KAPIL GARG,NEW DELHI V. ACIT CENTRAL CIRCLE, GHAZIABAD

ITA 3197/DEL/2024

AI Insights

The case involves three appeals filed by Kapil Garg against the orders of the Commissioner of Income Tax (Appeals)-3, Noida, which dismissed his appeals for the assessment years 2013-14, 2014-15, and 2019-20. The primary contention was the validity of the approval under section 153D of the Income Tax Act, 1961, which was necessary for initiating the assessment proceedings following a search and seizure operation. The Tribunal examined whether the approval process was conducted with due application of mind by the Additional Commissioner of Income Tax, Central Range, Meerut. The Tribunal found that the approvals were granted in a mechanical manner without proper examination of the facts or the draft assessment orders, leading to the conclusion that the assessments were invalid.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 22992 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Other Referred Cases: SEH Realtors Pvt. Ltd. Vs. ACIT, PCIT vs. Anju Bansal, PCIT vs Shiv Kumar Nayyar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: KAPIL GOEL
• Keywords: Question of law; Corroborative evidences; Document seized; Documents seized; Search and seizure; Assessment record
• Section: 143(3); 132; 153A; 43; 153C

Judgement Text

" 1 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’: NEW DELHI BEFORE BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 3197/Del/2024 (A.Y 2013-14) ITA No. 3198/Del/2024 (A.Y 2014-15) ITA No. 3199/Del/2024 (A.Y 2019-20) Kapil Garg, C/o. KapilGoel, Adv, F- 26/124 Sector 7 Rohini, 10, New Delhi, PAN No:ACGPG5196F Vs. ACIT Central Circle, IInd Floor, CGO Complex-1Hapur Chungi, Ghaziabad, Uttar Pradesh (Appellant) (Respondent) Appellant by Advocate KapilGoel, Respondent by Sh. Dayainder Singh Sidhu, CIT(DR) Date of Hearing 19/12/2024 Date of Pronouncement 07/02/2025 ORDER PER YOGESH KUMAR U.S.: The above three Appeals are filed by the Assessee for Assessment Years 2013-14, 2014-15 and 2019-20 challenging the orders passed by the Commissioner of Income Tax (Appeals)-3, Noida (‘Ld. CIT(A) for short), dated 18/06/2024. 2. The Assessee has raised several grounds Appeal in all the above captioned Appeals, in Ground No. 1 the Assessee, it has been contended that, the Ld. CIT (A) -3 Noida erred in not quashing the impugned 2 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT assessment framed u/s 153A/143(3) of the Act vide order dated 19/08/2021 being based on invalid approval u/s 153D of the Act. 3. Brief facts of the case are that, the assessment proceedings have been initiated against the Assessee pursuant to a search and seizure operationdated 30/07/2018 conducted u/s 132 of the Income Tax Act, 1961 (‘Act’ for short) at the residential as well as business premises of Assessees comprising M/s P. S. Enterprises and ors group of cases. In all the above cases, an approval u/s 153D of the Act dated 11/08/2021 has been issued by the Addl. Commissioner of Income Tax, Central Range, Meerut in respect of the assessment years 2013-14 to 2019-20 pursuant to the office letter of DCIT, Central Circle, Ghaziabad/A.O. dated 11/08/2021.Based on the said approval granted u/s 153D of the Act, the assessment proceedings have been initiated for assessment years 2013-14 to 2019-20 and the assessment orders have been passed against the Assessee by making certain additions. As against the assessment orders, the Assessee has preferred respective Appeals before the Ld. CIT(A). The Ld. CIT(A) dismissed the Appeals for Assessment Year 2013-14, 2014-15 and 2019-20 vide order dated 18/06/2024 which are called in question before us in the respective Appeals filed by the Assessee. 3 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT 4. Since, all the captioned Appeals are filed by the Assessee and are emerging out of single search and seizure operation and also considering the issue to be decided in the above Appeals, the captioned Appeals are clubbed and heard together. 5. The Ld. Counsel for the Assessee addressing on the ground No. 1 of Appeal, vehemently submitted that in all the above cases the assessment proceedings have been initiated pursuant to invalid approvals granted u/s 153D of the Act by the Addl. Commissioner of Income Tax. The Ld. Counsel further submitted that as per u/s 153D of the Act, the Ld. ACIT is required to verify the issues raised by the Ld. A.O. in the draft assessment order, apply his mind and ascertain whether the entire facts have been appreciated properly by the Ld. A.O. together with the supporting evidences. The procedure of granting approval by the Ld. JCIT is a quasi-judicial function, which has to be performed based on sound reasoning on due examination of the seized documents, replies filed by the Assessee and the draft assessment order of the Ld. A.O. 6. The Ld. AR submitted that the approval has been granted on the very same day and the approval has been accorded in single and consolidated manner for different Assessment years. Thus, the Ld. AR 4 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT submitted that the approval granted in all the above cases cannot be treated as a valid approval and submitted that consequentiallythe entire assessment framed in the hands of the Assessee in the years under consideration requires to be quashed as void ab- initio. The Ld. Counsel for the Assessee relied on the various judicial pronouncements: 7. The Ld. Department's Representative submitted that the role of ld. ACIT, Central Range is totally different from the role of a ACIT in the normal range. Further submitted that in the Central Range, the ld. ACIT is involved in the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing and is involved with the Ld. AO from time to time while issuing various questionnaires. The ld. ACIT in Central Range also examined the seized documents in detail in respect of each Assessment Years immediately after receipt of the appraisal report and provided able assistance to the Ld. AO about the interpretation of the said seized documents while issuing questionnaires to Assessees, examining the replies filed by the Assessees and drawing conclusions thereon. Thus, submitted that it is very easy for the ld. ACIT to grant approval of the draft assessment order on the same day since the Ld. ACIT is involved with the assessment proceedings right from the inception. Therefore, submitted that the by 5 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT contention of the Assessee's Representative that the Ld. ACIT has given mechanical approval has no force. 8. Further, the Ld. DR vehemently argued that bare reading of provisions of section 153D of the Act, which provides only about existence of approval from the ld. ACIT. There is no mention of application of mind on the part of the ld. ACIT or the approving authority in the said section. The expression “application of mind” is only provided by the judicial decisions and not provided in the statute. Further submitted that, the literal interpretation is to be given to the provisions of section 153D of the Act which does not provide for application of mind of the approving authority and hence any other interpretation contrary to the same would only result in re-writing the law. The Ld DR also argued that in some of the cases the Assessee files details at the last moment and that is why the approval is obtained from ld ACIT in the last moment. The Ld. Department's Representative has also submitted that the Ground challenging the approval issued u/s 153D of the Act has not been raised before the Ld. CIT(A), which cannot be raised before the Tribunal in the belated stage. Thus, the Ld. Department's Representative sought for dismissal of the Grounds of Appeal challenging the approval granted u/s 153D of the Act. 6 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT 9. We have heard both the parties and perused the material available on record. In all above cases the assessment proceedings have been initiated pursuant to the approval u/s 153D of the Act accorded by the Addl. Commissioner of Income Tax, Central Range, Meerut. The approval has been granted on 11/08/2021 on the very same day of the office letter written by the A.O./DCIT, central Circle, Ghaziabad. There was no time available for the ACIT to verify and examine the draft assessment order, assessment record etc. The approval has been granted in stereotype manner without examining the facts of the case. Apart from the same, single approval has been granted for various Assessment Years. 10. The Co-ordinate Bench of the Tribunal while examining the similar issue in the case of SEH Realtors Pvt. Ltd. Vs. ACIT in ITA No. 2503/Del/2017 and connected matters for Assessment Year 2013-14 vide order dated 23/07/2024 considered all the judicial pronouncements on the issue held as under: - “8. We find as per the scheme of the Act, for framing search assessments, the Ld. AO can pass the search assessment order u/s 153A or u/s 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the ld. JCIT, in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the ld. JCIT is a quasi judicial proceeding requiring application of mind by the 7 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT ld. JCIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme of the Act, it is the bounden duty of the Ld. AO to seek to place the draft assessment order together with copies of the seized documents before the ld. JCIT well in time much before the due date of completion of search assessment. The ld. JCIT is supposed to examine the seized documents, questionnaires raised by the Ld. AO on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the questionnaires issued by the Ld. AO and the conclusions drawn by the Ld. AO vis- à-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the ld. JCIT in a judicious way after due application of mind. Even though as vehemently argued by the Ld. CIT-DR, the ld. JCIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the ld. JCIT, while granting the approval u/s 153D of the Act has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Ld. AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Ld. AO and ld. JCIT are merely guidance to the Ld. AO and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the Ld. AO to frame the assessment after getting prior approval from ld. JCIT u/s 153D of the Act. The ld. JCIT getting involved in the search assessment proceedings right from inception does not have any support from the provisions of the Act as no where the Act mandates so. The scheme of the Act mandates due application of mind by the Ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the Ld. AO as well as the ld. JCIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of ld. JCIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the Ld. CIT DR, has no substance. In other words, irrespective of the 8 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT conclusions drawn in the appraisal report by the Investigation Wing, both the Ld. AO and the ld. JCIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. As far as the argument of the Ld. CIT DR that the details were normally filed by the assessee at the last moment is concerned, the ld. AO has got every right to reject the said replies if not filed within the stipulated time. It is not the case of the revenue that the details were filed by the assessee in the instant case at the last moment. Even if it is so, as stated above, it is the prerogative of the ld. AO to accept the said letter containing details or reject the same as it was not filed within the stipulated time. On the contrary, if the ld. AO himself grants time to the assessee to furnish the details till the last moment, then no fault could be attributed to the assessee. In such circumstances, the only irresistible conclusion that could be drawn is that the ld. AO is not serious about the statutory deadlines provided in the Act. In our considered opinion, if the arguments of the Ld. CIT DR are to be appreciated that the ld. JCIT need not apply his mind while granting approval of the draft assessment orders u/s 153D of the Act as it is not provided in section 153D of the Act, then it would make the entire approval proceedings contemplated u/s 153D of the Act otiose. The law provides only the Ld. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. JCIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the Ld. AO. 9. Let us now examine whether in the aforesaid background of the scheme of the Act, whether the approval in terms of section 153D of the Act has been granted by the ld. JCIT in a judicious way after due application of mind or not, in the instant case. We have gone through the approval granted by the ld. JCIT on 27.03.2015 u/s 153D of the Act. The said approval letter clearly states that a letter dated 27.03.2015 was filed by the Ld. AO before the ld. JCIT seeking approval of draft assessment order u/s 153D of the Act. The ld. JCIT has accorded approval for the said draft assessment order on the very same day i.e. on 27.03.2015 for various assessment years for 232 files on a single day. In any event, whether is it 9 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT humanly possible for an approving authority like the ld. JCIT to grant judicious approval u/s 153D of the Act for all the assessment years on a single day is the subject matter of dispute before us. Further, we find that similar issue has been addressed by the Hon'ble Jurisdictional High Court in the case of PCIT vs. Anju Bansal in ITA 368/2023 order dated 13.07.2023 wherein, under similar circumstances, the Hon'ble Delhi High Court categorically held that statutory approval given by a quasi judicial authority without due application of mind as contemplated in section 153D of the Act would be fatal to the entire search assessment proceedings. The relevant operative part of the said order is reproduced below:- \"12. This aspect was brought to the fore by the Tribunal in the impugned order. The Tribunal, thus, concluded there was a complete lack of application of mind, inasmuch as the ACIT, who granted approval, failed to notice the said error. 12.1 More particularly, the Tribunal notes that all that was looked at by the ACIT, was the draft assessment order. 13. In another words, it was emphasised that the approval was granted without examining the assessment record or the search material. The relev ant observations made in this behalf by the Tribunal in the impugned order are extracted hereafter: \"17.1 However, in the present case, we have no hesitation in stating that there is complete non -application of mind by the Learned Addl. CIT before granting the approval. Had there been application of mind, he would not have approved the draft assessment order, where the returned income of Rs.87,20,580/ -, Similarly, when the total assessed income as per the AO comes to Rs. 16,69,42,560/-, the Addl. CIT could not have approved the assessed income at Rs. 1,65,07,560/ - had he applied his mind. The addition of Rs. 15,04,35,000/ - made by the AO in the instant case is completely out of the scene in the final assessed income shows volumes . 17.2 Even the factual situation is much worse than the facts decided by the Tribunal in the case of Sanjay Duggal (supra). In that case, at least the assessment folders were sent 10 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT whereas in the instant case, as appears from the letter of the Assessing Officer seeking approval, he has sent only the draft assessment order without any assessment records what to say about the search material. As mentioned earlier, there are infirmities in the figures of original return of income as well as total assessed and the Addl. CIT while giving his approval has not applied Page | 10 SEH Realtors Pvt. Ltd his mind to the figures mentioned by the AO. Therefore, approval given in the instant case by the Addl. CIT, in our opinion, is not valid in the eyes of law. We, therefore, hold that approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D of the Act. In view of the above discussion, we hold that the order passed u/s 153A r.w.s. 143(3) has to be quashed, thus ordered accordingly. The ground raised by the Assessee is accordingly allowed\". [Emphasis is ours] 14. In this appeal, we are required to examine whether any substantial question of law arises for our consideration. 15. Having regard to the findings returned by the Tribunal, which are findings of fact, in our view, no substantial question of law arises for our consideration. The Tribunal was right that there was absence of application of mi nd by the ACIT in granting approval under Section 153D. It is not an exercise dealing with a immaterial matter which could be corrected by taking recourse to Section 292B of the Act. 16. We are not inclined to interdict the order of the Tribunal.\" 10. The ld. AR also placed on record the recent decision of Hon‟ble Jurisdictional High Court in the case of PCIT vs Shiv Kumar Nayyar reported in 163taxmann.com9 (Del) wherein it was held that where order of approval u/s 153D of the Act for relevant assessment year was granted by Additional Commissioner who had granted approval for 43 cases on a 11 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT single day without perusing the draft assessment orders at all and without an independent application of mind, impugned assessment order was rightly declared to be illegal by Tribunal. 11. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation in holding that the approval u/s 153D of the Act has been granted by the ld. JCIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decisions of the Hon'ble Orissa High Court; Hon'ble Allahabad High Court and Hon‟ble Jurisdictional High Court (Delhi High Court) referred to supra. Hence, we find lot of force in the arguments advanced by the Ld. AR in support of the ground raised in the Cross Objections of the assessee. Hence the assessment framed for the Asst Year 2013-14 by the ld. AO is hereby declared as void abinitio and is hereby quashed. Accordingly, the ground raised by the assessee in the Cross Objection is hereby allowed. 12. Since, pursuant to the allowing of the Cross Objections of the assessee, the entire assessment framed in the hands of the assessee is to be declared illegal and bad in law, the other legal grounds and grounds on merits raised by the assessee as well as by the revenue need not be gone into, as adjudication of the same would be merely academic in nature and, hence, they are left open. 13. In the result, the appeal of the assessee is allowed, cross objections of the assessee is allowed and appeal of the revenue is dismissed.” 11. Considering the fact that the Ld. ACIT accorded the approval u/s 153D of the Act on the very same dayand also considering the fact that consolidated single approval has been granted for different Assessment 12 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT Years, by following the ratio laid down in the case of SEH Realtors Pvt. Ltd. (supra), we allow the Ground No. 1 of the respective Appeals challenging the assessment order which was framed based on the invalid approval accorded u/s 153D of the Act. Accordingly, we set aside all the impugned Assessment Orders in the captioned Appeals. 12. In the result, the Appeal of the Assessee in ITA Nos. 3197/Del/2024, 3198/Del/2024 and 3199/Del/2024 are allowed. 13. Since we have quashed the respective assessment orders on the ground of invalid sanction accorded u/s 153D of the Act, other Grounds of Appeal raised by the Assessees have not been adjudicated. Order pronounced in open Court on 07th February, 2024 Sd/- Sd/- (SHAMIM YAHYA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07/02/2024 R.N, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 13 ITA No. 3197, 3198 & 3199/Del/2024 KapilGarg Vs. ACIT "