TMI Blog2019 (2) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri Nishit Gandhi, A.R. For the Revenue : Shri Manjunatha Swamy, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the order dated 23.03.2016 passed by Ld. CIT(A)-53, Mumbai and it relates to assessment years 2011-12. In the main grounds of appeal the assessee is contesting the decision of Ld. CIT(A) in confirming the disallowance of cost of construction to the tune of ₹ 69.50 crores. The assessee has also raised additional grounds urging therein various legal issues. The additional grounds raised by the assessee read as under: 1. In the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) - 53. Mumbai [ the CIT (A) ] erred in upholding the assessment order passed by the learned Assessing Officer ( the AO ) under section 143(3) r.w.s. 153C of the Income Tax Act. 1961 ( the Act ) in the case of the Appellant for the relevant assessment year. 1.1 While doing so the Ld. CIT (A) failed to appreciate that: (a) The necessary pre-conditions for the initiation as well as completion of an assessment under section 153C of the Act were not fulfilled in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the construction business. The Revenue carried out search and seizure operation in the hands of Sumer group in the year 2010. Consequent thereto the present assessment was completed by the Assessing Officer in the hands of the assessee under section 143(3) read with section 153C of the Act. The Assessing Officer disallowed cost of construction to the tune of ₹ 69.50 crores claimed by the assessee as application of income out of the income surrendered by Sumer group during the course of search. The AO also disallowed the claim of ₹ 21.13 crores relating to amount payable to MBR R Board. The Ld. CIT(A) confirmed both the additions. 3. We would first prefer to deal with the legal issues urged by the assessee. The legal issue urged as ground No.1.2 states that the assessment order passed by the Assessing Officer is unsustainable as it has been passed without obtaining necessary approval as provided under section 153D of the Act. In view of the same, the Ld. D.R. was directed to obtain copy of approval, if any, granted under section 153D of the Act. In response thereto the Ld. D.R. has submitted the copy of letter dated 12.09.2018 written by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises is whether the assessment order passed by the AO without obtaining approval from the higher authority as contemplated under section 153D of the Act is valid or not. We notice that an identical issue was considered by the Pune Bench of ITAT in the case of Akil Gulamali Somji (ITA No.455 to 458/PN/2010 dated 30.03.2012) and the Tribunal has held that the assessment order passed without obtaining approval under section 153D of the Act is null and void. 6. The provisions of section 153D of the Act read 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. 7. The above sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of assessment u/s. 153A in respect of person to whom notice is issued u/s. 153 C of the Act. Therefore, conjoint reading of Sec. 153 A, Sec. 153 B and Sec. 153 D makes it clear that the approval as prescribed u/s. 153 D is also required to be obtained in cases where notice u/s. 153 C had been served, the assessments are to be framed u/s. 153 A. The Ld. A.R. submitted that even the Memorandum explaining the provisions of Finance Bill 2007 speaks that approval u/s. 153 D is also to be obtained in case of other person as referred to Sec. 153 C. In support, he drew our attention to page No. 338 (Statute) of volume 289 ITR. He submitted that the word approval has been defined in Black s Law Dictionary -VIth Edition as the act of confirming, ratifying, assenting, sanctioning or consenting to some act or thing done by another. Approval implies knowledge and exercise of discretion after knowledge. The Sec. 153 D uses word shall which indicate that the provisions are mandatory especially when the Section further prescribes as that except with the prior approval of the Joint Commissioner no order shall be passed . Therefore in the absence of approval of Joint Commissioner, the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the Joint Commissioner of Income Tax for assessment order passed u/s. 153A of the Act. He contended that even if for the sake of argument it is accepted that A.O failed in his mandatory duty of obtaining prior approval, we have to go back to legislative intent behind the relevant Section. The Ld. D.R. submitted that the purpose of approval is to avoid high pitched assessment and inconvenience to the assessee. This pre-supposes the participation of both the A.O and assessee in the process of assessment. In the present case, all the assessments for 4 years has been passed u/s. 153 C read with Sec. 144 which itself implies that there was lack of cooperation from the assessee during the course of assessment proceedings on various counts. Similarly, even during the appellate proceedings, there has been no appearance of the assessee before the Ld CIT(A) and there was no compliance to statutory notices. The Ld. D.R. placed reliance on the following decisions to support her argument that A.O is well within the jurisdiction to continue with the proceedings from the stage at which the illegality has occurred : 1) Guduthur Bros. Vs. ITO, TC49R, 480 (SC) 2) Gayathri Textiles Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in ITATONLINE.org. 11. We have considered the above submissions and have gone through the decisions relied upon by the parties in view of orders of the authorities below and material available on record. The relevant facts are that during the course of search and seizure action on 29.7.2003 at the business and residential premises of Mr. Shriram Soni, certain documents belonging to the assessee were found and seized. Notice u/s. 153C was issued to the assessee and assessment u/s. 153C r.w.s. 144 have been framed for all the 4 A.Ys. under consideration. Before the Ld CIT(A), the assessment orders were questioned both on legal issue and on merits. On legal issue, the validity of assessment orders in absence of approval obtained u/s. 153 D of the Act of Joint Commissioner of Income Tax has been questioned. On merits additions made by the A.O were impugned. Since the assessee could not succeed in its appeal, the present appeals have been preferred in questioning the first appellate orders. 12. On perusal of the provisions laid down u/s. 153C of the Act, it is apparent that after issuance of notice u/s. 153C, the A.O having jurisdiction over such other person (against wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery 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. 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. The general rule that non-compliance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment 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 in the present case were passed the provisions laid down u/s. 153D were very much in operation. In the present case, assessments in question have been framed on 27.12.2007. 13. In the case of CIT Vs. Ratnabai N.K. Dubhash (Mrs.) (Supra), the difference between cancellation and amendment of assessment in view of the provisions of Sections 143, 144B, 153 and 251 of the I.T. Act 1961 has been dealt with. The Hon ble High Court has been pleased to hold as under : In view of the above discussion, we are of the clear opinion that incases falling under section 144B of the Act, the quasi-judicial function of the Income-tax Officer as an assessing authority comes to an end the moment the assessee files objections to the draft order. The power to determine the income of the assessee thereafter gets vested in the Inspect-ing Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of Addl. Commissioner of Income Tax, which is mandatorily required, was not taken. Since 4 years had elapsed from the end of the relevant A.Y, the A.O u/s. 151(1) of the Act was required to take approval of the competent authority. The Hon ble Delhi High Court after discussing the issue in detail and the case laws cited before it has been pleased to approve the decision of Tribunal. In view of these decisions and the position of law provided u/s. 153D of the Act, we hold that the assessment orders impugned framed in absence of obtaining prior approval of the Joint Commissioner for the A.Ys. under consideration are invalid as null and void and are quashed accordingly. 15. The decisions relied upon by the Ld. D.R are having different facts and issue, hence are not helpful to the revenue. In the case of Guduthur Bros. Vs. ITO (Supra) the levy of penalty without affording a hearing to the assessee was questioned before the appellate authority, who set aside that order. The matter ultimately travelled to the Hon ble Supreme Court and it was held that the ITO was well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurred and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL s Siddharth Ltd. (Supra) that requirement u/s. 153 D for obtaining approval of JCIT is not procedural only but a mandatory requirement, hence the cited decision by the Ld. D.R is not applicable in the case of present assessee. Under above circumstances, the issue raised regarding the validity of assessment orders in question without obtaining prior approval u/s. 153D of the Act is decided in favour of the assessee. The assessment orders in question are thus quashed as null and void. 8. The Ld. A.R. brought to our notice that the order passed by Pune Bench of the Tribunal in the above said case has been upheld by the Hon ble Jurisdictional Bombay High Court, vide its order dated 15.01.2013 passed in Income Tax Appeal (L) No.1416 of 2012 and others. The copy of the same is placed in pages 15 16 of the paper book. The Ld. A.R. also submitted that the Revenue filed petition for special leave to appeal before Hon ble Supreme Court of India and the Hon ble Supreme Court vide its order dated 05.08.2013 in Civil Appeal No.19389/2013 has declined to entertain special leave petition. 9. The Ld A.R also placed reliance on the decision rendered by Hon ble Gujarat High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law is couched in a negative language implying mandatory character, the same is not without exceptions. However, the present case deals with the interpretation of a taxing statute. It is well settled that a taxing statute has to strictly construed, therefore, from the language employed in section 153D of the Act, the requirement of obtaining the prior approval of the Joint Commissioner has to be regarded as mandatory in nature. 11. In the facts of the present case, as the assessment order has been passed by an Income Tax Officer, the requirement of obtaining the prior approval of the Joint Commissioner under section 153D of the Act was absolute. The Tribunal, however, has recorded a finding of fact that there is nothing on record to indicate that the prior approval of the Joint Commissioner was obtained. As a natural corollary therefore, in the absence of the requirement of prior approval of the Joint Commissioner being satisfied, the whole proceeding would stand invalidated. The Tribunal was, therefore, wholly justified in holding that the impugned order of assessment would stand vitiated in view of non-compliance of the provisions of section 153D of the Act. On this coun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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