2012 (4) TMI 318 - AT - Income Tax

Assessment orders nullified for lack of approval under Income Tax Act; Section 69C additions not addressed.

The appeals were allowed, and the assessment orders were quashed as null and void due to the absence of the mandatory approval from the Joint Commissioner ... Search and seizure action at the business and residential premises - Notice u/s.153C and assessment u/s. 153C r.w.s. 144 framed for all the 4 A.Ys - assessee challenged the validity of assessment order in absence of approval of the Joint Commissioner of Income Tax as provided u/s.153D of the Act and the validity of addition of the amount made by A.O. u/s. 69C - revenue submitted that Sec 153 D talks of only approval of the Joint Commissioner of Income Tax for assessment order passed u/s. 153A of the Act - Held that:- that requirement u/s. 153 D for obtaining approval of JCIT is not procedural only but a mandatory requirement - 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 -reliance on the decision of Hon’ble Bombay High Court in the case of CIT Vs. Mrs. Ratnabai N.K. Dubhash (1997 - TMI - 17266 - BOMBAY High Court)mentioning cases 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 and the power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with objections – in favour of assessee. Issues Involved:1. Validity of the assessment order due to the absence of approval from the Joint Commissioner of Income Tax as required under Section 153D of the Income Tax Act.2. Validity of the addition made by the Assessing Officer under Section 69C of the Income Tax Act for unexplained expenditure of interest and brokerage.Issue-Wise Detailed Analysis:1. Validity of the Assessment Order in Absence of Joint Commissioner Approval under Section 153D:The assessee contested the assessment order on the grounds that the Income Tax Officer (ITO) failed to obtain the necessary approval from the Joint Commissioner of Income Tax as mandated by Section 153D of the Income Tax Act. The argument was that the assessment framed under Section 153C should have followed the provisions of Section 153A, which necessitates prior approval from the Joint Commissioner.The assessee's representative argued that the absence of such approval renders the assessment orders invalid and deserving of annulment. It was emphasized that the term 'approval' implies a mandatory act of confirming or ratifying by a higher authority, and the use of the word 'shall' in Section 153D indicates that the provision is mandatory. The representative cited various legal precedents and the Memorandum explaining the provisions of the Finance Bill 2007 to support this argument.The Department's representative countered by justifying the validity of the assessment order, arguing that the purpose of the approval is to prevent high-pitched assessments and inconvenience to the assessee. The representative also suggested that even if the approval was not obtained, the defect could be cured by setting aside the file to the Assessing Officer or the Commissioner of Income Tax (Appeals).The Tribunal considered the submissions and reviewed the relevant legal provisions and precedents. It concluded that the provisions of Section 153D are mandatory and that the absence of prior approval from the Joint Commissioner renders the assessment orders invalid. The Tribunal emphasized that the requirement for prior approval is in the public interest and cannot be waived by the assessee. The Tribunal cited various legal precedents to support its conclusion that non-compliance with mandatory provisions results in the nullification of the act.2. Validity of Additions Made under Section 69C for Unexplained Expenditure:Given the Tribunal's finding on the first issue, the second issue regarding the validity of additions made by the Assessing Officer under Section 69C for unexplained expenditure became academic. Since the assessment orders were quashed as null and void due to the lack of approval from the Joint Commissioner, there was no need to adjudicate on the merits of the additions and disallowances made in those orders.Conclusion:The appeals were allowed, and the assessment orders were quashed as null and void due to the absence of the mandatory approval from the Joint Commissioner of Income Tax under Section 153D of the Income Tax Act. Consequently, the other issue regarding the validity of additions under Section 69C did not require adjudication. The order was pronounced in open court in March 2012.