the order of approval but the
manner and the material on the basis of which approval has been granted can be
challenged by the assessee and following proper procedure and application of mind
by the approving authority should be discernible from the order of approval. No
other evidence or documents is required to be considered or appreciated as the
approval should be self-speaking that it has been granted by the ld JCIT by following
due procedure and due application of mind to the relevant records and orders. The
scope and issue agitated by the assessee by way of legal ground in the present case
is not that of grant of hearing or representation to the assessee at the time of
granting approval but the main grievance and legal objection of the assessee is that
the approving authority has granted approval without application of mind and
without looking into the seized materials and investigation report and draft
assessment/reassessment orders and this fact should be clearly discernible from the
approval order and no other extraneous material/document can be seen in this
regard.
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
40. In view of above, we are inclined to hold 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 of approval u/s.153D and mandate of enactment by
the legislature will be defeated. In the present case, the approving authority, the ld
JCIT got five days time but from the order of approval, we are unable to see any
exercise by the approving authority and even in the approval orders (supra), he has
not mentioned that the relevant appeal folders/files alongwith
assessments/reassessment orders have been perused or any discussion or
consultation has been made with the AO prior to granting of approval u/s.153D of
the Act. Accordingly, we are compelled to hold that the approval granted by the ld
JCIT in the appeals under consideration has been granted in a mechanical manner
without application of mind and that the assessments/reassessment orders passed by
the AO on such approval are declared to be void and bad in law. We hold so.
41. In view of aforesaid discussion, we clearly find that approving authority has
not applied his mind to the relevant assessment records and draft assessment orders
prior to granting approval to the Assessing officer for passing assessment orders
u/s.153A/143(3) of the Act. Therefore, the contention of ld A.R. of the assessee is
justified and sustainable that the approval was granted in most mechanical manner
without application of mind and respectfully following the proposition rendered by
Hon'ble Bombay High Court in the case of Smt. Shreelakha Damani (supra), the
order of ITAT Delhi Bench in the case of M3M India Holdings (supra) and decision
of ITAT Cuttack Bench in the case of Geetarani Panda (supra), we hold that no valid
approval has been sanctioned or accorded by the ld JCIT before allowing the AO to
pass the relevant assessment orders. From the relevant approval orders dated
23.11.2017, it is vivid that ld JCIT has not mentioned in the approval orders that he
has gone through the relevant assessment records/files/folders and draft assessment
orders for granting approval. These facts clearly show that the approval had been
granted in a mechanical manner without application of mind and, thus, no valid
approval has been granted by the ld JCIT before authorising the AO to pass
assessment orders u/s.153A of the Act. Accordingly, all assessment orders are
vitiated and thus same are void being bad in law. The requirement of mandate of
section 153D of the Act has not been satisfied in both the cases and accordingly we
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ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
hold that the all assessment orders are vitiated and thus same are void being bad in
law. We, accordingly set aside the impugned orders of lower authorities and quash
the assessment orders by allowing additional ground of the assessees in all appeals
filed by both the assessees having identical and similar facts and circumstances.
12. Thus, respectfully following the above observations of the Tribunal and especially the
fact that the approval u/s.153D of the Act given by the JCIT for passing assessment orders
in case of assessee and other group concern is without application of mind as the JCIT has
not mentioned in the approval orders that he has gone through the relevant assessment
records/files/folders and draft assessment orders for granting approval, therefore, we hold
that the impugned order passed by the CIT(A) affirming the assessment order passed by
the AO, is not unsustainable. Accordingly, we allow the ground No.2 of the assessee and
cancel the assessment order framed u/s.153A/143(3) of the Act.
16. In the present appeal, the JCIT, Range-Central Raipur has granted approval on the
presumption basis, which in our opinion is not permissible. When the approval is not valid, then
the assessment framed u/s.153A r.w.s.143(3) of the Act in the case of the assessee is not
sustainable.
17. Before concluding and offering our final view on the issue, this is pertinent to mention
here that the case laws relied upon by the Ld CITDR are distinguishable on facts, have no
bearing on the issue under discussion in the present appeal, thus the same are not of any help
to the revenue to support their contentions. The judgment in the case of Bharat Krishi Kendra
Vs Union of India (supra) was decided in favour of the revenue only on the reason that where
"Joint Commissioner recorded satisfaction on proposal of Assessing Officer by mentioning that
it is a fit case for issuance of notice, approval under section 151 giving details of approving
authority as Principal Commissioner in itself will not make approval invalid", this is altogether
on different footing than the facts of the present case, where approval was granted by the Ld
JCIT himself but on the basis of certain presumptions without verifying the seized material by
himself, even the responsibility of satisfaction was placed on shoulders of the AO. We therefor
of the view that guidance of the Hon'ble Jurisdictional High Court of Chhatisgarh in the case
of Bharat Krishi Kendra Vs Union of India (supra) cannot be adopted for deciding the issue in
the present appeal. Regarding the judgment in the case of Sahara Credit Cooperative Society
Ltd. Vs. DCIT/ACIT (supra), Hon'ble Allahabad High Court has emphasised on the issue of
communication of the approval, whether same is done physically or through uploading the same
30
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
on portal of the department makes no difference, however in the present case no such issue has
been agitated, thus the same has no bearing on the issue to be decided herein.
18. In view of the above discussion and observations, respectfully following the decision of
the Hon'ble High Court of Allahabad as well as orders of the coordinate benches of the Tribunal
referred to above, in absence of any submission or decisions contrary to what has been emerged
by the observations herein above, we do not have any reason to upheld the order of the
authorities below, consequently we hold that the order of Ld CIT(A) in affirmation of the order
of Ld AO u/s.153A r.w.s.143(3) of the Act is unsustainable and derives to be quashed and we
do so. Accordingly, the assessment order in the case of the assessee u/s.153A r.w.s.143(3) of
the Act stands cancelled. Thus, the legal ground raised by the assessee in the form of additional
ground is allowed. Since, we have allowed the legal ground of the assessee, other grounds,
though not argued by the ld AR, are not adjudicated upon.
13. Reliance is also placed on the following judgments by the Ld. AR,
which for the sake of reference are listed as under:
Sr. No. Particulars Court/ Tribunal Citation
1 Pr. CIT v. Subodh Agarwal Hon'ble Allahabad I.T.A.
High Court No.86/Allahabad
2 M/s. Goyal Energy & Steel Pvt. ITAT, Raipur ITA No. 240 to
Ltd. V. ACIT 243/RPR/2019
3 Arch Pharmalabs Ltd. V. ACIT ITAT, Mumbai (2021) 62 CCH 9
4 Mysore Bhaskara Pankaja Delhi ITAT, Delhi ITA No.
vs ACIT Central Circle 15 3823/DEL/2023
5 PCIT v. Smt. Shreelekha Damani ITBom.HC 2018-TIOL-2516-
HC-MUMI
6 ACIT VS M S Serajuddin Co. Hon'ble Orissa High (2023) 116 CCH
Court 0449
7 PCIT VS Anuj Bansal Hon'ble Delhi High (2023) 117 CCH
Court 0050
8 The Pr. Commissioner of Income Hon'ble Allahabad I.T.Appeal No. 88
Tax vs Sapna Gupta High Court of 2022
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ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
9 Inder International v. ACIT ITAT, Chandigarh (2021) 35 NYPTTJ
374
10 Sh. Inder Pal Singh Arora v. DCIT ITAT Dehradun (2021)(6) TMI 933
11 ACIT vs. Sh. Subash Dabas ITAT, Delhi ITA No.
2399/Del/2016
12 Vijay Kumar Mittal HUF v. ACIT ITAT, Jabalpur 2021-TIOL-898-
ITAT-Jabalpur
13 Shri Saurabh Agarwal & Ors. V. ITAT, Agra ITA No.263 to
DCIT 267/AGR/2017
14 Shri Navin Jain & Ors. V. DCIT ITAT Lucknow IT(SS)Nos. 639 to
641/LKW/2019
15 Geetarani Panda v. Asstt. CIT ITAT Cuttack (2018) 194 TTJ 915
16 Indra Bansal v. Asstt. CIT ITAT Jodhpur (22018) 1192 TTJ
968
17 Rishabh Buildwell Pvt. Ltd. Vs. ITAT Delhi ITA
Dy. CIT No.2122/Delhi/2018
18 M/s India Holdings Vs. DCIT ITAT Delhi (2019) 71 ITR
19 Uttarakhand Uthan Samiti Vs. ITAT Delhi (2021) 86 ITR
ITO (Trib.) 695
20 Dilip Constructions (P) Ltd. Vs. ITAT Agra (2020) 203 TTJ
Asstt. CIT (Ctk)
21 Rajesh Ladhani vs. Dy. CIT ITAT Agra (ITA Nos. 106 to
108/AGRA/2019)
22 Shri Tarachand Khatri Vs. ACIT, ITAT Jabalpur ITA No.
Central Circle, Jabalpur 21/Jab/2019
23 Asstt. CIT vs. C.R. Mittal & Sons ITAT Jabalpur IT(SS) A
(HUF) No.100/Jab/2014
14. Based on aforesaid submissions, referring to the approval granted u/s
153D dated 14.03.2016, in the present cases, vide communication number
F.No. Addl.CIT /Central / Prakash Industries Group / RPR/2015-16 / 78 (copy
extracted supra), it is contented by the Ld. AR that this approval was granted in
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
the mechanical manner without application of mind, stating the reasons that the
approving authority i.e., Addl. Commissioner of Income Tax (Central), Raipur
had granted the approval based on draft assessment orders submitted by the
Ld. AO, without consulting the assessment records and incriminating / seized
material, which is evident from the fact on record that there is no whisper about
availability and deliberation of such documents by the sanctioning authority while
granting the approval u/s 153D dated 14.03.2016. Ld. AR further expounded that
without submission of assessment records along with incriminating / seized
documents by the Ld. AO to the supervising authority, the approval was granted
mechanically without thoroughly verifying such documents and incorporation of
relevant information from such documents in the draft assessment order, such
action of the revenue authority displays that the approval was granted merely
considering the same as mechanical formality, which is not permissible under
the settled principle of law emanating from the jurisprudence referred to supra.
Ld. AR further emphasized on a particular noting in the letter of approval u/s
153D dated 14.03.2016, wherein the approving authority had mentioned that "I
have gone through the draft assessment orders within limited time available.",
such admission by the approving authority itself indicates, that the approval was
granted half-heartedly, to which the approving authority himself was not fully
satisfied, thus, the same shall be treated as mere formality, in mechanical
manner and without application of mind. Ld. AR further referred to the case of
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
Ritanjali Khatai & Others. Vs. ACIT, CC- 1, Bhuvneshwar (supra), wherein
the coordinate bench of ITAT, Cuttack, had observed that
"it is the duty of approving authority to act in accordance with the mandate and
provisions of law while granting approval and discharging statutory function lay on his
shoulders by following proper procedure and also by applying his judicious and
cautious mind to the relevant assessment folders / files and draft assessment orders
while granting approval u/s 153D of the Act. This is not a formality but statutory duty of
approving authority with a corresponding obligation on him to examine relevant record
and assessment orders and, thereafter grant the approval".
15. With the above-mentioned assertions, it was the prayer by Ld. AR that
the approval u/s 153D granted in the present case was in mechanical manner,
without considering the merits in proposed adjustment with reference to
appraisal report, seized material collected in the Search & Seizure action, thus,
it was a simpliciter approval without application of mind, which cannot be
construed to be in accordance with the mandate of law. Accordingly, it is
submitted that the Search assessment framed u/s 153A r.w.s. 143(3) of the Act
dated 15.03.2016, on the strength of purported approval u/s 153D are void-ab-
initio, invalid, illegal and bad in law, thus, are liable to be quashed.
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
16. Per contra, Shri S. L. Anuragi, Ld. CIT-DR representing the revenue
have submitted that the issue / contention raised by the Ld. AR regarding validity
of approval u/s 153D has been decided in favour of revenue by the Hon'ble
Jurisdictional High Court of Chhattisgarh in the case of Hitesh Golchha vs.
ACIT, Circle-1, Raipur in TAXC No.88/2024 dated 16.04.2024, wherein the
observations of Hon'ble Court are as under:
3. He would submit that since the right is being protected under Section
153(D) of the Income Tax Act, as per the law laid down by High Court of
Orissa in the matter of Assistant Commissioner of Income Tax, (2023) 454
ITR 312 : 2023 SCC Online Ori 992: (2023) 333 CTR 228, the bare minimum
requirement of said section is Approving Authority is required to indicate that
what thought process was involved which should be reflected in the approval
order, though the elaborate reasons need not to be given, but some indication
of reason for arriving into conclusion must exist. In order to appreciate the
submission, we went through the order of the ITAT as also the approval order
dated 20.12.2018 (Annexure - 4). As per Section 153(D) which has covered
the instant case in hand the statute mandates was to obtain a prior approval
of the Joint Commissioner by the Assessing Officer. The approval of Joint
Commissioner has been taken, therefore mandate of Section 153(D) has been
complied.
4. The order of the Assessing officer of approval (Annexure - 4) would
reflect that Joint Commissioner was satisfied on the basis of the documents
on record that such approval was justified. In a given case, it can not be
presumed on the mere say of the assesee that no application of mind was
there while granting the approval. It is the subjective satisfaction and the
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
language of the (Annexure - 4) would show that on the basis of the document
produced before the Joint Commissioner, he was convinced of the fact that
such approval would be necessary as the statue mandate.
5. From perusal of the language of the letter (Annexure - 4), we cannot
presume that there was no application of mind as the approval need not be a
detailed assessment order. The presumption under Section 114 of the
Evidence Act would follow when such official Act has been done in
accordance with official procedure and will lead to presumption that due
diligence was followed. Even otherwise, the order of the ITAT would reflect
that the case of appellant was remanded back to the Assessing Officer for
fresh adjudication of the issue. Further the liberty was given to the assessee
to raise all such issues before the Revenue Authorities and furnish necessary
information/evidences in support of his contention. When such right has
already been reserved in favour of the assessee, to raise grounds, we do not
find that any prejudice has been caused and in fact the ITAT has principally
accepted the contention of the appellant and in furtherance to advance the
rules of natural justice, opportunity is given to appellant assessee.
17. Taking support from the aforesaid judgment, it was the submission by
Ld. CIT-DR that as per observations of Hon'ble Chhattisgarh HC, once the
approval is granted u/s 153D, it can not be presumed that there was no
application of mind as the approval need not be a detailed assessment order. It
is further submitted by Ld. CIT-DR that in approval Ld. Approving Authority had
mentioned that the case has also been discussed with the Ld. AO from time to
time, therefore, it cannot be said that the draft assessment orders are approved
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
without proper appreciation of the documents such as assessment records,
seized material, appraisal report etc. In view of such facts and circumstances, it
was the submission that the approval accorded in present matters was with due
application of mind, cannot be construed to be merely a mechanical formality,
therefore, the same deserves to be upheld and the issue raised by Ld. Counsel
of the assessee is liable to be rejected.
18. We have considered the rival submissions, perused the material
available on record and the judicial pronouncements referred to by both the
parties. In present matter, a combined approval is granted for assessment year
2008-09 to 2014-15 for the assessee "M/s Sharda Steel Traders", as well as one
another assessee namely "M/s Ashok Steel Rolling Mills (P) Ltd". Admittedly, on
perusal of approval nothing is arising to reveal that the assessment record and
other relevant documents like seized material, appraisal report etc. are
submitted to the approving authority and such documents are gone through by
him while granting the approval. The declaration by the Ld. Approving Authority
that the approval is granted after going through the draft assessment orders
within a limited time available, impliedly demonstrates that a thorough
examination of the draft assessment orders could not have been exercised by
the approving authority due to paucity of time. The mandate of section 153D,
which is further elaborated and enlightened by the various Hon'ble Courts that
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
the intent of legislature was that the superior authority should apply his mind on
the materials based on which the Ld. AO is making or passing the assessment
orders. It is expected from the approving authority to grant the approval after due
application of mind to the material in the hands of department while initiating
such proceedings, material found and seized during the course of search and
also material or information unearthed or gathered during post search
investigation and inquiry along with explanation, documentary evidence and
other relevant material or information submitted by the assessee during the
search and thereafter during the assessment proceedings. However, the
revenue is squarely failed in substantiating this crucial aspect of the issue that
the sanctioning authority had the opportunity or access to such documents while
the draft assessment orders are approved, therefore, verification of relevant
documents along with draft assessment orders whereas such documents are
not submitted to the approving authority, cannot be think of. Therefore, the claim
of revenue regarding application of mind by the sanctioning authority while
examining the Draft Assessment Orders cannot be believed, as the relevant
material was not available to him at the time of granting of approval.
19. Adverting to the judgment of Hon'ble Chhattisgarh High Court relied
upon by the Ld. CIT-DR, in the case of Hitesh Golchha (supra). We are unable
to subscribe with the claim of the revenue based on aforesaid judgment that an
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
approval u/s 153D was granted following the provisions of the said section which
is further enlightened by the Hon'ble Courts. We observe that, the facts of case
considered in the said judgment and the appeal before us are distinguishable.
From the judgment in the case of Hitesh Golchha (supra), as per para 4,
Hon'ble High Court had observed that "the Joint Commissioner was satisfied on
the basis of the documents on record that such approval was justified". Such
observation clarifies that in the case of Hitesh Golchha (supra), there was no
dispute about the submission of documents and records for verification to the
approving authority while granting the approval u/s 153D, whereas, the facts in
the instant case have a distinguishing feature, wherein there is no evidence to
show that such relevant documents are submitted or made available to the
approving authority at the time of approving the draft assessment orders for his
perusal, verification and deliberation, therefore, we are unable to persuade or
acknowledge the contention of the Ld. CIT-DR, that the judgment of Hitesh
Golchha (supra) have any bearing or relevance, so as to findings therein merits
to be adopted in the present matters. Consequently, the judgment relied upon
would not be of any help to the revenue having factual differences as against
the facts of the present cases before us. We, thus, cannot approve such claim
of the revenue.
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
20. It would be worth to note that on the issue of the validity of approval
u/s 153D, under similar facts and circumstances, the coordinate bench of ITAT,
New Delhi, "E" Bench, in ITA No.1420/DEL/2023 dated 29.04.2024 in the case
of MDLR Airline (P) Ltd. vs DCIT, Central Circle-14, New Delhi, had recently
passed an order, quashing the assessment on account non application of mind
as the Assessing Officer had simply sent the draft assessment orders without
the assessment records and seized material to the sanctioning authority. The
relevant observations of the New Delhi, Tribunal in the aforesaid case are
extracted hereunder for the sake of support:
5. We have considered rival submissions in the light of judicial
precedents relied upon and perused the materials on record. As discussed
earlier, the preliminary issue arising for consideration is whether the
approval granted u/s 153D of the Act is in terms with the provisions
contained therein and musters judicial scrutiny.
5.1 A reading of Section 153D of the Act makes it clear that no order of
assessment or reassessment in a search-related case can be passed except
with the prior approval of the Competent Authority. While interpreting the
meaning of 'approval' in the context of Section 153D of the Act, it has been
laid down by different courts and the Tribunal that though the word
'approval' has not been defined under the provisions of the Act, however,
as per the dictionary meaning of the word and judicial interpretation, grant
of approval means due application of mind on the subject matter of approval
which satisfies all the legal and procedural requirements. In case of ACIT
v. Serajuddin & Co. (supra), Hon'ble Orissa High Court, while interpreting
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
the meaning of approval u/s 153D of the Act has observed that approval of
a superior officer cannot be a mechanical exercise. His approval must
indicate the thought process involved while granting approval. The
approval must indicate that the Approving Authority has examined the draft
assessment order and finds that it meets the requirements of law. The
Approving Authority cannot act merely as a rubber stamp while granting
approval.
5.2 Pertinently, the aforesaid decision of the Hon'ble Orissa High Court
has attained finality due to dismissal of the SLP filed by the Revenue by the
Hon'ble Supreme Court.
5.3 In case of PCIT v. Anuj Bansal (supra), the Hon'ble Jurisdictional
High Court has approved the view of the Tribunal in holding that where the
approval is granted without examining the assessment records and seized
material, that too a single approval in case of various assessees and
multiple assessment years, it does not meet the requirement of Section 153D
of the Act. It is worth mentioning, the approval dated 21.03.2013, which is
the subject matter under consideration in the present appeals was also
under challenge before the coordinate Bench in case of MDLR Hotels Pvt.
Ltd. & ors. Vs. Assistant Commissioner of Income Tax & ors. (supra). While
dealing with the validity of the very same approval, the Coordinate Bench
has held the approval to be invalid qua the assessment orders. The following
observations of the Coordinate Bench in this context are of paramount
importance:
"13. We have given thoughtful consideration to the orders of
the authorities below and have carefully perused all the
relevant documentary evidences brought on record. We have
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
also gone through each and every approval granted by the
Additional Commissioner of Income tax, Central Range 2, New
Delhi vis-a-vis, each and every proposal made by the DCIT, Central
Circle-15, New Delhi.
14. The issue which we have to decide is, can these approvals
be treated as fulfilling the mandate of provisions of section 153D of
the Act vis-à-vis legislative intent of the said section in the statute.
Section 153D of the Act reads as under:
"No order of assessment or reassessment shall be passed by an
Assessing Officer below the rank of Joint Commissioner in respect of
each assessment year referred to in clause (b) of section 1534 or the
assessment year referred to in clause (b) of sub-section (1) of section
1538, except with the prior approval of the Joint Commissioner.
Provided that nothing contained in this section shall apply where the
assessment or reassessment order, as the case may be, is required to
be passed by the Assessing Officer with the prior approval of the
Commissioner under sub-section (12) of section 144BA."
15. The Legislative intent can be gathered from the CBDT Circular No.
3 of 2008 dated 12.3.2008 which 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 6 ITA.
No.4061/Mum/2012 section 132 or requisition is made under section
132A. does not provide for any approval for such assessment.
50.2 A new section 1530 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) section 153B in respect of the assessment year relevant to
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
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."
16. The Legislative intent is clear from the above, in as much as,
prior to the insertion of Sec. 153D of the Act, there was no provision
for taking approval in cases of assessment and reassessment in cases
where search has been conducted. Thus, the legislature wanted the
assessments/ reassessments of search and seizure cases should be made
with the prior approval of superior authorities which also means that
the superior authorities should apply their minds on the material on the
basis of which the officer is making the assessment and after due
application of mind and on the basis of seized materials, the superior
authorities have to approve the assessment order.
17. The question before us is "has this been done in the present case".
The language of the approval
18. In light of the afore-stated relevant provisions and legislative
intent, approval dated 08.03.2013 is in respect of 62 assessment orders
as exhibited at pages 136 and 137 of the Index to Convenience
Compilation furnished by the Id. counsel for the assessee. Approval
dated 15.03.2013 is in respect of 37 assessment orders as exhibited at
pages 138 and 139. Approval dated 18.03.2013 is in respect of 54
assessment orders as exhibited at pages 140 and 141. Approval dated
21.03.2013 is in respect of 24 assessment orders as exhibited at pages
142 and 143 and approval dated 25.02.2013 is in respect of 69
assessment orders as per exhibits in the Convenient Compilation.
19. Thus, the worthy Additional Commissioner of Income tax,
Central Range 2, New Delhi gave approval to 246 assessment order by
a single approval letter U / s 153D of the Act by mentioning as under:
"The above draft orders, as proposed, are hereby accorded
approval with the direction to ensure that the orders are passed
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
well before limitation period. Further, copies of final orders so
passed be sent to this office for record."
20. In our considered opinion, there is no whisper of any seized
material sent by the Assessing Officer with his proposal requesting the
approval u/s 153D of the Act. All the requests for approval are exhibited
at pages 123 to 135 of the Convenience Compilation.
21. Even the approval granted by the Additional Commissioner of
Income tax, Central Range - 2, New Delhi does not refer to any seized
material/assessment records or any other documents which could
suggest that the Additional Commissioner of Income tax, Central Range
2, New Delhi has duly applied his mind before granting approvals.
22. At this stage, it is paramount to note that all the orders framed
by the Assessing Officer are pursuant to orders of the CIT u/s 264 of the
Act. Therefore, the Additional Commissioner of Income tax, Central
Range - 2, New Delhi should have been more cautious since his superior
authority has set aside the assessment with specific directions.
23. Now, let us consider some analogous provisions in the Act.
24. Sec. 142(2A) of the Act reads as under:
"If, at any stage of the proceedings before him, the Assessing
Officer, having regard to the nature and complexity of the
accounts, volume of the accounts, doubts 7 ΙΤΑ. No.
4061/Mum/2012 about the correctness of the accounts,
multiplicity of transactions in the accounts or specialized nature
of business activity of the assessee, and the interests of the
revenue, is of the opinion that it is necessary so to do, he may,
with the previous approval of the Chief Commissioner or Chief
Commissioner or Commissioner, direct the assessee to get the
accounts audited by an accountant, as defined in the Explanation
below sub-section (2) of section 288, nominated by the
Commissioner in this behalf and to furnish a report of such audit
in the prescribed form duly signed and verified by such
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
accountant and setting forth such particulars as may be
prescribed and such other particulars as the Assessing Officer
may require."
25. In this section also the AO may direct the assessee to get the
accounts audited by an Accountant with the previous approval of the
Principal Chief Commissioner or Chief Commissioner. This provision
has been elaborately considered by the Hon'ble Supreme Court in the
case of Sahara India Vs CIT 169 Taxman 328 wherein at para-6, the
Hon'ble Supreme Court observed as under:
"A bare perusal of the provisions of sub-section (2A) of the Act
would show that the opinion of the Assessing Officer that it is
necessary to get the accounts of assessee audited by an
Accountant has to be formed only by having regard to: (i) the
nature and complexity of the accounts of the assessee; and (ii)
the interests of the revenue. The word "and" signifies conjunction
and not disjunction. In other words, the twin conditions of
"nature and complexity of the accounts" and "the interests of the
revenue" are the prerequisites for exercise of power under
section 142(2A) of the Act. Undoubtedly, the object behind
enacting the said provision is to assist the Assessing Officer in
framing a correct and proper assessment based on the accounts
maintained by the assessee and when he finds the accounts of the
assessee to be complex, in order to protect the interests of the
revenue, recourse to the said provision can be had. The word
"complexity" used in section 142(2A) is not defined or explained
in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT
[1988] 171 ITR 634 1 (All.), it is a nebulous word. Its dictionary
meaning is: "The state or quality of being intricate or complex or
that is difficult to understand. However, all that is difficult to
understand should not be regarded as complex. What is complex
to one may be simple to another. It depends upon one's level of
understanding or comprehension. Sometimes, what appears to be
complex on the face of it, may not be really so if one tries to
understand it carefully." Thus, before dubbing the accounts to be
complex or difficult to understand, there has to be a genuine and
honest attempt on the part of the Assessing Officer to understand
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
accounts maintained by the assessee; appreciate the entries
made therein and in the event of any doubt, seek explanation
from the assessee. But opinion required to be formed by the
Assessing Officer for exercise of power under the said provision
must be based on objective criteria and not on the basis of
subjective satisfaction. 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."
26. Thus, even the Hon'ble Supreme Court has clearly laid down that
the approval must reflect the application of mind to the facts of the case.
27. Similarly, the Hon'ble High Court of Calcutta in the case of
Peerless General Finance & Investment Co. Ltd. Vs DCIT 236 ITR 671
has made the following observations which are pertinent to the facts of
the case in hand before us:
"The factual matrix of the matter clearly shows that a proposal
was made on March 10, 1998, and no prior approval therefore
was granted by the Chief Commissioner of Income tax but
merely one G.
P. Agarwal was nominated.
An argument has been advanced to the effect that by making such
a nomination, approval will be deemed to have 9 ITA.
No.4061/Mum/2012 been granted. The answer to the said
contention must be rendered in the negative. The Chief
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
Commissioner of Income tax before granting such approval must
have before him the materials on the basis whereof an opinion
had been formed. A prior approval can be granted only when the
materials for appointment of the extraordinary procedure is
required to be taken by the Assessing Officer. The Assessing
Officer, therefore, was required to place all materials before the
Commissioner of Income-tax or the Chief Commissioner of
Income-tax, as the case may be, to show that he intends to take
recourse to the said provision having regard to the nature and
complexity of the accounts of the assessee and the interests of the
Revenue. No such materials had been placed before the Chief
Commissioner of Income-tax. It further appears that even no
previous approval was sought for but merely a proposal was
placed for perusal of the Chief Commissioner of Income-tax and
for appointment of a special auditor. The Chief Commissioner of
Income-tax, therefore, did not apply his mind at all as regards
the prerequisite for grant of previous approval and mechanically
appointed Sri G. P. Agarwal, as a special auditor. The said order
depicts a total non-application of mind on the part of the
Assessing Officer as also the Chief Commissioner of Income-
tax."
28. Another section relevant to the facts in issue is Sec. 158BG
which read as under:
"The order of assessment for the block period shall be passed by an
Assessing Officer not below the rank of an Assistant Commissioner or
Deputy Commissioner or an Assistant Director or Deputy Director, as
the case may be: Provided that no such order shall be passed without
the previous approval of-- (a) the Commissioner or the Director, as
the case may be, in respect of search initiated under section 132 or
books of account, other documents or any assets requisitioned under
section 132A, after the 30th day of June, 1995, but before the 1st day
of January, 1997; (b) the Joint Commissioner or the Joint Director, as
the case may be, in respect of search initiated under section 132 or
books of account, other documents or any assets 10 ITA.
No.4061/Mum/2012 requisitioned under section 132A, on or after the
1st day of January, 1997." 11.8. In this section also it is provided that
the order cannot be passed without the previous approval. This
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section was thoroughly scrutinized by the Tribunal Madras Bench in
the case of Kirtilal Kalidas & Co. Vs DCIT 67ITD 573, at para-41 of
its order the observations of the Tribunal are as under: "In these
cases, the Commissioner has passed an order granting approval
under section 158BG of the Act through a single order passed on 31-
3-1997 without giving any reason whatsoever. As we have recorded
elsewhere above, the draft assessment orders of the block period in all
these cases were made on 31-3-1997 and on the very same day, i.e.,
on 31-3-1997 the Commissioner grants approval and that too without
giving or recording any reasons whatsoever. The approval order does
not disclose the points which were considered by the Commissioner
and the reasons for accepting them. In our view, this is totally an
unsatisfactory method of granting approval in exercise of judicial
power vested in the Commissioner. 11.9. This decision of the Tribunal
was considered by Allahabad Bench of the Tribunal in the case of
Verma Roadways Vs ACIT 75 ITD 183 wherein also the assessee-
appellant has challenged the validity of approval to the assessment
order accorded by the CIT Kanpur. The Tribunal at Para-47 has held
as under: "Coming to the aspect of the application of mind, while
granting approval, we are of the view that requirement of approval
pre-supposes a proper and thorough scrutiny and application of mind.
In the case of Kirtilal Kalidas & Co. (supra), the I.T.A.T Madras
Bench 'A' has observed that the function to be performed by the
Commissioner in granting previous approval requires an enquiry and
judicial approach on the entire facts, materials and evidence. It has
been further observed that in law where any act or function requires
application of mind and Judicial discretion or approach by any
authority, it partakes and assumes the character and status of a
judicial or at least quasi-judicial act, particularly because their Act,
function, is likely to affect the rights of affected persons."
29. Similarly, u/s. 151 of the Act it is provided that no notice shall be
issued u/s. 148 unless the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner is satisfied that
it is a fit case for the issue of such notice. The sanction under this section was
considered by the Tribunal, Mumbai Bench in the case of Shri Amarial Bajaj
in ITA No. 611/M/2004 wherein at para-8, the Tribunal has
considered the decision of the Hon'ble High Court of Delhi Bench in the
case of United Electrical Co. 258 ITR 317 which read as under:
"The proviso to sub-section (1) of section151 of the Act provides
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that after the expiry of four years from the end of the relevant
assessment year, notice under section 148 shall not be issued
unless the Chief Commissioner or the Commissioner, as the case
may be, is satisfied, on the reasons recorded by the Assessing
Officer concerned, that it is a fit case for the issue of such notice.
These are some in-builts safeguards to prevent arbitrary
exercise of power by an 7 ITA Nos. 534 & 611/M/04 Assessing
Officer to fiddle with the completed assessment"
The Hon'ble High Court further observed that:
"what disturbs us more is that even the Additional Commissioner
has accorded his approval for action under section 147
mechanically. We feel that if the Additional Commissioner had
cared to go through the statement of the said parties, perhaps he
would not have granted his approval, which was mandatory in
terms of the proviso to sub-section
(1) of section 151 of the Act as the action under section 147 was
being initiated after the expiry of four years from the end of the
relevant assessment year. The power vested in the Commissioner
to grant or not to grane approval is coupled with a duty. The
Commissioner is required to apply his mind to the proposal put
up to him for approval in the light of the material relied upon by
the Assessing Officer. The said power cannot be exercised
casually and in a routine manner. We are constrained to observe
that in the present case there has been no application of mind by
the Additional Commissioner before granting the approval."
30. The Hon'ble Allahabad High Court in the case of Siddharth
Gupta ITA No. 90 of 2022 vide order dated 12.12.2-22 had the occasion
to consider an identical issue. The most relevant findings /observations
of the Hon'ble High Court read as under:
"The submission is that the substantial question of law which
arises for consideration before this Court is about the
justification of the act of the Tribunal in ignoring the findings
recorded by the Assessing Officer and setting-aside the
assessment orders on the sole ground of defect in the approval to
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Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
the draft assessment orders granted by the competent Approving
Authority. Learned counsel for the Assessee, however, defended
the order of the tribunal for the reasoning given therein.
Considering the submissions of the learned counsels for the
parties and having perused the order of the Tribunal, in view of
the undisputed facts before us about the manner in which the
approval to the draft assessment orders was granted under
Section 153D for the assessment proceedings, by two letters
dated 30.12.2017 and 31.12.2017, in 123 cases placed before the
approving authority in two days, we are required to examine as
to whether a substantial question of law arises for consideration
before us so as to admit the present appeals.
To answer the same, we are required to go through the relevant
provisions of the Income Tax Act. Section 132 provides the
procedure for search and seizure operations in consequence of
the information in possession of the Income Tax Authorities.
Section 153A prescribes assessment in case of search or
requisition. Section 153A provides that in the case of a person
where a search is initiated under Section 132, the Assessing
Officer shall issue notice to such person requiring him to furnish
within such period, as may be specified in the notice, 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), in the prescribed form and verified in
the prescribed manner and setting forth such other particulars as
may be prescribed and the provisions of this Act shall, so far as
may apply accordingly as if such return were a return required
to be furnished under Section 139.
Section 153D relevant for our purposes is to be noted herein under:
"Prior approval necessary for assessment in cases of search
or requisition.
153D.-No order of assessment or reassessment shall be
passed by an Assessing Officer below the rank of Joint
50
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
Commissioner in respect of each assessment year referred
to in clause (b) of [sub-section (1) of] section 153A or the
assessment year referred to in clause (b) of sub-section (1)
of section 153B, except with the prior approval of the Joint
Commissioner."
Provided that nothing contained in this section shall apply
where the assessment or reassessment order, as the case
may be, is required to be passed by the Assessing Officer
with the prior approval of the [Principal Commissioner
or] Commissioner under sub-section (12) of section
144BA.
The Tribunal while quashing the assessment orders had relied
upon its earlier decision in Navin Jain and Others (Supra)
wherein a detailed discussion has been made with regard to the
requirement of prior approval of superior authority on the draft
assessment order under Section 153D, before passing the
assessment order by the Assessing Officer. It was noted that the
word 'approval though has not been defined in the Income Tax
Act but the general meaning of the word 'approval' in Black's
Law Dictionary, 6th Edition was to be seen. The decision of the
Apex Court in Vijayadevi Naval Kishore Bharatia vs. Land
Acquisition Officer (2003) 5 SCC 83 wherein the distinction
between Approving Authority and Appellate Authority was
drawn, had been noted. The decision of the High Court of
Gauhati in Dharampal Satyapal Ltd. vs. Union of India (2019)
366 ELT 253 (Gau.) has been noted to record that grant of
approval means due application of mind on the subject matter
approved which satisfies all the legal and procedural
requirements. There is an exhaustive discussion on the
requirement of prior approval under Section 153D of the Act and
it was noted that the requirement of approval cannot be treated
as mere formality and the mandate of the Act that the Approving
Authority has to act in a judicious manner by due application of
mind in a manner of a quasi judicial authority, has been
considered.
It was held therein that if an approval has been granted by the
51
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
Approving Authority in a mechanical manner without application
of mind then the very purpose of obtaining approval under
Section 153D of the Act and mandate of the enactment by the
legislature will be defeated. For granting approval under
Section 153D of the Act, the Approving Authority shall have to
apply independent mind to the material on record for "each
assessment year" in respect of "each assessee" separately. The
words 'each assessment year' used in Section 153D and 153A
have been considered to hold that effective and proper meaning
has to be given so that underlying legislative intent as per scheme
of assessment of Section 153A to 153D is fulfilled. It was held
that the "approval" as contemplated under 153D of the Act,
requires the approving authority, i.e. Joint Commissioner to
verify the issues raised by the Assessing Officer in the draft
assessment order and apply his mind to ascertain as to whether
the required procedure has been followed by the Assessing
Officer or not in framing the assessment. The approval, thus,
cannot be a mere formality and, in any case, cannot be a
mechanical exercise of power
It was noted that the obligations of the approval of the Approving
Authority serves two purposes:
(i) On the one hand, he has to apply his mind to ensure the
interest of the revenue against any omission or negligence
by the Assessing Officer in taxing right income in the
hands of right person and in right assessment year.
(ii) 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.
The Tribunal has further noted that the provisions contained in
Sections 153A to Section 153D provide for separate notice to be
given to assessee for assessment for each year as specified in
Section 153A of the Act; the assessee has to file separate ITR for
each year as specified in Section 153A of the Act; separate
assessment orders are to be passed for each year as specified in
52
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
Section 153A of the Act.
It was observed that this is an important concept mentioned in
Section 153A of the Act, which is peculiar to the scheme of the
said Section. Keeping in view of this basic fundamental features
of Section 153A, if Section 153D is scrutinized, then, it would
become manifest that an important phrase is employed in the
text of Section 153D, which is
"each assessment year". The reading of the provisions in Section
153A and 153D conjointly makes it clear that separate approval
of draft assessment order for each year is to be obtained under
Section 153D of the Income Tax Act. In its erudite judgement with
the discussion on the legislative intent of Section 153A to 153D
and the meaning of the "approval" as defined in Black's Law
Dictionary as also the decisions of the Apex Court in the case of
Sahara India vs. CIT and Others (2008) 300 ITR 403 (SC) where
the discussion on the requirement of prior approval of Chief
Commissioner or Commissioner in terms of provision of Section
142(2A) of the Act had been made, it was noted that the Apex
Court has held therein that the requirement of previous approval
of the Chief Commissioner or Commissioner in terms of the said
provision being an in-built protection against arbitrary or unjust
exercise of power by the Assessing Officer casts a very heavy duty
on the said high ranking authority to see that the approval
envisaged in the section is not turned into an empty ritual. The
Apex Court has held therein 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 above discussion made in the judgement of Tribunal dated
3.08.2021 in the case of Navin Jain Vs. Dy. C.I.T. (Supra) has
been relied by the Tribunal, in the instant case, to arrive at the
conclusion that the mechanical approval under Section 153D of
the Act would vitiate the entire proceedings in the instant case.
For the reasoning given in the case of Navin Jain (Supra), as
extracted in the impugned order passed by the Tribunal, as noted
above, there cannot be any two opinion to the requirement of
53
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
prior approval of the Joint Commissioner to the draft assessment
order prepared by the Assessing Officer, as per the mandate of
Section 153D of the Income Tax Act.
The approval of draft assessment order being an in-built
protection against any arbitrary or unjust exercise of power by
the Assessing Officer, cannot be said to be a mechanical exercise,
without application of independent mind by the Approving
Authority on the material placed before it and the reasoning
given in the assessment order. It is admitted by Sri Gaurav
Mahajan, learned counsel for the
appellant-revenue that the approval order is an administrative
exercise of power on the part of the Approving Authority but it is
sought to be submitted that mere fact that the approval was in
existence on the date of the passing of the assessment order, it
could not have been vitiated. This submission is found to be a
fallacy, in as much as, the prior approval of superior authority
means that it should appraise the material before it so as to
appreciate on factual and legal aspects to ascertain that the
entire material has been examined by the Assessing Authority
before preparing the draft assessment order. It is trite in law that
the approval must be granted only on the basis of material
available on record and the approval must reflect the application
of mind to the facts of the case. The requirement of approval
under Section 153D is pre-requisite to pass an order of
assessment or re-assessment.
Section 153D requires that the Assessing Officer shall obtain
prior approval of the Joint Commissioner in respect of "each
assessment year" referred to in Clause (b) of 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
54
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
each assessment year falling within such six assessment years
(and for the relevant assessment year or years).
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 orders
under Section 153A.
In the instant case, the draft assessment orders in 123 cases, i.e.
for 123 assessment years placed before the Approving Authority on
30.12.2017 and 31.12.2017 were approved on 31.12.2017, 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
123 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.
As the facts are admitted before us, the questions of law framed
on the factual issues related to the findings recorded by the
Assessing Officer are not open to agitate within the scope of the
present appeals being in the nature of second appeal. No
substantial question of law arises for consideration before us.
The Appeals are dismissed being devoid of merit."
31. In the present batch of appeals also, the Additional CIT has given
approval in batches of 69, 62, 37, 54 and 24 assessment orders. As
observed by the Hon'ble Allahabad High Court [supra) it is humanly
impossible to go through the records of more than 50 cases in one day
to apply independent mind to appraise the material before the Assessing
Officer. Therefore, we have no hesitation to hold that the approval was
mechanical."
55
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
5.4 Keeping in perspective the legal position enunciated in the judicial
precedents discussed above, if we examine the facts of the present appeal, it is to
be noted that the Assessing Officer, vide letters dated 21.03.2013 sent draft
assessment orders in respect of six different assessees for various assessment years
for approval of the Additional Commissioner in terms of section 153D of the Act.
Perusal of copies of the aforesaid letters placed in the paper book reveals that the
Assessing Officer has simply sent the draft assessment orders without the
assessment records and seized material. Interestingly enough, on the very same day
i.e. 21.03.2013 the Additional Commissioner has granted approval u/s 153D of
the Act in respect of six different assessees involving multiple assessment years.
Approval granted u/s 153D, a copy of which is available at page 33 of the paper
book, reads as under:
"OFFICE OF THE
ADDL. COMMISSIONER OF INCOME TAX,
CENTRAL RANGE-2, ROOM NO. 343, ARA
CENTRE, E-2, JHANDEWALAN, NEW
DELHI
F.NO. 153D/CC-15/MDLR/12-13/1117 Dated: 21.03.2013
To,
The Deputy Commissioner of Income
Tax, Central Circle-15, Delhi
New Delhi
Sub: Approval u/s 153D of the Income tax Act in the MDLR Group of cases - reg.
This is in reference to your letter no. DCIT/CC-15/153D-MDLR/12-13/3620 dated
21.03.2013 received this office 21.03.2013, letter No. DCIT/CC-15/153D-MDLR/12-
13/3623 dated 21.03.2013 received this office 21.03.2013 and letter no. DCIT/CC-
15/153D-MDLR/12-13/3624 dated 21.03.2013 received this office 21.03.2013, whereby
you have submitted draft assessment order giving effect to order u/s 264 seeking approval
u/s 153D of the IT Act, 1961 in the following cases:-
56
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur
Sl. Name of the assessee PAN A.Y ORDER
No. company 1 SHRI GOPAL KUMAR AEFPG4870J 2002-03 u/s 144 r.w.s.
GOYAL 153A consequent
upon order u/s
264 passed by the
CIT setting
aside the original
assessment
2 SHRI GOPAL KUMAR AEFPG4870J 2003-04 -DO-
GOYAL
3 SHRI GOPAL KUMAR AEFPG4870J 2004-05 -DO-
GOYAL
4 SHRI GOPAL KUMAR AEFPG4870J 2005-06 -DO-
GOYAL
5 SHRI GOPAL KUMAR AEFPG4870J 2006-07 -DO-
GOYAL
6 SHRI GOPAL KUMAR AEFPG4870J 2007-08 -DO-
GOYAL
7 SHRI GOPAL KUMAR AEFPG4870J 2008-09 -DO-
GOYAL
8 M/S MDLR AIRLINES P AAECM5231C 2006-07 -DO-
LTD
9 M/S MDLR AIRLINES P AAECM5231C 2007-08 -DO-
LTD
10 M/S MDLR AIRLINES P AAECM5231C 2008-09 -DO-
LTD
11 M/S MM BUILDCON P AAECM0924E 2005-06 -DO-
LTD
12 M/S MM BUILDCON P AAECM0924E 2006-07 -DO-
LTD
13 M/S MM BUILDCON P AAECM0924E 2007-08 -DO-
LTD
14 M/S MM BUILDCON P AAECM0924E 2008-09 -DO-
LTD
15 M/S OMSHIV BUILDTECH AAACO7989B 2007-08 -DO-
P LTD
16 M/S OMSHIV BUILDTECH AAACO7989B 2008-09 -DO-
P LTD
17 M/S MDLR DEVELOPERS AAECM0201E 2005-06 -DO-
& PROMOTERS P LTD
18 M/S MDLR DEVELOPERS AAECM0201E 2006-07 -DO-
& PROMOTERS P LTD
19 M/S MDLR DEVELOPERS AAECM0201E 2007-08 -DO-
& PROMOTERS P LTD
57
ITA Nos. 111 - 116/RPR/2025
Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur 20 M/S MDLR DEVELOPERS AAECM0201E 2008-09 -DO-
& PROMOTERS P LTD 21 M/S NAGESHWAR AACCN0116B 2005-06 -DO-
BUILDERS P LTD 22 M/S NAGESHWAR AACCN0116B 2006-07 -DO-
BUILDERS P LTD 23 M/S NAGESHWAR AACCN0116B 2007-08 -DO-
BUILDERS P LTD 24 M/S NAGESHWAR AACCN0116B 2008-09 -DO-
BUILDERS P LTD The above draft orders as proposed are hereby accorded approval with the direction to sure that orders are passed well before the limitation. Further, the copies of the final orders passed be sent to this office for records.
Sd/-
(Shashi Bhushan Shukla) Addl. Commissioner of Income Tax, Central Range-2, New Delhi."
5.5 A careful reading of the approval granted u/s 153D of the Act clearly indicates that the Approving Authority has neither examined the assessment records nor the seized materials. In fact, the letter of the Assessing Officer seeking approval also makes it clear that only draft assessment orders were sent for approval without any assessment record or seized material. It is further clear that on the very same day the letter of the Assessing Officer with draft assessment orders were received, approval u/s 153D of the Act was granted by the Approving Authority. The aforesaid facts clearly reveal that the Approving Authority, while granting approval u/s 153D of the Act has acted as a mere rubber stamp. The approval granted is completely mechanical without application of mind. Thus, in our view, the approval granted u/s 153D of the Act is not in accordance with the provisions contained u/s 153D of the Act, keeping in view the ratio laid down in various judicial precedents discussed herein above. Thus, in our view, the 58 ITA Nos. 111 - 116/RPR/2025 Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur approval granted u/s 153D of the Act is invalid. Consequently, the assessment orders passed in pursuance to such approval are also invalid. Hence, deserves to be quashed. Accordingly, we do so. The impugned orders of learned First Appellate Authority are set aside. (emphasis supplied by us)
6. Since we have quashed the assessment orders while deciding the legal grounds raised by the assessee, the grounds raised on merits have become purely academic, hence do not require adjudication.
21. After a careful consideration of aforesaid facts, circumstances and material on record along with the judicial pronouncements referred to supra, we find substance in the contention raised by the Ld. AR that in absence of relevant documents i.e., assessment records and seized material, the approval granted by the approval authority with a rider that the draft assessment orders are gone through within the limited time available, thus, it cannot be said that there was due application of mind by the approving authority, as the relevant documents are not available to him, nor the revenue could establish by way of any material, evidence or submission to dislodge the said fact. The approval granted u/s 153D, therefore, can be construed as mere formality and in mechanical manner.
22. In consideration of aforesaid facts and circumstances, respectfully following the ratio of law laid down under various judicial pronouncements by Tribunal, Hon'ble High Courts as well as Hon'ble Apex Court (referred to supra), we, therefore, are of the considered opinion that the approval u/s 153D dated 59 ITA Nos. 111 - 116/RPR/2025 Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur 14.03.2016 (copy extracted supra) in the subject matters before us cannot constitute a valid approval, as per the mandate and settled position of law. Consequently, the assessment completed u/s 153A / 143(3) dated 15.03.2016 on the foundation of an invalid approval are bad in law, invalid and liable to be quashed. Resultantly, the common assessment order dated 15.03.2016 stands quashed, and the impugned orders of Ld. CIT(A) assailed before us are set aside.
23. Since, the common assessment order dated 15.03.2016 has been quashed by us in adjudication of legal ground raised by the assessee challenging the validity of approval u/s 153D, the grounds on merits have become academic, therefore, not required to be adjudicated separately.
24. Resultantly, ITA No. 111/RPR/2025 of the assessee is allowed, in terms of our aforesaid observations.
ITA No. 112 to 116/RPR/2025
25. As we have allowed the appeal of assessee in ITA No. 111/RPR/2025 for AY 2008-09 by quashing the assessment order u/s 153A r.w.s. 143(3) dated 15.03.2016, the remaining appeal from ITA No. 112 to 116/RPR/2025 for AY 2009-10 to 2014-15, emanating from the common assessment order, having 60 ITA Nos. 111 - 116/RPR/2025 Sharda Steel Traders Vs. ACIT/DCIT Central Circle 2, Raipur identical facts, circumstances and grounds of appeals are also allowed on the same terms.
26. In combined result, ITA No. 111 to 116/RPR/2025 of the assessee stands allowed in terms of our aforesaid observations.
Order pronounced in the open court on 21/05/2025.
Sd/- Sd/-
(PARTHA SARATHI CHAUDHURY) (ARUN KHODPIA)
ाियक सद / JUDICIAL MEMBER ले खा सद / ACCOUNTANT MEMBER
रायपुर/Raipur; िदनां क Dated 21/05/2025 Vaibhav Shrivastav आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant- Sharda Steel Traders
2. थ / The Respondent- ACIT/DCIT Central Circle-2, Raipur
3. The Pr. CIT, Raipur (C.G.)
4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur
5. गाड फाईल / Guard file.
// स ािपत ित True copy // आदे शानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur