KISHOR SEWKANI,GUJRAT V. DCIT, CENTRAL CIRCLE-17, NEW DELHI

ITA 2930/DEL/2022

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360772 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: SUDESH GARG
• Keywords: Principle of natural justice; Assessment record; Competent authority; Initiation of penalty proceedings
• Section: 142(1); 153A

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI BEFORE SH. SUDHIR KUMAR, JUDICIAL MEMBER AND SH. MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2929/Del/2022 & ITA No.2930/Del/2022 Assessment Year: 2014-15 &2015-16 Kishor Sewkani A-801, North one Near Sentossa Park, Behind Hirapura Hall Ahmedabad Gujarat PAN No.AVAPS7806F Vs. The DCIT Central Circle -17 New Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. Sudesh Garg Advocate Sh. Shubham Sharma Advocate Respondent by Sh.Dayainder Singh Sidhu CIT DR Date of hearing: 20/05/2025 Date of Pronouncement: 23/05/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: These appeals are preferred by the assessee against the order dated 14.10.2022 of the Commissioner of Income Tax 2 (Appeals)-27, New Delhi [hereinafter referred to as “CIT(A)”] arising out of the order of Assessing Officer dated 21.12.2019 passed under section 153C r.w.s 153 A(3) of the Income Tax Act, 1961 [herein after, the Act] for the assessment year 2014- 15 & 2015-16. 2. The assessee has raised following common grounds of appeals :- 1. The Ld. CIT (A) has erred in facts and law in confirming the addition u/s 69A of the Income Tax Act, 1961 amounting to Rs. 1,02,97,901/- made by the Assessing Officer while completing the assessment in the case of the appellant u/s 153C r.w.s. 153A of the Income Tax Act, 1961. 2. The Ld. CIT (A) has erred in facts and law in approving the action of the AO of initiating proceedings u/s 153C of the Income Tax Act even though the same was not in accordance with the settled law and CBDT Circular in this regard. 3. The Ld. CIT (A) has erred in facts and law in holding that the issue of notice u/s 153C was in accordance with the CBDT Circular and the Supreme Court Order in the case of M/s Calcutta Knitwears [2014] 43 taxmann.com 446 (SC). 4. The Ld. CIT (A) has erred in facts and law in holding that the assessment completed u/s 153C were not barred by limitation. 3 5. The Ld. CIT (A) has erred in facts and law in upholding the order passed by the AO in gross disregard of principles of natural justice. 6. The Ld. CIT (A) has erred in facts and law in approving the addition of Rs.1,02,97,901/- even though there was no evidence that the alleged transaction took place during the year under consideration. 7. The aforesaid grounds are without prejudice to each other and appellant craves for liberty to add fresh grounds) of appeal and also to amend, alter, modify any of the grounds of appeal. 8. Without prejudice to the other grounds of appeal, the Ld. AO has erred on facts and in law in completing the assessment on the basis of mechanical approval (without any application of mind and without due consideration of the relevant material) u/s 153D of the Act. 3. The brief facts of the case are that a search & seizure and survey operations u/s 132/133 A of the Act were conducted on 09-09-2015 in the case of Naryana Sai and Asaram Bapu along with other cases of groups at various residential & business premises. Notices u/s 153C r.w.s 153A of the Act were issued in the case of the assessee for A.Y. 2014-15 being the assessment year falling with in the six years preceding the assessment year relevant to the previous year in which search was conducted. In 4 the response of the notice the assessee has submitted the submission stating that the original return of income filed by the assessee may be treated as return of income. The assessing officer completed the assessment after making the addition of Rs.1,02,97,901/- u/s 69 A of the Act. 4. Aggrieved from the order A.O. the assessee was filed the appeal before the Ld. CIT(A) who vide his order dated 14-10- 2022 dismissed the appeals of the assessee. Being aggrieved from the order of the Ld. CIT(A) the assessee has filed these appeals before the Tribunal. 5. The Ld. AR for the assessee raised the legal ground no 8 in both the appeals and submitted that approval granted by the Joint. Commissioner of Income Tax u/s 153D is not a valid approval. It was further submitted that the approval of the 6 cases was granted on the same day by the one Order. He also submitted that approval u/s 153D of the Act by the Joint Commissioner of Income tax is mechanical and without application of mind. In this regard, ld AR for the assessee has 5 filed the copy of approval u/s 153D of the Act dated 16-12- 2019. He also stated that combined approval of all the assessment years i.e. 2010-11 to A.Y. 2015-16 was granted by the JCIT, Central Range -5 New Delhi in a mechanical manner without any application of mind and due verification of the assessment records. He has relied the following judgments: 1. PCIT Vs. Shiv Kumar Nayyar (ITA 285/2024), (Delhi), Date of Order: 15.05.2024 2. PCT Vs. MDLR Hotels (P) Ltd. (2024] 166 taxmann.com 327 (Delhi) Date of Order: 30.07.2024 3. PCT Vs. Pioneer Town Planners (P) Ltd. [2024] 160 taxmann.com 652 (Delhi) 4. PCIT v. Sapna Gupta [2023] 147 taxmann.com 288 5. Sohan Lal Singla (AOP) Vs. DCIT ITA No. 711 to 714/DEL/2023) Date of Order: 08.05.2025 6. Sh. Vinod Kumar Bajaj Vs. DCIT, CC-32 (ITA No. 2594/DEL/2022) Date of Order: 07.05.2025 7. Rekha Modi Vs. JCIT, Central Circle-1, (ITA No. 4559/DEL/2024) Date of Order: 02.05.2025 8. Splendor Landbase Ltd. (ITA No. 2462 & 2463/DEL/2016 & CO No. 101 & 102/DEL/2024) Date of Order: 07.03.2025 9. Rakesh Bhatt Vs. ACIT, CC-18 (TA No. 1181 to 1182/DEL/2023) 6 10. Millenium Vinimay (P) Ltd. Vs. ACIT, CC-28 (TA No. 458/DEL/2022) Date of Order: 31.05.2024 11. Vinod Karsanbhai Patel Vs. ACIT (ITA No. 2534/DEL/2022) Date of Order: 25.04.2025 12. M.G. Metalloy (P) Ltd. Vs. DCIT (ITA No. 648 to 650/DEL/2022) Date of Order: 02.09.2024) 13. Mysore Finlease (P) Ltd. & Others Vs. ACIT [ITA No. 8821 to 8826/Del/2019 & Others) 14. DCIT Vs. Harvansh Chawla (ITA No. 152/167/168 /Del/2022] (ITAT Delhi) (28.02.2025) 15. Rakesh Bhatt Vs. ACIT [ITA No. 1181 to 1182/DEL/2023) ITAT Delhi (28.03.2025) 16. Nageshwar Builders (P) Ltd. Vs. DCIT (ITA No. 1661 to 1664/Del/2023) (29.04.2024) 17. Kavita Jain Vs. DCIT (ITA No. 3301 to 3306/Del/2024 (TAT Delhi) (31.12.2024) 18. ACIT Vs. Serajuddin & Co. (2024] 163 taxmann.com 118 (SC) dated 28.11.2023 19. ACIT Vs. Serajuddin & Co. Kolkata [2023) 150 taxmann.com 146 (Orissa) 20. Shreelekha Damani Vs. DCIT (ITA No. 4061/Mum/2012) (Bombay High Court) 21. MЗM India Holdings Vs. DCIT [2019] 71 ITR 451 (Del.) 22. Vrushali Sanjay Shinde Vs. DCIT (2023) 154 taxmann.com 324 (Mum.-Trib.) 23. Sanjay Duggal Vs. ACIT (ITA No. 1813/Del/2019] 7 24. PCIT Vs. Anuj Bansal [2024] 165 taxmann.com 3 (Supreme Court) (11.07.2024) 25. PCIT Vs. Anuj Bansal 466 ITR 254 & 251 26. PCIT Vs. Subhash Dabas (ITA No. 243/2023) 27. Daze Construction (P) Ltd. Vs. ACIT (ITA No. 594 to 598/Del/2023] 28. Veena Singh Vs. ACIT (ITA No. 294 & 295/Del/2022) 29. PCIT Vs. Tirupati Buildings & Officers (P) Ltd. (ITA No. 447/2024) 6. This legal issue was raised before the Ld. CIT(A) who decided the issue observing as under: “12.4 Without prejudice to the above, the approval granted by the Addl. CIT is in the nature of administrative power. The Range Head while examining the matter u/s 153D does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of section 153A. Reliance is placed on the judgment of Hon'ble Karnataka High Court in the case of Rishabhchand Bhansali v. DCIT, 267 ITR 577, wherein it is held as under: \"4.2.....thirdly the order passed by the Joint Commissioner granting previous approval under the proviso to section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does not decide upon any rights of the assessee. The Joint Commissioner, 8 while examining the matter under the proviso to section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV.” 12.5 In view of the above the allegation of the appellant that the Addl. CIT, Delhi has granted the approval u/s 153D in mechanical manner and without application of mind has no meaning as the approval is an administrative action which is required to be based on existence of set of circumstances and on subjective satisfaction as per the provisions of the Act. Further, approval u/s 153D being an official act provided under the statute, it is to be presumed that before according approval, the Range Head has looked into the records, applied his mind and he did not find any reason to disapprove the draft order proposed by the Assessing Authority and thereafter he has accorded approval.” 7. Ld. DR submitted that the approval was granted by the speaking order and the matter was discussed with AO by the Joint. Commissioner of Income Tax Central Range-5. He relied the order of the lower authorities. 8. We have heard the revival contention of the parties and gone through the materials available on record. The approval letter dated 16-12-2019 is reproduce as under: 9 10 9. In the case of Apple Commodities Limited Vs. DCIT, central Circle II Noida the Co-ordinate bench held as under: 7. Upon careful consideration, we find considerable cogency in the contention of the Ld. AR for the assessee that as per section 153A of the Act, for making assessment notice is required to be issued for each year separately for which the assessment are to be made. The notice u/s. 142(1) is also issued separately for each of the years. The assessment order is also passed separately for each of the year. As per mandate of section 153D, the approval of JCIT is also required separately for each of the assessment year. However, in the present case, the JCIT has given combined approval for 7 years which is not in conformity with law as settled by various Courts. It is further noted that the AO has sent the letter for approval of JCIT on 10.01.2018 and JCIT has granted approval on 11.1.2018, which is not practically feasible, as he has to properly examine the facts of the case, the seized material and the issue involved. It is germane to mention here that the approval has been granted by the JCIT on the basis of undertaking /certificate from the AO that the contents of the appraisal report, seized material etc. have been examined by him. Thus, the JCIT has not made any independent application of mind. The JCIT has not mentioned that he has gone through the appraisal report, assessment records, seized material and other materials which clearly shows that the approval granted by the JCIT is without going through the seized material, appraisal report and other material on record. The approval given by JCIT is not final. He has directed the AO that the fact of the initiation of penalty proceedings, wherever applicable, must be incorporated in the assessment order. In our view, whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval of JCIT should reflect application of mind, which is missing in the instant case. The requirement of approval cannot be 11 treated as mere formality and the mandate of the Act is that the approving authority has to act in a judicious manner by due application of mind in a manner of a quasi- judicial authority. Moreover, it is settled law that if the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval u/s. 153D of the Act and the mandate of the enactment by the legislature will be defeated. However, JCIT without any consideration of merits in proposed additions with reference to the incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the JCIT has rendered approval to be a mere formality and cannot be countenanced in law. In view of the peculiar facts and circumstances of the case, we are of the considered view that approval by JCIT is not valid, hence, deserves to be quashed. In view of above, it is clear that Jt. Commissioner of Income Tax has given approval which is purely mechanical and without application of mind. In such cases, the assessment looses its validity. The case laws refereed by the Ld. Counsel for the assessee are germane and very much supports the case of the assessee. 8. We note that Delhi Bench of the Tribunal in the case of ACITVs, Splendor Landbase Itd. and Vice Versa and ACIT vs. Hridey Vikram Bhatia and (vice versa) vide orde dated 7.3.2025 reported in 2025 (3) TMI 599 has considered the exactly similar issue and has held as under.- \"2025 (3) TMI 599-ITAT DELHI ACIT, CENTRAL CIRCLE-3, NEW DELHI, VERSUS SPLENDOR LANDBASE LTD. AND (VICE-VERSA) AND ACIT, CIRCLE-3, NEW DELHI. VERSUS HRIDEY VIKRAM BHATIA AND (VICE-VERSA) ITAS No. 2462 & 2463/Del/2016, CO Nos. 101 & 102/Del/2024 (ITAS No. 2462 & 2463/Del/2016) And ITAs No. 3173 & 3174/Del/2016, CO Nos. 02 & 03/Del/2025 (ITAS No. 3173 & 3174/Del/2016) Dated:-7-3-2025 12 Legality of approval granted u/s 153D-allegation of perusing the records for each assessment year separately - HELD THAT:- We find that only draft assessment orders were sent to JCIT without any assessment or search record. The approvals establishes that approving authority has granted the approvals, without reasons or depicting having applied an active mind to the issue involved and the material relied by the AO, but by merely mentioning \"Following draft assessment orders are being approved\", the impugned approval is granted. Now more particularly in the present set of facts where substantive additions were made in the hands of respondent and protective assessment were made in the hands of its Director respondent, had the competent authority been even aware of the fact of the protective and substantive assessments being made, then it was more likely to have been granted in one letter. Rather if the sequence number of letters granting approval is considered the approval was first granted in case of protective addition and then of substantive addition in case of the company. This certainly shows that unmindful of nature of material relied and nature of additions the approvals have been mechanically granted by the JCIT. Whatever attempt is now being made by the department to fill in the lacuna by filing letters of then JCIT who granted the approval is dong more damage to the case of the department because when we take into consideration the letter of then JCIT, with the submission, we find that the said JCIT seems to be still under impression that grant of approval is mere formality and for that reasons the ICIT has stated in this letter that. \"It is further noted that Approval letter U/s 153D is only a formal culmination of application of mind, which takes place throughout the assessment period.\" 13 On the contrary law as stands crystallized is that the approval letter should be speaking one and show that approval was granted by application of mind. There is inherent fallacy in the belief of JCIT as mentioned in this letter that \"there is no requirement in law creating any evidence for discussions before granting the approval u/s 153D. On the contrary this bench is of firm view that not only as quasi-judicial authority but even in administrative capacity, if an approval is to be granted under a statute for initiating any quasi judicial proceedings then such approval should be self contained piece of evidence that due process of law was followed in grant of approval. Which certainly is not the case here. Thus, approvals granted in case of both the assessee to be vitiated and deserve to be quashed -Decided in favour of assessee.\" (Heads Notes). 9. We further draw support from the decision of the Coordinate Bench of ITAT, Delhi in the case of Sanjay Duggal Versus ACIT, 2021 (1) TMI 909-wherein on identical issue, it has been held as under: - \"14. Another interesting aspect that has come to the notice on the basis of various documents submitted for approval as well as request for approval by the A.O. to the JCIT. We make a specific reference to letter dated 29.12.2017 written by ACIT, Central Circle-4, New Delhi, which is placed at page-144 of the PB. This letter Dated 29.12.2017 is a request for obtaining approval under section 153D of the I.T. Act in the case of Shri Rajnish Talwar and family wherein the approval in the case of Shri Rajnish Talwar for A.Ys. 2010-2011 to 2016-2017 is sought for. The A.O, send the dran assessment order along with assessment records of the above named assessee. In paragraph-4 of the letter, A.O. stated as under:- 14 \"It is certified that all issues raised in the appraisal reports have been duly examined with reference to the seized impounded material 15. Thus, the JCIT acted on certificate given by the A.O, without satisfying himself to the record/seized material etc.. The A.O. sent only assessment records to the SCIll for his approval. The identical is fast in the case of all the request for approval made by the A.O, but factual position noted above established that even assessment records have not been seen by the JCIT. The A.O. sent draft assessment orders for 07 assessment years on 29.12.2017 which were got approved on 30.12.2017 merely on the basis of draft assessment order. The JCIT in the approval Order Dated 30.12.2017 also mentioned that A.O. to ensure all the assessment proceedings are conducted as per procedure and Law. It would show that even JCIT was not satisfied with the assessment proceedings conducted by the A.O, as per Law and records.\" 10. In view of the aforesaid discussions and also by respectfully following the aforesaid binding precedents, we hold that the approval dated 11.01.2018 granted u/s. 153D of the Act by the Jt. Commissioner of Income Tax, Central Range, Meerut in the instant case is mechanical and without due application of mind. Accordingly, we quash the assessment and allow the legal ground raised by the assessee. Since we have quashed the assessment, the other grounds have become academic, hence need not be adjudicated upon. 9.In the present case the combined approval for 21 cases was granted by the one order on the same day, in which the seven cases are the same assessee for the different AY. 2013 -14 to 2019-20. In view of the aforesaid discussion and also by respectfully following the aforesaid binding precedents, we hold that the approval dated 28- 09-2021 granted u/s 153D of the Act by the Add. Commissioner of Income Tax Central Range Meerut is 15 mechanical and without due application of mind. Accordingly, we quash the assessment and allow the legal ground raised by the assessee. Since we have quashed the assessment, the other grounds have become academic, hence need not be adjudicated upon. 10. In the cases in hand the consolidated approval for the 6 Assessment Years was granted by the same order after a one year on the letter dated 12-12-2018. We further note that the JCIT granted approval for all assessment years 2010-11 to 2015-16 by a common letter dated 16-12-2019 on the letter of the A.O. dated 12-12-2018. It is observed that approval granted by the JCIT u/s 153D of the Act by way of single letter, was without application of mind and mechanical in nature because in the body of the letter the approval authority had mentioned that he had perused the draft assessment orders and case records for the A.Ys.2012-13 to A.Y. 2018-19, while the approval was granted for the A.Y. 2010-11 to 2015-16. Thus, approval letter shows that the approval was granted without any application of mind and mechanical manner. In the back ground of the aforesaid discussion and respectfully following 16 the aforesaid binding precedent, we hold that the approval dated 16-12-2019 granted u/s 153D of the Act by the Joint. Commissioner Of Income Tax, Central Range-5 New Delhi in the instant case is mechanical and without due application of mind. Accordingly, we quash the assessment and allow the ground raised by the assessee. Since we have quashed the assessment order the other grounds have become academic, and keep them open for adjudication. 11. In the result, the appeals of the assessee are allowed. Order pronounced in the open court on 23.05.2025. Sd/- Sd/- (MANISH AGARWAL) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Date: 23.05.2025 f{x~{tÜ? fÜA cf f{x~{tÜ? fÜA cf f{x~{tÜ? fÜA cf f{x~{tÜ? fÜA cf Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) ` 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 17 "