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May 27, 2023

Without the use of reason, the approval granted under Section 153D is not enforceable in court

Without the use of reason, the approval granted under Section 153D is not enforceable in court

Fact and issue of the case

The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-IV, Kanpur [‘CIT(A)’] dated 19.03.2018 arising from the assessment order dated 31/12/2016 passed by the Assessing Officer [‘AO’] under Section 153A r.w.s 143(3) of the Income Tax Act, 1961 (the Act) concerning Assessment Year 20 14-15

The grounds of appeal raised by the assessee are read as under

On the facts and circumstances of the case and in law, the initiation of assessment proceedings and issue ! services of notices are not in accordance with the provisions of law and accordingly the assessment order passed on the foundation of such notice(s) is liable to be quashed and CIT(A) erred in not holding so

On the facts and circumstances of the case and in law, no notice u!s 143(2) was issued within the stipulated statutory time and accordingly the assessment order passed by the assessing officer is liable to be quashed and CIT(A) erred in not holding so

On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is without jurisdiction and CIT(A) erred in not holding so. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming addition of unsecured loans of Rs.2,31,41, 75,814!- made by the assessing officer as alleged unexplained cash credits u!s 68 of Income Tax Act, 1961

On the facts and circumstances of the case and in law, the various alleged adverse inferences drawn ! reasons given by the assessing officer ! CIT(A) for making ! confirming additions are erroneous and not sustainable in law

On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding so

The appellant craves leave to add, alter, modify or delete one or more ground of appeal before or at the time of hearing of appeal

The aforesaid grounds of appeal are without prejudice of each other

Briefly stated, a search & seizure action under Section 132 of the Act was carried out on ‘Apple Group of Companies’ including the captioned assessee on 11/11/2014. Consequently, a notice under Section 153A of the Act was issued and served on the assessee. In response to the notice, the assessee e-filed return of income declaring total income of Rs. 11,15,450/-. The return filed by the assessee was however assessed at Rs. 2,31,52,91,264/-. The assessment order was passed under Section 153A of the Act with the prior approval of the Joint Commissioner of Income Tax, Central Range, Meerut dated 31/12/2016 accorded under Section 153D of the Act and communicated to AO vide F. No. JCIT/ CR/ MRT/ S&S/ 153D/1422 dated 31/12/2016

Aggrieved by the staggering assessment made by the AO, the assessee moved an appeal before the CIT(A). Before the CIT(A), the assessee challenged the additions / disallowances made by the AO both on legal grounds as well as merits. The assessee inter alia challenged the assessment order passed by the AO on the ground that the approval granted for framing assessment order is contrary to provision of Section 153D of the Act. The CIT(A) however did not find any merit in the plea of the assessee in any of the grounds and consequently declined any

Aggrieved by the denial of relief by the CIT(A), the assessee preferred appeal before the Tribunal

Before the Tribunal, the Ld. Counsel for the assessee Mr. Amit Goel vociferously assailed the order of the CIT(A) on multiple grounds

To begin with, the Ld. Counsel raised a preliminary ground and submitted that the assessment order framed under Section 153A of the Act is bad in law on account of absence of any valid and effective approval under Section 153D by the competent authority. The Ld. Counsel pointed out that on a bare reading of the so called approval accorded by the JCIT under Section 153D, as placed in the Paper Book, it is ex-facie ostensible that the approval so granted is illusory & a moonshine and thus cannot be countenanced in law. The Ld. Counsel exhorted that the caveats and disclaimers made by the JCIT, both, in the communication of the AO and consequent approval are self explanatory and does not require any elaboration to establish the fact of perfunctory approval. The ld. Counsel thus contended that the assessment order so passed on the basis of a perfunctory approval can not be granted sanction of law

The Ld. Counsel thereafter adverted to other challenges raised as per grounds of appeal which we shall deal with in succeeding paragraphs, if so required

The Ld. DR for the Revenue, on the other hand relied upon the order of CIT(A)

Observation of the court

It may be pertinent to observe, Section 153D bestows a supervisory onus on the designated authority in respect of search related assessment and thus enjoins a salutary duty of statutory nature. The designated superior authority is thus expected to confirm to the statutory requirements in letter and spirit. As noted in the preceeding paragraphs, it is a classic case of collective abdication of statutory responsibility assigned under Act and yet putting civil consequences of onerous nature on a tax payer. It is axiomatic from the plain reading of approval memo that the JCIT is in complete dark on facts while being called upon to grant his clearance to the draft assessment orders. It is evident from the CBDT Circular No.3 of 2008 dated 12.03.2008 that the legislature in its highest wisdom made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval the respective Assessment order. The solemn object of entrusting the duty of Approval of assessment in search cases is that the Additional/ Joint CIT concerned, with his experience and maturity of understanding, should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. 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 enjoins 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. At the cost of repetition, it may be reiterated that in the instant case, the approving authority has granted a mere ‘technical approval’ by his own express admission in departure to a substantive approval expected in law. The JCIT rather himself fairly recorded his objections to the fag end supply of draft assessment orders by the AO in bulk for several assessees involving multiple assessment years and effectively claimed that he had no opportunity to peruse the relevant underlying material for effective discharge of duty of supervisory nature owing to last minute supply of draft assessment orders. As discernible from the conjoint approval memo, the sanctioning authority(JCIT) has, in fact, under the force of circumstances, relegated his statutory duty to the subordinate AO, whose action the JCIT, was supposed to supervise as per the scheme of the Act. Manifestly, the JCIT, without any consideration of factual and legal position in proposed additions/disallowances and without contents of appraisal report before him or incriminating material collected in search etc. has buckled under statutory compulsion and proceeded to grant a simplicitor approval with caveats and disclaimers. This approach of the JCIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and can not thus be countenanced in law

The identical issue has been favourably adjudicated in assessess’s own case in ITA 3306/Del./2018 order dated 23-08-2021 concerning other AY 2015-16 where co­ordinate bench found total lack of propriety in such statutory approval. There are plethora of decisions of various co-ordinate benches including Sanjay Duggal & ors (ITA 1813/Del/2019 & ors; order dated 19.01.2021 which have also echoed the same view o n similar fact situation

The CIT(A) in para 7 of first appellate order has brushed aside the legal objection summarily merely on an inept & indifferent premise that the assessment order makes mention of the approval from JCIT under 153D of the Act. The cryptic conclusion drawn by the CIT(A) is bereft of any reasons whatsoever and thus cannot be reckoned to be a judicial finding on the point. The observations so made are not tenable in law

In the light of foregoing discussions, We are unhesitatingly disposed to hold that the assessment order for AY 2014-15 in question, in pursuance of a hollow & cosmetic approval accorded under S. 153D and undeniably without application of mind, is rendered unenforceable in law and hence quashed

In view of legal objection answered in favour of the Assessee, the aspects of other objections on jurisdiction or merits of additions/ disallowance does not call for separate adjudication

In the result, the appeal of the Assessee is allowed

Order pronounced in the open Court on 08/05/2023


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order rom here


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