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TMI Blog2021 (4) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 & 131, 121, 122 & 123, 151, 152, 141, 124/JAB/2014, CO No.39, 79, 80, 81, 12, 30, 31, 26, 92, 93, 103, 113, 114, 16, 17, 50, 66, 69, 70, 71, 51, 52, 73, 74/JAB/2014 Shri Nrs Ganesan, Judicial Member And Sanjay Arora, Accountant Member For the Appellant : Shri Dhiraj Ghai, CA For the Respondent : Smt. Neerja Pradhan, C.I.T.-DR ORDER PER BENCH: All the appeals of the independent assessee are directed against the respective orders of ld. C.I.T.(A). Since common issues arising for consideration in all these appeals, we heard the same together and disposing of the same by this common order. 2. Shri Dhiraj Ghai, the ld. representative for assessee submitted that the first ground taken by him is with regard to approval by the JCIT as required under section 153D of the Income Tax Act, 1961 ( 'the Act' hereinafter). According to ld. representative for the assessee, no assessment order shall be passed unless it is approved by the JCIT. Referring to Paper Book, the ld. representative for the assessee submitted that the JCIT in categorically terms says that due to shortage of time as he was holding charges of six ranges, it was not possible for him to go into deep. Therefore, the JC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the A.O. by the JCIT, the ld. DR submitted that there were discussions between the A.O. and the JCIT, therefore, it cannot be said that there was no application of mind. The A.O. also has responded to the letter of the JCIT dated 21.12.2011 by this letter dated 22.12.2011. The assessee was also invited for the discussion along with the A.O. in the chambers of the JCIT. The JCIT has also written a letter to the Commissioner on 20.12.2011 in order to take the Commissioner into confidence. The A.O also by his letter dated 26.12.2011 reminded the JCIT to give approval at the earliest opportunities, since, the assessment is getting time barred. 5. The ld. DR placed her reliance on the judgment of the Supreme Court in C.I.T. vs. Jai Prakash Singh (219 ITR 737) and submitted that charging sections fix the liability to tax and any violation of machinery provision will not render the assessment order void. Once the superior authority agreed to the finding of the lower authorities then it is not necessary to record reasons for so agreeing. Referring to the judgment of the Bombay High Court in C.I.T. vs. Ratanbai N.K. Dubash (230 ITR 495). The ld. DR submitted that the power to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Judgment of the Apex Court is not applicable to the facts of this case. 9. We have also gone through the judgment of the Bombay High Court in Mrs. Ratanbai N.K. Dubash (supra). In this case, the AO passed the order without obtaining direction from Inspecting assisting Commissioner. Hence, the assessment was annulled. This judgment of the Bombay High Court in fact supported the case of the assessee. Moreover, the Bench of the Tribunal in Tarachand Khatri (supra) has found that on identical circumstances, there was no approval u/s. 153D of the Act. One of the Accountant Member is party to the order. 10. Now, let us examine whether the JCIT granted approval for passing the assessment order. Under the scheme of the Act, u/s. 153D, the Commissioner has no role to play. It is not known, why the JCIT intended to take the Commissioner into confidence by addressing a letter to him. The Commissioner has all the powers u/s. 263 of the Act, in case, he/she is satisfied that the assessment order is erroneous and prejudicial to the interest of revenue. We are reproducing the correspondence between the JCIT on the one hand and A.O. on other and also a letter written by JCIT to the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Dated: 26.12.2011 To The Asstt. Commissioner of Income Tax, Circle, Katni Sub: Statutory approval of Draft Assessment order u/s 153D in the cases of different assesses of Mittal Group, Katni- Reg. Please refer to your letter No.ACIT/KTE/MITTAL/153D/11-12 dated 26th December, 2011 forwarding therewith draft assessment orders in Mittal Group of cases for AY 2004-05 to 2010-11: Covering letter date Name of the assessee Assessment year 26.12.2011 1. Vijay Kumar Mittal Katni (Indl) 2. M/s Mittal Roadways 3. M.P Minerals Pvt. Ltd. 2004-05 to 2010-11 2004-05 to 2010-11 2004-05 to 2010-11 2. Due to shortage of time, as I am holding charge of six Ranges, it is not possible for me to go into the deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved u/s 153D as per technical requirement. Case records as received are returned herewith. 3. Please ensure passing of order, issue of demand notice and challan as also service before the limitation date. (Abhishek Shukla) Jt. Commissioner of Income Tax Range-Katni OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX RANGE-1, CR BUILDING, NAPIER TOWN, JABALPUR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Dated: 26.12.2011 To The Asstt. Commissioner of Income Tax, Circle, Katni Sub: Statutory approval of Draft Assessment order u/s 153D in the cases of different assesses of Mittal Group, Katni- Reg. Please refer to your letter No.ACIT/KTE/MITTAL/153D/11-12 dated 16th December, 2011 forwarding therewith draft assessment orders in Mittal Group of cases for AY 2004-05 to 2010-11: Covering letter date Name of the assessee Assessment year 16.12.2011 1. Smt. Satya Devi (Individual) 2004-05 to 2010-11 2. Smt. Sarla Mittal (Individual) 2004-05 to 2010-11 3.Smt. Kavita Mittal (Individual) 2004-05 to 2010-11 4.Smt. Seema Mittal (Individual) 2004-05 to 2010-11 5.Smt. Sarika Mittal (Individual) 2004-05 to 2010-11 2. Due to shortage of time, as I am holding charge of six Ranges, it is not possible for me to go into the deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved u/s 153D as per technical requirement. Case records as received are returned herewith. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Dated: 22.12.2011 To The Joint Commissioner of Income Tax, Range-Katni, Katni(MP) Sub: Reply to your letter regarding approval of Draft Assessment order u/s 153A/143(3) in case of different assessee of Mittal Group, Katni- Reg. Ref: Your letter F.No.JCIT/R-KATNI/Mittal Group/11-12, dated 21/12/2011 Sir, Please refer to above, in this connection most respectfully and most humbly at my end, I see the following for the kind consideration of your honor that: 1. Directions as given to me, are not clear regarding to which particular case and to which particular assessment year, same are issued, for not making addition? 2. As per Manual of Office procedure, it is an established administrative procedure that in case where the additions as proposed by investigation wing, are considered unwarranted by the AO, then investigation wing has to be consulted compulsorily. It is presumed that necessary consultation has been made. If so, please provide me the copy of minutes recorded of this consultation with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant companies to various fictitious persons of Delhi and Kolkatta, the identity of these persons (companies) could not be traced by the Investigation wing during the post search enquiry and also the fact that the letters issued by me during the assessment proceedings were received back unserved with the postal remark "No such addressee". It is also relevant to mention that those shares were transferred back to the mittal family in later years. During the course of search, such share certificates, transfer forms, power of attorney etc. were seized and all these documents are formed part of the assessment order. In view of the position, the shares sold in a particular financial year and claimed to have repurchased by the family members were treated as the investment of the family 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the provisions of section 49(1), I have no other alternative. In view of this, it is requested that specific directions be given to exclude the capital gain on sale of jewellery particularly in view of purity and date of acquisition. As regards the purchase of land in the name of Mr Kale, in spite of repeated opportunity, the assessee had not given any detail. In short, the point is clarified as- Mr. Kale is an Adivasi and as per the Govt. guidelines, the land of adivasis cannot be purchased by any other person except adivasi (except some exceptional cases.)In this case, the Mittal family purchased lands of Adivasis in the name of Mr. Kale and later on got transferred as per the exceptional circumstances. It is a well settled fact that the purchase of land in benami name 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2011, keeping in view the peculiar situation, may I request you to kindly issue clear instructions whether to maintain the addition or to delete the additions proposed. Yours faithfully, (Sanjay Kumar) Asstt. Commissioner Of Income tax Circle, Kátni. 11. From the above correspondence between the A.O. on one hand and the JCIT on the other hand and the letter addressed by the JCIT to the Commissioner clearly shows that it was at the stage of discussion and the JCIT could not able to make his mind. Ultimately he simply says that due to shortage of time as he was holding charges for six ranges, it is not possible for him to go into the material deep, therefore, he approved the proposal technically as required u/s 153D of the Act, immediately, after the AO brings to his notice that the assessment is getting time barred. 12. From the above communications, it is obvious that the JCIT has not applied his mind even though there was a discussion between the A.O. and JCIT, the JCIT could not make his mind. Hence, this kind of casual approval/technical approval without going to the matter and without applying his mind to the material available on record is not an approval at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortage of time, as holding charge of six ranges, it is not possible for me to go into the deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved u/s. 153D as per technical requirement. Case records as received are returned herewith.' (emphasis, supplied) The facts and circumstances leading to the said 'approval' have been discussed in detail, reproducing the communications exchanged between the Jt. CIT, the approving/competent authority, and the Assistant Commissioner, Katni ('Asst. CIT' for short), the Assessing Officer (AO), in the order by my ld. brother. The same cannot, by any score, be regarded as a valid approval. It is not a case of non-application of mind, a question of fact, as the ld. counsel for the assessee, Shri Ghai, would contend before us, but of it being indeed one, i.e., an approval in law, to which the answer must clearly be in the negative. As the exchange afore-referred, coupled with the letter dated 20/12/2011 by the Jt. CIT to the AO (forming part of the paper-book by the Revenue furnished on 03/02/2021), shows, the approving authority, on perusing the records and applying his mind to the various aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 144A and, since omitted, section 144B, reveal them, and even as explained by the Hon'ble Courts, to be designed to provide a pre-assessment review and a forum to an assessee to know the merits of the proposed assessment order before the actual assessment is made and he saddled with a pecuniary liability resulting from it. The object appears to be to avoid multiplicity of proceedings and to reduce the area of dispute between the assessees and the Department and also to provide for a check and balance against arbitrary assessments causing unnecessary harassment, which could otherwise be avoided [Bhagwat Prasad v. CIT [1998] 232 ITR 480 (All)]. The Board Circulars issued qua the said sections have also explained the same to be an attempt to improve the quality of the scrutiny assessments as well as strengthening the machinery for review of assessments as well as inspection of assessment charges. In recent times, the concept of limited scrutiny has also been introduced with a view to focus the resources of the Revenue on targeted issues, with an inbuilt flexibility for enhancing the scope of assessment in deserving cases - by following the procedure prescribed therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been, or been not, satisfied. It is his, and his satisfaction alone that is relevant, and doing so would be to intrude upon and usurp his supervisory power and duty with regard to assessment, framing of which is the prerogative of the Revenue. It is equally impermissible to question the bona fides of the approval as given or the truthfulness of what is stated in the 'approval' letter or indeed in the AO's letter dated 22/12/2011 (supra) seeking clarifications. 4. The question of due application of mind, which is often raised by and on behalf of the assessees in such-like situations, as indeed was in the instant case, it may be clarified here, arises for review only from the limited stand-point of whether the condition/s of the section or the provision is met, and not beyond. A parallel in this regard may be drawn to the recording of the reason/s to believe escapement of income from tax by the AO prior to the issue of a reassessment notice. The purview of an Appellate Court, as is well-settled, is limited to ascertaining the existence or otherwise of a live link or a rational nexus between the material or information available with the assessing authority and his honest belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Kathulia v. ITO [1961] 41 ITR 12 (SC) and Bhakta Vedanta Swami Charitable Trust vs. CIT (in WP(C) 12347/2005, dated 09/5/2006 (Orissa)). 5.1 An issue that came up in this regard during hearing was of the 'approval' being an 'administrative approval', lack of which may therefore not be fatal to the assessment. It may be necessary to clarify this aspect as want of administrative action, even as clarified in State of UP v. Manbodhan Lal Srivastava [1958] SCR 533 and K.S. Srinivasan v. UoI [1958] SCR 1295, 1321, noted with approval in Hazari Mal Kathulia (supra), may not affect the validity of the acts done. In the facts of the latter case, the Commissioner had failed to consult the Central Board of Revenue, which he was required to before finalizing the assessment under the Patiala Income Tax Act, as he had proceeded under the Indian Income Tax Act where-under no such consultation was necessary. This non-consultation was held as proof against the presumption of regularity of official acts, challenging the validity of the Commissioner's order. The Apex Court repelled the charge, holding the provision as directory, as follows: (pgs. 16-17) 'The provision about consultation must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise of the power cannot, therefore, be questioned by the assessee on the ground of failure to consult the Central Board of Revenue, provision regarding which must be regarded as laying down administrative control and as being directory.' 5.2 The issue, nevertheless, is not res integra; the decision in CIT vs. Maharaja Pratap Singh Bahadur of Gidhaur [1961] 41 ITR 421 (SC), among others, being on the point. In the facts of that case, reassessment notices u/s. 34 (corresponding to section 148(1) of the Act) were issued by the AO without observing the procedure prescribed therefor. The notices were issued on August 8, 1948 without recording the reasons for doing so and putting them before the Commissioner for his approval. There was in fact no such requirement in law as on 08.8.1948, i.e., the date of issue of the notices. However, subsequently, i.e., on September 8, 1948, an Amending Act was promulgated, which stipulated such a requirement by way of proviso to the amended section, reading as under, and which was given a retrospective effect from March 30, 1948: (pg. 423) Provided that- (1) the ITO shall not issue a notice under this sub- section unless he has recorded his rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived the assent of the Governor-General but from a stated day, viz., March 30, 1948, and substitutes in its place another section containing the proviso abovementioned. The amending Act provides that the amending section shall be deemed to have come into force on March 30, 1948, and thus by this retrospectivity, indicates a different intention which excludes the application of section 6. It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income Tax Officer to obtain prior approval of the Commissioner, and unless that approval was obtained, the notices could not be issued. The notices were thus invalid. The principle which was applied by this Court in Venkatachalam vs. Bombay Dyeing & Mfg. Co. Ltd. [1958] 34 ITR 143 (SC) is equally applicable here. No question of law was raised before us, as it could not be in view of the decision of this Court in Y. Narayana Chetty vs. ITO [1959] 35 ITR 388 (SC), that the proviso 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 recall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the process of framing the assessment. This is, again, for the same reason; an order passed without a valid approval being of no consequence in law. Reference in this regard may also be made to CIT v. Ratanbai N.K. Dubhash [1998] 230 ITR 495 (Bom). There is however no gainsaying that the time constraint, as stated in the 'approval' itself, is the reason for its grant in the manner it has, so that this aspect becomes, even as in Maharaja Pratap Singh Bahadur (supra), academic. In fact, this fact itself, i.e., the grant of approval so as to circumvent the time limitation for assessment, is itself reason enough to invalidate the approval. The impugned assessments are, subject of course to the fulfillment of the other pre-requisite conditions of the provision, non-est in law. 5.3 It is not in dispute that the AO in all the cases is of the rank of the Assistant Commissioner, i.e., below the rank of the Joint Commissioner. Similarly, the year of search being f.y. 2009-10, all the assessment years under reference, i.e., AYs. 2004-05 to 2010-11, are those specified in s. 153D. The assessment order/s under reference is, thus, not valid in law inasmuch as no order of assessment or re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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