TaxTMI 
TaxTMI 
TaxTMI 
2019 (12) TMI 311
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....assessment year 2010-2011 and 2012-13 against the separate orders of ld CIT(A) dated 28.6.2018. 3. The revenue has filed appeals for the assessment years 2015-16 & 2016-17 in IT(SS) A No.133/CTK/2018 and ITA No.387/CTK/2018 and the assessee has filed cross objections in the case of M/s. Shilpa Seema Constructions Pvt Ltd. Application of assessees/appellants for admission of additional ground. 4. Both the assessees have also filed common additional ground of appeal for all the assessment years under consideration as under: " That the assessment order passed u/s.153A r/w section 143(3) is not sustainable in view of the fact that the proper procedure of law has not been followed by the ld authorities below while granting the approval u/s.153D of the Act. Therefore, the assessment order is liable to be quashed." Adjudication of application of additional ground of appellants in IT(ss) Nos.66 to 71/CTK/2018 and ITA No.292/CTK/2018 in the case of Dilip Construction Pvt Ltd., and in IT(SS) A Nos.64 to 65/CTK/2018 in the case of Shilpa Seema Constructions Pvt Ltd. 5. Before we deal with the grounds of appeals raised by the Assessees, we need to first consider the Assessee's appli....
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....ing case laws spread over 293 pages and third paper book containing panchanama spread over 58 pages, we are of the considered view that from Form No.35 as well as assessment order, it is clearly discernible that the assessee has not raised legal issue pertaining to grant of approval of section 153D of the Act and thus, the same has been raised for the first time before the Tribunal. This is also not in dispute. In the case of NTPC (supra), as vehemently relied on by ld counsel for the assessee, Their Lordships speaking for the Apex Court has held thus: " . Under s. 254 of the IT Act the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction denied, we do not see any reason why the a....
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....required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 6. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits." 9. In view of above, it is incumbent upon the Tribunal and considering the powers of the Tribunal, Hon'ble Supreme Court has held that any question of law arising from the facts found by the Income tax Department and having a bearing on tax liability of the assessee, then the legal question/ground raised for the first time before the Tribunal can be admitted and adjudicated and the Tribunal has jurisdiction to decide such additional ground. This view has also been reiterated and approved by the Hon'ble Bombay High Court while ....
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....ed and followed as required for grant of approval u/s.151 of the Act. The Joint Commissioner must have to go through the seized documents, notices issued by the AO, submissions made by the assessee and also documents submitted by the assessee and then he had to apply his judicious mind to all the relevant records and thereafter he should proceed to grant approval to the AO to pass orders accordingly. He vehemently submitted that in the case of the assessee, the ld Jt. CIT has granted approval to pass the orders mechanical manner. In the said approval letter, it can be seen that JCIT has simply mentioned that "approval is hereby accorded as per the provisions of section 153D of the Act for passing the assessment orders in respect to the following cases". 13. Ld counsel for the assessee submitted that the draft assessment orders in the case of Dilip construction Pvt Ltd., and M/s. Shilpa Seema Construction Pvt Ltd., -assessees, were sent by the AO on 17.11.2017 and those were approved by the JT. CIT on 23.11.2017 and the order was passed by the Assessing Officer on 23.11.2017 i.e. on the same day when approval was obtained from Jt. CIT. Ld counsel for the assessee referred to letter....
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....Year 2012-2013 dated 15.3.2019 and drawing our attention to paras 13 to 14, ld A.R. submitted that the approving authority did not mention in the approval if he has gone through assessment records or whether the assessment records were produced before him before granting approval u/s.153D of the Act in the matter, then it was held that the requirement of section 153D of the Act has not been satisfied. He submitted that in the identical and similar situation, the Tribunal held that the requirement of section 153D of the Act is not satisfied and also held that entire assessment order is vitiated and is null and void. 16. Reliance has also been placed on the decision of ITAT Cuttack in the case of Geetarani Panda & ors vs ACIT (2018) 32 TTJ 703 (CTK), wherein, it was held that when the approval u/s.153D of the Act was granted without proper application of mind, the order of assessment will be bad in law. The ld A.R. also referred to the CBDT Circular No.3 of 2008 dated 12.3.2008, which provided that the assessment orders in the search case should be made or passed with the prior approval of superior authority, so that the approving authority may have an opportunity to apply his mind ....
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.... it cannot be inferred that proper procedure has not been followed in this case while granting approval u/s.153D of the Act. 19.. Placing rejoinder to above, ld counsel for the assessee submitted that the Assessing Officer has passed assessment orders u/s.153A r.w.s 143(3) of the Act on 23.11.2017 after receipt of letter from JCIT on 23.11.2017. Thus, the subsequent official correspondence i.e. letter dated 19.12.2018 has no relevance with the procedure adopted by JCIT for grant of approval u/s.153D of the Act and this communication between JCIT, Bhubaneswar and JCIT, Central, Bhubaneswar, which has been written after passage of time of more than one year cannot cure defects in the approval and cannot improve the approval granted without application of mind.. Ld A.R. vehemently pointed out that this letter has to be deemed as afterthought being an attempt to fill the gaps and procedural lacunas occurred in the procedure adopted by ld JCIT while granting approval under section 153D of the Act. Ld A.R. further submitted that another letter dated 4.1.2019 written by JCIT, Central, Bhubaneswar to Commissioner of Income Tax is another after thought attempt to curb and rectify the mist....
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....isition.-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 section 153A or the assessment year referred to in clause (b) of subsection (1) of section 153B, except with the prior approval of the Joint Commissioner. Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case maybe, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA." 23. First of all, we observe that we are in agreement with the contention of ld CIT DR based on the judgment of Karnataka High Court in the case of Gopal S Pandit (supra), wherein, it was held that the provisions of section 153D of the Act do not require that any opportunity of hearing to be given to the assessee by the authority who has to approve the draft assessment order passed by the Assessing Authority. Therefore, there is no requirement of allowing opportunity of hearing to the assessee before granting approval under section 153D of the Act. It is also not a contention of the asse....
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....oval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record. 5. The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid." 26. In almost similar facts and circumstances, the Delhi Bench in M3M India Holdings (supra), the Tribunal in para 14 held thus: " 14. Considering the facts of the case in the light of above discussion, it is clear that assessee filed last reply before assessing officer at Faridabad on 29th January 2014 and according to Learned Counsel for the Assessee, it contained more than 500 pages. Therefore, it is difficult for the Assessing Officer at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. I....
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....es below and quash the assessment order in the matter. Resultantly all additions stand deleted. In the result, Ground No.1.3 of the appeal of Assessee is allowed. " 27. Furthermore, ITAT Cuttack Bench in the case of Geetarai Panda (supra) in paras 24 to 26 held that when the approving authority could not apply his mind and has accorded the approval mechanically to meet the requirements of law, the requirement was merely a formality. The Coordinate Bench also held that the said Supervisory authority had a duty towards both the assessee as well as the revenue which was failed to be performed. The relevant paras 25 & 26 read as follows: " 25. In the instant case, we find that the supervisory authority has himself admitted that because of reasons stated by him, could not apply his mind and has accorded the approval mechanically to meet the requirements of law as the requirement 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 c....
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.... Bhubaneswar End: Record for the AY 2010-11 to 2016-17 (In Seven Folders) The approval granted in the case of Shilpa Seema Constructions Pvt Ltd., available at page 1 of paper book is as under: " OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX (CENTRAL), AAYAKAR BHAWAN ANNEXE. 4TH FLOOR. RAJASWA VMAR. BHUBANESWAR- 751007 F.No .JCIT(Central) /BBSR/153D CC-1 BBSR/2017-18/ 3137 Date: 23.11.2017 To The Assistant Commissioner of Income Tax, Central Circle-1, Bhubaneswar Sub: Approval of the Assessment orders u/s 153D of the LT. Act, 1961 in respect to the cases of M/s Shilpa Seema Construction P Ltd- Reg Ref: Your letter no. ACIT/CC-l/BBSR/Report/2017-18/8 dated 17.11.2017 seeking approval of draft assessment orders u/s 153D Approval is hereby accorded as per the provisions of section 15 3D of the I.T.Act tor passing the assessment orders in respect to the following cases. SI. No Name of the assessee PAN AY. Total Asessed Income (Rs.) Section under which order passed. 1 M/s Shilpa Seema Construction PLtd AAKCS 2712 E 2010-11 41,43,750/- u/sl53A/143(3) 2 2011-12 5,71,290/- u/s 153A/143(3) 3 2012-13 83,61,660/- u/s 153A/143(3) 4 2013....
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....baneswar is merely a covering letter supplying copy of the approval dated 23.11.2017, which cannot be treated as an explanation to the approval dated 23.11.2019 curbing the mistake in the procedure adopted by the JCIT while granting approval u/s.153D of the Act. On these subsequent letters/correspondences, we are of the considered view that for adjudicating legal ground of assessees challenging the validity of approval u/s.153D of the Act dated 23.11.2017, we have to evaluate said approval apparently by considering the totality of facts and circumstances and the manner in which such approval has been granted. This cannot be improvised by way of subsequent exercise or correspondence between the approving authority and the AO or other officers. 33. In view of foregoing discussion, we are inclined to hold that the ld JCIT has granted approval under section 153D of the Act in a mechanical manner without application of mind to the relevant assessment records and draft assessment orders submitted before him by the AO for grant of approval u/s.153D of the Act before passing the relevant assessment orders u/s.153A r.w.s 143(3) of the Act. 34. Considering the facts and circumstances of th....
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.... in its cautious wisdom to make it mandatory on the supervisory authority/approving authority to discharge the duty towards both the assessee as well as revenue to follow the proper procedure and to apply his mind on the material, relevant evidences and other documents including materials found during search & post search investigations and explanation & supporting documents of the assessee to the issue show caused to him by the AO, on the basis of which the AO wants to pass or frame assessment or reassessment orders and after such exercise by perusing and going through the relevant assessment folders/files alongwith proposed draft orders and also by applying his mind has granted approval u/s.153D of the Act. This is the minimum required exercise by the approving authority before granting approval u/s.153D of the Act. The approving authority has undertaken any such exercise should be discernible from the order of the approval and the subsequent internal correspondence between the lower authorities have no relevance and the defects or omissions or non-application of mind cannot be cured or rectified by any other exercise or working undertaken by the approving authority after grant o....
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....roving authority of the department which, in turn, provides safeguard to the both the parties i.e. revenue and the assessee. Therefore, the provisions of section 153D of the Act cannot be treated as a mere formality and mandate therein required to be followed by the approving authority in a judicious manner by due application of mind in a manner of cautious judicious or quasi judicial authority. This view has also been expressed by Pune Bench of the ITAT in the case of Akil Gulamali somji, in ITA Nos.455 to 458(Pune) of 2010 vide order dated 30.3.2012, wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law. We also take respectful cognizance of the fact that the Hon'ble Bombay High Court in the case of Akil Gulamali Somji (supra) has concurred with the said findings and view taken by the Pune Tribunal that not following the provisions of section 153D of the Act will render the related order of assessment void. 39. In view of foregoing discussion, we reach to a logical conclusion that it is the duty of the approving authority to act in accordance with the mandate and provisions of law while granting app....
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....he Act. Accordingly, we are compelled to hold that the approval granted by the ld JCIT in the appeals under consideration has been granted in a mechanical manner without application of mind and that the assessments/reassessment orders passed by the AO on such approval are declared to be void and bad in law. We hold so. 41. In view of aforesaid discussion, we clearly find that approving authority has not applied his mind to the relevant assessment records and draft assessment orders prior to granting approval to the Assessing officer for passing assessment orders u/s.153A/143(3) of the Act. Therefore, the contention of ld A.R. of the assessee is justified and sustainable that the approval was granted in most mechanical manner without application of mind and respectfully following the proposition rendered by Hon'ble Bombay High Court in the case of Smt. Shreelakha Damani (supra), the order of ITAT Delhi Bench in the case of M3M India Holdings (supra) and decision of ITAT Cuttack Bench in the case of Geetarani Panda (supra), we hold that no valid approval has been sanctioned or accorded by the ld JCIT before allowing the AO to pass the relevant assessment orders. From the relevant ap....