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2021 (8) TMI 1336
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....ithout any jurisdiction and without any prior approval in accordance with law. It was further submitted that, in case, this Tribunal comes to the conclusion that the matter is required to be heard on merits, and the ground no 11 supra is decided against the assessee then the matters are required to be heard on merits and other legal grounds were required to be decided . 4. To this the ld. DR had submitted, he has no objection for arguing and ground no .11, However, it was submitted that in case the Tribunal comes to the conclusion that the order passed by the AO was bad in law, on account of lack of approval u/s 153D, then, the matter may be remanded back to the lower authorities for passing the appropriate order. 5. The ld. AR for the assessee, at the outset had drawn our attention to para 8 to 8.3 of the CIT(A) order at page 10 to the following effect:- "8. Vide ground no. 10 of the appeal is against the order passed by the AO without obtaining requisite approval under section 153D of the act. The appellant has submitted that under the provisions of IT act before passing an order, AO required to get prior approval u/s 153D of the act. The authority giving the appro....
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....t be some minutes of the meeting on the file. Income tax proceedings are quasi-judicial proceedings and a proper procedure must be followed and every activity is supposed to be recorded. The AO/Range heads keep on getting transferred during the proceedings. To apprise the successor AO/Range head, what decisions have been taken in past, must be recorded in the file and mention should be there in the order sheet also. During the inspection of the file, there was no such material available, which could justify this contention of the AO. In case the same is in some different folder, the AO should be directed to produce the same and the copy may please be provided to the assessee. Otherwise keeping in view, the comments of the AO there is no application of mind at the final stage and this is in violation of the spirit of section 153D and is illegal. In addition to this AO has written that in present time being time of technology, the communication between persons at different stations is held via phone/ fax and date of receipt of physical letter by post is immaterial as held by judicial courts also. However, the AO has failed to mention any judicial decision on this issue. With....
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....the Addl. CIT. The copy of letter dated 27.7.2016 provides as under: 8. It was submitted by the LdAr that Additional CIT(A), without applying his mind, without considering the draft assessment order and documents, had wrongly granted the approval in a mechanical manner . The approval was communicated to the AO on 28/7/ 2016. It was submitted that non-application of mind by Add. CIT, is manifest from the letter itself, where, no reason whatsoever for granting the approval was mentioned . It was submitted that for all the assessment years, common approval was granted by the Add Cit, without giving reasons for each year. It was submitted that along with letter seeking the approval, neither draft orders were enclosed, nor assessment records were enclosed . However the additional CIT(A), had wrongly mentioned that "Assessment records in the above cases are enclosed". The approval letter of Add CIT provides as under :- 9. It was submitted by the ld. AR that the letter at page 788 dated 26.07.2016 was never sent by the DCIT to the Addl. CIT seeking the approval u/s 153D however, the letter dated 27.07.2016 was sent by the DCIT at page 789. 10. It was submitted that before the app....
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....p; Dated: 12.12.2017 To The Commissioner of Income Tax (Appeal)-2, Jalanadhar. (Through the Additional commissioner of Income Tax, Central Range, Jalandhar) Sub:- Furnishing of Remand Report in the case of Sh. Madan lal, S/o Bihari Lal, R/o Model Town, shahkot in appeals no. 357, 361, 365, 344, 369, 373, 345, 377,381/16-17 for the A. Yrs. 2007-08 to 2013-14 -Reg. Sir, Kindly refer to your office letter no 2235 dated 12.12.2017 on the subject cited above. In the written submission for the all the assessment years in question, the assessee has taken common grounds of appeals. Comments of this office on these written submissions are submitted hereunder:- 2. Ground No. 3 2.1 .................... 2.2 .................. 3.1 The id. AR has argued that the alleged approval u/s 153D was given in h....
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....CIT through a letter, there was no requirement of recording the same on the order sheet. Regarding availability of two letters with the same dispatch number, it is submitted that initially the Assessing Officer framed a different letter for each assessee, but later, to cut short the time involved, a fresh letter was prepared seeking approval in all the six cases involved. The first letter in fact was withheld and not sent to the Addl. CIT since both copies are available in record for the A.Y.2007-08. Nonavailability of office copy of draft order sent to the Addl. CIT is not an issue at all since the same depends to the practice and not any legal requirement. In respect of the last argument that when four more days were available with the Assessing Officer to pass the orders, he acted in a haste by releasing the order on the same day, it is submitted that once an order is approved, there cannot be any illegality in passing the same on the same on the same day and no prejudice has been done to the assessee in doing so. 13. On the basis of above, ld. AR had submitted that at the time of passing the assessment order, the AO has no prior approval as contemplated u/s 153D and therefor....
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....e, therefore, the assessment orders are required to be quashed. Ld AR had filled the w.s. in support of case of the assessee, which is reproduced herein for the completeness of record : 1. "It is submitted that the alleged approval u/s 153D of the Act is illegal, bad in law and without any application of mind and the Assessment order passed without obtaining valid approval is liable to be quashed. 2. There were two proposals prepared by Assessing Officer. The first communication was dated 26.07.2016 (at page number 788 of PB). Howeverthesecond letter dated 27.07.2016 (at page number 789 of PB) with the same dispatch number containedtherecord of 6 different Assessee for 7 years each with 42 draft orders. The approval letter by the Addl CIT is also dated 27.07.2016 in which all 42 orders are approved in one link. 3. Assessee is challenging the validity of the assessment order and of the alleged approval given under Section 153D and the procedure adopted by the revenue authorities while granting mandatory approval under section 153D of the Act before passing the assessment order. It is the case of Assessee that approval by Add CIT under Section 153D is not a....
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.... material was ever sent to Add CIT. 8. At this juncture, it is relevant to refer to the judgement rendered by the jurisdiction High Court, though in the cases on reassessment. However, the logic of the same is applicable to the facts of the present case, wherein it was obligatory on the part of the Assessing Officer to pass the final order and issue demand notice only once the approval under Section 153D was received by the Assessing Officer. The Hon'ble of Punjab & Haryana High Court in the case of K. G. Madan reported in 275 ITR 294 has held that - "accordingly, the Tribunal held that notice u/s 148 of the Act was issued before recording the reasons u/s 148 (2) and therefore, initiation of proceedings u/s 148 assessment made in pursuance thereof were bad in law". A similar view was taken by Hon'ble Punjab & Haryana High Court Baldev Gyan 248 ITR 266 wherein Hon'ble High Court has held that prior to the issue of notice u/s 148 it is mandatory to record reasons as per the provisions of section 148 (2) of the Act. 9. AO has referred in the remand report at page 1128 of paper book that,in the present time beingtime of technology, the communication between p....
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....een passed on the very same day which shows that no independent application of mind is there by Addl. CIT while giving approval and the assessement order is passed ignoring the provisions of the Income tax Act. Such assessment orers are liable to be quashed. 14. It is important to refer to the recent judgement in the case of Arch Pharmalabs Ltd. v ACIT CC-32 I.T.A. No. 6656/Mum/2017 order dated 07.04.2021 at page number 497-535 of case law compilation. Relavant extract is reproduced for reference- The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement.... ....
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....s, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Approval to be a mere formality and can not be countenanced in law. 15. It is submitted that provisions of section 153D imply that the meaning of approval is not simple approval or approval of the order in a mechanicalmanner.From this, it can be well imagined that how much mind the Addl. CIT has applied, and approval is nothing but stereotype and without application of mind. The act by introducing section 153D has withdrawn the free hand of AO and cast responsibility on the Addl./CIT/JCIT to apply hi....
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.... 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. Nothing has been clarified during the course of hearing to the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the part of the Addl. CIT before granting approval. The Addl. CIT, Chandigarh has merely gone through the draft assessment order as per PB-47. Therefore, the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion, we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section....
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....hat in the present case, there has been no 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." The ITAT, Jodhpur Branch in the case of Smt. Indira Bansal vs., ACIT, held as under: "Jt. CIT having granted the approval under s. 153D on the very same day on which the forwarding letter seeking approval was received in his office, and circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind and even without going through the records as the same were in Jodhpur while the Jt. CIT was at Udaipur, therefore, the approval granted by him cannot be sustained. Impugned assessments are annul led." ITAT Cuttack in the case of Geetarani Panda, Bhubaneswar vs. ACIT, Corporate Circle-1(2), Bhubaneswar ITSSA 1/CTK/2017 (at page 10-35 of CLC)observed that: 24. In our considered view, the provisions contained in Section 153D as enacted by the Parliament cannot be tr....
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....onding obligation on him to examine relevant record and assessment orders and thereafter grant the approval. We are cautious about that the reasons for granting approval may not be a subject matter of challenge or are not required to be mentioned in the order of approval but the manner and the material on the basis of which approval has been granted can be challenged by the assessee and following proper procedure and application of mind by the approving authority should be discernible from the order of approval. No other evidence or documents is required to be considered or appreciated as the approval should be self-speaking that it has been granted by the ld JCIT by following due procedure and due application of mind to the relevant records and orders. The scope and issue agitated by the assessee by way of legal ground in the present case is not that of grant of hearing or representation to the assessee at the time of granting approval but the main grievance and legal objection of the assessee is that the approving authority has granted approval without application of mind and without looking into the seized materials and investigation report and draft assessment/reassessment orde....
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....nd also in the matter of West Bengal Central School Service Commission vs. Abdul Halim, (2019) SCC online (SC) 902. We are bound by the law laid down by the Hon'ble Supreme Court in the aforesaid judgment. 4.15 we may mention that in the approval granted by additional Commissioner of income tax on 27 March 2014 it is clearly mentioned that he has not applied its mind and he has not even look into the draft assessment order and he solely relied upon the undertaking of the assessing officer who had completed the assessment proceedings. He has also not gone into the record of investigation and seized material and has granted the approval without any meaningful discussion and going through the record. In our view such a practice is required to be deprecated and we deprecate the same. It is the duty of the additional Commissioner of income tax to apply his mind while according the approval and should not grant approval in a callous and clandestine manner. There is a statutory duty on the additional Commissioner of income tax with a corresponding obligation on him to examine the record and thereafter accord the approval. The reason for granting the approval may not be subject ma....
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.... Assessing Officer in the Demand Report submitted before the CIT appeal had admitted that "Approval conveyed by the Addl. CIT on the same day when he signed the letter of approval, was sufficient compliance of there relevant provisions of law even though the letter was received in 'DAK' by the AO on the next working day. As per records of the Addl. CIT, Central Range, Jalandhar, approval letter was dispatched vide no. 435 on 27.0702016 itself." From the above said, it is crystal clear that the letter granting the approval was received in the office of the Assessing Officer on 28.07.2016, as the Assessing Officer has not denied the fact of receiving the letter on 28.07.2016, however, merely stated that the letter was dispatched from the office of Addl. CIT on 27.07.2016 vide Diary No.435. 21. From the reading of the above, it is clear that the approval was received in the office of the Assessing Officer on 28.7.2016, whereas the Assessment Order was passed by the Assessing Officer on 27.7.2016. In the remand report, the Assessing Officer had submitted that in the era of technology where communication between the persons via phone /fax, date of receipt of physical letter by post i....
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...., the assessment order, if any passed could not nullity and non-est in the eyes of law. 23. The Assessing Officer and DR, as submitted that in the age of technology, if the approval is taken over the phone or facts that it is sufficient compliance of the provisions of law. In our considered opinion, the approval taken on the fax/ email may be considered approval in law if it fulfill the other requirements of law. However, this is not the case before us where the approval was sought either by fax or by email or by phone. The letter dated 27.07.2016 clearly shows that the written approval was sought by writing the letter from the Addl. CIT and alongwith that it was alleged that draft assessment order as well as assessment records were also sent to the Addl. CIT. In view of the above, when the approval was not sought either by fax or by email or by phone, the reasoning given by the Assessing Officer /DR does not hold good and is required to be rejected. 24. As the Assessing Officer has passed the assessment order without having the approval in his record, in our considered opinion, the assessment order passed in all the cases before us is null and void and cannot be acted upon. ....
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....ng statute. It is well settled that a taxing statute has to strictly construed, 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 noncompliance of the provisions of section 153D of the Act. On this count also, therefore, the appeal, does not merit acceptance. 25.Similarly in the matter of Akil Gulamali Somji 20 taxmann.com 380 (Pune) tribunal had held as under :- ....
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....53B, except with the prior approval of the Joint Commissioner]." The above provisions u/s. 153 D have 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 reassessment" 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 enact....
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....9. Approval for assessment : An assessment order under Chapter XIV-B can be passed only with the previous approval 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. 1.6.200....
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....l as in the matter of Rajesh Ladhani vs. DCIT ITA No. 106-108/Agr/2019, dated 06.11.2019, where we have annulled the assessment order as it was passed without proper approval u/s 153D of the Income Tax Act. In the case of Rajesh Ladhani we have held as under:- 21. It is the bounden duty of the Additional Commissioner of Income Tax to act in accordance with the law, while discharging statutory functions an obligation is casted upon him by the Act to apply his mind while according the approval. There is a statutory duty on the Additional Commissioner of Income Tax with a corresponding obligation on him to examine the record and thereafter accord the statutorily required Approval. The reason for granting the Approval may not be subject matter of the challenge but the manner and the material on the basis of which the approval was granted can always be examined by the Tribunal to come to the conclusion whether the Approval was granted in a mechanical manner or after applying mind looking into the record. No evidences required to be appreciated as the approval is self-evident, i.e., that it was granted by the Additional Commissioner of Income Tax without application of mind and ....
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....edings and prepare a draft assessment order which need to be placed before the approving authority i.e. Joint / Addl. Commissioner (designated authority giving approval to search assessments u/s. 153D of the Act). The approving authority is necessarily required to objectively evaluate such draft assessment order with due application of mind on various issues contained in such order so as to derive his/ her conclusive satisfaction that the proposed action of AO is in conformity with subsisting law. The AO is obligated to pass the assessment order exactly, as per approval/ directions of the designated authority. Inevitably, this evaluation is to be made on basis of material gathered at time of search as well as obtained in the course of the assessment proceeding. The requirement of law is to grant approval not merely as a formality or a symbolic act but a mandatory requirement. 11.2 In the backdrop of facts narrated in the preceding paras, it is the contention on behalf of the asssessee that approval granted under S. 153D does not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law. The assessment orders ....
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....rs. Apparently, the approval has been granted on a dotted line without any availability of reasonable time which firms up the belief towards non application of mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which volumnous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record which allegation has not been rebutted. The draft assessment orders showing some marking / intials etc. could have given a valuable input on the applicability of mind and could throw light on objectivity applied owing to total silence on any delineation on these aspects in the approval memo. The records before us are totally muted. 11.4 Based on solitary communication placed before us, it is ostensible that draft assessment orders were placed before the Addl. CIT on 29.12.2010 for the first time. It is axiomatic from the plain reading of approval memo that various assessment orders and the issues incorporated in the assessment orders, were never sub....
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.... never carried out. From the said approval, it can be easily inferred that the said order was approved, solely relying upon the implied undertaking obtained from the Assessing Officer in the form of draft assessment order that AO has taken due care while framing respective draft assessment orders and that all the observations made in the appraisal report relating to examination / investigation of seized material and issues unearthed during search have been statedly considered by the AO seeking approval. Thus, the sanctioning authority has, in effect, abdicated his/ her statutory functions and delightfully relegated his/her statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The addl. CIT in short appears to have adopted a short cut in the matter and an undertaking from AO was considered adequate by him/ her to accord approval in all assessments involved. Manifestly, the Additional CIT, without any consideration of merits in proposed adjustments with reference to appraisal report, incriminating material collected in search etc. has proceeded to grant a simplicitor approval. This approach of the Additional CIT, Central has rendered the Ap....
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.... assessment order, we deem it appropriate not to adjudicate the remaining grounds of appeal raised by the Assessee in the present set of appeals. 32. In the result, all the appeals of the Assessee are allowed. Order Pronounced in the Open Court on 16/08/2021. ============= Document 1 पà¥à¤°à¤¥à¤®à¤¤ जमते 788 OFFICE OF THE à¤à¤¾à¤°à¤¤ सरकार DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-I, JALANDHAR 25-AAYTAN'S TOWER, CIVIL LINES, JALANDHAR-144401 F.No. DCIT/CC-1/JAL/2016-171658 TELEPHONE NO:- 0181-2221092 TELE FAX NO:- 0181-2221092 दिनांक : 26-07-2016 To 10 Sir, The Additional Commissioner of Income Tax, Central Range, Jalandhar. Subject: Approval u/s 153D of the Income Tax Act, 1961 in the case of Sh. Madan Lal, S/o Sh. Bihari Lal, Model Town, Shahkot, PAN No: ABFPL4650B - regarding- Kindly refer to the subject cited above. In this connection, you are requested to give statutory approval u/s 153D of the Income Tax Act, 1961 in the case of Sh. Madan Lal, S/o Sh. Bihari Lal, Model Town....
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....¯à¤•à¤° आयà¥à¤•à¥à¤¤ buty Commissioner of Income CERTIFIED TRUE COPY (Parikshit Singh) Deputy Commissioner of Income Tax, Central Circle-I, Jalandhar. Document 3 2222 कारà¥à¤¯à¤¾à¤²à¤¯ आयकर अपर आयà¥à¤•à¥à¤¤ केनà¥à¤¦à¥à¤°à¥€à¤¯ मंडल सतà¥à¤¯à¤®à¥‡à¤µ जयते V à¤à¤¾à¤°à¤¤ सरकार / GOVERNMENT OF INDIA वितà¥à¤¤ मंतà¥à¤°à¤¾à¤²à¤¯ / Ministry of Finance Office of the R/Telephone: 0181-2233263, 800 Addl. Commissioner of Income Tax, Central Range, Jalandhar. H/Fax: 0181 - 2233263 F. No. Addl.CIT/CR/JAL/153D/16-17/435 To The Deputy Commissioner of Income Tax, Central Circle-1, Jalandhar. Dated: 27.07.2016 Sub: Approval under section 153D of the Income Tax Act 1961- Reg.- Please refer to your office Letter No. 658 dated 26-0 on the subject cited above. 2. In this regard the proposed....