TaxTMI 
TaxTMI 
2019 (9) TMI 866
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....2017 for A.Y. 2007-08 as a leady case and our decision in this appeal would equally apply to other appeals, mentioned herein above. The grounds raised in this appeal read as under : "1. That the Ld. CIT(A)-2, Agra has erred in Law and on facts in partly allowing assessee's appeal without properly appreciating facts, circumstances and legal position of the case. 2. That the Ld. CIT(A)-2, Agra has erred in law and on facts in not adjudicating the ground No. 17 of the ground taken in original grounds filed with the form 35 which relates to the addition of Rs. 11,86,075/- in respect of unexplained investment in the construction of Hotel Haveli." 2. The ld. AR has submitted that he has moved an application for additional ground vide letter dated 08.07.2019 and the same may kindly be admitted. Additional ground raised by the assessee provides as under : Because the so-called approval as granted by the Learned Additional Commissioner of Income Tax, Central Range, Kanpur under section 153D for passing impugned assessment order dated 29.03.2014 under section 153A of the 'Act' is no approval in the eye of law, having been granted without application of mind and such a mechanically gr....
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....f the assessee PAN AY 1. Mridul Garg - 2006-07 to 2011-12 2. Mridul Garg HUF - 2006-07 to 2012-13 3. Ashok Agarwal - 2006-07 to 2012-13 4. Ashok Agarwal HUF - 2006-07 to 2012-13 5. Saurabh Agarwal - 2006-07 to 2012-13 6. Saurabh Agarwal HUF - 2006-07 to 2012-13 7. Shalini Garg - 2006-07 to 2012-13 8. Neelam Garg - 2006-07 to 2012-13 9. Brij Kishori Agarwal - 2006-07 to 2012-13 10. Sterling Infrastructure & Developers A copy of the final order issued in the above cases alongwith office note immediately be sent to this office for record." On the basis of the above, it was submitted that the additional CIT before granting approval has not applied his mind and has approved the draft assessment order etc. without himself examining the record of the assessment. 2.3 The ld. AR for the assessee had submitted that the approval envisaged under section 153D, is not merely an administrative approval but there is a statutory duty on the higher authorities to apply its mind before granting the approval. It was submitted that this duty is not required to be mechanically discharged by the officers as there is ....
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....equired to be communicated to the assessee then it is not permissible in law to permit the assessee to agitate the reasons for passing the administrative approval. It was submitted the approval granted by the additional CIT is not justiciable in law. It was submitted that the subject matter of the proceeding before the tribunal is the assessment order for which the existence of approval is necessary and therefore the approval cannot be formed basis of challenging the assessment order. 3.2 He further submitted that it administrative approval granted by the supervisory authority is not justifiable. He relied upon SpaceWood Furnishers Private Limited of the honourable Supreme Court. 3.3 it was submitted by the learned DR that Bombay High Court in the matter of CIT versus RatanbaiN.K.Dubash 230 ITR 495 had held as under: "the power to determine the income vest in the authority exercising the quasijudicial function, and it is in violation of principle of quasi-judicial function that can render the assessment invalid. The act of administrative approval by additional CIT does not take away the quasi-judicial powers which still vests in AO and therefore administrative act cannot invali....
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....the matter of Gopas S. Pandit v. CIT, 95 taxman. Com 246 in paragraph 8 had held as under : "8. Having heard the learned Counsel for the parties, we are satisfied that the internal guidelines issued by the Central Board of Direct Taxes, as urged by the learned Counsel for the Assessee, bereft of the statutory provisions in Section 153D of the Act cannot bind the approving Authority, namely, the Joint Commissioner to comply with the principles of natural justice by the said Authority. The Assessing Authority undoubtedly has of course given adequate and reasonable opportunity of hearing to the Assessee and all objections on merits were considered by him. Merely because, Section 153D of the Act requires a prior approval of the Draft Assessment Order by the higher Authority, namely, the Joint Commissioner in the present case, because the Assessment Order was passed by the Authority below the rank of the Joint Commissioner, the provisions of the Act do not mandate that a fresh round of opportunity of hearing should Date of Judgment 28-06-2018, I.T.A. No.37/2017 Gopal S. Pandit Vs. The Commissioner of Income Tax & Another be given to the Assessee by such Authority, namely, Joint Commis....
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....nstrued, 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 count also, therefore, the appeal, does not merit acceptance. 4.2 Similarly in the matter of AkilGulamaliSomji20 taxmann.com 380 (Pune) tribunal had held as under 11. We have considered the above submissions and have gone through the decisions reli....
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....ve been laid down under the heading "prior approval necessary for assessment in cases of search or requisition". This heading itself suggests that obtaining prior approval the assessment in cases of search or requisition is necessary. We further note that the provisions u/s. 153D start with a negative wording "no order of assessment or re-assessment" supported by the further wording "shall" makes the intention of the Legislature clear that compliance of Sec. 153D requirement is mandatory. No universal rule can be laid down as to whether mandatory enactment shall be considered directory or obligatory with an implied nullification for disobedience. As per the decision of Hon'ble Supreme Court in the cases of Banwari Lal Agarwalla v. State of Bihar AIR 1961 SC 849 ; Raza Buland Sugar Co.Ltd., v. Municipal Board AIR 1965 SC 895 if object of the enactment will be benefited by holding the same directory, it will be construed as mandatory, whereas if by holding it mandatory, serious general inconvenience will be created to nascent persons without very much further object of enactment, the same will be construed as directory. But all these does not mean that language used is to be igno....
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....al of the range JCIT/ADDL.CIT. (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.) The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself." Chapter XIVB also deals with assessment of search cases. Sections 153A, 153B & 153 C have been introduced to Chapter XIV "procedure for assessment" 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. ....
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....t Commissioner and obtaining directions from him. Such an order, on the face of it, is beyond the powers of the Income-tax Officer under section 143 read with section 144B of the Act and, hence, without jurisdiction. The Tribunal, in our opinion, was, therefore, justified in its conclusion that the assessment was liable to be annulled. It was right in holding that the assessment order passed by the Income-tax Officer the instant case without reference to the Inspecting Assistant Commissioner had rightly been annulled by the Commissioner of Income-tax (Appeals). In view of the above, we answer the question referred to us accordingly in favour of the assessee and against the Revenue. This reference is disposed of accordingly with no order as to costs." 14. In the case of SPL's Siddharth Ltd. (Supra), before the Hon'ble Delhi High Court, the facts were that notice issued by the A.O u/s. 147 r.w.s 148 of the Act for re-opening the assessment for the A.Y. 2002-03 was set aside by the Tribunal on the ground that the requisite 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....
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....upra), the Hon'ble High Court of Madhya Pradesh with reference to Sec. 271(1)(c) of the Act was pleased to hold that a procedural irregularity not involving the question of jurisdiction can be cured. It is not helpful to the revenue in the present case because in the present case, the A.O was having no jurisdiction to frame assessment order without prior approval of JCIT as necessary requirement to comply with u/s. 153D of the Act. In the case of DamoderdasMurarilal (Supra), the Hon'ble High Court did not approve the view of the Tribunal in holding that in view of Clause (b) of Sec. 251(1) of the Act, the first appellate authority had no power of remand and therefore, the procedural illegality would not be corrected by recourse to remanding the case to the ITO. Here in the present case, as we have already discussed, and also cited the recent decision of Hon'ble jurisdictional Bombay High Court in the case of Mrs. Ratanbai N.K. Dubhash ( Supra) and of Hon'ble Delhi High Court in the case of SPL's Siddhartha 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....
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.... assessment under Chapter XIB-B of the Act. Apart from the language of the provision, the nature of the functions confided to the Commissioner is inconsistent with the application of the principles of natural justice." 4.5 Similar decision was rendered by the Hon'ble Karnataka High Court in the matter of RishabhchandBhansail, 136 Taxman 579, where the Karnataka High Court had held that the approval granted by the Commissioner u/s. 158BG is an administrative approval and there is no necessity of giving hearing to the assessee. For the purpose of that, we reproduce paragraph No. 4 to 4.4 which is to the following effect : 4. Section 158BG provides that no order of assessment for the Block period shall be passed by the Assessing Officer without the previous approval of the Joint Commissioner in respect of a search initiated under section 132. The assessee contends that before granting previous approval under section 158BG for an order of assessment made under section 158BC, the Joint Commissioner should have given a hearing to the assessee. It is submitted that the power to grant previous approval under section 158BG is an amalgam of appellate and revisional power and therefore, th....
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....only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV-B. 4.3 In V.C. Shukla v. State AIR 1980 SC 962, the Supreme Court gave the following example : "In cases where law requires sanction to be given by the appointing authority before a prosecution can be launched against a Government servant, it has never been suggested that the accused must be heard before sanction is accorded. . . ." 4.4 Where a statute requires the Executive to take an administrative action after being satisfied or after forming an opinion as to the existence of a state of circumstances, the action is based on the subjective satisfac-tion. It is well-settled that any administrative actions based either on policy or on subjective assessment, if does not prejudicially affect any vested right or interest, need not be preceded by a hearing, unless the statute specifically provides for the same. Therefore, in the absence of any provision for opportunity of hearing in section 158BG, there is no need for the Joint Commissioner to give a hearing to the assessee before granting "previous approval" under section 158BG. The first question is, therefore, answered against the asseee....
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....ated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997.] 4.7 in view of the above and also on account of the fact that the issue had already been examined by the jurisdictional High Court in respect of section 158 BG holding that the approval granted by the higher authorities were administrative in nature we do not find any reasons to take a contrary view and accordingly we are also of the opinion that the approval granted by the Joint Commissioner in the present case was in the nature of administrative approval. Whether an administrative order which entail civil consequences/penal consequences/civil liabilities can be challenged before the tribunal if assessment order is premised on such administrative prior approval 4.8 In the above noted paragraph it is categorically mentioned that if the approval is lacking under section 153D granted by the superior authorities, then the assessment order is liable to be quashed being passed in violation of section 153D. However, if the approval is granted by the superior authority without looking into the material, without application of mind and m....
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....ior authority in the context of our aforesaid observation and also the other preparation of law laid down by the high courts and the tribunal . 4.11 The jurisdictional High Court in the case of Verma Roadways vs. ACIT, 75 ITD 183 to the following effect : "Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval pre-supposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas & Co. (supra), the I.T.A.T Madras Bench 'A' has observed that the function to be performed by the Commissioner in granting previous approval requires an enquiry and judicial approach on the entire facts, materials and evidence. It has been further observed that in law where any act or function requires application of mind and judicial discretion or approach by any authority, it partakes and assumes the character and status of a judicial or at least quasi-judicial act, particularly because their Act, function, is likely to affect the rights of affected persons." 4.12 Similarly in the matter of Sahara India (Firm) vs. CIT, 169 taxman 329 and in paragraph 6 and 21-24 it was held as under : "A bare perusal of....
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....rotection 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. 21. In the light of the aforenoted legal position, we are in respectful agreement with the decision of this Court in Rajesh Kumar's case (supra) that an order under section 142(2A) does entail civil consequences. At this juncture, it would be relevant to take note of the insertion of proviso to section 142(2D) with effect from 1-6-2007. The proviso provides that the expenses of the auditor appointed in terms of the said provision shall, henceforth, be paid by the Central Government. In view of the said amendment, it can be argued that the main plank of the judgment in Rajesh Kumar's case (supra) to ....
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....ives, we deem it unnecessary to dilate on the scope of section 136 of the Act. It is the civil consequence which obliterates the distinction between quasi-judicial and administrative function. Moreover, with the growth of the administrative law, the old distinction between a judicial act and an administrative act has withered away. Therefore, it hardly needs reiteration that even a purely administrative order which entails civil consequences, must be consistent with the rules of natural justice. (Also see:Mrs. Maneka Gandhi v. Union of India [1978] (1) SCC 248 and S.L. Kapoor v. Jagmohan AIR 1981 SC 136. As already noted above, the expression "civil consequences" encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. Anything which affects a citizen in his civil life comes under its "wide umbrella. Accordingly, we reject the argument and hold that since an order under section 142(2A) does entail civil consequences, the rule audi alteram partem is required to be observed. 23. We are also unable to persuade ourselves to agree with the proposition canvassed by learned counsel for the revenue that ....
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.... assumes the character and status of a judicial or at least quasi-judicial act, particularly because their Act, function, is likely to affect the rights of affected persons." 11.10 Similarly, u/s. 151 of the Act it is provided that no notice shall be issued u/s. 148 unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied that it is a fit case for the issue of such notice. The sanction under this section was considered by the Tribunal, Mumbai Bench in the case of Shri Amarlal Bajaj v. Asstt. CIT[2013] 37 taxmann.com 7/60 SOT 83 (URO) wherein at para-8, the Tribunal has considered the decision of the Hon'ble High Court of Delhi Bench in the case of United Electrical Co. (P.) Ltd. v. CIT[2002] 125 Taxman 775/258 ITR 317 (Delhi) which read as under: 'Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. v. CIT258 ITR 317 has held that "the proviso to sub-section (1) of section151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be,....
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....application of mind by the Addl. Commissioner before granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/s. 143(3) of the Act r.w. sec. 153A of the Act is bad in law and deserves to be annulled. The additional ground of appeal is allowed. 13. The ld. Departmental Representative has strongly relied upon the decision of the Tribunal Mumbai Bench in the case of Rafique Abdul Hamid Kokani v. Dy. CIT[2000] 113 Taxman 37 (Mag.), Hon'ble High Court of Karnataka in the case of Rishabchand Bhansali v. Dy. CIT[2004] 136 Taxman 579/267 ITR 577 and Hon'ble High Court of Madras in the case of Sakthivel Bankers v. Asstt. CIT[2002] 124 Taxman 227/255 ITR 144. 13.1 We have carefully perused the decisions placed on record by the ld. DR. We find that all the decisions relied upon by the ld. DR are misplaced inasmuch as all these decisions relate to the issue whether the Joint CIT/CIT has to give an opportunity of being heard to the assessee before granting the approval. This is not the issue before us as the ld. Counsel has never argued that the assessee was not given any opportunity of being heard. These decisions therefore would not do any g....
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....tion of mind and without looking into the record. In view of the above the assessment order passed by the assessing officer is void and accordingly all the appeals of the assessee are allowed. 4.16. We may record that the decisions relied upon by the ld. DR are factually distinguishable as none of the decisions have examined this aspect of application of mind by the superior authorities at the time of granting the approval. The sum and substance of the decisions relied upon by the learned departmental representative was that the assessee was not entitled to any hearing or representation at the time of grant of approval. As mentioned hereinabove the scope and ambit in the present litigation is not that of grant of hearing or representation at the time of approval but whether the approval can be granted by the superior authority without application of mind without looking into seized material, investigation report, the draft assessment order etc can be sustainable in the eyes of law. We had already answered that such an approval is bad in law and cannot be sustained. 4.17 The last submission made by the learned departmental representative was that the matter may be sent back to the....