TMI Blog2019 (7) TMI 1659X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances that the department has not proceeded to finalise the impugned assessment(s) in true light of the relevant mandatory provision sec. 153D of the Act mainly for the reason neither the Assessing Officer had sent anything more than the draft assessment order(s) nor the JCIT had an occasion to apply his mind to ensure the twin purpose of his statutory exercise (supra). We further make it clear that since the entire exercise was carried out from both the authorities end on the same date i.e. 28.03.2016 itself in absence all the corresponding records, the impugned approval does not satisfy the relevant parameters of law as settled in preceding case law. We therefore quash all the impugned assessment(s) framed u/s. 153A r.w.s. 143(3) for this precise reason alone. - Decided in favour of assessee. - ITA No.136-142/Gau/2018, 155-158/Gau/2018, 143-148/Gau/2018, 149-151/Gau/2018, 153-154/Gau/2018 C.O. No.28-31/Gau/2018, 22 to 27/Gau/2018 (a/o ITA No.155-158/Gau/2018), (a/o ITA No. 149 to 154/Gau/2018) - - - Dated:- 31-7-2019 - Shri S.S.Godara, Judicial Member And Dr. A.L. Saini, Accountant Member By Assessee: Shri Sanjay Mody, FCA By Revenue: Shri A.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is given in the following table. You are directed to pass finial order in these cases served upon the assessee and send a copy of the said final order to this office for record purpose. Since o assessment records are sent by you along with your draft order(s), question of returning the same does not arise. Name of the assessee` PAN A/Yr. Assessed income (in Rs) Remarks Swapan Kumar Paul AEYPP1792J 08-09 21,04,770 1. Don t quote section 68 in case of addition under voluntary disclosure / undisclosed income. 2. Keep proper note as note not for the assessee . 3. Penalty proceedings u/s. 271(1)(c)/271AAB is to be initiated after careful consideration. Keep proper note, i.e. your satisfaction for initiation of penalty quoting proper section under which penalty proceedings are initiated. Penalty notice is to be issued specifying proper section served upon the assessee. 4.Sentence regarding approval u/s. 153D is to be mentioned in note not for the assessee . 5. Return income must be mentioned in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do . 14-15 20,70,87,907 .do . Subhajit Paul AZNPP5539K 08-09 1,53,950 do .do... do . 00-10 5,25,320 .do . .do... do . 10-11 17,26,930 .do . .do... do . 11-12 19,23,600 .do . .do... do . 12-13 1,15,65,396 .do . .do... do . 13-14 1,74,58,030 .do . .do... do . 14-15 1,44,89,296 .do . Abhijit Paul APDPP3896B 08-09 6,06,070 .do . .do... do . 09-10 7,20,050 .do . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search conducted on a person) arose or re-assess income of such other person in accordance with the provisions of Sec. 153A. Sec. 153B talks about time limit for completion of assessment u/s. u/s. 153A, whereas S.153D, talks about necessity of prior approval for framing assessment in case of search or requisition. We thus fully concur with the submission of the Ld. A.R. that provisions laid down u/s. 153D are very much applicable in case of assessment of income of any other person (i.e. the person other than the person searched). Now the issue for our adjudication is as to whether absence of obtaining prior approval u/s. 153D of Joint Commissioner of Income Tax, assessment made u/s. 153 C will make the assessment void or voidable/curable. For a ready reference, provisions laid down u/s. 153D of the Act are being reproduced hereunder: 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Here, before us, is not a 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 Akil Gulamali Somji A.Y. 2001-02 to 2004-05 Page of 14 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. 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 has not been able to rebut the above inference by pointing out other consideration like object and scope of the enactment and the consequence flowing from such construction before us. Clause 9 of Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of Income Tax on behalf of Central Board of Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner to whom the Income-tax Officer is required to forward the draft order together with objections. The only thing that remained to be done by the Income-tax Officer is to pass a final order in accordance with the directions given by the Inspecting Assistant Commissioner. The function of the incometax Officer to make the final assessment under section 144B(5) of the Act is more in the nature of a ministerial function because he can pass the order only in accordance with the directions of the Inspecting Assistant Commissioner. He cannot vary ordepart from the directions given by the Inspecting Assistant Commissioner. Moreover, the requirements of section 144B of the Act re mandatory. The Income-tax Officer has no option but to follow the same. He cannot make the final order on the basis of the draft order without forwarding the same to the Inspecting Assistant Commissioner along with the objections and without obtaining the directions of the Inspecting Assistant Commissioner. An assessment made by the Income-tax Officer in violation of the provisions of section 144B of the Act would be an assessment without jurisdiction. In the instant case, the admitted position is that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;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 to assess the appellants to a penalty, if any. Before the Hon' ble M.P. High Court in the case of CIT Vs. Sardarilal Hasim (Supra), the issue was regarding applicability of prescribed limitation u/s. 275 in a penalty order passed after the case is remanded by an appellate authority. The Hon'ble Court was pleased to hold that the limitation prescribed u/s. 275 of the Act is not applicable to the penalty order passed after the case is remanded by an appellate Authority. In the case of Gayatri Textiles Vs. CIT (Supra) non-obtaining of prior approval of I.A.C u/s. 271(1)(c) (iii) for direction for payment of penalty was held as procedurally defective. The provisions laid down u/s. 153D of the Act under consideration in the present case before us, are different as here the prior approval of Joint Commissioner is not required merely for direction for payment of the due amount of tax but overall approval of the assessment framed by the I.T.O. Thus, the cited decision is not applicable in the present case. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of seeking approval. He invites our attention to the JCIT s remarks in last column extracted hereinabove to buttress the point that the said prescribed authority had duly applied its mind as required u/s 153D of the Act. 5. We have given our thoughtful consideration to rival contentions. Suffice to say, there is hardly any dispute that the Assessing Officer herein had in fact asked for the JCIT s approval u/s. 153D of the Act before framing all the impugned assessment(s). The sole question our apt adjudications whether the said approval dated 28.03.2016 satisfies the relevant parameters settled by various judicial precedents or not. Mr. Mody at this stage invites our attention to clause 9 of Manual of Office Procedure, Volume-II (Technical), February 2003 issued by the Directorate of Income Tax on behalf of Central Board of Direct Taxes, Department of Revenue, Government of India dealing with the instant issue of approval to be finalized in a particular manner (supra). He emphasizes that the ACIT as well as the JCIT s action under challenge does not comply the prescribed procedure therein. We find no merit in the instant argument since such a Manual of Office Procedure is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2015 or prior to that nor also orders were approved by the Ld. Addl. Commissioner of Income Tax. Therefore, the assessment order passed without obtaining the approval from the Addl. Commissioner of Income Tax is illegal and void ab initio and liable to be quashed. b. Further it is submitted that, as per the provisions of section 153D the Act, every assessment or reassessment order is to be passed not below the rank of Joint Commissioner of Income Tax, except with the prior approval of the Joint Commissioner. That means if an order is not passed by the Joint Commissioner then that order is to be approved by the Joint Commissioner. Here the meaning of approval is not simple approval or approval of the order in the mechanical manner. The Joint Commissioner must have to go through the seized documents, notices issued by the Assessing Officer, submissions made by the assessee and also the documents submitted by the assessee, then he had to apply his judicious mind to all the relevant records and then only the orders can be approved. In the instant case the last notices u/s 142(1) was issued on 30.03.2015 to which the submissions were made on 31.03.2015 and as mentioned in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogether misplaced and incorrect and not borne by the material available on record. Hence deserve to be dismissed. The A.O. has furnished copy of the approval letter of the Addl.CIT, Range- 1, Bhubaneswar dt.27.03.2015. The copy of the letter has been placed record. On perusal of the approval letter, it is clearly evident that the Addl. C7 asked the A.O. to verify opening balance with evidence failing which the opening balance may be added to the total income. Therefore, the A.O. issued the alleged notice u/s. 142(1) asking the appellant to prove the same with evidence. The counsel of the appellant appeared in response to the notice, but produced no evidence and hence, the alleged addition to the total income was made. In view of the above, it is held that there is no strength in the argument of the Ld. A.R. alleging violation of provisions of sec. 153 D of the Act and hence, the ground of appeal is rejected. 6. At the time of hearing, ld A.R. of the assessee argued that search was conducted in the premises of the assessee on 13.12.2012. The assessment order under section 153A(b) of the Act was passed on 31.3.2015. The approval was obtained from the Addl. Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us now consider some analogous provision in the Act. Sec. 142(2A): 142(2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require. In this section also the AO may direct the assessee to get the accounts audited by an Accountant with the previous approval of the Principal Chief Commissioner or Chief Commissioner. This provision has been elaborately cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uck to the special auditor. Similarly, the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the Assessing Officer, casts a very heavy duty on the said high ranking authority to see to it that the requirement of the previous approval, envisaged in the section is not turned into an empty ritual. Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the Assessing Officer. The approval must reflect the application of mind to the facts of the case. 11.5 Thus, even the Hon ble Supreme Court has clearly laid down that the approval must reflect the application of mind to the facts of the case. 11.6 Similarly, the Hon ble High Court of Calcutta in the case of Peerless General Finance Investment Co. Ltd. Vs DCIT 236 ITR 671 has made the following observations which are pertinent to the facts of the case in hand before us. The factual matrix of the matter clearly shows that a prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997. 11.8. In this section also it is provided that the order cannot be passed without the previous approval. This section was thoroughly scrutinized by the Tribunal Madras Bench in the case of Kirtilal Kalidas Co. Vs DCIT 67 ITD 573, at para-41 of its order the observations of the Tribunal are as under: In these cases, 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. As we have recorded elsewhere above, the draft assessment orders of the block period in all these cases were made on 31-3-1997 and on the very same day, i.e., on 31-3-1997 the Commissioner grants approval and that too without giving or recording any reasons 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. 11.9. This decision of the Tribunal was conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. 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 Additional Commissioner before granting the approval . 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 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise of seeking and granting of approval in all the 22 cases was completed in one single day itself i.e. 31st March, 2013. Thus, it is apparent that the JCIT did not have adequate time to apply his mind to the material on the basis of which the AO 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 Jt. CIT 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 Jt. CIT in a mechanical manner without proper application of mind. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer and while doing so, he has directed the Assessing Officer to examine the opening cash in hand before determining the total income of the assessee. The Assessing Officer after examining the same as per the direction of the Addl. CIT has passed the assessment order. Hence, it is wrong to say that the order of the Assessing Officer is not approved by the Additional CIT in view of the provisions of section 153D of the Act. 10. He further argued and submitted that the case laws relied upon by ld A.R. of the assessee are not applicable to the facts of the case of the assessee as in those cases, the approval was granted by the Jt. CIT on the very day of receipt of the draft order from the Assessing Officer, which is not the case at hand, wherein, the draft orders were received by the Jt. CIT four days prior to the grant of approval. 11. In the rejoinder, ld A.R. of the assessee submitted that a reading of the first, second and third paras of the Addl. CIT of his letter dated 27.3.2015 read as under: Despite a reminder given on 19th March, 2015 to submit the time barring draft assessment orders for approval u/s. 153D on or before 23.03.2015, the draft orders in M/s. Nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition is it to bring to your kind notice that, the notice u/s 142(1) was issued and served on the appellant on 30.03.2015 to which the hearing was fixed on 31.03.2015. On 31.03.2015, the A/R of the appellant appeared and filed the required documents, explanations and necessary written submission. As per the provisions of the Act after getting of the documents, submissions etc the ld Assessing Officer applied his judicious mind and then prepare the draft order which were sent to the Ld. Addl. CIT who had gone through the seized materials/documents, notices issued by the Ld. Assessing Officer, documents and submissions submitted by the appellant and after being satisfied with all these, he had given the approval of the orders and only thereafter the final order came out and uploaded by the Ld. 'Assessing Officer. Humanly all these activities are not possible within one day. Moreover from the system, it can be verified that, the assessment order passed by the Ld. Assessing Officer were not uploaded which again prove that, the assessment orders were not passed within the due date, otherwise what prevented him to upload the assessment orders. So it is clear that the order were nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y following the aforesaid decision in the case of ACIT, Circle2(2) Vs. Orissa Stevedores Ltd. Vide ITA No.409-411/2011 CO no.30-32/CTK/2011, it was held the communication is condition precedent to an order of assessment becoming effective. e. Recently the Hon'ble Karnataka High Court in the case of Commissioner of Income Tax and Others Vs. B J N Hotels Ltd. (2016), 382 ITR 110 (Kar) it was held that, to make an order effective the revenue has to dispatch the order within the due date, i.e. in the instant case it should be dispatched on or before 31.03.2015 which had not been done. Therefore the orders are barred by limitation. f. Further, it is submitted that, the assessment order was served on the appellant by hand on 8th of April, 2015 which also proves that the order was never dispatched or 'sent by any other specified mode. Therefore the assessment order is barred by limitation and liable to be quashed. Similar view was also expressed in the following ratios: SHANTI LAL GOD AW AT ORS Vs. ASSISTANT COMMISSIONER OF INCOME TAX, (2009) 126 TTJ (Jd) 135 COMMISSIONER OF INCOME TAX Vs. PURSHOTTAMDAS T. PATEL, (1994) 120 CTR (Cuj) 332 : (1994) 209 ITR 52 (Guj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153 is the period within which the AO has to complete one stage of the proceedings, that is, the assessment of the income and the determination of the tax payable. It is not necessary that the terms of the order of assessment should, also be communicated to the assessee within that period [Relied on RM.P.R. Viswanathan Chettiar Vs. CIT (1954) 25 ITR 79 (Mad.) approved in CIT Vs. Balkrishna Malhotra (1972) 81 ITR 759 (SC), Esthuri Aswathiah Vs. CIT (1963) 50 ITR 764 (Mys.), Badri Prasad Bajoria Vs. CIT (1967) 64 ITR 362 (Cal.) etc.] or that the notice of the demand should also be served on the assessee within that period. [Also relied on Sushil Chandra Ghose Vs. ITO (1959) 35 ITR 379 (Cal.) CAgIT Vs. Kappumalai Estate (1998) 234 ITR 187, 188 (Ker.) etc.]. What is required for completion of the assessment is the determination of the tax liability and issue of demand notice, but certainly not the -service of the same on the assessee. [India Ferro Alloy Industry Pvt. Ltd. Vs. CIT (1993) 202 ITR 671, 677 (Cal.), N. Subha Rao 48 ITR 808 (Mys.)]. In the case of Esthuri Aswathiah Vs. CIT (1963) 50 ITR 764 (Mys.), the order under section 143(3) dated 29-02-1961 was served to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Durga Condev Pvt. Ltd. (Supra), though one of us is co signatory in that order still we differ from the said order as there is no bravery. perpetuating an error in law. The fact that the assessment order is dt.31.12.2010 an there is no evidence available to show that this order was not passed on 31.12.201t makes this order sustainable in law as under the provisions of the Genera/ Clauses Act government document cannot be questioned unless and until substantial evidence has been produced to dislodge the veracity of the same. Under these circumstances, s it is noticed that the assessment order is dt. 31.12.2010 and as no evidence has been produced to show or to prove the allegation that the order was back dated, the technical ground raise by the assessee stands rejected. In view of the facts and circumstances of the case discussed above, it is found that there is no inordinate delay in service of the order and therefore, the ground of appeal filed by the appellant is not acceptable and hence, it is rejected. 16. Ld A.R referring to page 16 of the order of the CIT(A) in the case of Geetarani Panda and page 15 of the order of the CIT(A) in the case of Manjusmita D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials available on record. In the instant case, the assessee has raised two legal issues. Firstly, the order of assessment being issued after the statutorily permitted time is barred by limitation. Secondly, no requisite approval as envisaged under the provisions of Section 153D of the Act was obtained and, therefore, the impugned order of assessment is barred in law. 20. We find force in both the above legal issues raised by the assessee for the reason discussed hereunder. 21. In the instant case, it is not in dispute that though the impugned order of assessment is dated 31.3.2015 was issued and served manually only on 8.4.2015 on the Authorised Representative of the assessee. This Bench of the Tribunal in the case of M/s. Nidan vs ACIT, (2018) 53 CCH 0046 (Cuttack Tribunal) has held as under: 4. In all the above seven appeals, the assessee raised a legal ground which is that the orders of assessment passed by the Assessing Officer are barred by limitation. 5. The facts relating to this issue are that a search and seizure operation was conducted in the case of the assessee on 28.5.2014. In pursuance to the said search, order u/s.153A r.w.s 144 of the Act was passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by whom it has to be followed, it does not become an order . 12. In our considered view, simply determining the total income of an assessee and determining its tax liability on a piece of paper and signing the same may constitute an assessment but only on its communication to the assessee it becomes order of assessment . Thus, in our considered opinion, to become a legal valid order of assessment, its communication must be within a period of limitation prescribed by the law though the communication may end after the prescribed period of limitation. Our above view derives support from the decision of Hon ble Karnakata High Court in the case of B J N Hotels Ltd (supra), wherein, it has been held as under: That the revenue is neither able to point out from the records that the assessment orders were dispatched on 27.4.2007 nor produced the dispatch register to establish that the orders were complete and effective i.e. it was issued, so as to be beyond the control of the authority concerned within the period of limitation i.e. 29.4.2007. Admittedly, the assessment orders were served on the assessee on 30.4.2007. hence, the assessment orders passed were barred by limitation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case, the communication process of the assessment was not initiated admittedly within the prescribed period of limitation, hence it did not become an order of assessment within the period of limitation. We, therefore, have no hesitation in holding that the impugned order of assessment is barred by limitation. 23. In the instant case, the alleged approval letter dated 27.3.2015 of the Addl. CIT, Range-1, Bhubaneswar reads as under: Despite a reminder given on 19th March, 2015 to submit the time barring draft assessment orders for approval u/s.153D on or beforej23i03.2015, the draft orders in M/s. Neelachal Carbo Metalicks Pvt. Ltd. Group of cases has been received in this office only on ill 26th March, 2015 in the afternoon. The draft orders having being submitted only 5 days before final orders are getting barred by limitation, I have no other option but to accord the approval to the same as the approval is statutorily required u/s. 153D, even though there is no time left for undersigned to ensure that all the points raised in the appraisal report, the appellate proceedings, audit inspection etc. are duly taken into account, and the enquiries and investigations that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was merely a formality. The said Supervisory Authority had a duty towards both the assessee as well as the Revenue which was failed to be performed in the instant case. 26. Further, we find that 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, Range1, Bhubaneswar does not constitute the approval which is envisaged by the provisions of section 153D of the Act. Thus, following the decision of the Hon ble Bombay High Court in the case of Akil Gulamali Somji (supra), we hold that the impugned order of assessment is void and bad in law. Therefore, the impugned order of assessment is hereby cancelled and Ground No.2 and Ground No.4 of appeal in case of both the assessees are allowed. 7. Learned co-ordinate bench has taken into consideration the settled legal position on the very issue of sec. 153D approval in light of earlier provision s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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