ITO, NEW DELHI V. SH. RAMESH KHANNA, NEW DELHI

ITSSA 17/DEL/2014

AI Insights

The case involves multiple appeals related to block assessments for the period from April 1, 1996, to October 17, 2002, against Sh. Ramesh Khanna and others by the Income Tax Officer, Ward-29(2), New Delhi. The primary legal contention was the validity of the statutory approval under section 158BG of the Income Tax Act, 1961, which was allegedly granted without proper application of mind and in violation of mandatory procedures laid down by the CBDT. The Tribunal examined whether the approvals were granted mechanically and without proper consideration of the individual cases, as required by law.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 23661 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-10-2024
• Assessment Year: misc
• Appeal Filed On: 04-04-2014
• Other Referred Cases: PCIT vs. Shiv Kumar Nayyar, Asst. CIT vs. Serajuddin & Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APPELLANTASSESSE
• Assessee Lawyers: AJAY WADHWA; ANUJ GARG
• Keywords: Opportunity of being heard; Block assessment; Assessment record
• Section: 143(3); 119; 43; 158BC

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER IT(SS) Appeal No.09/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Sh. Ramesh Khanna, 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AASPK0719Q Vs. Income Tax Officer, Ward-29(2), New Delhi (Appellant) (Respondent) IT(SS) Appeal No.17/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Income Tax Officer, Ward-29(2) New Delhi Vs. Sh. Ramesh Khanna, 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AASPK0719Q (Appellannt) (Respondent) ITA No.13/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Sh. Rajesh Khanna, 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AUUPK5091R Vs. Income Tax Officer, Ward-29(2), New Delhi (Appellant) (Respondent) 2 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO ITA No.18/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Income Tax Officer, Ward-29(2), New Delhi Vs. Sh. Rajesh Khanna, 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AASPK0277B (Appellant) (Respondent) IT(SS) Appeal No.14/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Sh. Pradeep Khanna 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AGCPK0272E Vs. Income Tax Officer, Ward-3(4) New Delhi (Appellant) (Respondent) IT(SS) Appeal No.15/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Sh. Kamal Khanna 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AASPK0283H Vs. Income Tax Officer, Ward-29(2) New Delhi (Appellant) (Respondent) 3 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO IT(SS) Appeal No.19/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Income Tax Officer, Ward-29(2) New Delhi Vs. Sh. Kamal Khanna 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AASPK0283H (Appellant) (Respondent) IT(SS) Appeal No.11/Del/2014 (Block Period 01.04.1996 to 17.10.2002) M/s Coco Dry Fruits India Pvt. Ltd. FA/B-1, Extension, Mohan Co-op Industrial Area, Mathura Road, New Delhi PAN:AAACC8061G Vs. Income Tax Officer, Ward-3(4) New Delhi (Appellant) (Respondent) IT(SS) Appeal No.16/Del/2014 (Block Period 01.04.1996 to 17.10.2002) Income Tax Officer, Ward-29(2) New Delhi Vs. M/s India International, 480, Katra Ishwar Bhawan, Khari Baoli, Delhi-110006 PAN:AABF10544A (Appellant) (Respondent) Assessee by Shri Ajay Wadhwa, Adv. and Shri Shivam Garg, Adv. Respondent by Shri Anuj Garg, Sr. DR 4 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO Date of Hearing 07/10/2024 Date of Pronouncement 26/11/2024 O R D E R PER BENCH: 1. The five appeals filed by Assessee and four appeals filed by the Department are against order dated 30/01/2014 of Learned Commissioner of Income Tax (Appeals)-1, New Delhi [hereinafter referred to as ‘Ld. CIT(A)’] arising out of Assessment Order dated 29/10/2004 u/s 158BC r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) passed by the Assistant Commissioner of Income Tax, Central Circle-25, New Delhi for Block Period 01/04/1996 to 17/10/2002 respectively. 2. In Application dated 04/10/2024 under Rule-11 of the IT Act, 1963 is for admission following additional ground: The requisite mandatory statutory approval u/s 158BG in this case is without application of mind, without perusing the records, has been passed in a hurried manner, is a consolidated approval for number of assesses and is passed in violation of mandatory procedure laid down by CBDT; hence, the assessment order of Ld. AO passed u/s 158BC dated 29.10.2004 is void ab initio, jurisdictionally flawed, and deserves to be quashed. 3. Learned Authorized Representative for appellant/assesse submitted that the additional ground is regarding the validity of the assessment order on basis of that no proper satisfaction was recorded by the Learned ACIT while approving draft assessment order. The record clearly indicates that Learned ACIT passed order without application of mind and reviewing the relevant record. The 5 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO assessment order is based on the foundation of approval is incurable jurisdictional effect. The Hon’ble High Court of Delhi in PCIT vs. Shiv Kumar Nayyar [2024] Taxman.com 385 (Delhi) held that the approval under section 153D therein as granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in single day. It was explicitly held that the authority granting approval has to apply mind for ‘each assessment year’ for ‘each assessee’ separately. 4. The learned Authorized Representative for Department of Revenue relied on order of Departmental Authorities. 5. From examination of record in light of aforesaid rival contention, it is crystal clear that statutory approval u/s 158BG of the Act which was necessary from 01/07/1995 to 31/05/2003. The Assessment Order passed by Ld. AO u/s 158BC dated 29/10/2024 for the block period from 01/04/1996 to 17/01/2002 indicates that it was issued after obtaining approval under section 158BG from the Addl. CIT, Range-1, Delhi. This approval was granted by the Addl. CIT vis letter F. No. Addl. CIT/CR-1/2004-05/196 dated 28.10.2004. 6. Letter from the Addl. CIT (F. No. Addl. CIT/CR-1/2004-05/196 dated 28.10.2004) granting approval under section 158BG reveals the following facts:- 6 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO  A common approval was sought by the Ld. ACIT and granted by the Addl. CIT for all assesses, rather than obtaining individual approvals for each assessee.  The Addl. CIT granted approval mechanically, stating, \"Considering the same (letter seeking approval) and confirmation by you that all points contained in the Appraisal Report have been duly covered in the aforementioned orders, the orders are hereby approved.\"  The approval was based solely on the Ld. AO's confirmation, without any independent application of mind regarding the draft orders.  Had the Addl. CIT reviewed the draft assessment order and applied his own judgment, he would have recognized whether all points in the appraisal report were adequately addressed by the Ld. AO.  Not even the draft assessment orders were perused, let alone the assessment and search records.  Only the draft assessment orders were sent to the Addl. CIT, without any accompanying assessment or search records.  The approval does not refer to any seized materials, assessment records, or other documents that would indicate that the AddI. CIT applied his mind prior to granting approval.  There was no application of mind whatsoever.  The Addl. CIT also failed to provide the assessee with an opportunity to be heard, as required by the Manual of Office Procedure (February 2003) issued by the CBDT in exercise of power under section 119 of the Act, before approving the draft assessment orders. 7 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO 7. Since the approval for all assesses was granted on the same day via a common letter, it is unlikely that the Addl. CIT could have applied his mind to determine whether the orders were factually and legally correct. Furthermore, in order to approve orders under Section 158BG of the Act, the authority must independently assess the material on record for each assessee separately. Hon'ble High Court of Delhi while considering approvals granted under section 153D in PCIT v. Shiv Kumar Nayyar, [2024] 163 taxmann.com 9 (Delhi) in para 12 to 17 has held as under: “12. It is observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that the authority granting approval has to apply its mind for \"each assessment year\" for \"each assessee\" separately. 13. Reliance can also be placed upon the decision of the Orissa High Court in the case of Asst. CIT v. Serajuddin & Co. [2023] 150 taxmann.com 146/292 Taxman 566/454 ITR 312/SCC OnLine Ori 992 to understand the exposition of law on the issue at hand. Paragraph no.22 of the said decision reads as under.- \"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 Commissioner of Income-tax. 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 \"seen\" or \"approved\" will not satisfy the 8 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO requirement of the law. This is where the 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, (i) the Assessing Officer 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.\" [Emphasis supplied] 14. During the course of arguments, learned counsel for the assessee apprised this Court that the Special Leave Petition preferred by the Revenue against the decision in the case of Serajuddin & Co. (supro), came to be dismissed by the Supreme Court vide order dated 28.11.2023 in SLP (C) Diary no. 44989/2023. 15. A similar view was taken by this Court in the case of Anuj Bansal (supra), whereby, it was reiterated that the exercise of powers under Section 153D cannot be done mechanically. Thus, the salient aspect which emerges from the abovementioned decisions is that grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind. 16. In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under:- \"10. We have gone through the approval granted by the Id. Addl. CIT on 30.12.2018 w/s 153D of the Act which is enclosed at page 36 of the paper book of the assessee. The said letter clearly states that a letter dated 30.12.2018 was filed by the ld. AO before the id. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The Id. Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30.12.2018 for seven assessment years in the case of the assessee and for seven assessment years in the case of Smt. Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. Neetu Nayyar from Central Public Information Officer who is none other than the id. Addl. Commissioner of Income- tax, Central Range-S, New Delhi, under Right to Information Act, wherein, it reveals that the Id. Addl. CIT had granted approval for 43 cases on 30.12.2018 itself. This fact is not in dispute before us. Of these 43 cases, as evident from page 36 of the paper book which 9 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO contains the approval u/s 153D, 14 cases pertained to the assessee herein and Smt. Neetu Nayyar. The remaining cases may belong to some other assessees, which information is not available before us. In any event, whether it is humanly possible for an approving authority like ld. Addl. CIT to grant judicious approval u/s 153D of the Act for 43 cases on a single day is the subject matter of dispute before us. Further, section 153D provides that approval has to be granted for each of the assessment year whereas, in the instant case, the Id. Addl. CIT has granted a single approval for all assessment years put together.\" 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.” 8. The language used in section 153D and section 158BG, are similar in nature and both prohibit passing of the assessment order or reassessment /block assessment without the prior approval of the officers mentioned in the said sections. The language used in these sections are in the mandatory form which prohibits passing of the order by the assessing officer without prior approval. Meaning thereby if an order is passed without any approval from the authorities mentioned in the respective sections then the order shall be bad in law and would be liable to be declared void being passed in contradiction to these provisions. Moreover these two provisions were provided by the legislature for the same purposes i.e., to supervise the functioning of the lower authorities by the higher authorities. 10 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO 9. In view of the above observations and respectfully following the judicial precedent, we have no hesitation in holding that the approvals u/s 158BG of the Act granted by Learned ACIT in the instant cases before us were in mechanical manner without due application of mind, thereby making the approvals an empty ritual. We find force in the argument of Learned Authorized Representative for the assesse in support of grounds raised in aforesaid block period i.e. 01/04/1996 to 17/10/2002. Accordingly, the additional ground by all the assessee’s for all the assessment years under consideration are allowed. 10. Since, the entire search assessment in the hands of all assessee’s have declared as bad in law and illegal, the other grounds raised by assesse and by the Department in the three appeals are academic in nature and are left open. 11. Resultantly, five appeals filed by the Assesees are allowed and four appeals filed by the Department of Revenue are dismissed. Order pronounced on this day 26th November, 2024 Sd/- Sd/- /-/- (M. BALAGANESH) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 26/11/2024 Pk/sps 11 IT(SS)Appeal No.09/Del/2014 & Ors. Ramesh Khanna & Ors. vs. ITO Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "