DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL-2, RAIPUR V. M/S NR STEELS PVT. LTD., BASNA

ITA 8/RPR/2021

AI Insights

The case involves M/s NRVS Steels Limited, which faced a search and seizure operation under section 132 of the Income Tax Act, 1961, on 24.10.2017. Following this, the Deputy Commissioner of Income Tax (Central)-2, Raipur, issued notices under section 153A, leading to an assessment order dated 30.12.2019. The assessee contested the additions made to their income, which were based on valuations and estimations of stock and unexplained expenditures. The CIT(A) partly allowed the assessee's appeal, leading to both the assessee and the revenue filing appeals before the Tribunal. The Tribunal's decision primarily focused on the validity of the approval under section 153D, which was found to be mechanically granted without proper consideration of the objections raised by the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 106777 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Other Referred Cases: Manmohandas Jagmohandas (HUF) vs ITO, ITO vs Bhupindra Food and Malt Industries, PCIT vs Siddarth Gupta, PCIT vs Smt Shreelekha Damani, Akshata Realtors P Ltd vs ACIT, Goyal Energy & Steel P Ltd vs ACIT, MDLR Hotels P Ltd vs DCIT, Rishabh Buildwell P Ltd vs DCIT, Dilip Constructions (P) Ltd vs ACIT, Anuj Bansal vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Unexplained expenditure; Gross profit estimation; Principle of natural justice; Search and seizure; Valuation report; Source of fund; Loose papers; Assessment record; Value adopted by valuation officer; Bogus
• Section: 143(3); 142(1); 143(2); 250; 56; 48; 132; 153A; 43; 22; 69; 69C; 13; 20

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 05/RPR/2021 (िनधा[रण वष[ Assessment Year: 2018-19) M/s NRVS Steels Limited, House No. 286, C/o. Prakash Agrawal, Padampur Road, Basna, C.G.-493554 V s Deputy Commissioner of Income Tax (Central)-2, CR Buildings, Civil Lines, Raipur, C.G.-492001 PAN: AAHCS4369L आयकर अपील सं. / ITA No: 08/RPR/2021 Deputy Commissioner of Income Tax (Central)-2, CR Buildings, Civil Lines, Raipur, C.G.-492001 V s M/s NRVS Steels Limited, House No. 286, C/o. Prakash Agrawal, Padampur Road, Basna, C.G.-493554 PAN: AAHCS4369L (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Vijay Mehta, CA राजˢ की ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR सुनवाई की तारीख / Date of Hearing : 08.10.2024 घोषणा की तारीख/Date of Pronouncement : 23.12.2024 आदेश / O R D E R Per Arun Khodpia, AM: The captioned cross appeals are filed by the assessee and the revenue assailing the order of Commissioner of Income Tax (Appeals), Bhopal, [in short “Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961, dated 03.12.2020 for the Assessment Year 2018-19, which in turn arises from the order of Deputy 2 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur Commissioner of Income Tax (Central-2), Raipur, u/s 143(3) r.w.s. 153A of the Act dated 30.12.2019. 2. The grounds of appeal raised by the assessee and the department in the present appeals, are extracted as under: ITA No. 05/RPR/2021 (Assessee’s Appeal) 1. \"On the facts and circumstances of the case and in law, the Id CIT(A) has erred in sustaining addition of Rs.32,83,482 on the count of excess stock of 'Sponge Iron' (i.e., finished goods) computed by the Id AO; when it is not actually weighed by search team; which is on the basis of 'volume' taken randomly by the DVO at 923.700 on sampling method in place of correct volume of 644.361 ; books of account has not been rejected; alleged presumptive addition is invalid, unjustified in absence of any independent corroborative material evidence brought on record for suppressed production of the alleged finished goods, is liable to be deleted.\" 2. On the facts and circumstances of the case and in law, the Id CIT(A) has erred in sustaining addition of Rs.14,90,856 on the count of excess stock of 'Iron Ore' (i.e., raw material) computed by the Id AO; when it is not actually weighed by search team; which is on the basis of 'volume' taken randomly by the DVO at 3,031.630 without giving any working for such wild estimation on sampling method in place of correct volume of 2,520.109; books of account has not been rejected; alleged presumptive addition is invalid, unjustified in absence of any independent corroborative material evidence brought on record for unaccounted purchases of the alleged raw material, is liable to be deleted. 3. \"On the facts and circumstances of the case and in law, the Id CIT(A) has erred in sustaining addition of Rs.30,105 on the count of excess stock of 'Iron Ore Fines' (i.e., raw material) computed by the Id AO; when it is not actually weighed by search team; which is on the basis of 'volume' taken randomly by the DVO at 2,861.550 without giving any working for such wild estimation on sampling method in place of correct volume of 2,708.550; books of account has not been rejected; alleged presumptive addition is invalid, unjustified in absence 3 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur of any independent corroborative material evidence brought on record for unaccounted purchases of the alleged raw material, is liable to be deleted.\" 4. \"On the facts and circumstances of the Rs.91,402 case and in law, the Id CIT(A) has erred in sustaining addition of on the count of GP estimation of 5.50% on alleged less stock at Rs.30,60,356 on the count of 'Ash Char' & 'Coal'; when it is not actually weighed by search team; while it is only based on DVO report without disposing off the objection raised before the DDIT(Inv.) against such arbitrary DVO report; books of account has not been rejected; alleged GP estimation based on arbitrary DVO report is invalid, unjustified in search assessments more so, in absence of any independent corroborative material evidence brought on record for any suppression in sales, is liable to be deleted.” 5. \"On the facts and circumstances of the case and in law, the Id CIT(A) has erred in sustaining addition of Rs.32,83,482 & Rs.14,90,856 on the count of alleged excess stock of 'Sponge Iron' & 'Iron Ore'; while it is only based on DVO report without disposing off the objection raised before the DDIT(Inv.) against such arbitrary DVO report; while the search has been concluded on 27-10-17 and no excess stock has been found place in the 'Panchanama' drawn; no surrender has been made on that count in the statement recorded u/s132(4) on 24-10-17; books of account has not been rejected; alleged presumptive addition is invalid unjustified in absence of any independent corroborative material evidence brought on record for any suppressed production/ unaccounted purchases of the alleged finished goods/ raw material, is liable to be deleted.\" 6. \"On the facts and circumstances of the se and in law, the Id CIT(A) has erred in not quashing the search assessment u/s 143(3) r.w.s. 153A for the search year, since the approval granted u/s153D as there is no application of mind on the part of the Jt.CIT and it has granted in a mechanical and hasty manner, merely a formality, an empty ritual; no satisfaction has been recorded by the Jt.CIT; all the responsibilities & duties has been shifted to the Id AO; the Id AO has power to act/ alter/ add/ amend as he thinks fit in the alleged 'assessment order'; in absence of a valid approval as mandated u/s153D as per sec 153B(l )(b), the alleged search assessment u/sl 43(3) rws 153A be treated as invalid, non-est, null & void-ab-initio and is liable to be quashed.\" 4 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur ITA No. 08/RPR/2021 (Department’s Appeal) 1. \"On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition partly on account of excess stock, rejecting the valuation report of the registered valuer which was prepared on the basis of valuation done during the course of search, and that CIT(A) relied upon the valuation report of a valuer appointed by the assessee. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in holding that section 115BBE of the Income Tax Act, 1961 shall not be applicable in the case of the assessee in the wake of the fact that the income of the assessee as determined by the Assessing Officer includes income as referred to in section 69 of the Income Tax Act, 1961. 3. Apropos, appeal of the department in ITA No. 8/RPR/2021, an application under rule 27 of the IT Rules, 1963 has been filed by the assessee raising preliminary objection / legal issues against the order passed u/s 250 by the Ld. CIT(A) dated 03.12.2020. Copy of application under rule 27 of the Act, raising preliminary objections are extracted as under: 5 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 6 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 4. The brief facts of the case are that, a search & seizure action u/s 132 of the Act was conducted in the business and residential premises of M/s NR group of cases along with assessee’s premises on 24.10.2017. Consequently, notice u/s 153A of the Act was issued, in response to the said notice, assessee company has filed its return of income for the AY 2008-09 to 2017-18 on 05.12.2019. However, the regular return for the AY 2018-19 was filed on 06.10.2018, declaring total income at Rs. NIL. In due course of proceedings, detailed questionnaire along with notice u/s 142(1) and notice u/s 143(2) for the AY 2012-13 to 2018-19 were issued through email. Subsequently, statement of Shri Rajesh Agrawal, Director of the assessee company were recorded on oath u/s 132(4) on 24.10.2017, so as to examine the genuineness of share capital and share premium money received by the assessee company in various assessment year, which are under consideration. Inquiries were conducted by the investigation wing on the investor companies, wherein, it is 7 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur revealed that such company do not exist at the given address. Shri Rajesh Agrwal, Director of the Company was confronted with the inquiry report to which he expressed his inability to answer. Based on search proceedings, statement of Shri Rajesh Agrawal was again recorded u/s 131(1A) dated 11.05.2018. The response of Shri Rajesh Agrawal qua the transactions was not found convincing by the Ld. AO. Ld. AO in the assessment order have observed about the bogus transactions on share capital and share premium have also produced various details of such transactions through various investor companies. Ld. AO described in detail modus operandi of such transaction and have finally concluded that the contention of the assessee company is not acceptable and have made an addition u/s 68. 5. The present appeals pertain to AY 2018-19, i.e., the year in which search and seizure operation was conducted, accordingly, physical inventory of Raw material, finished goods, spare parts and consumable items were prepared and the same were got valued by the registered valuer in respect of the material lying in the factory premises of the assessee company at village Gourmudi, Raigarh. There were certain disputes between the assessee and Assessing Officer qua the method, quantity and rates for valuation of the stock, which finally culminated into certain disallowances, the relevant observations of the Ld. AO on the said issue, are as under: 8 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 9 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 10 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 6. Further Ld. AO., based on loose paper seized from the premises of M/s Seleno Steel Limited (subsequently changed its name as “NRVS Steel Limited”, the assessee), Nayaganj, Raigarh, in which some handwritten non- accounted cash transactions were found, have asked the assessee, the nature of transaction and source of funds, also to reconcile the same with the books of accounts along with all the supporting documentary evidence. However, as observed by the Ld. AO, the assessee was unable to substantiate the same to his satisfaction, who only submitted the written explanation but without any documentary evidence or reconciliation with the books of accounts, and therefore, the addition was made for 15% on such unaccounted transactions on estimated basis, by disallowing and adding to the income of the assessee, observation of the Ld. AO while making such addition are as under: 11 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 12 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 13 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 7. Aggrieved with the aforesaid total additions of Rs. 1,60,41,762/- (Rs.1,41,65,857/- on account of excess stock + Rs. 30,60,356/- on account of shortage of stock and Rs. 17,07,585/- being 15% of Rs.1,13,83,903/- estimated on account of unexplained expenditure), the assessee preferred an appeal before the First Appellate Authority, wherein the contentions of the assessee are discussed and deliberated at length by the Ld. CIT(A) and have partly allowed the appeal of the assessee. 8. Ld. CIT(A) have partly deleted the addition qua the difference in stock for Rs. 1,44,65,851/- made by the Ld. AO, after long deliberations on the issue, wherein the observations of the Ld. CIT(A) are as under: 14 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 15 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 16 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 17 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 18 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 19 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 20 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 21 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 9. The issue of estimated addition of Rs. 17,07,585/- on account of unexplained expenditure has been decided by the Ld. CIT(A) by deleting the same in favour of the assessee, with the following observations: 4.3 Ground No. 3 & 13:- Through these grounds of appeal the appellant has challenged the addition of Rs.17,07,585/- on account of unexplained expenditure. During the course of search action, some loose papers (LPS-2, LPS-3 and LPS-5) and pocket diaries (BS-I, BS-2, BS-3 and BS-4) were seized from the office premises of M/S Seleno Steels Limited Naya Ganj, Raigarh, which contain details of hand written jottings of various amounts. The AO during the course of assessment proceedings required the assessee to explain the transaction. The assessee in reply submitted that the transactions mentioned on loose papers BS-I & BS-2 are rough jottings and transactions mentioned on loose papers BS-4 of Rs. 33,20,000/represents payments made to M/S Maa Bhawani Transport for transportation of coal and are fully recorded in books of accounts. The AO after considering reply of the assessee made ad-hoc disallowance of 15% of the said expenditure on account of unexplained expenditure u/s 69C of the Act. 4.3.2 In view of the cited judicial pronouncements the AO was not justified in making ad-hoc addition in the hands of appellant. Thus, the addition made by the AO amounting to Rs.17,09,585/- is Deleted. Therefore, the appeal on these grounds is Allowed for statistical purpose. 10. Ld. CIT(A) have also decided the issue regarding profit of shortage of stock for Rs.1,68,320/- by confirming the same against the assessee, the observations therein are as under: 22 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 4.6 Ground No. 2 and 12:- Through these grounds of appeal the appellant has challenged the addition of Rs.1,68,320/- on account of shortage of stock. During the course of search operation, physical inventory of raw material, finished goods, spare parts and consumable items were prepared and the same was got valued by the Registered Valuer in respect of factory premises of M/s Seleno Steel Limited (NRVS Steels Ltd) situated at village Gourmudi, Raigarh. The valuation Report was received from the registered valuer and the valuation of each item was compared with the stock declared by the assessee group. On comparison of each item of inventory as valued by the Registered Valuer with that stock declared by the appellant, it is found that some items are in short which are given below:- s. No. ITEMS Valuation as per report of (Valuer as on 27.10.2017) Stock as per books of Account of the assessee (Closing Balance as on 27.10.2017) Difference QTY. IN M.T RATE PMT VALUE QTY. IN M.T RATE PMT VALUE VALUE 1 Ash Char 9167.049 100 916704.9 9306.836 100 930684 -13979 2 Coal 3804.941 2182 8302381.3 5201.081 2182 11348759 -3046377 Total 9219086 12279442 -3060356 4.6.1 The valuation report of the registered valuer was confronted to the appellant for its comments. During the course of post search proceedings, the assessee has raised various objections against the impugned report of M/s FVCPL. The appellant has contended that the stock was not measured properly and was measured on sampling basis. The appellant also contended that the stock was estimated on presumption basis. The appellant during the course of appellate proceedings has not produced any evidence which shows that there is any irregularity in the stock measurement of Ash Char and Coal. It is seen that the stock of Ash Char and coal was found short. The appellant has failed to bring on record any justification for alleged shortage of stock. Therefore, the AO was fully justified in applying average GP @ 5.5%. Therefore, the addition made by the AO amounting to Rs. 1,68,30/- is Confirmed. Therefore, the appeal on this ground Dismissed. 23 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 11. Since appeal of assessee is partly allowed in favour of the assessee, therefore, against the relief to the extent granted by Ld. CIT(A), department is in appeal, whereas for approving the additions, the assessee is in appeal before us. 12. First, we shall be taking up, the preliminary objection / legal issues raised by the assessee against the appeal of the department in ITA No. 8/RPR/2021, assailing the validity of approval u/s 153D dated 30.12.2019 granted by the Joint Commissioner of Income Tax, (Central), Raipur. For the sake of clarity and interpretation, the impugned approval so granted by the Joint Commissioner of Income is extracted as under: 24 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 25 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 13. While challenging the validity of approval, Ld. AR of the assessee had submitted written synopsis stating as under: 26 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 27 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 14. Adverting to the aforesaid multifold contentions, challenging the legality of the approval u/s 153D, the first controversy raised by the Ld. AR is that, the request letter submitted by the Ld. AO to the Ld. JCIT, Range- Central, Raipur vide F. No. DCIT(C)-2 / RPR / Search assessment / 2019-20 dated 26.12.2019 and dated 28.12.2019 were disposed of by granting an approval on 30.12.2019 vide F. No. JCIT(C)/RPR/153D/2019-20/348, under the presumption that the draft assessment orders are framed by the Assessing Officer (i) after giving proper opportunity of hearing to the assessee, (ii) have thoroughly verified the seized material and there were no adverse finding and (iii) satisfied himself that all the issues emanating from the records have been verified and the addition wherever required have been proposed. It was the submission that the issue involved in present appeal is regarding valuation of stock was under consideration, to which the assessee has raised certain objections against the method of valuation by M/s Frontline Consultants Pvt. Ltd. (FCPL), which are forwarded for the comments of the valuation authority but are yet to be disposed of by the FCPL. It is further submitted that the objections of the assessee are disposed of vide the response of FCPL on 28.12.2019, a copy of the letter of response from FCPL is furnished before us, the same is extracted as under: 28 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 29 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 15. Referring to the aforesaid communication from M/s FCPL, it is contended by the LD. AR that such communication from the DVO was not provided / confronted to the assessee, neither the same was placed before the Ld. JCIT, the sanctioning authority u/s 153D, for his perusal. It was the submission that the assessment order is also silent on this aspect that the objections of the assessee are disposed of by the DVO. Ld. AR further argued that as the crucial document having a strong bearing on the assessment framed was not brought to the knowledge of assessee or the sanctioning authority, therefore, the first presumption under which the sanction was granted found to be on wrong facts that proper opportunity of hearing was granted to the assessee, moreover there was no evidence to show that the report of valuer was placed before the sanctioning authority, under such circumstances, in absence of complete records placed before the sanctioning authority, the approval granted u/s 153D is at nullity. Such act on the part of Ld. AO makes the approval granted by Ld. JCIT u/s 153D in absence of complete records before him is against the mandate of law, thus, illegal and non-est. Ld. AR placed his reliance on the following case laws on these issues: (i) Manmohandas Jagmohandas (HUF) vs ITO, (1985) 23 TTJ 350, in this case the coordinate bench of ITAT, Jabalpur has held that in obtaining the approval of the board, the ITO did not represent the facts 30 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur properly, since the sanctioned of the board was obtained on improper representation of facts, which, in fact, tantamount of representation of facts, the sanctioned obtained was not in accordance with law. (ii) ITO vs Bhupindra Food and Malt Industries (1987) 30 taxman 169 (Chd) (Mag), wherein the coordinate bench of ITAT, Chandigarh have on the issue of sanction u/s 151(1) granted by the board have observed that in case the reasons projected a wrong set of facts, the sanction will be illegal. 16. The aforesaid observations of the ITAT are further fortified by the Hon’ble High Court of Himanchal Pradesh in their judgment, reported in [1998]229ITR496(HP), Bhupindra Food and Malt Industries vs Commissioner of Income-Tax on 1 May, 1997, wherein the observations of Hon’ble High Court are as under: 7. When the proceedings were sought to be initiated again for assessment on the footing that there was an association of persons, sanction of the Board was obtained by the Income-tax Officer under Section 151(1) of the Income-tax Act. The reasons were set out by the Income-tax Officer that there was an association of persons and it should be proceeded against for assessment of the income-tax. The 31 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur Board had granted that sanction, but it is found by the Tribunal that when the facts set out by the Income-tax Officer were themselves wrong, then the Board's sanction was consequentially illegal. We have now found that there was no association of persons to be proceeded against on that footing. Hence, the sanction granted by the Board on the footing that there was an association of persons was illegal. The view expressed by the Tribunal is, therefore, correct. Question No. 4 is answered in the affirmative. 17. Based on aforesaid submissions, Ld. AR on behalf of the assessee have submitted that the approval granted by the Ld. JCIT was on the basis of wrong presumptions, also there was no evidence on record to show that the letter of DVO disposing of the objections of the assessee was placed before the Ld. JCIT, therefore, the approval was granted without perusing the complete assessment record by the Ld. JCIT, it shows that there was lack of application of mind on the part of Ld. JCIT and the approval was granted u/s 153D in mechanical manner, on this aspect Ld. AR placed his reliance on the judgment in the case of ACIT vs Serajuddin & Co. Kolkata in ITA No. 39-45 of 2022, decided by the Hon’ble High Court of Orrisa on 15.03.2023 wherein the relevant findings of the Hon’ble High Court are as under: 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 32 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves. 18. Ld. AR further placed his reliance on various judicial pronouncements assailing the validity of approval u/s 153D on account of various issues involved therein, the same are listed as under: (i) PCIT v. Siddarth Gupta (2023) 330 CTR 295/ (2023) 221 DTR 137(All HC) dated 12.12.22; ITA No. 85,87 & 90 of 2022 Siddarth Gupta v. DCIT (2023) (Lkw-Trib) dated 07.10.21; IT(SS)A No.418, 420 & 421/Lkw/2019, AY 13-14, 15-15 & 16-17; relied on Navin Jain (2021) 91 ITR (Trib) 682 (Luck-Trib) dt. 3-8-21; IT(SS)A No. 639 to 641/Lkw/2019, AY 2015-16 to 17-18 (ii) PCIT v. Smt Shreelekha Damani (2019) 307 CTR 218 (Bom HC) dt. 27- 11-18; ITA No. 668 of 2016 Smt. Shreelekha Damani v. DCIT (2015) 173 TTJ 332 (Mum-Trib) dt. 19-8-15; ITA No. 4061/Mum/2012; AY 07-08 (iii) Akshata Realtors P Ltd v. ACIT (2023) (Raipur-Trib) dt. 27-3-23; IT(SS)A No.9/RPR/2018; AY 13-14 (iv) Goyal Energy & Steel P Ltd v. ACIT (2023) (Raipur-Trib) dt. 27-3-23; ITA No. 244, 245/RPR/2019, AY 16-17 & 17-18 33 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur (v) MDLR Hotels P Ltd v. DCIT (2023) (Del-Trib) dt. 08-2-23; ITA No. 3076/Del/2016, CO 264/Del/2016, AY 08-09; relied on PCIT v. Siddarth Gupta (2023) 330 CTR 295 (Allahabad HC) dt. 12-12-22; (vi) Rishabh Buildwell P Ltd v. DCIT(2019) (Del-Trib) dt. 4-7-19; ITA No. 2122/Del/2018, AY12-13 (vii) Dilip Constructions (P) Ltd v. ACIT (2020) 203 TTJ 422 (Cuttack-Trib) dt. 29.11.19; IT(SS)A No. 66 to 71 & 292/Ctk/2018; AY 10-11 to 16-17 (viii) Anuj Bansal v. ACIT(2022)(Del-Trib) dt. 29-4-22; ITA No. 1016/Del/2021, AY 17-18 19. Backed by aforesaid submissions, it was the prayer by Ld. AR that the approval granted u/s 153D by the Ld. JCIT was illegal, bad in law, non-est and has no standing in the eyes of law, therefore, the order passed on the foundation of such invalid approval cannot sustained and is liable to be quashed. 20. Per contra, Ld. CIT DR representing the department submitted that the approval was granted in accordance with the mandate of law, once the approval is granted it cannot be presumed that there was no application of mind by the Ld. JCIT. On this issue, Ld. CIT DR had furnished a report from the concerned AO on 29.08.2024, along with communications between the sanctioning authority and the Assessing Officer, the same is culled out as under: 34 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 35 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 36 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 37 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 38 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 39 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 40 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 41 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 42 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 43 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 44 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 45 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 46 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 47 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 48 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 49 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 50 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 51 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 52 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 21. On the basis of aforesaid report, it was the submission by Ld. CIT DR that the revenue had followed all the processes which are necessary and as mandated in the law. Referring to the report of Ld. AO, it is submitted that the Ld. AO was in constant touch with the range head, who was specially supervising the case, the approval dated 30.12.2019 was, therefore, clearly showing that the case records comprising of various notices issued, replies of assessee and seized material etc. were returned to the Ld. AO after approval, thus, are duly deliberated upon by the sanctioning authority. As per para 7 of the report of Ld. AO, it is clarified that the approval sought by the Ld. AO on 26.12.2019 / 28.12.2019, were granted on 30.12.2019, hence, it is clear that the approval has not been granted in mechanical and routine without application mind in a hasty manner. The contention of the assessee qua the objections dated 13.12.2019, raised regarding valuation of plant and machinery and determination of quantity, value of inventory, are disposed of by the valuer M/s FCPL vide their communication dated. 28.12.2019, since there was no change in valuation report as per the letter of FCPL, the report was put up before the Ld. JCIT but was not confronted to the assessee. It is submitted that in another case of the same group, the opportunity was afforded to the assessee by way of a show cause dated 27.12.2019 in the case of M/s NRTMT (India) (Pvt. Ltd.), to furnish explanation / clarification on the same day i.e., 27.12.2019 without wasting any time as the case was going 53 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur to be time barred on 31.12.2019. It was the submission that there was no report of FCPL at the time when the draft assessment order was sent for approval to the range head. It is further submitted that the assessee had submitted a reply on 27.12.2019 in the case of NRTMT, accordingly, a revised draft order has been put up before the JCIT on 30.12.2019, and approval was granted on the same day, considering all the facts brought on record, with proper application of mind. It is further argued by the Ld. CIT DR that the approval u/s 153D was only administrative in nature to ensure that the order approved did not suffer with any vice of illegality, irrationality or procedural impropriety and such approval in present case meet the requirement of law. While discussing on the issue qua the approval in the case of NRTMT, wherein the assessee was put to notice by way of show cause notice dated 27.12.2019, however, on confrontation, issuance of such notice of opportunity to the assessee was found missing in the case of M/s NRVS Steel Ltd., therefore, there was no occasion for the assessee to rebut against the communication by FCPL, disposing of the objections of the assessee. On this aspect, the then Ld. AO Shri Sunny Kachhwaha, presently JCIT (AU)- 16(1), Mumbai, who attended the hearing virtually on 27.09.2024, have explained that the report of valuer i.e., M/s FCPL, rebutting the objections of the assessee was received on 28.12.2019 in the case of NRVS Steel Ltd. (the assessee), which was placed before the Ld. JCIT and since there was no 54 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur change in the valuation in the case of NRVS, therefore, the same was not confronted to the assessee. For this reason, there was no change in draft assessment order, which is finally approved by the Ld. JCIT after deliberation, with due application of mind in a considerate manner. On the basis of aforesaid submission, it was the prayer of the revenue that approval u/s 153D granted by the Ld. JCIT dated 30.12.2019 was a valid, legal, rational, meeting with the requirement of law, therefore, the contention raised by the Ld. AR, challenging the validity of approval u/s 153D needs to be rejected at threshold and the matter may be decided on merits. 22. We have considered the rival submissions, perused the material available on record and the judicial pronouncement relied upon by both the parties. In present case, as per the facts on record, the case of assessee was picked up for assessment on account of search and seizure proceedings u/s 153A r.w.s. 143(3) for the AYs 2012-13 to 2018-19. In the process of assessment, as per mandate of law, Ld. AO had submitted draft assessment orders for approval u/s 153D to the JCIT (Central), Raipur on 26.12.2019, vide communication no. DCIT(C)-2/RPR/Search Assessment/153D/2019-20 along with case records pertaining to the connected cases for NR Ispat & Power Pvt. Ltd. and NR TMT (India) Pvt. Ltd., for the assessee NRVS Steel Ltd. it is stated that the communication seeking approval on draft assessment 55 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur was made on 28.12.2019, though copy of such communication could not be furnished before us. It is to be noted the communication by the valuer i.e., M/s FCPL dated 28.12.2019, in the form of a report to dispose of the objections raised by the assessee qua the valuation of stock vide its reply dated 13.12.2019, was also submitted to the sanctioning authority for consideration. As clarified by the then Ld. AO (Joined virtually) that the communication received from FCPL dated 28.12.2019 (extracted supra), was just for clarification that the valuation was completed in presence of the authorized representative of the assessee company to witness as well as the income tax authorities, during the process of valuation all the objections raised by the assessee were taken care of, therefore, the objections raised by the assessee on certain issues is nothing but to linger on the proceedings which has no merit therein. The valuation officer i.e., FCPL had strongly relied on the valuation report submitted previously, therefore, there was no change in the valuation earlier done, on account of objections raised by the assessee. It is further described by the then Ld. AO (Joined virtually) that, as there was no change in the valuation report, therefore, the same was not confronted to the assessee, however, the same was put up before the Ld. JCIT, but without any formal forwarding letter of communication, who after taking into consideration the same had granted the approval u/s 153D. 56 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 23. After giving a thoughtful consideration to the aforesaid facts, circumstances and the information emerged on the basis of documentary evidence along with verbal averments by the revenue authorities, we find that there were certain proceedings ongoing in the case of assessee, after the draft of assessment was submitted to the Ld. JCIT on 28.12.2019. A communication from the valuer M/s FCPL was received on 28.12.2019. Though, there was no documentary evidence to substantiate that such report of valuer was duly furnished before the Ld. JCIT and the draft assessment was approved after considering the same, at this juncture, a question emerges qua the objections of the assessee which were responded by the valuer, why the same are not confronted to the assessee for its comments before culmination of the assessment. Another question arises that, if the report was furnished before the Ld. JCIT, who was the authority granting the approval u/s 153D, bearing a presumption that proper opportunity of hearing has been afforded to the assessee, whereas apparently, when there was no response of assessee on the report of valuer on record placed before the sanctioning authority, for the reason that the assessee was not even aware about the receipt of such communication from the valuer, how the sanctioning authority convinced himself that the required / reasonable / proper opportunity of hearing was granted to the assessee. Such observations led to a situation, wherein it can be plainly construed that either the complete set of records are 57 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur not placed before the sanctioning authority or are not perused by the sanctioning authority or the failure in compliance of the mandatary proceedings could not be envisaged by the authority while granting the sanction u/s 153D. Such facts and circumstances, establishes that there was a violation of principle of natural justice on the part of Ld. AO, as the report of valuer M/s FCPL was not communicated to the assessee for its comments, and furthermore such mistake / lapse could not be perceived / comprehended or slipped the attention of the sanctioning authority, is nothing short of non- application of mind or approval in routine manner. 24. We, thus, respectfully following the various judicial pronouncements (refer to supra), considering the facts and circumstances of the present case wherein Hon’ble Courts have held that the approval granted mechanically, without application of mind has no standing in the eyes of law, therefore, the consequential assessment, following such invalid and non-est approval u/s 153D is void ab initio, thus, liable to be quashed due to non-satisfaction of mandate of law u/s 153D. Consequently, the legal ground raised by the assessee challenging the validity of approval u/s 153D of the Act, is allowed in terms of our observations. 58 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur 25. Since the impugned assessment for the AY 2018-19, u/s 153A r.w.s. 143B dated 30.12.2019, which is under consideration before us in ITA No. 5/RPR/2021, has been rendered as bad in law and quashed by us on account of invalid sanction u/s 153D, therefore, the other grounds raising the legal issues or issues on the merit in the present case are, thus, left open. 26. Adverting to the appeal of department in ITA No. 08/RPR/2021, as the assessment u/s 153A r.w.s. 143(3) dated 30.12.2019, for the AY 2018-19 has been quashed by us in terms of our observations in foregoing paras, the appeal of department challenging the order of Ld. CIT(A) in granting partial relief to the assessee, have become infructuous, thus, stands dismissed. 27. In result, ITA NO. 5/RPR/2021 of the assessee is allowed and ITA no. 08/RPR/2021 of the revenue stands dismissed, in terms of our aforesaid observations. Order pronounced in the open court on 23/12/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 23/12/2024 59 ITA No. 05/RPR/2021(Assessee) & 08/RPR/2021(Department) M/s NRVS Steels Limited vs Deputy Commissioner of Income Tax (Central)-2, Raipur Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- 2. ŮȑथŎ / The Respondent- 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // स×याǒपत Ĥित True copy // "