Implicitly, application of mind is imbedded and imperative with every incumbent officer, must demonstrate while exercising his vested authority, in general and explicitly, the application of mind becomes sine qua none when authority is specifically prescribed by statue viz significantly implementing rule of law and constitutional governance.

Statutory Methodology

1. At the outset it is a settled salutary principle that if a stature provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. If a statute has conferred a power to do an act and had laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. when the statute prescribes to do a particular thing in a particular manner, the same shall not be done in any other manner than prescribed under the law. when a particular mode is prescribed, no other mode can be adopted.

2. The legal maxim “Expressio unius est exclusio alterius” ie., the express mention of one thing implies exclusion of another. The Law Lexicon explains the maxim – whenever a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative viz. that the thing shall not be done otherwise. This Rule had been adopted in various judicial precedents from Taylor v. Taylor (1875(1) Ch D 426) to GVK Industries Ltd. and another v. Income Tax Officer and another (2011(4) SCC 36). This Rule adopted in Taylor v. Taylor is well recognised and is founded on sound principle. The court took the view that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than which has been prescribed. This view has been adopted in Nazir Ahmed v. King Emperor (AIR 1936 PC 253(2)).

3. The above jurisprudence equally applies to taxation laws as well. Reference may be taken CIT vs. SPL’s Sidhartha Ltd. 345 ITR 223 (Del) (referred in ITAT Delhi -ITA No. 1185 & 1186/Del /2009 dt.24.2.2016 at page 10 &11) it is observed at page 227:

“It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not except its being done in some other manner.

4. As a measure of abundant caution, the Legislature consciously provided a rider for previous approval so that certain harsh provisions are not abused by the Lower Authorities in delivering justice, befalling any ipse-dixit conduct in the quasi-judicial process and frustrating intent of the law as the 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.

5. The Income Tax Act 1961, has categorically prescribed specific approval by the competent authority before obtaining jurisdiction for application of several proviso including section 153D of the Income Tax Act 1961. So there is no space for mechanical and a baffling haste approach in discharging statutory obligation casted upon. Any abysmal conduct of statutory authority defies law and injustice.

6. Analysis of Section 153D of the Income Tax Act 1961
Section 153D requires

” 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].”

7. The above provisions u/s. 153D have been laid down under the heading “prior approval necessary for assessment in cases of search or requisition”. This heading itself suggests that obtaining prior approval the assessment in cases of search or requisition is necessary.

8. The provisions u/s. 153D start with a negative wording “no order of assessment or re-assessment” supported by the further wording “shall” makes the intention of the Legislature clear that compliance of Sec. 153D requirement is mandatory. No universal rule can be laid down as to whether mandatory enactment shall be considered directory or obligatory with an implied nullification for disobedience.

9. As per the decision of Hon’ble Supreme Court in the cases of Banwarilal Agarwalla Vs. State of Bihar, AIR 1961 SC 849 (853); Razas Bulland Sugar Co.Ltd., Vs. Municipal Board, AIR 1965 (SC) 895 (899) & Others if object of the enactment will be benefited by holding the same directory, it will be construed as mandatory, whereas if by holding it mandatory, serious general inconvenience will be created to nascent persons without very much further object of enactment, the same will be construed as directory. But all these does not mean that language used is to be ignored, only that the prima facie inference of the intention of the legislature arising from the words used may be displaced by considering the nature of the enactment, its designed consequences flowing from alternative constructions.

10. The wordings and language used in Sec. 153D of the Act and the heading “prior approval necessary for assessment in cases of search or requisition” under which, Sec. 153D has been provided do not leave an iota of doubt about the very intention of the legislature to make the compliance u/s. 153D a mandatory. There is no dispute that if a provision is mandatory, an act done in breach thereof will be invalid, but, if it is directory, the act will be valid although non-compliance may give rise to some other penalty if provided by the Statute.

11. CBDT Circular No. 3 of 2008, dated 12.3.2008, clarifies 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 apply their mind on the materials and other attending 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 draft Assessment order.

12. The general rule that noncompliance of mandatory requirements results in nullification of the Act is subject at least to one exception. If contain requirements or conditions are provided by a statute in the interest of a particular person, the requirements, or conditions although mandatory may be waived him if no public interest are involved and in such case, the act done still be valid even if the requirement or condition has not been performed.

13. It is not the case where consent of assessee will waive the condition of obtaining prior approval u/s. 153D of the Joint Commissioner of Income Tax by the A.O for framing assessment u/s. 153C/ 153A of the Act. Condition of prior approval of JCIT u/s. 153D has been put in public interest and not in the interest of a particular person. Thus it cannot be waived by particular person.

14. The use of word “shall” raises a presumption that a particular provision is imperative but this prima facie inference may be reverted by other consideration such as object and scope of the enactment and consequence flowing from such construction. The revenue cannot rebut the inference by pointing out other consideration like object and scope of the enactment and the consequence flowing from such construction. Clause 9 of Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of Income Tax on behalf of Central Board of Direct Taxes, Department of Revenue, Government of India, page 44 read as under:

“9. Approval for assessment: An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT. (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.) The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself.”

15. Chapter XIV-B also deals with assessment of search cases. Sections 153A, 153B & 153C have been introduced to Chapter XIV “procedure for assessment” w.e.f. 1.6.2003 by the Finance Act 2003 whereas Sec. 153 D has been inserted to the Chapter w.e.f. 1.6.2007 by the Finance Act 2007. These provisions thus also deal with the assessment in case of search or requisition and when the assessment orders were passed the provisions laid down u/s. 153D were very much in operation.

Approval viz -a -viz Application of Mind

16. The “approval” being an expression indicating application of mind on the part of the higher authority. The Apex Court in the decision reported in AIR 2006 SC 2879 Ashok Kumar Sahu vs. Union of India held that the expression ‘approve’ means to have or express a favourable opinion of to accept as satisfactory as to the content of the assessment made under Section 158BC of the Income Tax Act 1961. It is instrument for persuasion of judges.

17. The Karnataka High Court pointed out the difference between the approval and permission by referring P.Ramanatha Aiyar’s Law Lexicon and held that when approval is given it means the approving authority has full knowledge about the contents of what is approved and confirmed authoritatively the order of the lower authority. It also preserve the institutional legitimacy and “adjudicative integrity”.

18. ‘Approval’ signifies a product of human thoughts based on the given set of facts and interpretation of the applicable law. It provides equality in treatment and thus prevents bias, prejudice and arbitrariness and avoids inconsistent / divergent decisions.

19. The Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of Income Tax on behalf of Central Board of Direct Taxes, Department of Revenue, and Government of India, is based on sound principles of law and enunciated by Supreme Court in the other as well, dwelled upon in following paragraphs.

20. The concept of approval after due application of mind after deliberation of records, is not new to legal parlance but akin to Cr PC under section 196, as well, where It is the obligation of the sanctioning authority to scrutinize all the records and facts presented and apply their own mind on the same so that the sanction would be granted in accordance with the law. Strict adherence to the time limit is to be followed by the sanctioning authority. The concept of due approval was explained by Apex court in the matter of CBI vs Ashok Kumar Aggawal 14 SCC 295 where supreme court has explained the basic requirement of the process of sanction which is similar to the term ‘approval’ as prescribed by section 153D of the Income tax Act 1961.

21. Reference may be taken of Supreme Court wherein H’ble Apex court says in para 18 &19, that The validity of the sanction would, therefore, depend upon the material placed before the sanctioning authority and the fact that all the relevant facts, material and evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it…… .Further in para19 H’ble courts explains Since the validity of “Sanction” depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows, that the sanctioning authority has to apply its own independent mind for the generation of genuine satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning authority should not be under pressure from any quarter nor should any external force be acting upon it to take decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous consideration. If is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be had for the reason that the discretion of the authority “not to sanction” was taken away and it was compelled to act mechanically to sanction the prosecution.”

Application of mind is the sacred duty of incumbent. Approval must have inextricable link with application of mind based on material on records.

22. In sum and substance, the term “Approval” for the purpose of section 153D connotes conscious, diligent and objective appraisal of facts, material on record and its findings by assessing office in the form of ‘Draft Assessment order’, by applying judicious mind & skill in accordance with law by superior authority, encompassing dominate purpose test .

23. The proposition is no more res-integra that approval under section 153D of the Act is not procedural requirement but mandatory. It is trite that where the AO is required to do a particular act in a particular manner, he cannot bypass the mandate of law and adopt a different approach. The supervisory power mandated under s.153D of the Act in case of search assessment could not be bypassed. The co-ordinate bench in D. S. India Jewelmart P Ltd. (supra) has taken note of various judicial decisions and arrived at conclusion that lack of approval under s.153D of the Act could invalidate the assessment order. The noncompliance of Section 153D of the Act is a substantive defect and thus not curable. Such absence of approval has rendered the assessment order passed under s.153A of the Act as bad in law at the threshold. the compliance of section 153D is mandatory in nature. Therefore, assessment order passed by the Income Tax Officer, in the assessee’s case, without taking prior approval from JCIT, is ‘null’ in the eye of law..

24. Approval under section 153D as interpreted in various circumstances by Judicial forums

The different facets of approval process has been expounded by several judicial forums are tabulate as under:

Sl.
No. What is not valid approval as envisaged by section 153D of the Income Tax act 1961 and explained by judiciary Judicial Precedents Citation
1 ‘Draft assessment order’ after completion of hearing should be prepared by AO M/s. Rajat Minerals Pvt. Ltd.

ACIT, New Delhi vs Sh. Bhupesh Kumar Dhingra, ITAT Ranchi ITS no. 41 to 47/Ran/2019 dt.20.1.2020

ITAT – Delhi.. ITA No.5800/Del./2015 -dated 31 January, 2020

2 The Process of Approving ’Draft Assessment order’ should not be purportedly carried out the exercise of granting approval in a baffling haste.

The purported act of approval of the JCIT on assessment orders placed before him on that day itself and obtained on the same day (in as many as 28 cases) relating to search is highly improbable and a near impossibility.

It is not humanly possible to look into assessment records as well as draft assessment orders thereon and apply its own mind objectively by a senior designated authority involving such complex matters and grant approval as contemplated under s.153D of the Act in a spur. The approval granted by the JCIT, if any, on the same date as noted is thus illusory tantamounting to no approval ; rendering the entire assessment process void and a nullity. M/s. Rajat Minerals Pvt. Ltd. ITAT Ranchi ITS no.41to 47 /Ran/2019 -dt.20.1.2020
Para 14.5

3 AO has prepared the draft assessment order without even waiting for completion of that date of hearing is gross sub-version of the quasi-judicial process

“12. Aforesaid approval given by the Addl. Commissioner of Income-tax shows that approval to the draft assessment order u/s 153D is granted in case of the assessee, Shri Bhupesh Kumar Dhingra along with 8 other assessees without perusing the draft assessment order in this case M/s. Rajat Minerals Pvt. Ltd.

ACIT, New Delhi vs Sh. Bhupesh Kumar Dhingra, ITAT-Ranchi-ITA no. 41 to 47of 2019 dt.20.1.2020
Para 14.3

ITAT – Delhi.. ITA No.5800/Del./2015 -dated 31 January, 2020

4 No reference to the assessment records also being sent together with the draft assessment orders is found in the order sheet. M/s. Rajat Minerals Pvt. Ltd. ITAT Ranchi 41 to 47/Ran/2019 dt.20.1.2020
Para 14.5

5 A conditional approval subjected to modifications by the DCIT after receiving of the approval which makes it an invalid, qualified, uncertain approval. Rishabh Buildwell P. Ltd ITAT Delhi- ITA No. 2122, 2163, 2123,2162, 2124 &2491/Del/2018 dt.10 6.2019 para 14

6 The copy of the order sheet of the A.O. which does not mention if A.O. has sent any proposal to the JCIT/Addl. CIT for obtaining prior approval before passing the impugned assessment order. Ajay Sharma, New Delhi vs DCIT, Ghaziabad ITAT Delhi -ITA.No.3554/Del./2015 dt.14.2.2020 para 8.4

7 No such approval under section 153D of the Act was found in the assessment record. Ajay Sharma, New Delhi vs DCIT, Ghaziabad ITAT Delhi -ITA.No.3554/Del./2015 dt.14.2.2020

8 The compliance of S. 153D requirement is absolute. therefore order passed by the Assessing Officer without approval of Joint Commissioner was held to be bad in law . PCIT v. Sunrise Finlease (P. ) Ltd. 252 Taxman 407 (Guj)(HC)

9 The approval should not be an empty ritual and must be based on consideration of relevant material on record.

The Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st 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. Shree Lekha Damani HC Bom ITA NO. 668 OF 2016 dt.27.11.2018

10 Assessment order framed in absence of obtaining prior approval of JCIT is invalid as null and void. Shri Jaykumar Uttamchand Pokarna ITAT Pune -ITA NO. 549/PN/2011,dt.5.10.2012

11 A.O has no jurisdiction to frame assessment order without prior approval of JCIT as necessary requirement to comply with u/s. 153D of the Act Akil Gulamali Somji ITAT Pune ITA . Nos.455 to 458//PN/2010 dt. 30. 3 2012 confirmed by HC Bom

12 No prior approval of the Joint Commissioner was taken before Income Tax officer passing the order. CIT vs. Shri. Akil Gulamali Somji ITA (L) HC Bom NO.1416-19 OF 2012 dt. 15.1.2013 SC dismissed SLP no.19389 of 2013 on 5.8.2013.

13 • The Assessing Officer should submit the draft assessment order for such approval well in time.

• The submission of the draft order must be docketed in the order-sheet

• A copy of the draft order and covering letter filed in the relevant miscellaneous records folder.
• Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet.
• The assessment order can be passed only after the receipt of such approval.

• The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself. Ch. Krishna Murthy ITA No. 766/Hyd/2012- dt.13.2.2015

14 Jt. CIT having granted the approval under s. 153D on the very same day on which the forwarding letter seeking approval was received in his office, and circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind and even without going through the records as the same were in Jodhpur while the Jt. CIT was at Udaipur, therefore, the approval granted by him cannot be sustained. Indra Bansal & Ors. v. ACIT
ITAT, JODHPUR BENCH
ITA Nos. 321 to 324, 279 to 281, 325 to 331 & 400 to 404/Jd/2016 -dt.23.2.2018

15 The approving authority has required the assessing authority to conduct further enquiry in respect of opening cash in hand. The Assessing Authority thereafter has never communicated his findings of the further enquiry to the Supervisory Authority and not taken.

The approval of justification of his findings. Thus, in our considered opinion, alleged approval letter dated 27.3.2015 of the Addl. CIT, Range- 1, Bhubaneswar does not constitute the approval which is envisaged by the provisions of section 153D of the Act. Geetarani Panda, ITAT Cuttak IT(ss)A No.01& 2/CTK/2017 -dt.5.7.2018-Para 26

16 The concerned authority while granting the approval is expected to examine the entire material before approving the assessment order. Verma Roadways v. ACIT (2000) 75 ITD 183 (All)

17 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. Sahara India (Firm) v. CIT & Anr. (2008) 300 ITR 403 (SC),

18 The assessment order under 153C of the Act can be passed by the Income Tax Officer only after obtaining prior approval under section 153D of the Act from the Joint Commissioner in as much as compliance of section 153D requirement is absolute. Pr. CIT vs. Sunrise Finlease (P.) Ltd. Gujarat High Court in the case of (2018) 252 taxman 407
Followed by
Mumbai bench of ITAT in ITA No.4916of 2016-M/s. Sumer Associates, dt 26.12.2018

ITAT Mumbai HiKlass Moving Picture Pvt.

ITA No.926 to 931/Mum/2013dt.30.9.2016

19 No relevant documents were produced before JCIT before granting approval under section 153D of the I.T. Act. Approval have been granted on the same day on 22.12.2017 despite the fact that A.O. was having his office at Jabalpur and JCIT was holding his Office at Bhopal in which there is a significant distance. No record have been produced before JCIT, only draft order have been sent. The A.O. in his letter did not mention if he has forwarded any assessment record before JCIT for his perusal before granting approval under section 153D. No statement of assessee have been recorded under section 132(4). The JCIT did not see any seized material or submission of the assessee brought on record. Therefore, JCIT granted the approval under section 153D without application of mind and in a mechanical manner.

The JCIT also in his approval Dated 22.12.2017 (supra) has merely mentioned that A.O. has verified the facts of examining the material. Thus, it is clear that JCIT has not gone through the record or the material before granting approval under section 153D of the I.T. Act. The JCIT merely believed the certificate given by the A.O. Shri Tarachand Khatri 2020 (1) TMI 1027 – ITAT JABALPUR

20 It is difficult for the Assessing Officer at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the Assessing Officer. Similarly, no record is available as to how the draft order and assessment record have been received by Addl. CIT at Chandigarh. The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced before him. Since no details are available on record about the mode, through which, assessment record was transmitted by the assessing officer at Faridabad to Addl. CIT in Chandigarh and vice-versa by Addl. CIT, Chandigarh to Assessing Officer at Faridabad on the very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time or if the Addl. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. M3M India Holdings 2019 (3) TMI 895 – ITAT DELHI

21 The Supervisory Authority has himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement was merely a formality. Sri Swapan Kumar Paul

Sri Madhusudan Panigrahi vs ACIT Corporate Circle-1(2) ITAT Guwahati -ITA No.136-142/Gau/2018 order dated 31.7.2019

ITAT Cuttack -, ITA No. IT(S) A No. 44 to 46/CTK/2016
dated 27 September, 2018

25. Having regard to the aforesaid, 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.

26. Therefore, ex-facie interaction with AO and physical access to assessment records including order sheet and seized material showing any sort of need based enquiry ,investigation etc. relied upon to come to a conclusion in ‘draft assessment order’ subject to approval, is integral part of entire process of approval as required by section 153D of the Act. It is beyond apprehension that how a superior authority can apply mind even without the same being put up at the time of approval.

27. The purpose of introduction of section 153D of the act in the statue, is also to ensure application of mind so that any possibility of invoking section 263 of the Act, is ruled out. In other words, invoking of section 263 prima facie demonstrates that approval of section 153D was not given adequately in accordance with law.

28. No assessment order under section 153A or 153C can be framed inter-alia without prior approval of the prescribed authority under section 153D of the Income Tax Act 1961 and the essence of approval should actively, circumstantially and substantively demonstrate application of mind by the competent authority both as to the law and facts, provisions of section 153D implies that the meaning of approval is not simple approval or approval of the order in the mechanical manner. While granting approval u/s.153D of the Act, almost same principle and procedure has to be adopted and followed as required for grant of approval u/s.151 of the Act. The Joint Commissioner must have to go through the seized documents, notices issued by the AO, submissions made by the assessee and documents submitted by the assessee and then he had to apply his judicious mind to all the relevant records and thereafter he should proceed to grant approval to the AO to pass orders accordingly. He vehemently submitted that in the case of the assessee, the ld Jt. CIT has granted approval to pass the orders mechanical manner. In the said approval letter, it can be seen that JCIT has simply mentioned that “approval is hereby accorded as per the provisions of section 153D of the Act for passing the assessment orders in respect to the following cases….’ without which assessment framed shall be null and void in the eyes of law and sheer injustice to the authority sorely deprecate by law. the law under which the authority is making a decision, itself requires a judicial approach, the decision will be quasi-judicial.

Gist of Due Process

Summarily, based on the traversing judicial precedents following steps expounded and subsumed, shall constitute as none application of mind for the purpose of section 153D of the Act and reprimanded by courts :

 No draft assessment order’ should be prepared for approval by assessing officer before completion of hearing. That means cannot put cart before bullock.

 Not adequately entering in the order sheet shall lead to prima facie conclusion that no draft order was prepared and forwarded with covering letter to concerning authority for approval under section153D of the Income Tax Act 1961 along with assessment file and other relevant documents relied upon by the assessing officer in arriving at conclusion.

 Adequate evidence of movement of assessment file etc. and put up before the approving authority with proper docketing. the Id JCIT has not even bothered to mention that he has perused the relevant assessment records and draft assessment orders for which he has granted approval u/s.153D of the Act as per the mandatory requirements of the said provisions of the Act.

 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…. The Joint Commissioner must have to go through the seized documents, notices issued by the AO, submissions made by the assessee and also documents submitted by the assessee and then he had to apply his judicious mind to all the relevant records and thereafter he should proceed to grant approval to the AO to pass orders accordingly…. the object of entrusting the duty of Approval of assessment in search cases is that the Jt. CIT, with his experience and maturity of understanding should 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 draft assessment order must be presented to approving authority in accordance with the internal guidance, well before the time barring limit so that adequate time can be devoted on the file before approving. Hon’ble Bombay High Court in the case of Smt. Shreelekha Damani (supra), while granting approval, if the approving authority did not have enough time to analyse the issues arising out of the draft assessment orders, then clearly this was a case in which the higher authority had granted the approval without consideration of relevant issues.

 Approval should be absolute and it cannot be conditional or interlocutory sort of approval. In fact, conditional approval is no approval in the eyes of law for the purpose of section 153D of Income tax Act 1961.

 There should not be any error of facts and law leading to conclusion that draft assessment order was apparently, approved without application of mind by the competent authority. Like error of mentioning correct section under which the approved draft assessment order was framed. ‘Non pointing out the mistake/error by the Joint Commissioner of IncomeTax on the part of the Assessing Officer is prima facie evidence of non application of mind on the part of the sanctioning authority while granting the sanction. (related to reopening of assessment )

 The AO must be in possession of valid approval as on the date of signing the assessment order. Admittedly the approval was granted by the learned joint Commissioner of Income Tax dated 4th of March 2013 but the same was received by the AO having jurisdiction over the assessee dated 5 March 2013. ……it is the beyond doubt that the assessment has been framed by the AO under section 143(3) of the Act, without obtaining the valid approval from the joint Commissioner of income tax. Accordingly, such assessment is not valid under the provisions of law. Thus, the subsequent official correspondence has no relevance with the procedure adopted by JCIT for grant of approval u/s.153D of the Act, cannot cure defects in the approval and cannot improve the approval granted without application of mind. Thus, the approval cannot be improvised or defects therein cannot be cured, subsequently.

 The approval under section 153D of the Act is pari-materia to approval under section 158BG of the Act. the Commissioner has passed an order granting approval under section 158BG of the Act through a single order passed on 31-3-1997 without giving any reason whatsoever. …..The approval order does not disclose the points which were considered by the Commissioner and the reasons for accepting them. In our view, this is totally an unsatisfactory method of granting approval in exercise of judicial power vested in the Commissioner.

Another facet of construction ‘Approval’ to be tested by judicial forums.

29. Section 153D of the Act reads as under:

“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.]

30. The marginal note to the aforesaid section reads as “prior approval necessary for assessment in cases of search or requisition”.

31. Further, statutory provision states that 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 section 153A(1)(b) of the Act or section 153B(1)(b) of the Act except with the prior approval of the Joint Commissioner.

32. It is thus further explained that statutory mandate under section 153D of the Act, is that order of assessment or reassessment by an Assessing Officer under section 153A(1)(b) of the Act, is to be preceded with the prior approval of the Joint Commissioner. However, it does not in any manner state that the order of assessment so made under section 153A(1)(b) of the Act, is itself required to be approved by the Joint Commissioner. All what it states and imposes an obligation is that before passing order of assessment under section 153A(1)(b) of the Act, the Assessing Officer must obtain prior approval of the Joint Commissioner of Income Tax. Further, in obtaining such prior approval for the Joint Commissioner to pass the order of assessment under section 153A(1)(b) of the Act, the Assessing Officer must forward the assessment records to the Joint Commissioner of Income Tax and thereafter, the Joint Commissioner of Income Tax on independent consideration of assessment records, grant approval to the Assessing Officer to pass the assessment order under section 153A(1)(b) of the Act. In other words, the submissions are as under:

(a) That there is no concept of draft order of assessment or final order of assessment in the scheme of section 153A of the Act or for obtaining approval under section 153D of the Act, specifically provided as in the case of section 144C of the Act.

(b) The Joint Commissioner of Income Tax under section 153D of the Act does not have the power to control the quality of order of assessment under section 153A(1)(b) of the Act;

(c) The quality and the legality of order of assessment under section 153A(1)(b) of the Act, is to be determined only in the appellate proceedings under section 246A/253/260A of the Act. The power under section 153D of the Act vested with the Joint Commissioner of Income Tax, is to examine assessment records and grant approval to the Assessing Officer to pass the order under section 153A(1)(b) of the Act and no more.

34. It is inevitable that once assessment records are not considered by the Joint Commissioner of Income Tax before granting approval under section 153D of the Act, then such an order under section 153A(1)(b) of the Act is illegal, invalid and void ab-initio and without jurisdiction. It may be added here and to clarify that Assessing Officer may at his discretion choose to also circulate along with the assessment records a draft order but however, circulation of draft order alone dehors assessment records, is in absolute illegality and in fraction of section 153D of the Act.

Conclusion

35. The statutory approval under section153D of the Act, should not ipso facto manifest anything which is beyond the preponderance of human probability so far as contemplating ought most application of mind in delivering justice and, the process adopted seems casual, per-incuriam, subjective, mechanical and sans in accordance with law.

36. The essence of approval within the meaning of section 153D, is not the certification of ‘draft assessment order’, which is nowhere prescribed in the Act but the assessment records by independent application of judicious mind on it.

37. Lastly, the generic principle of pervading Quasi-Judicial Sense should be tested at all stages till the approval is granted under section 153D of the Act, within the jurisdictional parameters by accomplishing purposive construction of the statute. In nutshell, ‘act judicially’ is paramount. Finally, ensure that no tax is levied without the authority of law in terms of Article 265 of the Constitution of India.

38. Disclaimer

The content of this document is solely for informational purpose. It does not constitute professional advice or recommendation of author. The authors neither accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon. Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of the mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without written permission of author.
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Posted on: April 7th, 2021