Search Assessment Invalid Without Incriminating Material; Relief on Profit Estimation and Seized Cash

The Hon’ble ITAT, Lucknow Bench ‘A’, Lucknow

Ref: SHRI RAKESH KUMAR PANDEY (PAN:ATIPP6520B)

Subject:-Consolidate Synopsis:

“Section 145 of the Income-tax Act, 1961 provides for computation of income under section 29 on the basis of books of account and methods of accounting regularly followed by the assessee. However, where the Assessing Officer is not satisfied with the correctness or completeness of the books, he may reject them and estimate the income to the best of his judgment in accordance with the provisions of Section 144 of the Act. When an estimate is made to the best judgment of an Assessing Officer, he substitutes the income that is to be computed under section 29 of the Act. Once best judgment assessment is made by fixing a rate of net profit, the assessee’s claim for deduction on account of expenses cannot be deemed to have been ignored. The net profit rate is applied after taking into consideration all factors and it accounts for all the deductions which are referred to under section 29 and are deemed to have been taken consideration while making such estimate.”

7.12 Considering the aforementioned discussion, case laws specially the judgment of Hon’ble HIGH COURT OF ALLAHABAD in the case of Commissioner of Income-tax, Allahabad v. Target Construction Co. Ltd and the fact that depreciation of Rs. 14,99,267/- has already been disallowed, the net profit rate of 11% applied by the Assessing Officer is too high when appellant has shown comparatively higher profit margin of 10.13% and 9.68% in subsequent years i.e. A.Y. 2021-22 and A.Y. 202223 to cover up the deficiencies of unproved sundry creditors/remission of liabilities found during search proceeding. Therefore, I am of the considered view that it would be justified to apply net profit rate of 7% on the total turnover of Rs. 1,59,98,27,836/- which works out at Rs. 11,19,87,949/-. Since the appellant has shown income from business at Rs. 10,07,00,526/-, thus, the difference in profit works out at Rs. 1,12,87,423/-. Thus, the addition to the tune of Rs. 1,27,86,690/- (Rs. 1,12,87,423 + Rs. 14,99,267/-) deserved to be confirmed. Therefore, the addition to the extent of Rs. 1,27,86,690/- is confirmed and remaining addition of Rs.6,24,93,846/- (7,52,80,536-1,27,86,690) made by the Assessing Officer is hereby deleted. Thus, these grounds of appeal are partly allowed.

Recently, Hon’ble Mumbai High Court in case of PrakashPandurangPatil (Bombay) after following the Division bench judgment of Hon’ble Mumbai high Court in case of Hexaware Technologies Limited held as under:-

“9. In the light of the above discussion, and when there is no dispute that the Jurisdictional Assessing Officer (JAO) had no jurisdiction to issue the impugned order and the impugned notices, the writ petition is required to be allowed. It is accordingly allowed in terms of prayer clause (b) and (d), which reads thus:-

“(b) To issue a writ of Mandamus or direction or order in the nature of Mandamus or writ of Certiorari or any other writ under Article 226 of the Constitution of India, setting aside the impugned order under section 148A(d) dated 05.04.2022.

(d) To issue a writ of Mandamus or direction or order in the nature of Mandamus or writ of Certiorari or any other writ under Article 226 of the Constitution of India, declaring that the consequential notice dated 05.04.2022 issued under section 148 as invalid.”

10. We make it clear that having disposed of this petition on the ground of non-compliance with Section 151A of the Act, we have not expressed any opinion on the other issues as raised in the Writ Petition, which are expressly kept open.”

Further, SLP of Revenue Diary No. 39689 / 2025 (dated 18.08.2025) in case of PrakashPandurangPatil are dismissed by Hon’ble Supreme Court on ground of delay as well as merits.

Recently Apex Court in case of Deepanjan Roy SLP Civil Diary No. 33956/2025 (dated 16.07.2025) has dismissed the SLP of Revenue.

5. From the perusal of record, it is seen that against total receipts of Rs. 9,95,21,021/-, net profit of Rs. 16,42,215/- has been shown by the assessee which gives net profit rate of 1.65%. During the course of assessment proceedings, the assessee was required to produce books of accounts, bills/vouchers relating to the expenses claimed vide notice u/s 142(1) of the Income Tax Act, 1961 dated 04.10.2023, 20.11.2023, 28.11.2023, 29.01.2024, 05.02.2024, 26.02.2024, 05.03.2024 and order sheet entries dated 01.03.2024, 07.03.2024 and 12.03.2024. No books of accounts, bills/ vouchers were produced by the assessee despite ample opportunities given to him. Not only that, during the course of search proceedings, post search proceedings also, books of accounts, bills/vouchers were neither found norproduced. In view of above and following discrepancies, books of account of assessee are not reliable: 5.1 The Auditor, in his audit report dated 22.09.2014, in Form No. 3CB has commented as follows: “a. Records necessary to verify personal nature of expenses not maintained by the assessee. b. Proper stock records are not maintained by the assessee. c. Valuation of closing stock is not possible. Page 2 of 6 ATIPP6520B- RAKESH KUMAR PANDEY A.Y. 2014-15 ITBA/AST/S/147/2023-24/1063514529(1) d. Figures shown under the head of Sundry Debtors, Sundry Creditors, Loans & Advances, Provisions etc are subject to reconciliation and confirmation. Figures shown under the head of closing stock and cash in hand are physically verified by the proprietor of the firm. Fixed Assets as shown in the balance sheet are subject to verification. Details of TDS deducted and deposited could not be verified due to non availablility of receipts and challans. However, the assessee is liable for deduction of tax. The assessee did not provide information regarding deductions to be claimed under Chapter VI-A. e. GP ratio is not ascertainable from the financial statements prepared by the assessee. 5.2 During the year under consideration, the assessee has shown sundry creditors to the tune of Rs. 77,28,457/-. During the assessment proceedings, vide notice u/s 142(1)of the Income Tax Act, 1961 dated 04.10.2023, the assessee was required to furnish detailed list of Sundry Creditors with name, complete address, amount, PAN along with ledger accounts. The assessee vide reply furnished the list of sundry creditors with name, address and outstanding amount due to them at the end of the financial year. To verify the creditworthiness and genuineness of sundry creditors, notice u/s 133(6) of the Income Tax Act, 1961 was sent to some of the creditors on test check basis. No reply from any of the entities was received. Some of the notices were returned unserved. The assessee during the course of search proceedings also accepted in his statement that he is surrendering additional income to cover unproven sundry creditors/remission of liabilities. 5.3 Violation of provisions contained in section 40A(3) of the Income Tax Act, 1961 cannot be ruled out as substantial amount of payments are found to have been made in cash. 5.4 The possibility of incurring expenditure which are prohibited by law and constitute an offence, as per Explanation 1 to section 37 of the I.T. Act, 1961, can also be not ruled out as the assessee has failed to produce even a single bill or voucher in support of his claims, made in ITR. The issues as discussed above may be the reasons for assessee having resorted to non-production of books of accounts including cash book, party ledger etc bills/ vouchers and other supporting documents. In view of these facts, it is clear that the trading results shown by the assessee are not open to verification and are hence not reliable. Considering the overall facts of the case & violation of provisions of sections of Income Tax Act, 1961 in several instances, as discussed above, the book result Page 3 of 6 ATIPP6520B- RAKESH KUMAR PANDEY A.Y. 2014-15 ITBA/AST/S/147/2023-24/1063514529(1) shown are rejected as per provision of section 145(3) of the Income Tax Act, 1961 and accordingly income from construction business is estimated according to provision of section 144 of the IT Act, 1961. After considering the facts and circumstances of the case and the fact that the assessee has himself disclosed net profit rate @10.13% from contract business in the A.Y. 2021-22, net profit rate of 11% is applied on the turnover shown for this assessment year i.e. A.Y. 2014-15 against net profit rate of 1.65% disclosed by the assessee during the A.Y. 2014-15. As the assessee has shown the turn-over at Rs. 9,95,21,021/- for the FY relevant to assessment year 2014-15, the Net Profit calculated @ 11% as per above discussion, works out at Rs.1,09,47,312/-. Since the assessee has shown income from business at Rs. 16,42,215/-, the difference of net profit works out to Rs.93,05,097/-. Accordingly, this amount is added to the income for theyear under consideration. (Addition: Rs. 93,05,097/-)

7.10 The appellant has placed his reliance in the case of M/s A.B. Construction ACIT, Circle-Gonda, ITA No.433/LKW/2015 wherein the Hon’ble ITAT, Lucknow bench vide its order has held as under:-“7. We have heard rival contentions and perused the entire material available on record. We find that as per various Tribunal’s orders noted by the CIT(A) in this Para of his order, the Tribunal has confirmed N. P. rate of 7% in some cases and 7.5% and 9.6% also in some other cases. Ld. CIT(A) has adopted the N. P. rate of 7% being lowest net profit adopted by the Tribunal as per the judgments noted by him. The CIT(A) in his para 5.2 relied on the various cases to estimate the profit of the assessee at Rs.40,47,077/- @ 7% of gross receipts of Rs.5,78,15,398/-. In the present case, it is noticed that the CIT(A) applied the net profit rate of 7% on the basis of decisions of the ITAT Lucknow Bench and Allahabad bench estimate the profit of the assessee at Rs.40,47,077/- @7% of gross receipts of Rs.5,78,15,398/. Under these facts and circumstances of the case, we are of the considered opinion that adoption of suitable net profit rate should be decided on the basis of facts of each case and therefore, after considering the facts of the present case, we hold that adopting @ 6% rate of net profit of gross receipts of Rs.5,78,15,398/- in the present case will meet the ends of justice. We hold accordingly.” 7.11 Considering the aforementioned discussion, case laws specially the judgment of Hon’ble HIGH COURT OF ALLAHABAD in the case of Commissioner of Income-tax, Allahabad v. Target Construction Co. Ltd, the net profit rate of 11% applied by the Assessing Officer is too high when appellant has shown comparatively higher profit margin of 10.13% and 10.09% in subsequent years i.e. A.Y. 2021-22 and A.Y. 2022- 23 to cover up the deficiencies of unproved sundry creditors/remission of liabilities found during search proceeding. I am of the considered opinion that for the year under consideration it would be justified to apply net profit rate of 7% on the total turnover of Rs. 9,95,21,021/- which works out at Rs. 69,66,471/-. Since the appellant has shown income from business at Rs. 16,42,215/-, thus, the difference in profit works out at Rs. 53,24,256/-. Thus, the addition to the tune of Rs. 53,24,256/- deserved to be confirmed. Therefore, the addition to the extent of Rs. 53,24,256/- is confirmed and remaining addition of Rs. 39,80,841/- made by the Assessing Officer Page 49 of 55 ATIPP6520B- RAKESH KUMAR PANDEY A.Y. 2014-15 ITBA/APL/S/250/2024-25/1075190753(1) is hereby deleted. Thus, these grounds of appeal are partly allowed.

“Section 145 of the Income-tax Act, 1961 provides for computation of income under section 29 on the basis of books of account and methods of accounting regularly followed by the assessee. However, where the Assessing Officer is not satisfied with the correctness or completeness of the books, he may reject them and estimate the income to the best of his judgment in accordance with the provisions of Section 144 of the Act. When an estimate is made to the best judgment of an Assessing Officer, he substitutes the income that is to be computed under section 29 of the Act. Once best judgment assessment is made by fixing a rate of net profit, the assessee’s claim for deduction on account of expenses cannot be deemed to have been ignored. The net profit rate is applied after taking into consideration all factors and it accounts for all the deductions which are referred to under section 29 and are deemed to have been taken consideration while making such estimate.”

7.12 Considering the aforementioned discussion, case laws specially the judgment of Hon’ble HIGH COURT OF ALLAHABAD in the case of Commissioner of Income-tax, Allahabad v. Target Construction Co. Ltd and the fact that depreciation of Rs. 14,99,267/- has already been disallowed, the net profit rate of 11% applied by the Assessing Officer is too high when appellant has shown comparatively higher profit margin of 10.13% and 9.68% in subsequent years i.e. A.Y. 2021-22 and A.Y. 2022- 23 to cover up the deficiencies of unproved sundry creditors/remission of liabilities found during search proceeding. Therefore, I am of the considered view that it would be justified to apply net profit rate of 7% on the total turnover of Rs. 1,59,98,27,836/- which works out at Rs. 11,19,87,949/-. Since the appellant has shown income from business at Rs. 10,07,00,526/-, thus, the difference in profit works out at Rs. 1,12,87,423/-. Thus, the addition to the tune of Rs. 1,27,86,690/- (Rs. 1,12,87,423 + Rs. 14,99,267/-) deserved to be confirmed. Therefore, the addition to the extent of Rs. 1,27,86,690/- is confirmed and remaining addition of Rs.6,24,93,846/- (7,52,80,536-1,27,86,690) made by the Assessing Officer is hereby deleted. Thus, these grounds of appeal are partly allowed.

7. During the year under consideration, the assessee was found to have purchased an immovable property bearing Khata No. 192/2, Gata No. 447/2, Civil Line, Gonda on 04.10.2013. On perusal of sale deed, it was noticed that the sale consideration of the property was Rs. 31,45,000/-(Stamp duty amount Rs. 6,55,000/-) and market value of the property is Rs.92,76,000/-. The difference between sale consideration and market value of the property is found to be of Rs. 61,31,000/-. During the assessment proceedings, the assessee was required to show cause vide notice dated 26.02.2024 as to why the difference in market value and sale consideration of the property amounting to Rs. 61,31,000/- may not be added u/s 56(2)(vii)(b) of the Income Tax Act, 1961. No satisfactory reply has been submitted by the assessee. Page 4 of 6 ATIPP6520B- RAKESH KUMAR PANDEY A.Y. 2014-15 ITBA/AST/S/147/2023-24/1063514529(1) Accordingly, difference amount of Rs. 61,31,000/- between market rate and sale consideration of the property is added to the total income for the year under consideration u/s 56(2)(vii)(b) of the Income Tax Act, 1961. (Addition : Rs.61,31,000/-)

8.5 Considering the above case laws wherein the Hon’ble Courts directed to the Assessing Officer that valuation estimated by the Departmental Valuation Officer has to be adopted being binding in nature, therefore, I am of the view that the difference of sale consideration of Rs. 31,45,000/- and Rs. 43,46,000/- which is the value estimated by the Valuation Officer deserves to be added to the total income of the appellant. Thus, the addition of Rs. 12,01,000/- (43,46,000 – 31,45,000) is hereby confirmed and remaining addition of Rs. 49,30,000/- is hereby deleted. Thus, this ground of appeal is partly allowed.

Recently, Hon’ble Mumbai High Court in case of PrakashPandurangPatil (Bombay) after following the Division bench judgment of Hon’ble Mumbai high Court in case of Hexaware Technologies Limited held as under:-

“9. In the light of the above discussion, and when there is no dispute that the Jurisdictional Assessing Officer (JAO) had no jurisdiction to issue the impugned order and the impugned notices, the writ petition is required to be allowed. It is accordingly allowed in terms of prayer clause (b) and (d), which reads thus:-

“(b) To issue a writ of Mandamus or direction or order in the nature of Mandamus or writ of Certiorari or any other writ under Article 226 of the Constitution of India, setting aside the impugned order under section 148A(d) dated 05.04.2022.

(d) To issue a writ of Mandamus or direction or order in the nature of Mandamus or writ of Certiorari or any other writ under Article 226 of the Constitution of India, declaring that the consequential notice dated 05.04.2022 issued under section 148 as invalid.”

10. We make it clear that having disposed of this petition on the ground of non-compliance with Section 151A of the Act, we have not expressed any opinion on the other issues as raised in the Writ Petition, which are expressly kept open.”

Further, SLP of Revenue Diary No. 39689 / 2025 (dated 18.08.2025) in case of PrakashPandurangPatil are dismissed by Hon’ble Supreme Court on ground of delay as well as merits.

Recently Apex Court in case of Deepanjan Roy SLP Civil Diary No. 33956/2025 (dated 16.07.2025) has dismissed the SLP of Revenue.

The Hon’ble ITAT, Lucknow Bench ‘A’,

Lucknow

Ref: RAKESH KUMAR PANDEY(PAN:ATIPP6520B) (Heard on 27.11.2025)

Subject:- Revised Consolidate Synopsis for following years& correction in Issue no. 17 – AY 2021-22 of consolidated synopsis submitted on 20.11.2025

The Hon’ble ITAT, Lucknow Bench ‘A’,

Lucknow

Ref: SHRI RAKESH KUMAR PANDEY (PAN:ATIPP6520B)

Subject:- Revised Consolidate Synopsis for AY 2021-22 (Issue No. 17) -ITA No. 557/LKW/2024 (D) & CO 27/LKW/2024 AY 2021-22

Additional CIT,

Central Range,

Income Tax Office,

Lucknow.

Subject: Reg. direction u/s 144A of the Income Tax Act for AY 2022-23.

DCIT/ACIT(Central)-2

Income Tax Office

Lucknow.

Subject: Reg. Submission of information for AY 2022-23.

“(F) At the time of hearing, representatives of both sides agreed that appeals of Minto Developers Pvt. Ltd. (I.T.A. No.337/Lkw/2018 for A.Y. 2009-10) may be taken as the lead case as regards the legal issue whether the assessments were passed by the Assessing Officer after obtaining valid approval of JCIT. They submitted that the facts and circumstances for all the other appeals on this issue were in para materia and the decision in the case of Minto Developers Pvt. Ltd. would apply mutatis mutandis to remaining cases also. Accordingly, we first take up the appeal of Minto Developers Pvt. Ltd. (I.T.A. No.337/Alld/2018 for A.Y.2009-10).

(F.1) As regards validity of approval given by JCIT u/s 153D of the Act, the learned Counsel for the assessee drew our attention to approval letter No.Jt.CIT/CR/VNS/Approval u/s 153D/JJGroup/2017-18/304 dated 31/07/2017 whereby approvals were given for 11 different assessees for a total of 63 assessments pertaining to numerous assessment years. The aforesaid letter is reproduced below for the ease of reference:

(F.1.1) The learned Counsel for the assessee challenged the validity of approval granted u/s 153D of the Act on many grounds. To begin with, he contended that the approvals were given without due application of mind. In this regard he drew our attention to the fact that the draft assessment orders were sent to the JCIT by the Assessing Officer vide letter F.No.ACIT/CC/Approval/Alld/2017-18/352 dated 28/07/2017. He further drew our attention to the fact that the next two days, i.e. 29^th & 30^th July, 2017 were closed holidays on account of Saturday and Sunday. Thereafter, the JCIT gave approval u/s 153D of the Act vide aforesaid letter dated 31/07/2017 in the case of aforesaid 11 assessees for a total of 63 assessments pertaining to different assessment years in the cases of the aforesaid 11 different assessees. It was the contention of the learned Counsel for the assessee that considering the enormity of seized materials, digital data, submissions of the assessees, appraisal report provided by the Investigation Wing of Income Tax Department, reports under Rules 9 and 9A of ITSC(P) Rules, and other materials including assessment records, it was humanly impossible for the JCIT to exercise due application of mind before granting approval to the Assessing Officer for 63 assessments pertaining to 11 different assessees for various assessment year; vide aforesaid common approval letter dated 31/07/2017, sufficiently in time on 31/07/2017 for the letter of approval to reach the Assessing Officer along with seized materials, digital data, submissions of the assessees, appraisal report provided by the Investigation Wing of Income Tax Department, reports under Rules 9 & 9A of ITSC(P) Rules and other materials including assessment records to reach the Assessing Officer on 31^st July 2017 itself from Varanasi (where JCIT was stationed) to Allahabad (where the Assessing Officer was stationed) in order to also enable the Assessing Officer to pass the assessment order on 31/07/2017 itself, which was the last date for passing assessment order (after which the assessments would have been barred by limitation).

(F.1.2) The learned Counsel for the assessee then challenged the aforesaid approval given u/s 153D of the Act on the basis that the JCIT did not grant approvals u/s 153D of the Act through separate approval letters for separate assessment years for each assessment orders pertaining to each of the aforesaid assessees. He contended that the JCIT was required to issue separate letters of approval for each assessment year for each assessee. The approvals granted u/s 153D for the aforesaid assessments pertaining to different assessment years for the aforesaid 11 assessees through a common letter do not meet this requirement, the learned Counsel for the assessee submitted.

(F.1.3) Next, the learned Counsel for the assessee challenged the validity of the approval granted u/s 153D of the Act, contending that the approvals were granted by JCIT vide aforesaid common letter dated 31/07/2017 in a non speaking manner. The letter did not contain any writeup of JCIT himself indicating that the approvals were granted for the aforesaid 63 assessments after proper application of mind. He contended that contents of the approval letter should include discussion to show that the JCIT had considered all the issues in the proposed draft assessment order, and had applied his mind independently before granting approval instead of giving approval in a summary and non speaking way, in the manner of rubber stamping whatever draft assessment order was sent by the Assessing Officer. He further submitted that this showed that the approvals were granted in a summary, routine, perfunctory and mechanical manner, as an idle formality; and that approvals were not based on independent application of mind by the JCIT.

(F.1.4) The learned Counsel for the assessee also submitted that the JCIT was required, u/s u/s 153D of the Act, to approve not only the additions proposed by the Assessing Officer; but was also required to approve the assessment order in entirety, contending that the assessment order proposed by the Assessing Officer was required to be approved word by word. In the present case, the learned Counsel for the assessee submitted, the JCIT, vide order sheet dated 25/07/2017, had observed that certain corrections were needed in the draft orders and had directed the Assessing Officer to resubmit the draft orders after making necessary corrections, as discussed with him, latest by 28/07/2017. The JCIT had further directed the Assessing Officer to resubmit the draft orders after corrections, through official e-mail address. Therefore, learned Counsel for the assessee submitted even till 25/07/2017, there was no finality to the assessment order. The state of affairs was conditioned and tentative.

(F.1.4.1) Moreover, the learned Counsel for the assessee submitted, there was common order sheet for all the cases of Jeevan Jyoti Group which consisted of several assessees and the assessments pertained to seven assessment years in the case of each assessee. However, the learned Counsel for the assessee submitted, there was no record, either in the order sheet or elsewhere, as to what corrections were directed to be made by JCIT in the draft assessment orders sent by the Assessing Officer vide aforesaid letter dated 18/07/2017 which was received in the office of the JCIT on 19/07/2017. He contended that considering large number of assessees and multiple assessments for different assessment years; it was impossible for the JCIT to remember what corrections were directed by him in the absence of any record and therefore, it was impossible for him to satisfy himself whether the second draft assessment orders were prepared after carrying out the corrections as per the directions given on 25/07/2017. In the absence of such satisfaction, the approval given u/s 153D of the Act were in the nature of rubber stamping and suffered from infirmity on the ground of having been given without due application of mind.

(F.1.5) The learned Counsel for the assessee further submitted in this connection that the direction of the JCIT to send the second draft of the proposed assessment order by e-mail by 28/07/2017, was not complied with by the Assessing Officer and instead only physical copies were submitted by the Assessing Officer. In the absence of compliance of the directions of the JCIT, the learned Counsel for the assessee submitted, the approvals granted by the JCIT vide aforesaid common approval letter dated 31/07/2017 were vitiated. The learned Counsel for the assessee also contended that the omission to send the second draft of the proposed assessment order by e-mail, pointed to the likelihood that the proposed second drafts of the assessment orders were not even ready by 28/07/2017 and hard copies of the second drafts of the assessment order may have been sent to the JCIT later, possibly on 31/07/2017, which was the next working day; leaving the JCIT with no time to exercise due application of mind before giving approvals u/s 153D of the Act, on 31/07/2017 itself.

(F.6) The learned Counsel for the assessee further submitted that CBDT has directed the Assessing Officers, in Search Manual, to seek the approval from the approving authority at least one month before the time barring date. In this connection, he drew our attention to order of Lucknow Bench of ITAT in the case of Navin Jain and Others v. DCIT (order dated 03/08/2021 in IT(SS)A Nos. 639 – 641/Lkw/2019) in which, at paragraph 7 of the order, this direction of CBDT is noted. For the ease of reference; para 7 of the aforesaid order dated 03/08/2021 of ITAT is reproduced below:

10. Before embarking upon the analysis of the factual scenario of the instant appeal, we deem it apposite to examine the underlying

Prior approval necessary for assessment in cases of search or requisition.

153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner.

Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner under sub-section (12) of section 144BA.

“9. We have heard the rival parties and have gone through the material placed on record. We find that in these cases, in view of a search carried out on the Sigma Group, the assessments of various assessees were reopened and various assessees were required to file income tax returns as required under the provisions of section 153A of the Act. The search was conducted on 23/08/2016 which continued upto 25/08/2016 and therefore, assessment year 2017-18 became the search year and the years preceding the search year became the subject matter of reopening u/s 153A of the Act. The issue raised by Learned counsel for the assessee is that the approval granted by the Addl. CIT is bad in law as it is humanly impossible to go through documents exceeding 17,800 in a single day and then grant approval on the same day. Since the controversy involved here is with respect to approval u/s 153D of the Act, it would be appropriate to first visit the provisions of section 153D of the Act, which for the sake of completeness are reproduced below:

“SECTION 153D.

Prior approval necessary for assessment in cases of search or requisition [No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [sub-section (1) of section 153A] or the assessment year referred to in clause (b) of subsection (1) of section 153B, except with the prior approval of the Joint Commissioner.] [Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the [Principal Commissioner or Commissioner] under sub-section (12) of section 144BA.]”

9.1 The above provisions of section 153D of the Act were inserted by Finance Act, 2007 with effect from 01/06/2007. In our humble understanding of the said provisions, we are of the opinion that the Legislature wanted the assessment/reassessment of the search cases should be made and order should be passed with the prior approval of superior authority. The word approval has not been defined in the Income Tax Act but the general meaning of word approval can be understood from Black Law of Dictionary which defines approval as:

“The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or ‘consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with.”

9.2 The Hon’ble Supreme Court of South Carolina in State v. Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that approval implies knowledge and, the exercise or discretion after knowledge.

9.3 Further Hon’ble Supreme Court in the case of Vijayadevi Naval Kishore Bharatia v. Land Acquisition Officer [2003] 5 SCC 83 has held as under:

“Whenever there is an administrative approval given by higher authority, higher authority applies its mind to see whether the proposed Award is acceptable to the Government or not ? Such Authority may satisfy itself as to the material relied upon by the Adjudicator, but, the Approving Authority cannot reverse the finding, as he is an Appellate Authority for the purpose of remanding the matter to the Adjudicating Authority as can be done by the Appellate Authority. Further, the Approving Authority also cannot exercise its power of prior approval to give directions to the Adjudicating Authority in what beneficial to accept/ appreciate tine material on record in regard to the compensation payable. Otherwise, it would tantamount to blurring the distinction between Approving Authority and Appellate Authority”.

9.4 Further Hon’ble Gauhati High Court in the case of Dharampal Satyapal Ltd., vs., Union of India [2019] 366 ELT 253 (Gau.) Manu/GH/07070/2018 in para-28 has held as under :

“When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must co- exist and, therefore, where an Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements.”

Therefore, from the definition of approval as per above authorities, its meaning with respect to approval u/ s 153D means that the superior authority should apply his mind on the material on the basis of which the Assessing Officer is making or passing assessment order and after due application of mind to material in the hands of the Department and after going through the explanation by the assessee and documentary evidence and other relevant material, the superior authority has to grant approval u/ s 153D for passing assessment/reassessment order in search cases. The approval u/s 153D of the Act cannot be treated mere formality only and the purpose of inserting this provision is two fold i.e. one before approving the senior authority will ensure that the assessee should be protected against the undue and irrelevant addition and disallowances and the approving authority will also ensure that proper enquiry or investigations are carried out by the Assessing Officer on the relevant materials including material in the hands of the Department. Secondly, the Assessing Officer also keeps in mind the interest of Revenue. Therefore, the said provision provides application of mind by the approving authority of the Department.

Therefore, the provision of section 153D of the Act cannot be treated as mere formality and mandate therein is required to be followed by the approving authority in a judicious manner by due application of mind in a manner of a quasi judicial authority. We are cautious about the fact that reasons for granting approval may not be a subject matter of challenge or not required to be mentioned in the order of approval but the manner and material on the basis of which approval has been granted can be challenged by the assessee. The scope and issue agitated by the assessee by way of legal ground in the present cases is not that of granting of approval but the main grievance of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized material. We are inclined to hold that if an approval has been granted by the approving authority in a mechanical manner without application of mind then the very purpose of obtaining approval u/s 153D of the Act and mandate of enactment by the Legislature will be defeated. It is a trite law that for granting approval u/s 153D of the Act, the approving authority shall have to apply independent mind to the material on record for each assessment year in respect of each assessee separately. The rationale of word “Each” as specifically referred to in Section 153D and Section 153A deserves to be given effective/proper meaning so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. The meaning of ‘approval’, as contemplated u/s 153D of the Act, is that the Jt. CIT is required to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind and to ascertain as to whether the entire facts have been properly appreciated by the Assessing Officer. The Jt. CIT is also required to verify whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. Thus, the approval cannot be a mere discretion or formality but quasi judicial function based on reasoning. In our view, when the Legislature has enacted the provision to be exercised by the higher authority to pass assessment order in the search cases then it is the duty of the Jt. CIT to exercise such power by applying his judicious mind. The obligation of the approval of the approving authority is of two fold i.e. on one hand, he has to apply his mind to ensure the interest of the Revenue against any omission or negligence by the Assessing Officer in taxing right income in the hands of right person and in right assessment year and on the other hand, superior authority is also responsible and duty bound to do justice with the tax payer by granting protection against arbitrary or creating baseless tax liability on the assessee. The provisions contained from section 153A to section 153D contain features by which the assessee is to be given separate notice for assessment for each year as specified u/ s 153A of the Act. Secondly, the assessee has to file separate ITR for each year as specified in section 153A of the Act. Thirdly, separate assessment orders are to be passed for each year as specified in section 153A of the Act. There is an important concept mentioned in section 153A of the Act, abated and non abated which is peculiar to the scheme of section 153A of the Act. Keeping in view the above basic fundamental features of Section 153A, if Section 153D is scrutinized, then, it would become manifest that very important phrase as deployed in text of Section 153D, is “Each” assessment year. The word “Each” has been used extensively and this word needs to be given due weightage and adequate meaning and as such for each year separate approval is to be given under section 153D of the I. T. Act which is lacking in the present cases. There are many other provisions where statutory approval is required from higher authorities. Few of them are noted like in Section 151 and Section 274 etc., respectively dealing with the approvals on reopening cases and penalty cases. When Section 153D is juxtaposed with Section 151 and Section 274, most important differences which is peculiar to Section 153D is the word “Each”. Word each is not used in Section 151 and Section 274 and the word “Each” is specially and consciously referred to in Section 153D so that assessee-wise and year-wise application of mind on the part of the approving authority is there which is in accordance with the overall scheme of Section 153A to Section 153D of the I. T. Act. Hon’ble Allahabad High Court in the case of Shri Mohd. Ayub v. ITO [2012] 346 ITR 30 (Alld) dealt with non issue of separate notice under section 148 of the I. T. Act and held it to be invalid because each assessment year was to be taken as an independent unit of assessment and therefore, if the above settled position is tested with the provisions of Section 153D, it would emerge that when in a case where requirement of separate notice under section 148 of the I. T. Act was given absolute primacy therefore, in the context of Section 153D of the I. T. Act (where each word is expressly used and which is a year centric special scheme of assessment with concept of abated/non-abated assessments) there is absolute necessity of separate approval for each year and for each assessee. In the present cases Jt. CIT has given approval u/s 153D of the Act for all the years altogether involved in search and the approving authority in a mechanical manner and as an idle formality has granted approval. In one line the approving authority has given blank go ahead to pass order under section 153A without even taking minimum possible pains to take appropriate note of year-wise income as computed. The legislative intent behind Section 153D can be discerned/gathered from the CBDT Circular No.3/2008 dated 12.03.2008 in which it is highlighted that approval of the approving authority is mandatory. For the sake of completeness, the contents of Circular No. 3/2008 are reproduced below:

“50. Assessment of search cases Orders of assessment and reassessment to be approved by the Joint Commissioner.

50.1 The existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132A does not provide for any approval for such assessment.

50.2 A new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A.

50.3 Applicability-These amendments will take effect from the 1st day of June, 2007.”

9.5 It is evident from the CBDT Circular that the legislature in its highest wisdom made it compulsory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority could apply his mind on the materials and other circumstances on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority have to approve the assessment order. The object of entrusting the duty of approval of assessment in search cases is that the Jt. CIT, with his experience and understanding could scrutinize the seized documents and any other material forming the foundation of assessment. It is an elementary law that whenever any statutory obligation is casted upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind. The approval granted under section 153D of the Act should necessary reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self defending. In the above background of law and in the light of order dated 30.12.2018 passed under section 153D of the Act, which gives legality to the impugned assessment orders, question which arises for our consideration is whether the approval granted by the Additional CIT, Central, Kanpur vide his order dated 30.12.2018 can be held to be granted after due application of mind and can be held to be valid in the eyes of law. Learned counsel for the assessee, during the proceedings before us had filed a chart showing number of documents seized during search belonging to the group totaling 15,800 pages. Besides the above documents, replies filed by assessees belonging to the group consisted of about 200 pages and in fact there were documents belonging to other group also, the approval of which has also been granted along with assessees on the same day through the same approval letter. Therefore, keeping in view huge number of documents involved, it is humanely impossible for a person to apply his mind on all cases individually and that too in a single day. For the sake of completeness, the said approval dated 30/12/2018 has been made part of this order and is reproduced below:

The contents of the approval speaks for itself loud and clear. The following inferences are inevitable from the bare reading of the said order. The draft assessment orders were placed before the Additional CIT, Central, Range-Kanpur on 30/12/2018 for the first time and on the same day approval was granted. As clearly mentioned in the approval under challenge, prior to this date the case was never discussed with the authority granting the approval. The Additional CIT without any consideration on merits in respect of the issues on which addition was made, granted the approval and such approval is an eyewash and idle formality and such a mechanically granted approval is no approval in the eyes of law. The entire gamete of law, as contemplated u/s 153D of the Act, has been considered by Delhi Bench of the Tribunal in a bunch of 52 appeals in I.T.A. No.1813/Del/2019 in the case of Sanjay Duggal and Others wherein the Hon’ble Bench vide order dated 19/01/2021 has quashed the assessment orders by holding that the approval granted u/s 153D of the Act was in a mechanical manner and thus cannot be held to be an approval as required u/s 153D of the Act. The relevant findings of the Tribunal are contained in para 11 onwards, which for the sake of completeness are reproduced below: “11. We have considered the rival submissions and perused the written submissions filed by the parties and considered the material on record. It is an admitted fact that search and seizure action were carried-out in the cases of the assessees on 29.12.2015. Section 153A have been inserted into the Income Tax Act w.e.f. 01.06.2003. Prior to that there were provisions contained under section 158BC being the special procedure for assessment of search cases. Thus, the provisions of Section 153A to 153D are applicable in the case of assessees. According to Section 153A of the I. T. Act, there should be a search initiated under section 132 of the I. T. Act and panchanama drawn, the A.O. shall have to issue notice to the assessee requiring him to furnish the return of income within the specified time in respect of each assessment year falling within six assessment years. The A.O. shall assess or re-assess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Provided that the A.O. shall assess or re-assess the total income in respect of each assessment year falling within such six assessment years. It is further provided that assessment or re-assessment, if any, relevant to any assessment year falling within the period of six assessment years referred to in this Section pending on the date of initiation of the search under section 132 or making of requisition under section 132A as the case may be, shall abated. Thus, when provisions of Section 153A are applicable in a case of assessee, A.O. shall have to give separate notice of each assessment year and assessee shall have to be directed to file return of income for each year and separate orders shall have to be passed for each assessment year. In Section 153A of the I. T. Act, the A.O. shall have to see whether there are abated or nonabated assessments which was not provided in earlier provisions for block assessments. The Hon’ble Delhi High Court in the case of CIT vs., Kabul Chawla [2016] 380 ITR 573 (Del.) considered the issue of abated and non-abated assessments and with regard to completed assessments held that the same can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. It is also held in the same Judgment that in so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall have to be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on record by the A.O. Therefore, these were the mandatory provisions contained in Section 153A which shall have to be satisfied by the A.O. before proceeding to frame assessment in the cases of persons searched under section 132 of the I. T. Act, 1961. Further safeguard have been provided for framing the assessments under section 153A that prior approval shall be necessary for assessments in the cases of the search or requisitioned, under section 153D of the IT. Act. Section 153D of the I.T. Act is reproduced as under: “153D – No Order of assessment or re-assessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in Clause (b) of Sub-Section (1) of Section 153A or the assessment year referred to in Clause (b) of sub-section (ii) of Section 153B except with the prior approval of the Joint Commissioner.

“Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under subsection (12) of section 144BA.”.

11.1. It is an admitted fact that in all the above appeals assessments under section 153A have been framed by ACIT, Central Circle, New Delhi, therefore, prior approval of the JCIT in respect of each assessment year referred to under section 153A or 153B shall have to be obtained. Thus, no order of assessment or re-assessment shall be passed by the A.O. in the present cases in respect of each assessment years under section 153A/153B of the I.T. Act, 1961, except with the prior approval of the Joint Commissioner. Learned Counsel for the Assessee has argued that the approval under section 153D have been granted by the JCIT without going through the seized material, appraisal report and other material on record. Thus, the approval is granted in a most mechanical manner and without application of mind. Therefore, same is invalid, bad in Law and void ab initio and as such all assessments under section 153A got vitiated and as such A.O. was not having jurisdiction to pass the assessment orders under section 153A of the I.T. Act, 1961.

11.2. The meaning of the word “Approval” as defined in Black Law Dictionary is –

“The Act of confirming, rectifying, sanctioning or consenting to some act or thing done by another. To approve means to be satisfied with, to confirm, rectify, sanction or ‘consent to some act or thing done by another, to consent officially, to rectify, to confirm, to pronounce good, thing or Judgment of, admitting propriety or excels or to pleas with.”

11.3. The Hon’ble Supreme Court of South Carolina in State vs., Duckett 133 SC 85 [SC 1925], 130 SE 340 decided on 05.11.1925 held that “Approval implies knowledge and, the exercise or discretion after knowledge.”

11.4. The Hon’ble Supreme Court in the case of Vijayadevi Naval Kishore Bharatia vs., Land Acquisition Officer [2003] 5 SCC 83 wherein it has been held that :

“Whenever there is an administrative approval given by higher authority, higher authority applies its mind to see whether the proposed Award is acceptable to the Government or not ? Such Authority may satisfy itself as to the material relied upon by the Adjudicator, but, the Approving Authority cannot reverse the finding, as he is an Appellate Authority for the purpose of remanding the matter to the Adjudicating Authority as can be done by the Appellate Authority. Further, the Approving Authority also cannot exercise its power of prior approval to give directions to the Adjudicating Authority in what beneficial to accept/ appreciate tine material on record in regard to the compensation payable. Otherwise, it would tantamount to blurring the distinction between Approving Authority and Appellate Authority”.

11.5. The Hon’ble Gauhati High Court in the case of Dharampal Satyapal Ltd., vs., Union of India [2019] 366 ELT 253 (Gau.) Manu/GH/07070/2018 in para-28 has held as under :

“When an Authority is required to give his approval, it is also to be understood that such Authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of Law or procedure to which it may be subjected. In other words, grant of approval and application of mind as to whether such approval is to be granted must co- exist and, therefore, where an Authority grants an approval it is also to be construed that there was due application of mind that the subject matter approved and satisfies all the legal and procedural requirements.”

11.6. Therefore, in the cases of search, assessment orders whether framed under section 153A or 153C, the Joint Commissioner [Approving Authority] is required to see that whether the additions have been made in the hands of assessee are based properly on incriminating material found during the course of search, observations/comments in the appraisal report, the seized documents and further enquiries made by the A.O. during the course of assessment proceedings. Therefore, necessarily at the time of grant of approval of the assessment made by the A.O, the Joint Commissioner is required to verify the above issues, apply his mind that whether they have been properly appreciated by the A.O. while framing the assessment orders or not. The JCIT is also required to verify whether the required procedure have been followed by the A.O. or not at the time of framing of the assessments. Thus, the approval cannot be a mere discretion or formality, but, is mandatory being Quasi Judicial function and it should be based on reasoning. In our view, when the legislature has enacted some provision to be exercised by the higher Revenue Authority enabling the A.O. to pass assessment order or reassessment order in search cases, then, it is the duty of the JCIT to exercise such powers by applying his judicious mind. We are of the view that the obligation of the approval of the Approving Authority is of two folds ; on one hand, he has to apply his mind to secure in build for the Department against any omission or negligence by the A.O. in taxing right income in the hands of right person and in right assessment year and on the other hand, JCIT is also responsible and duty bound to do justice with the tax payer [Assessee] by granting protection against arbitrary or unjust or unsustainable exercise and decision by the A.O. creating baseless tax liability on the assessee and thus, the JCIT has to discharge his duty as per Law. Thus, granting approval under section 153D of the I. T. Act is not a mere formality, but, it is a supervisory act which requires proper application of administrative and judicial skill by the JCIT on the application of mind and this exercise should be discernable from the Orders of the approval under section 153D of the I.T. Act.”

9.7 Further we find that I.T.A.T. Cuttack Bench in the case of Geetarani Panda v. ACIT in I. T.A. No. 01/CTK/2019 vide order dated 05/07/2018 has held as under:

“24. In our considered view, the provisions contained in Section 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. It is apparent that the purpose behind the enactment of the above provision in the Statute by the Parliament are two folds. Firstly, the approval of the Senior Authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by Senior Authority will also ensure that proper enquiry or investigation are carried out by the Assessing Authority. Thus, the above provision provides for mental application of a Senior Officer of the Department, which in turn, provides safeguard to both i.e. Revenue as well as the assessee. Therefore, this important provision laid down by the legislature cannot be treated as a mere empty formality. The same view was expressed by the Pune Benches of the Tribunal in the case of Akil Gulamali Somji v. ITO, in IT Appeal Nos.455 to 458 (Pune) of 2010 order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. The Hon’ble Bombay High Court in the case of CIT-II v. Shri Akil Gulamali Somji, in Income Tax Appeal (L) No.1416 of 2012 order dated 15.1.2013 concurred with the view of the Tribunal that not following of the provisions of section 153D of the Act will render the related order of assessment void.”

9.8 Further we find that I.T.A.T. Mumbai Bench in the case of Shreelekha Dammani vs.DCIT in I. T.A. No.4061/Mum/2012 vide order dated 19/08/2015 has decided the issue in favour of the assessee by holding as under:

“12. Coming to the facts of the case in hand in the light of the analytical discussion hereinabove and as mentioned elsewhere, the Addl. Commissioner has showed his inability to analyze the issues of draft order on merit clearly stating that no much time is left, inasmuch as the draft order was placed before him on 31.12.2010 and the approval was granted on the very same day. Considering the factual matrix of the approval letter, we have no hesitation to hold that the approval granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. Commissioner before granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/ s. 143(3) of the Act r. w. Sec. 153 A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed.

13. The ld. Departmental Representative has strongly relied upon the decision of the Tribunal Mumbai Bench in the case of Rafique Abdul Hamid Kokani v. DCIT , Hon’ble High Court of Karnataka in the case of Rishabchand Bhansali v. DCIT and Hon’ble High Court of Madras in the case of Sakthivel Bankers v. Asstt.Commissioner .

13.1. We have carefully perused the decisions placed on record by the Ld. DR. We find that all the decisions relied upon by the Ld. DR are misplaced inasmuch as all these decisions relate to the issue whether the Joint CIT/CIT has to give an opportunity of being heard to the assessee before granting the approval. This is not the issue before us as the Ld. Counsel has never argued that the assessee was not given any opportunity of being heard. These decisions therefore would not do any good to the Revenue.

14. Since we have annulled the assessment order, we do not find it necessary to decide the issues raised on merits of the case.”

9.9 In this case, the Addl. Commissioner has showed his inability to analyze the issues of draft order clearly stating that no much time was left as the draft order was placed before him on 31/12/2010 and approval was granted on the same day. In the case before us the Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible. If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day.

9.10 The Hon’ble Bombay High Court has dismissed the appeal of the Department filed against the above order of the Mumbai Tribunal in the case of Shreelekha Damani vide judgment dated 27/11/2018. The findings of Hon’ble Bombay High Court are reproduced below:

“7. In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st 3 of 4 Uday S. Jagtap 668-16-ITXA- 15=.doc December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises.”

9.11 Similar are the findings of I.T.A.T. Jodhpur Bench in the case of Indra Bansal & Ors. v. ACIT in I.T.A. Nos. 321 to 324 in which the Tribunal held as under:

“6. We have heard the rival contentions and have perused the material on record. The main contention of learned Authorised Representative is that reasonable time was not available with the Joint Commissioner for the grant of necessary approval as envisaged under section 153D of the Act. We have perused the forwarding letter dt. 30-32013 seeking approval of the draft assessment order. The date of receipt of this letter in the office of Joint Commissioner is indisputably on 31-3-2013 which is apparent from the date stamped on it by the office of the Joint Commissioner. Thus, this leaves no doubt that the letter requesting grant of approval and the granting of approval, both, are within one day of each other. This lends credence to the contention of the learned Authorized Representative that the draft assessment order was approved without much deliberation by the Joint Commissioner. Further, the time of the fax granting approval is 6.56 a.m. on 31-3-2013 which is prior to the office hours and, thus, it brings out a reasonable doubt that the approval was granted even before the letter requesting the approval was received in the office of the Joint Commissioner. Further, the response received by the assessee in response to his application under Right to Information Act, 2005 also establishes the correctness of the claim of the assessee that the assessment records were not before the Joint Commissioner when the approval was granted as the records were with the Range Office in Jodhpur whereas the approval was sent by fax on the morning of 31-3-2013 from Udaipur. Thus, it is our considered opinion that the Joint Commissioner had granted approval in a mechanical manner without examining the case records because the approval has been granted at 6.56 a.m. on 31-3-2013 from Udaipur wherein it has already been mentioned that the assessment records were being returned whereas the draft assessment order along with the assessment records were handed over to the office of the Joint Commissioner on 31-3-2013 and as such it was physically impossible that all the case records along with the draft assessment order were received by the Joint Commissioner at Udaipur.

Tribunal, Mumbai Bench in the case of Smt. Shreelekha Damani v. Dy. CIT (2015) 125 DTR (Mumbai)(Trib) 263 : (2015) 173 TTJ (Mumbai) 332 has held that the legislative intent behind the insertion of section 153D of the Act was that the assessments in search and seizure cases should be made with the prior approval of superior authority which means that the superior authorities should apply their mind to the material on the basis of which the assessing officer is making the assessment. In this case, the Addl. CIT had expressed his inability to analyze the issues of the draft order on merits clearly stating that not much time was left and granted the approval under section 153D of the Act on the same day and Tribunal, Mumbai Bench held that the approval granted by Addl. CIT was mechanical and had been passed without considering the material on record and was, therefore, devoid of any application of mind. The impugned assessment order was annulled.

Similarly, Tribunal, Allahabad Bench in Verma Roadways v. Asstt. CIT (2001) 70 TTJ (All) 728; (2000) 75ITD 183 (All) held that while granting approval, Commissioner is required to examine the material before approving the assessment order. In this case, Tribunal, Allahabad Bench was examining the issue of approval under section 158BG of the Act and it opined that the object for entrusting the job of approval to a superior and a very reasonable (sic-responsible) officer of the rank of Commissioner is that he with his ability, experience and maturity of understanding can scrutinize the documents, can appreciate its factual and legal aspects and can properly supervise the entire progress of assessment. Tribunal, Allahabad Bench held that the concerned authority while granting the approval is expected to examine the entire material before approving the assessment order and further that whenever any statutory obligation is cast on any authority, such authority is legally required to discharge the obligation not mechanically, nor formally but by application of mind.

Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 2 cases was completed in one single day itself i.e., 313-2013. Thus, it is apparent that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co-ordinate Benches of Mumbai and Allahabad as afore-mentioned and also applying the ratio of the judgment of the Hon’ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained. Accordingly, assessments in three COs and nineteen appeals of the assessee(s), on identical facts, are liable to be annulled as suffering from the incurable defect of the approval not being proper. Accordingly, we annul the assessment orders in CO Nos. 8 to 10/Jodh/2016 and ITA Nos. 325 to 331/Jodh/2016. Thus, all the three COs and the nineteen appeals of the assessee, as aforesaid, are allowed.”

10. Similarly we find that Hon’ble Supreme Court in the case of Sahara India v. CIT & Others’ [2008] 216 CTR 303 (S.C.) : [2008] 7 DTR (SC) 27: [2008] 300 ITR 403 (SC) while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high- ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon’ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case.

11. In view of these facts and circumstances and in view of judicial precedents relied on by Learned A. R. Ground No.5 in appeals is allowed and the assessments orders are annulled. Rest of the grounds were not argued by Learned A. R. therefore, rest of the grounds are dismissed as not pressed.”

“3.That in any view of the matter approval u/s 153D of the as taken by the assessing officer from Joint Commissioner of Income Tax, Lucknow in various assessee (Group cases) in one day which shows that prescribed authorities granted the approval without application of mind and without considering the search material facts, in all the cases (Group cases) hence the entire assessment order is illegal invalid hence order of the two lower authorities liable to be declared void as well as non-est.

4. That in any view of the matter meaning of approval as contemplated u/s 153D of the Act by the Joint Commissioner Lucknow was required to verify the issue raised by the assessing officer in draft assessment order and to apply his mind and to ascertain the entire facts from the assessing officer and to examine search material but in the present case inmechanical manner approval taken/granted on the day in more than 45 cases (Group) hence the order passed by the assessing officer and his action as confirmed by CIT(A) is highly unjustified. The legal issue in question is well covered by the decision of Hon’ble Jurisdictional High Court as well as other Hon’ble ITAT benches hence the decisions are binding.”

“I, Buddhadeb Mukhopadhyay, S/o Late Amiyalal Mukherjee aged about 69 years P./o Fiat No. 801, Moore Heights, 93, M. B. Sarani, Kolkata 700040 Solemnly affirm as under:

1. That, during the period 19.07.2012 to 15.10.2014, 1 was posted as Joint/Addi Commissioner of Income Tax, Central Range, Lucknow.

2. That, apart from other supervisory roles, I was also approving authority for the Assessment orders prepared by Assessing Officer of Central Circle within jurisdiction of these ranges.

3. That, vide letter F.No. DCIT(CC)/Alld/Vaish Groups/2012-13/1037 dated 125.03.2013, the A.O. sought approval for passing assessment orders in the case of Shri Ramji Vaish for A.Y. 2005-05 to 2011-12 which are under appeal for Hon’ble ITAT.

4. That, after proper application of mind, accorded approval for-passing assessment orders in the case of ShriRanji Vaishfor A.Y. 2005-06 to 2011-2, which are under appeal before Hon’ble ITAT, vide my office letter F.No. dated 26.03.2013. Jt. CIT/CR/LKO/Approval/2012-13/158

5. That, before approving the draft assessment orders submitted by Assessing Officers, a regular monitoring and supervision of assessment proceedings were made since examination of seized materials till scrutinizing of final reply.

6. That, since I, as Range Head constantly supervised the proceedings therefore at the time of submitting droit assessment order, I was well acquainted with facts and findings of the case.

7. That, for the purpose of proper monitoring and firsthand information of the progress of the cases, time and again I made my Camp Office at Allahabad during the material time. Moreover, the Assessing Officer used to give the draft orders in my e-mail and after due diligence, I used to return those draft order, after necessary correction and modification, through e-mail.

8. That, this is the reason that approval process took minimum time.

9. That, the regular monitoring was also necessary because in the most of cases assessee took long time for giving responses and submitted final reply at the fag-end of the year.

10. That, the approval has been accorded after due diligence and proper application of mind.

I, Buddhadeb Mukhopadhyay, S/o Late Amiyalal Mukherjee aged about 69 years R/o Flat No.- 301, Moore Heights, 93, M. B. Sarani, Kolkata- 700040, solemnly affirm that contents of point no. 1 to 10 are true and correct to the best of my knowledge and belief.”

“Having regard to the facts and circumstances of the case, we are not inclined to interfere in the matter. The Special Leave Petition is dismissed.”

“9.27 It is a well settled principle of law emerging from a catena of decisions of this Court including Supreme Court Employees’ Association v. Union of India and Anrand State of Punjab v. Davinder Pal Singh Bhullar, that the dismissal of the SLP in limine simply implies that the case before this Court was not considered worthy of examination for a reason, which may be other than the merits of the case. Such in limine dismissal at the threshold, without giving any detailed reasons, does not constitute any declaration of law or a binding precedent under article 141 of the Constitution.”

“1. Whether the supervisory and advisory involvement of the Approving authority would be liable to be borne in consideration while examining the validity of approval accorded under section 153D of the Act ?”

“We leave the question pertaining to the effect and impact of section 144A of the Act as well as the provision contained in the Search and Seizure Manual 2007, open to be addressed in appropriate proceeding”.

“I, Buddhadeb Mukhopadhyay, S/o Late Amiyalal Mukherjee aged about 69 years P./o Fiat No. 801, Moore Heights, 93, M. B. Sarani, Kolkata 700040 Solemnly affirm as under:

1. That, during the period 19.07.2012 to 15.10.2014, 1 was posted as Joint/Addi Commissioner of Income Tax, Central Range, Lucknow.

2. That, apart from other supervisory roles, I was also approving authority for the Assessment orders prepared by Assessing Officer of Central Circle within jurisdiction of these ranges.

3. That, vide letter F.No. DCIT(CC)/Alld/Vaish Groups/2012-13/1037 dated 125.03.2013, the A.O. sought approval for passing assessment orders in the case of ShriRamjiVaishfor A.Y. 2005-05 to 2011-12 which are under appeal for Hon’ble ITAT.

4. That, after proper application of mind, accorded approval for-passing assessment orders in the case of ShriRanji Vaishfor A.Y. 2005-06 to 2011-2, which are under appeal before Hon’ble ITAT, vide my office letter F.No. dated 26.03.2013. Jt. CIT/CR/LKO/Approval/2012-13/158

5. That, before approving the draft assessment orders submitted by Assessing Officers, a regular monitoring and supervision of assessment proceedings were made since examination of seized materials till scrutinizing of final reply.

6. That, since I, as Range Head constantly supervised the proceedings therefore at the time of submitting droit assessment order, I was well acquainted with facts and findings of the case.

7. That, for the purpose of proper monitoring and firsthand information of the progress of the cases, time and again I made my Camp Office at Allahabad during the material time. Moreover, the Assessing Officer used to give the draft orders in my e-mail and after due diligence, I used to return those draft order, after necessary correction and modification, through e-mail.

8. That, this is the reason that approval process took minimum time.

9. That, the regular monitoring was also necessary because in the most of cases assessee took long time for giving responses and submitted final reply at the fag-end of the year.

10. That, the approval has been accorded after due diligence and proper application of mind.

I, Buddhadeb Mukhopadhyay, S/o LateAmiyalal Mukherjee aged about 69 years R/o Flat No.- 301, Moore Heights, 93, M. B. Sarani, Kolkata- 700040, solemnly affirm that contents of point no. 1 to 10 are true and correct to the best of my knowledge and belief.”

“A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein, nor what logically follows from the various observations made in the judgment. Every judgment must be read as applicable to the particular facts proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.

“It is only the principle laid down in the judgment that is binding law under article 141 of the Constitution. A deliberate judicial decision arrived at after hearing argument on a question which arises in the case or is put in any issue may constitute a precedent, no matter for what reason, and the precedent by long recognition may mature into rule of stare decisis. It is the rule deductible from the application of law to the facts and the circumstances of the case which constitutes its ratio decidendi.

Therefore, in order to understand and appreciate the binding force of a decision is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided. No judgment can be read as if it is a statute. A word or a clause or a sentence in the judgment cannot be regarded as a full exposition of law. Law cannot afford to be static and therefore, Judges are to employ an intelligent interpretation in the use of precedents……”

“In our opinion the purpose / necessity to take approval u/s 158BG by AO to pass block assessment order appears to be that the CIT should monitor and supervise the assessment of the block period for the reason of this not being a routine assessment but a special assessment being a case of search and seizure and involving a block period of 10 years. It is from this angle that the Board’s instruction contained in its circular letter dated 2^nd January 1996, directs the CIT to keep themselves involved in search assessments proceedings right from the beginning and for proper monitoring of search cases, internal correspondence folder should be maintained. While considering the giving of approval u/s 158BG the CIT may on perusal of record consider some part of the draft assessment order to need a modification or some addition not to be made, and to advise / instruct the AO accordingly. This process may rid the appellate authority of some its exercise. Therefore, even if their appears to be some irregularity in giving approval, the same hardly has any fatal consequence inasmuch as the resultant block assessment order remain very much assailable in appeal before the Tribunal and thus approval hardly entails any material prejudice to the assessee. Such approval, even if laconic in some aspects, will not invalidate / vitiate the order itself. The only understandable impact seems to be that it may necessitate somewhat more exercise at the appellate stage.”

“Let us now for a moment assume that there has been a violation of section 153D of the Act. The consequence of the same would not be annulment of the assessment order. The provisions of section 153D is an administrative procedure in the course of assessment. The breach of such administrative procedure could at best lead to the assessment proceeding being redone from the point which the breach took place.”