1. The approval taken u/s 153D of the Act before passing order u/s 153A of the Act cannot be taken in a mechanical manner. The approval must reflect materials/findings/reasoning to show that the higher authority has applied his mind before granting approval. AO is duty bound to submit draft assessment order well in advance for taking approval. Various judicial pronouncements on the subject are examined by the Court while holding that the approval taken in the present case is without application of mind and hence invalid.

2. Shares held as ‘stock in trade’ by a company cannot be subject matter of addition u/s 56(2)(viia) of the Act as they are outside the meaning of the word ‘property’ as provided in clause (vii).

While holding the aforesaid view, the court has reiterated principles of interpretation of statute that in absence of specific meaning provided in a particular provision, the words used in similar/analogus provisions or provision having genesis over the other provision has to be considered. In the present case, the memorandandum explaining Finance Bill, 2010 refects that Clause (viia) is merely extension of clause (vii). Where the meaning of the word, ‘property’ is neither provided in clause (viia) nor specifically imported from clause (vii) (unlike the meaning of FMV), still the meaning as provided in clause (vii) has to be taken for clause (viia) as clause (viia) is mere an extension of clause (vii) and is having genesis from clause (vii).

The court also observed that the provisions of clause (viia) and clause (vii) are anti abuse provisions and cannot be invoked to tax genuine business transactions.

3. Principles of ‘stare decisis’ explained in detail by Court while observing that the CIT(A) is duty bound to follow his predecessors order on similar issue decided in another case.