REKHA MODI,DELHI V. JOINT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, NOIDA, NOIDA

ITA 4559/DEL/2024

AI Insights

This case involves an appeal by Rekha Modi against the order of the Commissioner of Income Tax (Appeals) - 3, Noida, which arose from an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 for the assessment year 2019-20. The primary contention was regarding the validity of the approval under section 153D for the assessment, which the assessee argued was granted in a mechanical manner without proper application of mind. The Tribunal examined the procedural compliance and the substantive merits of the case, particularly focusing on the nature of the approval process under section 153D and its implications on the validity of the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312334 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2019-2020
• Other Referred Cases: The Pr. Commissioner of Income Tax and Another versus Subodh Agarwal, Pr. Commissioner of Income Tax and Another Versus Sapna Gupta, Pr. Commissioner of Income Tax and another Vs. Siddarth Gupta, Principal Commissioner of Income Tax Vs. Anuj Bansal, ACIT, Central Circle -14, New Delhi Vs. Anuj Bansal, ACIT Vs. M/s. Serajuddin and Co. Kolkata, Apple Commodities Limited Vs. DCIT, Central Circle- II, Noida, Kapil Garg C/o Kapil Gole Vs. ACIT Central Circle Ghaziabad, Inder Chand Bajaj AE-17 Vs. DCIT Central Circle - 32, Delhi, DCIT , Central Circle 8 New Delhi Vs. Amloak Singh Bhatia and Amolak Singh Bhatia Vs. DCIT, Central Circle 8 New Delhi, Pr. Commissioner of Income Tax -15, Vs. Shiv Kumar Nayyar, ACIT Vs. Splendor Landbase Itd. and Vice Versa, ACIT vs. Hridey Vikram Bhatia and (vice versa), Sanjay Duggal Versus ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: PRANSHU SINGHAL
• Keywords: Period of limitation; Search and seizure; Assessment record; Competent authority; Initiation of penalty proceedings; Time period of passing order
• Section: 143(3); 142(1); 132; 153A; 2

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITA No.4559/Del/2024 Assessment Year: 2019-20 Rekha Modi E-380, First Floor, Greater Kailash Part-I, New Delhi PAN No.AAEPM8105E Vs. JCIT Central Circle -1 Noida (APPELLANT) (RESPONDENT) Appellant by Sh. Pranshu Singhal, CA Ms. Mansi Jain, CA Respondent by Ms. Suman Malik, CIT DR Date of hearing: 23/04/2025 Date of Pronouncement: 02/05/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: This appeal is preferred by the assessee is against the order 30.07.2024 of the Commissioner of Income Tax (Appeals)- 3, Noida [hereinafter referred to as “CIT(A)”] arising out of the order of Assessing Officer dated 29.09.2021 passed under 2 section 143(3) of the Income Tax Act, 1961 [herein after, the Act] for the assessment year 2019-20. 2. The assessee has raised following grounds of appeal :- “1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eyes of law as well as on facts of the case and thus, liable to be quashed. 2 2. (i) On the facts and circumstances of the case and in law, the order passed u/s 143(3) is bad in law in the absence of a proper approval obtained by the AO as prescribed under Section 153D of the Act. (ii) That the said approval has been granted in a mechanical manner and as such the assessment order so passed is illegal and void-ab-initio. 3. 3. (i) On the facts and circumstances of the case and in law, the order passed u/s 143(3) is barred by limitation as the same has been made beyond the period of limitation as prescribed in Section 153B of the Act. (ii) That the notice 3 of demand as well as the assessment order passed was issued and served upon the assessee after the limitation period as prescribed in Section 153B of the Act. 4. (i) On the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the addition of Rs. 4,15,898/- on account of unexplained jewellery as found during the course of search. (ii) That the Ld. CIT(A) has grossly erred in confirming the aforesaid additions despite the assessee having furnished satisfactory explanation in support of the jewellery. (iii) That the aforesaid addition is illegal and invalid as the same has been made without issuing show cause notice. 5. (i) On the facts and circumstances of the case and in law the AO has grossly erred in issuing defective notice of demand under section 156 of the Act prior to making of assessment under section 143(3) of the Act and as such, the notice of demand issued prior to the conclusion of the assessment proceedings is invalid and bad in law. (ii) That the AO has erred in issuing the defective notice of demand and the assessment order without mentioning the 4 Document Identification Number (DIN) which is a mandatory requirement as envisaged in Circular No. 19/2019 dated 14.08.2019. (iii) That the notice of demand issued by the AO is full of defects which mentions the incorrect details of the assessment order under question. 6. 6. That the appellant craves leave to add, amend or alter any of the grounds of appeal.” 3. The brief facts of the case are that a search and seizure operation u/s. 132 of the IT Act, 1961 was conducted on 11.102.2018 on the premises of the assessee comprising M/s PMC Group of cases and the residential and business premise of the assessee. During the course of search operation, various incriminating documents/ information belonging to the assessee were found and seized. The assessee has filed the return of income on 31-08-2019 declaring total income of Rs. 35,31,160/-. A notice u/s 143(2) of the Act was issued on 26- 08-2020 through ITBA portal and duly served on the assessee. Notices u/s 142(1) of the Act were issued with questionnaire. During search from the bank lockers and residence gold 5 jewellery of 1186.59gram and 1864.25 gram were seized. The assessment in the case of the assessee was completed u/s 143(3) of the Act, by the AO after obtaining the prior approval of the Add. Commissioner of Income Tax Central Range Meerut u/s.153D of the Act, by making an addition of Rs.5,86,000/- u/s. 69A of the Act on account of unexplained jewellery. 4. Aggrieved from the order AO, the assessee was filed the appeal before the CIT(A) who vide his order dated 29-09-2021 partly granted the relief to the assessee and sustained the addition of the Rs.4,15,898/-. Being aggrieved from the order of the Ld. CIT(A) the assessee has filed this appeal before the Tribunal. 5.The Ld. AR for the assessee submitted that approval granted by the Add. Commissioner of Income Tax u/s 153D is not a valid approval. It was further submitted that the approval of the 21 cases was granted on the same day by the one Order. He also submitted that approval u/s 153D of the Act by the Add. Commissioner of Income tax is mechanical and without 6 application of mind. In this regard, ld AR for the assessee has filed the copy of letter dated 28-09-2021 of the AO sent to Add. Commissioner Of Income Tax for approval: copy of approval u/s 153D of the Act dated 29-09-2021. He has relied the following judgments: i. The Pr. Commissioner of Income Tax and Another versus Subodh Agarwal ii. Pr. Commissioner of Income Tax and Another Versus Sapna Gupta iii. Pr. Commissioner of Income Tax and another Vs. Siddarth Gupta iv. Principal Commissioner of Income Tax Vs. Anuj Bansal v. ACIT, Central Circle -14, New Delhi Vs. Anuj Bansal and Anuj Bansal ACIT, Central Circle 14, New Delhi vi. ACIT Vs. M/s. Serajuddin and Co. Kolkata vii. Apple Commodities Limited Vs. DCIT, Central Circle- II, Noida viii. Kapil Garg C/o Kapil Gole Vs. ACIT Central Circle Ghaziabad 7 ix. Inder Chand Bajaj AE-17 Vs. DCIT Central Circle - 32, Delhi x. DCIT , Central Circle 8 New Delhi Vs. Amloak Singh Bhatia and Amolak Singh Bhatia Vs. DCIT, Central Circle 8 New Delhi xi. Pr. Commissioner of Income Tax -15, Vs. Shiv Kumar Nayyar 6. This legal issue was raised before the Ld. CIT(A) who decided the issue observing as under: 5.2 Ground of Appeal No. 2 In this ground, the AR has challenged the validity of the assessment framed by the AO on the basis that there is a mechanical approval by the Addl. CIT u/s 153D of the Act. On consideration of the facts of the case, it is seen that the contentions of the AR that the order has been passed after a mechanical approval of the Addl. CIT is without merits as the cases are thoroughly discussed with the Range Head during the course of assessment and only after due application of mind, the approval is given by the Range Head. Moreover, the AR has provided no cogent reasons as to how the 8 approval was mechanical. The Hon'ble High Court of Chhattisgarh in the case of Hitesh Golcha vs. ACIT, Central Circle-1, Raipur reported at TAXC No. 76 of 2024 dated 10.04.2024 on the issue of approval u/s 153D has in paras 5 & 6 has held as under: \"5. The order of the Assessing officer of approval (Annexure 4) would reflect that Joint Commissioner was satisfied on the basis of the documents on record that such approval was justified. In a given case, it cannot be presumed on the mere say of the assessee that no application of mind was there while granting the approval. It is the subjective satisfaction and the language of the (Annexure - 4) would show that on the basis of the document produced before the Joint Commissioner. he was convinced of the fact that such approval would be necessary as the statute mandate. 9 6. From perusal of the language of the letter (Annexure 4), we cannot presume that there was no application of mind as the approval need not be a detailed assessment order. The presumption under Section 111 of the Evidence Act would follow when such official Act has been done in accordance with official procedure and will lead to presumption that due diligence was followed……………………………..” Hence in view of the above discussion, this ground cannot be accepted and is therefore dismissed. 7. Ld. DR submitted that the approval was granted by the speaking order and the matter was discussed with AO by the Add. Commissioner of Income Tax Meerut Range which can been seen the letter dated 28-09-2021. The draft assessment orders for approval and letter of approval reproduce as under: 10 11 u 8. We have heard the parties and perused the material available on the record. 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 12 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, 13 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 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, 14 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.- 15 \"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 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. 16 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 17 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.\" 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. 18 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:- 19 \"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.\" 20 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 mechanical and without due application of mind. Accordingly, we quash the assessment and allow the legal 21 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 case in hand the consolidated approval for the 21 cases was granted by the same day by the same order. We further noted that AO sent a common letter for approval u/s 153D of the Act for assessment 2013-14 to 2019-20 to the Addl. Commissioner of Income tax Meerut on 28-09-2021 and the ACIT granted approval for all assessment years 2013-14 to 2019-20 by a common letter dated 28-09-2023 i.e the same day. It is observed that approval granted by the ACIT u/s 153D of the Act by way of single letter was without application of mind and mechanical in nature. In the back ground of the aforesaid discussion and respectfully following the aforesaid binding precedent, we hold that the approval dated 28-09-2021 granted u/s 153D of the Act by the Addl. 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 ground raised by the 22 assessee. Since we have quashed the assessment, the other grounds have become academic, and keep them open for adjudication. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 02.05.2025. Sd/- Sd/- (SHAMIM YAHYA) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:02.05.2025 Neha, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) ` 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "