TMI Blog2021 (3) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... n to pass the assessment order. In other words, the assessment order passed by A.O. as confirmed by C.I.T.(A) is void, nullity, non-est, hence, cannot be stand in the eye of law. An irregularity in the assessment order may be rectified by remitting back the matter to the assessment. In the case on hand it is not an irregularity in the assessment order, it is a jurisdictional error. The A.O. has no jurisdiction to pass the assessment order unless the JCIT granted approval. This Tribunal is of the considered opinion that this is not a rectifiable error since it is a jurisdictional error and not an irregularity in the assessment proceeding. Moreover, even if the matter is remitted back, the AO cannot do anything better, since time limit provided under the Act has already expired. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below were set-aside and the entire assessment order as confirmed by C.I.T.(A) are quashed. Order of assessment or reassessment passed by the AO below the rank of Joint Commissioner - It is not in dispute that the AO is of the rank of the Assistant Commissioner, i.e., below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical approval, the A.O. has no jurisdiction to pass the assessment order. Therefore, the entire assessment order as confirmed by the C.I.T.(A) is invalid, non-est and void, hence, the assessment order as confirmed by C.I.T.(A) cannot stand in the eye of law. The ld. representative for assessee also placed a copy of the order of this bench of the Tribunal in the Paper Book in case of Tarachand Khatri vs. ACIT in ITA No. 21/Jab/2019 dated 17.01.2020. The Tribunal on identical set of facts found that unless the JCIT applied his mind to the material available on record while granting approval under section 153D of the Act. The technical approval, cannot be an approved at all. The ld. counsel for the assessee has also filed the copies of the decision of the Bombay Bench of this Tribunal in ACIT vs. Shreelekha Damani and Lucknow Benches of the Tribunal in AAA Paper marketing Ltd. vs. ACIT. 4. On the contrary, Smt. Neerja Pradhan, ld. representative for the revenue submitted that no doubt, the letter of the JCIT says that he was holding the charges of six ranges, therefore, it was not possible for him to go into the deep, however, finally he approved the draft assessment order as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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. This provision clearly says that no assessment order shall be passed unless it is approved by the JCIT. In other words, the A.O. is prohibited from passing any assessment order without approval of the JCIT. The parliament in its wisdom thought it fit in cases of searches, a senior officer of the Department at the rank of the Joint Commissioner has to grant his/her approval before passing the assessment order. This requirement of approval under section 153D is not an empty formality. It has its own sanctity in the eye of law. In other words, unless the JCIT approves the proposal/draft assessment of the A.O. by applying his mind to the facts of the matter, the A.O. would not get jurisdiction to pass the assessment order. In other words, the AO will be vested with jurisdiction to pass assessment order only after the approval granted by JCIT u/s. 153D. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sesse. This note was prepared in view of the fact that when opportunity was allowed to the assessed to confront the evidences brought by you on record for making addition. It was observed that explanations and submissions of the assessee have not been properly related and proper clarity has not been brought for making additions. This note was discussed with you in my chamber and later in view of the fact that neither sufficient material is being brought or making justifiable additions nor proper enquiries have been made me thus arguments of the assessee as baseless and in fructuous, it was thought necessary to bring this state of affairs in the knowledge of hon'ble CIT. The discussion on live major issues involved in the case was made in the chamber of hon'ble CT with you on 20.12.2011 at 4.00 p.m. onwards, which are as under:- (i) Share capital in various group companies of Mittal Group (ii) Fixed Deposit Receipts in the cases of Ankit/Novas/Nippon (iii) Investment in Jewellery and capital gain on sale of these jewellery items linked to land purchased by the assessee in the name of on Shri Kale (iv) Issue related to sale of land having Dolomite mines through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 349 (SC) (vi) Dwarkadhish Investment (P) Ltd. (HC of Delhi) [2010] 6 taxman.com 8.1 (Delhi) (vii) CIT vs. M/s. Jay Dee Securities Finance Ltd. (Allahabad HC) 166 Taxmann 7 It is also learnt that you have issued section 133(6) letters to the investor companies. However, in spite of specific request to produce a chart of these companies where these letters have been issued indicating the status of response in each case, no such chart has been brought on record. On the other hand assessee has claimed that in majority of investor companies, the replies have been received in your office, which have not been incorporated in the body of assessment order. This fact has been brought in the knowledge of Hon'ble CIT. who has stated that in such cases no additions can be made. In view of these facts, you may proceed ahead following Hon'ble apex court judgment and other High court judgment. In case you wish to differ on this matter, you may put up your view point before undersigned. (ii) Fixed Deposit Receipts in the cases of Ankit/Novas/Nippon. In this matter also, detailed discussion was made and Hon'ble CIT, has clearly indicated that you should examine whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been strengthened by further enquiries, which has not been done. You may also go through the affidavit of Shri Babulal Burman in this regard. Similarly, no efforts have been made to counter the explanation of the assessee regarding local cartage which includes RC book of trucks utilized. their truck numbers, the payment vouchers. AS no enquires have been made, the evidence brought by the assessee has to accepted. After discussion in the chamber of Hon'ble CIT. some further issues have been brought t0 my notice by 1he assessee where your proposed additions dose not appear to be proper viz. a. Dividend income. b. Gifts received by family members, which are duly received by the assessee. c. Indira vikas patra encashed, which are duly recorded by the assessee. d. Cash deposits in savings banks accounts, which are duly recorded by the assessee. e. Interest on loans taken against FDRs, which are duly recorded by the assessee. Further your may also verify correct value to be adopted for sale of property in in the case of Shri Pawan Kuamr Mittal (HUF). On the other issues, which may come across in other draft orders, instructions will be issued separately. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y members from undisclosed sources. This is the position in respect of all HUFS Individuals. Similar additions were made in the case of companies on protective basis as the amounts were found credited in their account. In view of the specific clarification, still you are in view of not making such additions, the same be clarified. 3. One of the issue raised by you is regarding share capital in various group companies of Mittal Group - It may be made clear that till 19/12/2011, the cases which you are referring, no draft orders in cases of companies were furnished. In that situation, without going to the merit of the assessment order how a prudent person can decide what additions are to be made or otherwise. It may be mentioned here that on this issue, during the personal discussion, your honour had advised me to refer the decision of the ITAT Indore in the case of Agrawal Coal Corporation wherein the case laws suggested by the assessee and also in the present letter you had quoted have been elaborately discussed and held that merely filing of PAN, copy of return, profit and loss account is not sufficient. In view of your advise, and Following the decision of ITAT Indore bench, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me cannot be from known sources of income. When later on transferred into assessee's name, the amount is being transferred to Mr Kale's account and withdrawn and utilized by the assessee for their own purposes. In the case of assessee, neither the amount which was invested earlier out of unaccounted sources was subjected to tax nor are the persons introducing the capital by way of gift paying tax on such amount. Therefore, it was held in the assessment order that the unaccounted money which was used for purchase of land was brought on account, therefore, the investment in Jewellery was thought to be taxed in this year. If the decision of mine is wrong, please clarify. 6. Issue related to sale of land having Dolomite mines though routes of sale/purchase of shares of the company. In my knowledge, no such issue had came to any of the draft assessment orders submitted to you. It appears that all the above issues are raised by your honour as per the version of Mr. Lalit Mittal and Shri RN Mittal, CA. 7. Similar is the position regarding Excavation and cartage charges- the matter relates to unaccounted purchases and non debiting of expenses based on various seized documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax-11, Jabalpur (MP) Sir, Sub: Approval of Draft Assessment order w's 153A/ 143(3) in the case of different assessces of Mittal Group, Katni...reg.. In this connection, it is to submit that ACIT, Circle Katni, Shri Sanjay Kumar has submitted draft assessment orders in the cases of some assessees belonging to the Mittal Group, in which search was conducted by the department and block assessments orders u/s 153A / 153(3) are to be passed by 31.12.2011. It is further submit that these draft orders for companies and some other assessee of this group are yet to be submitted for perusal of this office. Due to paucity of time available and large number of assessments pending in this Range and other Ranges, it was thought fit to discuss the issues involved in each draft assessment order with the assessee and the AO and simultaneously refer to appraisal report so that a proper and balanced view or the issues may be taken in shortest possible time. The major issues crystallized are presented below for your kind consideration and necessary directions. 1. Share capital in various group companies of Mittal Group It is observed that some companies have s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subscribed through cheque in the case of assessee group company. It was further brought out that section 143(3) assessments have been completed in the some of group companies of assessee, where capital subscription has been verified by the then AO viz ACIT, Katni. The assessee has also brought on record some letters of verification issued by the Assessing Officers of Investor companies, which were received by the assessee in past. From the website of ROC, the assessee has drawn latest status of some of these investors companies to show that these companies are live companies and in some cases they are listed companies also. The Assessee also claims that some of the letters issued by the AO for confirmation have been duly responded by the said companies. In some other cases, the report from local income tax department at Kolkata and New Delhi have been received. In my view, the presumption of these investors companies being bogus companies is not established. On the other hand, the assessee has proved beyond doubt the existence of these companies and the fact of subscription of shares by them through banking channels. However, you honors kind directions are solicited as this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted fact that assessee purchased some piece of land in the name of a tribal person, namely, Shri Kale somewhere between 2003 to 2005 nearby Katni town. Obviously, the payment was made in cash. Later, the assessee got the land in his name by paying sale consideration by cheque to Shri Kale and getting back withdrawal of the same amount from his bank account in cash. Assessee states that the some of the jewelleries found from the members of family, or sold by them, are purchased from the amount of this cash withdrawal available with the assessee. However, assessee has not been able to directly link this amount with the purchase of jewellery as no purchase bills are available with the assessee. It is claimed by the assessee that these jewelleries were already in the WT return of these lady members. As per finding of the appraisal report, the AO has proposed investment in these jewelries to be made from undeclared income of the assessee. The assessee has further raised objection to long-term capital gain calculation on the sale of these jewelleries taking purchase value as on 01.04.1981, while these jewelries were purchased after taking withdrawal from land transactions rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-3 clerical staff recorded by the Wing. Shri Babulal Burman is stated to be blaster at the mines and he is employee of M P State Mining Corporation. This corporation is co-owner of the company, which is managing the excavation work at site. It is stated by the assessee that excavation work is independently managed and supervised by the assessee at site. It is further explained that this mine was managed directly by this corporation and from December, 2006, it has been let out to the assessee on commission basis with understanding that existing employees and labours of corporation working at this mine will be retained by the assessee. It is claimed by the assessee by producing an affidavit of Shri Burman that he is not well educated and could not understand the contents of the statement stated to be signed by him during his examination in the Investigation Wing, Apart from this affidavit, the assessee is supported by copies of returns filed by these contractors supplying labours and doing excavation work. On the face of these documentary evidences regarding these contractors who have received payments from the assessee after TDS and who have also filed their returns in the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the findings are based on concrete evidence gathered by me during the course of assessment proceedings and as gathered by investigating wing during search and seizure proceedings. 4. The copy of directions addressed by you to me is without any DAK number and the photocopy of some original letter, which has not been received by me till now. It is requested your honor to provide me original copy of the same. 5. Since the directions are not clear I am withholding the passing of assessment orders till the specific directions are received. I would also like to mention that the time barring date in said assessment orders is 31/12/2011. Hence you are requested to issue clear directions in each and every case assessment year wise. Yours Sincerely, Date: 22/12/2011 (Sanjay Kumar) ACIT-Katni OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX RANGE-1, CR BUILDING, NAPIER TOWN, JABALPUR HOLDING ADDITIONAL CHARGE OF RANGE-II, JABALPUR RANGE-SATNA, KATNI, CHHINDWARA AND SAGAR F.No.JCIT/Range/Katni/Mittail/2011-12 Dated: 26.12.2011 To The Asstt. Commissioner of Income Tax, Circle, Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order may be rectified by remitting back the matter to the assessment. In the case on hand it is not an irregularity in the assessment order, it is a jurisdictional error. The A.O. has no jurisdiction to pass the assessment order unless the JCIT granted approval. This Tribunal is of the considered opinion that this is not a rectifiable error since it is a jurisdictional error and not an irregularity in the assessment proceeding. Moreover, even if the matter is remitted back, the AO cannot do anything better, since time limit provided under the Act has already expired. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below were set-aside and the entire assessment order as confirmed by C.I.T.(A) are quashed. 14. In the result, appeal of the revenue is dismissed and C.O. of the assessee stands allowed. Order pronounced in the open court on 04.03. 2021. (As per my separate, assent order) (Sd/-) Sd/- (Sanjay Arora) (N.R.S.Ganesan) Accountant Member Judicial Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on perusing the records and applying his mind to the various aspects of the assessment/s, finds himself unable to approve the draft assessment order as such. He, however, instead of requiring the AO to make change/s therein as deemed proper or, time permitting, even requiring him to, for the purpose, undertake inquiry on the lines he considers necessary, cites the reasons of overload of work and paucity of time, and grants what he calls, technical approvals. How, one wonders, could he do so, i.e., in law, being obliged thereby to, and even as required of him by the AO vide his letter dated 22/12/2011, either agree with the draft assessment order or advise necessary changes therein before according his approval. This is as the law contemplates an order of assessment or reassessment only upon his approval and, of course, within the time prescribed therefor. That his directions to the AO in the matter were not in clear terms and, besides, did raise concerns, not addressed, is the substance of AO s letter dated 22/12/2011 to the Jt. CIT. The assessment order as passed the said non-approval being manifest from the order granting approval , can therefore only be regarded as not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment in deserving cases by following the procedure prescribed therefor again, clearly, with the same intent and toward the same end. Considered in this backdrop, the legislative intent behind s. 153D could be no different, or at least materially so. In fact, the need for framing a balanced assessment, i.e., providing a check on the arbitrary use of power through high pitched assessments, as well as to strengthen the internal monitoring and review system of the Department, is imperative and cannot be over-emphasized. It appears that inasmuch as no pre-decisional hearing to the assessees, as in ss. 144A/144B, has been provided in section 153D, its primary purpose is to improve the quality of the assessments in search and search-related cases. This perhaps also explains the absolute bar on the issue of an order of assessment/reassessment without prior approval by the Range head in such cases. Where, therefore, the approving authority states of being constrained for time to go into the depth of the matter, it only indicates his non-satisfaction with the draft order. That this nonsatisfaction obtains despite his examination of the various aspects of the assessment/s makes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material or information available with the assessing authority and his honest belief as to the escapement of income chargeable to tax from assessment. The veracity of this material/information, as long as it is from a reliable source, cannot be examined at the stage of assumption of jurisdiction for reassessment; the scope being the relevancy of the reason/s recorded for the purpose with a view to determining the validity thereof. Application of mind by the AO becomes a necessary ingredient toward this. Sufficiency of reason/s, which falls within the realm of the subjective satisfaction of the AO, cannot be gone into. Further, even this the Court does, not to review the manner of the exercise of the power of reassessment per se , but only to see as to whether the requirement of law, providing a condition precedent for the exercise of the said power, has been met or not. In the instant case/s as well, it would be a different matter where the Jt. CIT had issued some direction/s to the AO, subject to and on the basis of which he accords his approval. It will not, in that case, be open for an appellate court to review the same or sit in judgment thereon. No criterion for approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge, holding the provision as directory, as follows: (pgs. 16-17) The provision about consultation must be treated as directory, on the principles accepted by this Court in State of U.P. vs. Manbodhan Lal Srivastava [1958] S.C.R. 533 and K.S. Srinivasan vs. Union of India [1958[ S.C.R. 1295. In the former case, this Court dealt with the provisions of Art. 320(3)(c) of the Constitution, under which consultation with the Union Public Service Commission was necessary. This Court relied upon the decision of the Privy Council in Montreal Street Railway Co. vs. Normandin (1917) A.C. 170 where it was observed as follows: .....The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at. The cases on the subject will be found collected in Maxwell on Statutes, 5th Edn. p. 596 and following pages. When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 30, 1948: (pg. 423) Provided that- (1) the ITO shall not issue a notice under this sub- section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice. (emphasis, supplied) The assessments, on challenge, were regarded as not valid, from the stage of the Tribunal whereat the issue of their being not maintainable was raised for the first time, onwards. The Revenue relying on section 6 of the General Clauses Act, 1897, the Apex Court held as under: (pgs. 423-425) The question is whether the notices which were issued were rendered void by the operation of this proviso. The Commissioner contends that section 6 of the General Clauses Act, particularly cls. (b) and (c), saved the assessments as well as the notices. He relies upon a decision of the Privy Council in John Lemm vs. Mitchell [1912] A.C. 400, Eyre vs. Wynn-Mackenzie [1896] 1 Ch. 135 and Butcher vs. Henderson [1868] LR 3 QBD 335 in support of his proposition. The last two cases have no bearing upon this matter, but strong reliance is placed upon the Privy Council case. In that case, the earlier action w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. For these reasons, we are in agreement with the High Court in the answers given, and dismiss this appeal with costs. True, it is not the validity of the jurisdictional notice as in Maharaja Pratap Singh Bahadur (supra), resulting in the proceedings taken without such a notice or in pursuance of an invalid such notice being void and illegal, and the assessments, in consequence, without jurisdiction, which is under question in the instant case. The approval u/s. 153D, as aforenoted, is primarily towards safeguarding the interest of the Revenue in search and search-related cases, giving it a mandatory status. It thus becomes as much integral to the procedure for assessment as is the issue of the notice for reassessment . And, further, in discharge of his quasijudicial functions by the Jt. CIT who, as the Range head, has been for the purpose allowed the requisite powers (see ss. 2(7A), 120(4),124(5), 131, 132, 133). There is, thus, no inconsistency between section 153D, the scope of which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08, is that specified in s. 153D. The assessment order under reference is, thus, not valid in law inasmuch as no order of assessment or reassessment could be passed by the AO below the rank of Joint Commissioner for any of the years specified in section 153D, except with the approval of the Jt. CIT. 6. Before parting with this order, one cannot help note the irony of the situation, i.e., a measure adopted by law to protect the interest of the Revenue in critical cases should itself become the reason for the destruction thereof, an extremely unfortunate incident. This Court, however, cannot do anything beyond expressing its anguish at the sorry state of affairs with regard to the management of work as well as the commitment thereto of the officers concerned, and hope that the Revenue, so keen and anxious to improve the quality of the assessments and avoid unnecessary litigation, takes steps to prevent a recurrence, which has an opposite effect being detrimental to the cause of the Revenue as well as the morale of its officers. Where, one wonders, was the scope for hearing the assessee and his counsel by the Jt. CIT in the sec. 153D proceedings? One cannot also help mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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