Income Tax Appellate Tribunal - Delhi
Ambika Alloys,New Delhi vs Pcit Central, Gurgaon on 9 January, 2025
1
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: 'A': NEW DELHI)
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
AND
SHRI SUDHIR PAREEK, JUDICIAL MEMBER
ITA Nos:- 1918 , 1921/Del/2024
(Assessment Years- 2013-14 & 2014-15)
Ambika Alloys, PCIT-Central Gurgaon,
C/o Kapil Goel Adv. Vs. CR Building, Himalaya Marg,
F-26/124, Sector-17 E,
Sector 7, Rohini, Chandigarh (UT), 160017.
Delhi.
PAN No: AAJFA6144N
APPELLANT RESPONDENT
ITA No:- 1919/Del/2024
(Assessment Year- 2013-14)
J.B. Rolling Mills Ltd., PCIT-Central Gurgaon,
C/o Kapil Goel Adv. Vs. CR Building, Himalaya Marg,
F-26/124, Sector-17 E,
Sector-7, Chandigarh (UT), 160017.
Rohini, Delhi.
PAN No: AACCG2489A
APPELLANT RESPONDENT
ITA Nos:- 1920 & 1922/Del/2024
(Assessment Years- 2013-14 & 2014-15)
Aditya Industries, PCIT-Central Gurgaon,
C/o Kapil Goel Adv., Vs. CR Building, Himalaya Marg,
F-26/124, Sector, Rohini, Sector-17 E,
Delhi. Chandigarh (UT), 160017
PAN No: AAKFA1378H
APPELLANT RESPONDENT
2
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
Assessee by : Sh. Kapil Goel, Adv. &
Sh. Sandeep Goel, Adv.
Revenue by : Ms. Nidhi Singh, CIT(DR), &
Sh. Satya Prakash Sharma, Sr. DR
Date of Hearing : 11.10.2024
Date of Pronouncement : 09.01.2025.
ORDER
PER SUDHIR PAREEK, JM
These appeals are preferred by the different Assessee against the different order dated 11.03.2024, 13.03.2024, 14.03.2024, 15.03.2024, passed by the Learned Principal Commissioner of Income Tax (Central), Gurgaon (hereinafter referred to as 'Ld. PCIT')/, for the Assessment Year ('AY') 2013-14 and 2014-15.
2. Issues raised in all these appeals are identical hence they are taken up together and disposed by this common order for the sake of convenience. We reproduced the following grounds of appeal in ITA No.- 1918/D/2024, by the assessee:
"1. Revision order U/s 263 is invalid because Asst. Order itself in invalid: Tht impugned revision order passd u/s 263 of 1961 Act by PCIT central Gurgaon is non est and nullity because it is founded on underlying assessment order passed u/s 153C which itself is nullity and totally invalid and is passed without authority of law. 1.1 That impugned revision order u/s 263 is nullity and void ab initio because for present 'unabated 'year there is total lack 3 ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024 of valid / requisite incriminating material for making valid assessment u/s 153C of 1961 Act so impugned asst. Is also invalid.
1.2 That impugned revision order u/s 263 is nullity and void ab initio because impugned assessment without doubting audited / regular books u/s 145(3) and without appreciating factum of sales / trading receipts has arbitrarily disallowed entire purchases as alleged 'bogus' purchases which is totally impermissible;
1.3 That impugned revision order u/s 63 is nullify and void ab initio because underlying asst. order is founded on invalid / mechanical approval u/s 153D of 1961 Act.
1.4 That impugned revision order u/s 263 is nullity and void ab initito because underlying assessment is made totally contrary to provisions of 1961 Act and applicable binding CBDT instruction / guidelines.
2. ABRITRARINESS AND TOTAL NON APPLICATION OF MIND ON PART OF PCIT(C): That impugned revision order u/s 263 is nullity and void ab initio because same is passed in totally arbitrary manner without application of mind as evident from cursory look to the same.
3. COMPLETE AND PATENT LACK OF JURISDICTION U/S 263: That impugned revision order u/s 263 is nullity and void ab initito because it is passed in violation of jurisdiction pre-requisite conditions stipulated under the 1961 Act as the only basis to invoke revisionary jurisdiction is purported (vague / alternate) reference to provision of Sec. 68 and / sec. 69C qua accounted / recorded purchases which is held to be totally unlawful and without any legal rationale in various binding precedents which are not given any heed by PCIT(C) Gurgaon.
4. ASST. ORDER WITH APPROVAL U/S 153D: CAN NOT BE REVISED U/S "That impugned revision order u/s 263 is nullity and void ab initio as underlying assessment order admittedly passed with statutory approval u/s 153D cannot be revised u/s 263 of 1961 Act, as held in series of juridical precedents.
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ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
5. PENDING FIRST APPEAL SO NO REVISION U/S 263 PERMISSIBLE:
That impugned revision order u/s 263 is nullity and void ab initio as there is valid appeal pending before first appeal authority which denudes power of revision u/s 263 of 1961 Act.
6. LACK OF VALID SCN U/S 263 :That impugned revision order u/s 263 is nullity and void ab initio as there is violation of principle of natural justice and lack of valid scn u/s 263 of 1961 Act."
3. We take ITA No.- 1918/Del/2024 as a lead case. In this case, a search and seizure operation u/s 132 and survey operation u/s 133(A) were conducted on 03.05.2018 in M/s Jai Bharat Group of cases, Samalkha, Panipat. The assessee's case was also covered u/s 133(A) of Income Tax Act, 1961 (hereinafter referred to as 'the Act').
4. At the time of hearing, the Ld. Counsel for Assessee, submitted at the outset that the disputed issues in this appeals is covered in favour of the Assessee by the order of Co-ordinate Bench of Income Tax Appellate Tribunal (ITAT), Delhi, in assessee's own case for Assessment Years 2012-13 to 2016-17. The Ld. Counsel for Assessee drew our attention to the order of Co-ordinate Benches of ITAT, Delhi, dated 30.09.2024 in ITA No.- 594 to 598/Del/2023. 5
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
5. The Ld. Departmental Representative (DR) agreed with the contention of the Ld. Counsel for Assessee that the issue in dispute is covered in favour of assessee's own case by orders of Co-ordinate Benches of ITAT, Delhi, as mentioned above.
6. We have heard both sides carefully and perused the material available on record. There is no dispute between the two sides that the facts in the case of the Assessee in these years are identical to the facts of the assessee's case for Assessment Years 2012-13 to 2016-17. As both sides agree, that the issue in dispute is covered in favour of the Assessee by the aforesaid order of Co-ordinate Benches of ITAT, Delhi.
7. Heard rival submissions and carefully scanned the material available on record.
8. At the outset and reiterating the grounds regarding jurisdiction and validity of proceedings in question the learned AR submitted that impugned order u/s 263 of the Act is null and void ab initio because underlined assessment order is founded on invalid/mechanical approval u/s 153D of the Act and also vehemently submitted in this regard that underlined assessment order admittedly passed without statutory approval u/s 153D cannot be revised u/s 263 of the Act in the revisionary jurisdiction.
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ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
9. He further submitted that the impugned order is also void ab initio because there is valid appeal pending before competent first appellate authority which denotes powers of revision u/s 263 of the Act.
10. The learned AR further submitted that it is established principle of law that assessee/appellant in appeal against order u/s 263 of the Act may challenge the validity of the questioned assessment. For this purpose he relied upon the order of coordinate Bench in the case of WSP Consultants India Pvt. Ltd. v. Pr. CIT rendered in ITA no. 867/Del/2021 dated 27.03.2024. The relevant para 17 is reproduced herein below as under:
"17. Then reference to 'any order' u/s 263 of the Act is to an assessment order, which otherwise is passed in due course of law and is otherwise a valid and enforceable order and not an order which is void ab initio, being not passed in accordance with due course of law. The following judgements, which the Id. AR has relied, also brings forth the settled proposition of law that a non est and void order cannot be subject matter to the revisionary proceedings u/s 263 of the Act:-
(i) Gigabyte Technology (India) (P.) Ltd. V. CIT. [2020] 121 taxmann.com 301 (Bombay) (HC);
(ii) DCIT v. Dina Mahabir Re-Rollers Pvt. Ltd. [2022] 135 taxmann.com 338(Patna - Trib.);
(iii) Mohan Jute Bags Mfg. Co. v. PCIT [2021] 131 taxmann.com 309 (Kolkata -Trib.);
(iv) Keshab Narayan Banerjee v. CIT [1998] 101 Taxman 512 (Cal.) (Calcutta-HC):
(v) Westlife Development Ltd. v. Principal Commissioner of Income Tax [2017] 88 taxmann.com 439 (Mum. - Trib.); and 7 ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
(vi) V. Narayanan v. DCIT, [2010] 127 ITD 133 (Chennai) (Trib. - Full Bench)
11. The learned AR also relied upon in this context the order of the coordinate Bench in the case of M/s Sahi Exports Pvt. Ltd. v. PCIT (ITA nos. 2170 & 2171/Del/2017 dated 24.03.2021). The relevant para 16 is reproduced herein below as under:
"16. In light of the aforesaid ratio laid down by the Hon'ble Supreme Court, we are of the considered opinion that the assumption of jurisdiction u/s 263 of the Act in respect of an assessment which is non-est is also bad in law as a non-est order cannot be erroneous and prejudicial to the interest of the Revenue. An order framed u/s 263 of the Act for both the A.Ys 2008-09 and 2010-11 are accordingly quashed on the principle of Sublato Fundamento Cadit Opus, meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation, i.e. the order u/s 153C has been removed, the super structure i.e. the order u/s 263 must fall."
12. The learned AR also referred to the judgment passed by the Hon'ble Orrisa High Court in the case of PCIT v. Badal Prakash Jindal HUF 334 CTR 164/ 457 ITR 345, wherein the Hon'ble High Court has held that even original reassessment order itself was not validly passed, the subsequent revisional order by the PCIT was required to be held invalid.
13. So far regarding validity of impugned assessment order u/s 153A of the Act, it is submitted that same is invalid on the reason that questioned approval u/s 153D dated 17.08.2021 is mechanical in nature even on the face of it. 8
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
14. Per contra, learned DR relied upon the impugned order passed by the competent authority u/s 273 of the Act by stating that the draft assessment was submitted by the learned AO vide letter dated 28.07.2021 and the approval was granted on 17.08.2021, so the draft order was submitted well in time. He also submitted that finally the approval was granted in writing and fact regarding obtaining the approval is mentioned in the body of the assessment order also.For ready reference, relevant provision of section 153D, with proviso, is reproduced as under:
"Prior approval necessary for assessment in cases of search or requisition. 53D. 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 86 sub-section (1) of section 153A or the ssessment 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 88 [Principal Commissioner or] Commissioner under sub-section (12) of section 144BA.]
15. From bare perusal of section 153D it is crystal clear that concrete approval is a condition precedent to initiate the proceedings and in absence of valid approval, proceedings initiated will have no effect in the eye of law.
16. In this regard learned AR referred the order passed by the Hon'ble Jurisdictional High Court of Delhi in the case of PCIT v. Shiv Kumar Nayyar [ITA 9 ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024 285/2024 & CM Appeal 28994/2024 order dated 15.05.2024], in which Hon'ble Delhi High Court, in relevant para 17 has held as under:
"17. Notably, the order of approval dated 30.12.2020 which was produced before us by the learned counsel for the assessee clearly signifies that a single approval has been granted for AYs 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, we cannot lose sight of the fact that in the instant case. the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above."
17. Learned AR further referred the order of coordinate bench in the case of Veena Singh v. ACIT [ITA nos. 294 & 295/Del/2022 - dated 24.04.2024] "12. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard.
13. 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 the above approval letter issued by the Addl. Commissioner says that the approval has been granted subject to certain conditions.
14. Plain reading of the letter of approval granted by the Addl. Commissioner, clearly depicts that the Addl. CIT had routinely given 10 ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024 approval to the AO to pass the order only on the basis of letter of the Ld. A.O. without any application of mind. From the said approval, it can be easily inferred that the approved has been accorded with certain conditions. Thus, the sanctioning authority had in effect abdicated its statutory functions and delightfully relegated its statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The said approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be sustained in the eyes of law.
............ .
16. In the case of ACIT, Circle-1 (2) Vs. Serajuddin and Co. the Hon'ble Supreme Court in SLP (Civil) Dairy No. 44989/2023 vide order dated 28/11/2023, dismissed the Appeal filed by the Department of Revenue against the order dated 15/03/2023 in ITA No. 43/2022 passed by the Hon'ble High Court of Orissa at Cuttack, wherein the Hon'ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act.
17. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the arguments advanced by the Ld. the Assessee's Representative on the Aditional Ground of Appeal. In our considered opinion the approvals so granted under the shelter of section 153D of the Act does not pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments orders in the captioned appeals are non-est and a nullity and hence the same are quashed."
18. In the course of hearing learned AR also relied upon the order passed by the Hon'ble Orissa High Court in the case of ACIT v. M/s Serjuddin & Co. [ITA nos. 39, 40, 41, 42, 43, 44 & 45/2022 - dated 15.03.2023], in which the Hon'ble High Court in relevant paras 15,16, 22 & 23 has observed as under: 11
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024 "15. A plain reading of Section 153D itself makes it abundantly clear that the legislative intent was to be obtaining of "prior approval" by the AO when he is below the rank of a Joint Commissioner, before he passes an assessment order or reassessment order under Section 153A(1)(b) or 153B(2)(b) of the Act.
16. That such an approval of a superior officer cannot be a mechanical exercise has been emphasized in several decisions. Illustratively, in the context of Section 142 (2-A) which empowers an AO to direct a special audit. The obtaining of the prior approval was held to be mandatory. The Supreme Court in Rajesh Kumar v. Dy. CIT (2007) 2 SCC 181 observed as under:
"58. An order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee, if any, would be a relevant factor. The approving authority was required to go through it. He could have arrived at a different opinion. He in a situation of this nature could have corrected the assessing officer if he was found to have adopted a wrong approach or posed a wrong question unto himself. He could have been asked to complete the process of the assessment within the specified time so as to save the Revenue from suffering any loss. The same purpose might have been achieved upon production of some materials for understanding the books of accounts and/or the entries made therein. While exercising its power, the assessing officer has to form an opinion. It is final so far he is concerned albeit subject to approval of the Chief Commissioner or the Commissioner, as the case may be. It is only at that stage he is required to consider the matter and not at a subsequent stage, viz., after the approval is given."
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 12 ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024 Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act, it would equally apply to Section 153D of the Act. There are three or four requirements that are mandated therein, (1) the AO should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (III) The fact that approval has been obtained, should be mentioned in the body of the assessment order.
23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure."
19. It is relevant to mention here that appeal preferred by the revenue against the above judgment passed by the Hon'ble Orissa High Court in M/s Serjuddin & Co. (supra) has since been dismissed by the Hon'ble Supreme Court.
20. It is submitted by the learned AR that approval dated 17.08.2021 is mechanical in which there is no specification that draft assessment order was presented before the competent authority; even not any word is mentioned in the approval order as to whether draft assessment order was perused or not; and also in five cases same/ similar stereo type approval is granted; and by only this ground it is clearly manifested that it was clerical or mechanical approach adopted by the concerned authority.
13
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
21. It is established by law that provision of section 153D is mandatory to initiate assessment or reassessment u/s 153C and in section 263 "any order" does not include an order which is void ab initio. The submission of appellant that approval is mechanical and without application of mind, at best on such approval if any proceeding is initiated it will have null and void effect in the eye of law and will have no relevancy; and that it is not subject to revision. It is also submitted that in the above circumstances any order passed under revisional authority remains unsustainable. The relevant approval dated 17.08.2021 is reproduced as under:
"1. Please refer to your letter number: आ.उ.आ/के.वृ./करनाल/2021-22/478. dated 28.07.2021, under which the draft assessment order made as per section 153C r.w.s 143(3) of the Income Tax Act was sent for approval under Section 153D.
2. In this context, the draft assessment order for the assessment year 2013- 14 in the case of the above taxpayer under section 153D of the Income Tax Act is approved.
3. The assessment is recorded in volume 1 (without serial number)"
22. From the bare perusal of the approval dated 17.08.2021 it does not appear as to when draft assessment order was received by the competent authority, who issued the approval and it clearly lacks of thought process which is essential for a valid approval that competent authority entered into thought process and after application of mind he issued the same and mechanical approval issued in the 14 ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024 mechanical way is not permissible in the eye of law; and in above circumstances and on the basis of judicial pronouncements mentioned hereinbefore we find that there is material substance in the submissions advanced on behalf of the assessee/appellant.
23. On the basis of foregoing submissions, discussion and the ratio of decisions given by judicial pronouncements as mentioned earlier, we find material substance in the submissions advanced on behalf of the assessee/appellant on grounds 1.3, 2 & 4 and we are of the firm opinion that approval in question is quite mechanical, passed without application of mind and lacks sufficient thoughtful process, which is nto permissible in the eye of law and resultantly assessment order followed by such approval lacks legitimacy and term as 'non-est' and 'null and void' and liable to be quashed.
24. In the light of the foregoing discussion, as we find material substance in the submission of the assessee/appellant, we need not go into the merits of the case. As issue regarding mandatory approval u/s 153D has been decided in favour of the assessee/appellant, so other grounds raised in the appeals of the assessee/appellant become academic or infructuous and do not require specific adjudication. We also hold that revisional authority overlooked the mandatory requirement of law and in such a circumstances, impugned order is quite unsustainable in the eye of law. 15
ITA nos. 1918,1921/Del/2024; 1919/Del/2024 & 1920 & 1922/Del/2024
25. Consequently, all appeals filed by the assessee in ITA nos. 1918, 1921/Del/2024; ITA 1919/Del/2024; and ITA 1920 & 1922/Del/2024 are allowed.
Order pronounced in the Open Court on 09 .01.2025
Sd/- Sd/-
(SHAMIM YAHYA) (SUDHIR PAREEK)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 09.01.2025.
*Pooja/-
*MP*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI