Case Law Details
Inder Pal Singh Arora Vs DCIT (ITAT Dehradun)
Held that in the present case the approving authority has acted casually and granted the approval u/s. 153D in a mechanical manner without judicious exercise of power. According, approval granted u/s 153D was quashed and consequently the assessment order u/s 153A was also quashed.
Facts-
Pursuant to the search, the assessment for the year was completed u/s 153A(1)(b) r.w.s. 143(3) of the Act. AO made additions of Rs. 36,05,000/- and Rs. 36,00,950/- as undisclosed investment and unexplained credit u/s 68 of the Act respectively. CIT (A) has upheld the additions made by AO and hence the assessee has preferred the present appeal.
The assessee has raised additional grounds challenged validity of assessment order on the ground of invalid approval in terms of provisions of section 153D of the Act.
Conclusion-
Held that the Statute mandates approval of assessment order for ‘each’ assessment year referred to in section 153A(1)(b) which necessarily means that independent approval is required for draft assessment order of each assessment year and it is not open to the approving authority to accord blanket approval as has been done in the present case.
In the present case, the entire exercise of grant of approval u/s 153D and passing the final assessment order was completed within a single day. Further, vide common letter, the approval has been granted to multiple draft assessment orders passed in 20 odd cases on the very same day of receiving the draft assessment order. It is self-evident that the approval has been accorded without going through the facts of the individual cases.
Held that as we have negated the approval u/s 153D, the assessment order passed u/s 153A r.w.s 143(3) of the act stands vitiated for want of approval u/s 153D of the Income Tax Act, 1961 and is hereby quashed.
FULL TEXT OF THE ORDER OF ITAT DEHRADUN
Both the appeals are arising out of common search undertaken u/s 132 of the Income Tax Act, 1961 (hereinafter called ‘the Act’) undertaken on the Juyal Group of cases and are being hereby heard and decided together as a common legal issue in involved in both the appeals.
2.0 First, we are taking up appeal in the case of the assessee Shri Inder Pal Singh Arora bearing ITA No.3900/Del/2015. This appeal is against the order passed by the Ld. Commissioner of Income Tax – Dehradun {(CIT (A)} vide order dated 30/03/2015 and is relating to assessment year 2007-08. The brief facts of the case are that a search action u/s 132 of the Act was carried out on 21/10/2010 on the Juyal Group covering the case of the assessee. Pursuant to the search, the assessment for the year under consideration was completed u/s 153A(1)(b) r.w.s. 143(3) of the Act vide order dated 28/03/2013. The Assessing Officer (AO) made additions of Rs. 36,05,000/- and Rs. 36,00,950/-as undisclosed investment and unexplained credit u/s 68 of the Act respectively. The Ld. CIT (A) has upheld the additions made by the assessing officer and hence the assessee is in appeal before us.
2.1 The assessee has raised the following grounds of appeal:
1. That in facts and circumstance of the case, the Learned CIT has erred wrongly in sustaining the addition of Rs. 72,05,950/ – treating Rs. 36,00,950/ – as unexplained cash credit and Rs. 36,05,000/- as unexplained investment.
2. That in facts and circumstances of the case, sustaining the addition of Rs. 36,00,950 / – without going through the Balance Sheet wherein at the liability side the name of M/s Bankev Bihari Marketing (P) Ltd. is clearly mentioned and the party has filed the confirmation of account. The addition is arbitrary and illegal.
3. That in facts and circumstances of the case, the Assessing Officer has incorrectly invoked the provision of section 68 and sustained by the CIT(A) in the absence of any incriminatory document found during the course of search.
4. That in facts and circumstances of the case, sustaining the addition of Rs. 35,00,000/-advance to Shri Kumar S Vishal and interest thereupon Rs. 1,05,000/- treating the same as undisclosed income is wrong and bad at law.
5. That the addition to the returned income as sustained by the ld. CIT (A) may please be deleted.
2.2 In addition to the grounds raised in the memo of appeal, the assessee has also raised additional grounds vide application dated 28/12/2018 which are as under:
1. That having regard to the facts and circumstances of the case, Ld. CIT(A)has erred in law and on facts in not quashing the impugned assessment order and that too when Ld. AO has passed the impugned order without valid statutory approval in terms of section 153D of the Income Tax Act,1961.
2. That in any case in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order and that too when Ld. AO has passed the impugned order without valid statutory approval in terms of section 153D of the Income Tax Act, 1961, is bad in law on facts and circumstances of the case.
3.0 The assessee has raised additional grounds challenging the validity of the assessment order on the ground of invalid approval in terms of provisions of section 153D of the Act. This ground was not raised before the Ld. first appellate authority and the same has been raised for the first time before this Tribunal. As the additional grounds involve legal issue challenging the validity of the assessment order, it would be appropriate to hear both the parties on the same first.
4.0 The Ld. Counsel appearing for the assessee submitted that the additional grounds are purely of legal nature and requested the admission of the same by citing various judicial decisions. On merits of the additional ground, our attention was drawn to the approval u/s 153D of the Act dated 28/03/2013 placed at Pages 2-3 of the Paper book. It was submitted that the approving authority u/s 153D of the Act is vested with important power to grant approval and same should be exercised after due application of mind. It was submitted that the assessing officer forwarded the copy of draft assessment order to the Addl. CIT on 28/03/2013 and the approval was granted on the same date i.e. 28/03/2013. The Ld. Counsel further highlighted that a common approval was accorded to the draft orders passed in the cases of 20 assessees in very limited time i.e. only on a single day. It was the submission of the Ld. Counsel that the approving authority has mechanically granted the approval without even going through the draft assessment order and as such the approval u/s 153D of the Act was invalid and bad in law.
5.0 The Ld. DR, on the other hand, placed on record the report submitted by the assessing officer in respect of the additional grounds taken by the assessee and argued that the approval accorded by the Addl. CIT u/s 153D was valid.
6.0 We have considered the rival submissions and have gone through the material available on record. As far as the issue of admissibility of additional grounds is concerned, it is noted that the issue of approval u/s 153D of the Act is a legal ground and goes to the very root of the matter. Further, it is observed that no new facts are required for adjudication of the additional grounds and same can be decided on the basis of material available on record which duly forms part of assessment record. Moreover, even the assessing officer in his report dated 14/02/2019 addressed to Ld. CIT DR has not objected to the admission of the additional grounds. In the light of the facts of the case and guidance by the Hon’ble Supreme Court in the case of NTPC Ltd. v. CIT 229 ITR 383 (SC), we are of the considered view that the additional grounds challenging the validity of assessment being purely of legal nature deserve admission and are hereby admitted for adjudication.
7.0 Now coming to the merits of the additional grounds, the Ld. Counsel has vehemently argued that the approval granted by the Addl. CIT was invalid and same was not in conformity with the provisions of section 153A of the Act. On careful perusal of the sequence of events, the following facts emerge:
- Date of forwarding draft assessment order to Addl. CIT for approval u/s 153D 28/03/2013
- Date of approval letter u/s 153D 28/03/2013
- Date of assessment order 28/03/2013
7.1 It is interesting to note that the entire exercise of grant of approval u/s 153D of the Act and passing of the final assessment order was completed within a single day, that too when the assessing officer was located in Dehradun and the sanctioning authority was sitting at Noida. Further, vide common letter, the approval has been granted to multiple draft assessment orders passed in 20 odd cases on the very same day of receiving the draft assessment orders. Another glaring fact noted is that the Addl. CIT granted the so-called approvals merely on the basis of draft assessment orders without even examining the assessment record of each case. It is self-evident that the approval has been accorded without going through the facts of the individual cases. This position is further corroborated from the contents of the approval letter itself wherein the approving authority is admitting that due to limitation of time, only broad issues were discussed. The relevant paragraph i.e. paragraph 3 in the approval letter is reproduced hereunder:
“3. …As most of the draft orders have been received at the end of the limitation period, it is not possible to discuss minute details and only broad issues have been discussed with you. Due to limitation involved, approval is being accorded.”
7.2 We find it difficult to comprehend as to how the approving authority satisfied itself about the correctness of the search based draft assessment orders without even looking at the search material. In these circumstances, we have no doubts in our mind that the approving authority has acted casually and granted the approval u/s 153D of the Income tax Act, 1961 in a mechanical manner without judicious exercise of power.
7.3 At this juncture, it is relevant to make a reference to the provisions of section 153D of the Income tax Act, 1961:
“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 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.”
7.4 From a bare reading of the section, it is clear that the Statute has placed inbuilt checks and balances so as to ensure that the assessment orders passed u/s 153A pursuant to search or requisition are passed under the supervision of superior authority. As the assessments u/s 153A are extra-ordinary proceedings, the purpose behind such approval is to avoid framing of arbitrary assessments and to make sure that the scheme and spirit of special provisions are adhered to by the assessing officer. Further, the Statute mandates approval of assessment order for ‘each’ assessment year referred to in section 153A(1)(b) which necessarily means that independent approval is required for draft assessment order of each assessment year and it is not open to the approving authority to accord blanket approval as has been done in the present case. It deserves mention that the shortcoming in approval u/s 153D of the Act will have fatal consequence on the validity of the assessment order and the assessment order would be rendered as null and void in absence of proper approval.
7.5 An identical issue came up for consideration before the Coordinate bench of this Tribunal in the case of Sanjay Duggal and ors v. ACIT (ITA No. 1813/Del/2019 dated 19/01/2021) (Delhi Bench). The relevant findings are reproduced hereunder:
“11.6. Therefore, in the cases of search, assessment orders whether framed under section 153A or 153C, the Joint Commissioner [Approving Authority] is required to see that whether the additions have been made in the hands of assessee are based properly on incriminating material found during the course of search, observations/comments in the appraisal report, the seized documents and further enquiries made by the A.O. during the course of assessment proceedings. Therefore, necessarily at the time of grant of approval of the assessment made by the A.O, the Joint Commissioner is required to verify the above issues, apply his mind that whether they have been properly appreciated by the A.O. while framing the assessment orders or not. The JCIT is also required to verify whether the required procedure have been followed by the A.O. or not at the time of framing of the assessments. Thus, the approval cannot be a mere discretion or formality, but, is mandatory being Quasi Judicial function and it should be based on reasoning. In our view, when the legislature has enacted some provision to be exercised by the higher Revenue Authority enabling the A.O. to pass assessment order or reassessment order in search cases, then, it is the duty of the JCIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of two folds ; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the A.O. in taxing right income in the hands of right person and in right assessment year and on the other hand, JCIT is also responsible and duty bound to do justice with the tax payer [Assessee] by granting protection against arbitrary or unjust or unsustainable exercise and decision by the A.O. creating baseless tax liability on the assessee and thus, the JCIT has to discharge his duty as per Law. Thus, granting approval under section 153D of the I.T. Act is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the JCIT on the application of mind and this exercise should be discernable from the Orders of the approval under section 153D of the I.T. Act.
12. It may be noted that provisions of Section 153D provides for approval in case of [“Each”] the assessment year. Therefore, each of the assessment year is required to be verified and approved by the JCIT being Approving Authority that it complies with Law as well as the procedure laid down. The assessee has filed details on record regarding returns filed under section 139 (1) for A.Ys. 2010- 2011 to 2015-2016. It is also explained that there are unabated assessments except A.Y. 2015-2016 in which the assessments have been abated. Therefore, for each unabated and abated assessments, the authorities below and the Approving Authority [JCIT] shall have to verify the incriminating material found during the course of search or the seized material if pertain to the same assessment year and its basis. The assessee has explained above that these cases are coming up because of the assessments framed in the case of M/s. JIL and others prior to the search in the case of assessee. Therefore, all material was within the knowledge of the Income Tax Authorities prior to the search in the cases of the assessees. Therefore, for granting approval under section 153D of the I.T. Act, the Approving Authority shall have to verify and consider each assessment year and shall have to apply independent mind to the material on record to see whether in each assessment year there are un-abated or abated assessments and their effect, if any. But, in the present case, the Approving Authority i.e., JCIT has granted common approval for all the assessment years in respect of the single assessee. Thus, there is no application of mind on the part of JCIT while granting approval for all the common years instead of granting approval under section 153D for each assessment years separately.
16. In some of the cases the approval was granted on the date the request was made for approval by the A.O. In all those cases merely draft assessment order and the assessment folders were available with the A.O. For example in the case of Shri Sanjay Duggal family, in the case of Ms. Kritika Talwar on the same date the approval was granted and that too merely on the basis of the assessment records and draft assessment order and in most of the cases approval has been granted either on the same day or on the next day. Further, there is no reference that seized material as well as appraisal report have been verified by the JCIT. It is not clarified whether assessment record is also seen by the JCIT.It may also be noted that even in some of the Talwar group of cases approval is granted prior to 30.12.2017 but in main cases of Shri Sanjay Duggal and Rajnish Talwar the approval is granted on 30.12.2017. Therefore, without granting approval in the main cases how the JCIT satisfied himself with the assessment orders in group cases which is also not explained. Therefore, the approval granted by the JCIT in all the cases are merely technical approval just to complete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in appraisal report. Thus, we hold the approval under section 153D have been granted without application of mind and is invalid, bad in Law and is liable to be quashed. Since we have held that approval under section 153D is invalid and bad in law, therefore, A.O. cannot pass the assessment orders under section 153A of the I.T Act against all the assessees. Therefore, all assessment orders are vitiated for want of valid approval under section 153D of the I.T. Act and as such no addition could be made against all the assessees. In view of the above, we set aside the Orders of the authorities below and quash the assessment orders passed under section 153A of the I.T. Act as well as the impugned appellate Order. Resultantly, all additions are deleted. The additional grounds are allowed.”
7.6 In light of the finding recorded in the aforesaid Para and respectfully following the order of the Coordinate bench, we are of the considered view that the approval granted u/s 153D of the Act suffers from various infirmities and same is not in accordance with the letter and spirit of the law and is liable to be quashed. As we have negated the approval u/s 153D, the assessment order passed u/s 153A r.w.s 143(3) of the act stands vitiated for want of approval u/s 153D of the Income Tax Act, 1961 and is hereby quashed. Accordingly, the additional grounds are allowed.
7.7 As we have quashed the impugned assessment order for want of proper approval, other grounds raised by the assessee become academic in nature and do not require any adjudication.
8.0 In the result, ITA No.3900/Del/2015 stands allowed.
9.0 We now take up the appeal of the other assessee i.e. Shri Surinder Pal Singh Kohli in ITA No. 2784/Del/2015. This appeal is against the order passed by the Ld. CIT (A) vide order dated 05/02/2015 and relates to assessment year 2011-12. Since search u/s 132 of the Act was carried out on 21/10/2010, the year under consideration i.e. AY 2011-12 (FY 2010-11) is the year of search and, accordingly, the assessment was framed u/s 143(3) of the Income Tax Act, 1961.
10.0 It is relevant to note that requirement of approval u/s 153D of the Income Tax Act is equally relevant for passing of the assessment order for the year of search as per section 153D read with section153B(1)(b) of the Income Tax Act, 1961. Further, in this case, the approval u/s 153D was accorded vide the same common approval letter dated 28/03/2013 which has already been dealt by us while deciding the appeal in the case of Shri Inder Pal Singh Arora (Supra) in ITA No. 3900/Del/2015.
10.1 As the issue involved in this appeal is identical to that in ITA No. 3900/Del/2015 wherein we have quashed the approval u/s 153D and consequently the assessment order, the finding recorded in that case is applicable mutatis mutandis to this appeal. Accordingly, by parity of reasoning, we hereby quash the assessment order passed u/s 143(3) dated 28/03/2013. As a result, the additional ground raised by the assessee is allowed.
10.2 As we have quashed the impugned assessment order for want of proper approval, other grounds raised by the assessee become academic in nature and do not require any adjudication.
11.0 In the result ITA No. 2784/Del/2015 stands allowed.
12.0 In the final result, both the appeals of the above captioned assesses stand allowed.
Order pronounced on 31/05/2021.
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