TaxTMI 
TaxTMI 
2024 (1) TMI 17
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....g the proof of reasons explained in the notarized affidavit. Therefore, we find that the reasons stated by the assessee are bonafide which really prevented the assessee to file the present appeals in time. Therefore, the delay of 03 days is condoned. 3. We find that the issues raised in all the appeals are similar basing on the same identical facts. Therefore, with the consent of both the parties, we proceed to hear all the appeals together and to pass a consolidated order for the sake of convenience. 4. First, we shall take up appeal of the assessee in IT(SS)A No. 11/PUN/2023 for A.Y. 2014-15 being a lead case. 5. The brief facts of the case are that the assessee is a public limited company and engaged in the business of providing building maintenance and other support services like solid waste management, office support, catering, housekeeping, etc. The assessee filed its original return of income on 31-03-2015 declaring a total income of Rs. 90,06,15,010/-. A search and seizure action conducted in assessee's case on 06-11-2019 u/s. 132 of the Act, a notice u/s. 153A of the Act was issued. According to the AO, no return of income filed in response to the said notice. The AO, ....
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....ther, he stated the intention of CBDT in issuing such circular to maintain audit trail for all the communications which are integral part of assessment proceedings. He vehemently argued the audit trail could not be said to be maintained in the absence of trail for approval granted in the present case u/s. 153D of the Act without which an order u/s. 153A of the Act cannot be proceeded with. 9. In support of his above contention, he drew our attention to the decisions of Hon'ble High Court of Chhattisgarh in the case of Jugal Kishore Paliwal reported in 446 ITR 515 (Chhattisgarh) and in the case of Bharat Krishi Kendra reported in 444 ITR 584 (Chhattisgarh) and drew our attention at pages 108 to 133 of the paper book-II. The ld. AR argued that the Hon'ble High Court of Chhattisgarh in both the above said cases held that DIN is required to be affixed on approval granted and since approval issued u/s. 151 of the Act contained DIN, the same cannot be held to be invalid. Further, he submits that the reading of above said two decisions are very much clear that the approval u/s. 151 of the Act are held to be valid approval if the same is with DIN, meaning approval without DIN is invalid. ....
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...., no noting is generated in the case history notings as the procedure of approval has been undertaken manually". Second, "to take approval through system and subsequently use functionality available in ITBA system to pass assessment order" as the approval has been taken through ITBA system, a noting in the case history notings is generated and the approval comment of the specified/concerned authority is displayed. He vehemently argued referring to the present case that no separate DIN is generated for the approval accorded by the specified/concerned authority and the assessment order bearing DIN along with computation sheet and demand notice is generated automatically. Further, Shri Ajay Kumar Kesari vehemently contended there is no requirement of law for generation of DIN for the approval granted by the Addl. CIT under the extant provisions of the law and guidelines of the CBDT. 13. By referring to Circular No. 19/2019, he submits that the said circular mandates generation and allotment of DIN for communication to the assessee or any other person but not the intra Departmental communication. Further, that the DIN is made mandatory for all the communications issued by any Income T....
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....e draft assessment order, approval and final assessment were passed on the same day. He submits, according to the AO that the search team seized various alleged incriminating documents consisting of 8300 pages, 16 hard disks and 6 pen drives and it is impossible for the Addl. CIT for examination of such voluminous alleged material before giving approval u/s. 153D of the Act. He argued that the said approval granted by the Addl. CIT on 30-09-2021 is only mechanical in nature without application of mind within such short time. The ld. AR referred to manual of office procedure issued by the CBDT in February, 2023 laying down procedure to be followed vide para 9, and argued that at least one month before the time barring date draft assessment order should be given to Addl. CIT for approval. He referred to the decision of Hon'ble High Court of Orissa in the case of M/s. Serajuddin & Co. in ITA Nos. 39, 40, 41, 42, 43, 44 of 2022 which is at page 534 of the paper book and vehemently contended there was no sufficient time for verification of voluminous seized material by the approving authority to give approval u/s. 153D of the Act which clearly infers that there was no application of min....
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.... u/s. 154 of the Act. He argued that the said variation is an error occurred in the demand notice is a rectifiable clerical mistake falls under the provisions u/s. 154 of the Act. He vehemently argued that the said mistake in the demand does not render the assessment order invalid nor indicate lack of application of mind. 19. Regarding the applicability of charging rate of tax at 60%, the ld. DR submits the provisions u/s. 115BBE are applicable which deals with taxation of income referred in sections 68, 69, 69A, 69B, 69C and 69D of the Act. He argued since the approval was granted for addition u/s. 69C of the Act and the provisions u/s. 115BBE are applicable with a charging rate at 60%, there is no discrepancy or error in the tax rate applied by the AO, it is in compliance with the provisions of the Act in respect of provisions u/s. 69C of the Act which demonstrates application of mind. 20. Regarding non-application of mind by the Addl. CIT while approving the draft assessment, the ld. CIT-DR submits that the assessment proceedings have undergone in multiple stages, involving the thorough discussions between the AO and the Addl. CIT till the completion of the order, is evident f....
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....he decision of Hon'ble High Court of Bombay in the case of Shri Akhil Gulamali Somji in batch of ITA Nos. (L) 1416 of 2012 to 1419 of 2012 vide order dated 15-01-2013 and argued that in the absence of fresh approval, the final assessment order is bad in law. 22. Heard both the parties and perused the material available on record. The ld. AR, Shri Vijay Mehta led his submissions vide ground No. 1 challenging the approval u/s. 153D of the Act is invalid for non-mentioning of DIN. Further, non-application of mind by the approving authority i.e. Addl. CIT, wherein, it is noted he divided the said challenge in two parts i.e. non-application of mind while granting approval u/s. 153D of the Act terming the same as mechanical in nature and second part is the AO passed final assessment order altering the draft assessment order without having fresh approval. 23. Let us examine the first challenge i.e. whether non-generation of DIN on approval u/s. 153D of the Act results into invalid assessment? 24. On perusal of the CBDT Circular No. 19/2019 which is placed at page 92 of the paper book-II of the assessee, we note that the said circular was issued taking into account some instances which ....
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....es contained in CBDT circular which is binding on all Income Tax Authorities. Further, para 4 of said circular provides that any communication which is not in conformity with para 2 and 3 shall be treated as invalid and shall be deemed to have never been issued, which clearly explains any communication without DIN is invalid in the eye of law. Thus, we find approval u/s. 153D of the Act is covered by para 2 of Circular No. 19/2019. Therefore, in the present case non-mentioning of DIN on approval granted u/s. 153D of the Act by the Addl. CIT renders the assessment order dated 30-09-2021 passed u/s. 153A r.w.s. 144 of the Act invalid treating the same deemed to have never been issued. 26. In order to come to such conclusion, we find support from the decision of Hon'ble High Court of Chhattisgarh in the case of Jugal Kishore Paliwal (supra), is as to whether approval u/s. 153D of the Act is covered by Circular No. 19/2019 not? The relevant part at para 12 is reproduced here-in-below for ready reference: "12. So far as submission of learned counsel for petitioners that there was no proper sanction/approval on the date of issuance of notice under Section 148 of the Act of 1961 is con....
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....that the sanction/approval u/s. 151 of the Act prima facie shows the DIN number showing status to be generated on 31-03-2021, held cannot be said that there was no sanction/approval for issuance of notice u/s. 148 of the Act and rejected the contention of the assessee. It is clear from above finding of Hon'ble High Court that the approval u/s. 151 of the Act is covered by para 2 of Circular No. 19/2019 of CBDT. 28. Further, we also find support from the decision of Hon'ble High Court of Chhattisgarh in the case of Bharat Krishi Kendra (supra). The relevant part at para 14 is reproduced here-in-below for ready reference: "14. Third submission of learned counsel for petitioner is that approval granted under Section 151 of the Act of 1961 does not bear digital signature of authority, referring to note appended to approval (Annexure P-5), is concerned, the note appended says "if digitally signed, the date of digital signature may be taken as date of document". Submission of learned counsel for petitioner, in the opinion of this Court, is not acceptable in view of provisions of Section 282 (a) of the Act of 1961, which provides that notice or other documents to be issued for the purp....
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....utory or otherwise, inquiries, approvals, etc. to an assessee or any other person on or after 1st October 2019 unless a computer generated DIN has been allotted and is quoted in the body of such communication. The Circular reads as under : CIRCULAR NO.19/2019 (F. NO.225/95/2019-ITA.II], DATED 14-8-2019 With the launch of various e-governance Initiatives, Income tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax-administration Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice. order, summons, letter and any correspondence (hereinafter referred to as "communication" were found to have been issued manually, without maintaining a proper audit trail of such communication. 2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under ....
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....ed as invalid and shall be deemed to have never been issued. 5. The communication issued manually in the three situations specified in para 3- (i), (ii) or (iii) above shall have to be regularised within 15 working days of its issuance, by i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro-forma available on the System. 6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance. 7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31st October, 2019. Paragraph 3 of the Circular sets out five exceptional circumstances where the aforementioned mandatory requirement may not be adhered to, but requires that if an order/communication is to be issued without a DIN, it can be d....
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....by the CBDT in exercise of its powers under Section 119 of the Act are binding on the revenue. xxxxxxxxxxx 18. The argument advanced on behalf the appellant/revenue, that recourse can be taken to Section 292B of the Act, is untenable, having regard to the phraseology used in paragraph 4 of the 2019 Circular. 19. The object and purpose of the issuance of the 2019 Circular, as indicated hereinabove, inter alia, was to create an audit trail. Therefore, the communication relating to assessments, appeals, orders, etcetera which find mention in paragraph 2 of the 2019 Circular, albeit without DIN, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 Circular. (c) During the course of hearing, Mr. Suresh Kumar produced an intimation letter dated 13th October 2021 stating that the order dated 28th September 2021 under Section 153C of the Act has a DIN, which is set out therein. Even if this is held to be in compliance with paragraph 5 of the Circular, which deals with regularization of communications without DIN, this can only seek to regularize the failure to generate a DIN, but yet the requirements of paragraph 3 of the Circular will still rema....
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....ra 2 of the circular as a communication. Further, the Hon'ble Court observed impugned assessment order does not bear a DIN, does not bear the required format set out in para 3 of the said circular and held assessment orders are invalid, deemed never to have been issued, by placing reliance in the case of Brandix Mauritius Holdings Ltd. reported in (2023) 149 taxmann.com 238 (Del.). 33. Thus, in the light of above ratio laid down by the Hon'ble Jurisdictional High Court of Bombay it is clear satisfaction note shall be authenticated with a DIN, in the absence of which the assessment passed thereon becomes invalid. We find the ratio laid down by the Hon'ble High Court is clearly applicable to the facts on hand, thereby, we hold the approval dated 30-09-2021 granted by the Addl. CIT u/s. 153D of the Act is invalid and the consequential final assessment order dated 30-09-2021 passed u/s. 153A r.w.s. 144 of the Act is quashed. 34. Further, the Hon'ble High Court of Allahabad in the case of Deepak Gupta (supra) held that the approval u/s. 153D of the Act is a statutory approval and cannot be considered as a mere internal communication. The relevant portion of the said judgment is reprod....
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.... communication and same cannot be provided. The Hon'ble High Court held that the approval u/s. 151 of the Act is a jurisdictional prerequisite and the assessee is fully entitled to have the same. It is established that a communication by way of approval u/s. 153D of the Act between Addl. CIT and the AO is not a internal communication, is a jurisdictional prerequisite covered by Circular No. 19/2019. In view of the same, we reject the arguments of ld. DR that the circular is not applicable for internal communication between Addl. CIT and AO. 36. Coming to the second issue of non-application of mind by the approving authority. The ld. AR placed reliance on the decision of Hon'ble High Court of Orissa in the case of M/s. Serajuddin & Co. (supra). The relevant portion of the said judgment is reproduced here-in-below for ready reference : "22. As rightly pointed out by learned counsel for the Assessee there is not even a token mention of the draft orders having been perused by the Additional CIT. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the ....
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....rawn to the attention of the Court by the Revenue that there were in fact circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam 2003 (5) SCC 528. The principles laid down by all these decisions are: (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars." 25. For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal p....
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....Assessing Officer and also responsible and duty bound to do justice with tax payer. The relevant portion of the said judgment is reproduced here-in-below for ready reference : "14. It was noted that the obligations of the approval of the Approving Authority serves two purposes: (i) On the one hand, he has to apply his mind to ensure the interest of the revenue against any ommission or negligence by the Assessing Officer in taxing right income in the hands of right person and in right assessment year. (ii) On the other hand, superior authority is also responsible and duty- bound to do justice with the tax-payer by granting protection against arbitrary or creating baseless tax liability on the assessee. 15. The Tribunal has further noted that the provisions contained in Sections 153A to Section 153D provide for separate notice to be given to assessee for assessment for each year as specified in Section 153A of the Act; the assessee has to file separate ITR for each year as specified in Section 153A of the Act; separate assessment orders are to be passed for each year as specified in Section 153A of the Act. 16. It was observed that this is an important concept mentioned....
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....r, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by Sri Gaurav Mahajan, learned counsel for the appellant-revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval of superior authority means that it should appraise the material before it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the Assessing Authority before preparing the draft assessment order. It is trite in law that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. The requirement of approval under Section 153D is pre-requisite to pass an order of assessment or re-assessment. Section 153D requires that ....
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.... voluminous record in one day, therefore, the approval granted mechanically and the final assessment orders passed thereon are liable to be quashed. 40. On the same lines, ITAT Delhi Benches in the case of Sanjay Duggal held the assessment order passed u/s. 153A of the Act are invalid for want of valid approval u/s. 153D of the Act, consequently, deleted additions made thereon. The relevant portion at page 514 of paper book of the said case is reproduced here-in-below for ready reference : "13. In the present cases various approvals were granted by the JCIT, Central Range-1, New Delhi, and forwarding letter of the A.O. are placed on record in all the cases. In all the cases as per the forwarding letter of the A.O. only assessment records were forwarded to the JCIT, Range-1, New Delhi at the time of granting approval. Therefore, it is evident that the JCIT being the Approving Authority was neither having seized material nor the appraisal report or other material at the time of granting approval. In the approval under section 153D there is a reference to the A.O. letter only. There is no reference to the seized material or record or notice under section 142 and reply of the assess....
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....not done in the case of M/s. JIL, rightly so, how the same sale proceeds could be added as income in the hands of assessees under section 68 of the I.T. Act is not understandable. Thus, the Approving Authority without application of mind and in a most mechanical and technical manner granted approval under section 153D even without reference to any reason in the Order under section 153D of the I.T. Act. We, even, otherwise failed to understand that in search cases how an approval can be granted to an assessment year which is required to be based only on incriminating material without verification of those material and its reference in the appraisal report. The JCIT even in approval did not mention if assessment record is seen by him. 14. Another interesting aspect that has come to the notice on the basis of various documents submitted for approval as well as request for approval by the A.O. to the JCIT. We make a specific reference to letter dated 29.12.2017 written by ACIT, Central Circle-4, New Delhi, which is placed at page-144 of the PB. This letter Dated 29.12.2017 is a request for obtaining approval under section 153D of the I.T. Act in the case of Shri Rajnish Talwar and f....
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....mplete the formality and without application of mind as neither there was an examination of the seized documents and the relevance of various observations made by the Investigation Wing in appraisal report. Thus, we hold the approval under section 153D have been granted without application of mind and is invalid, bad in Law and is liable to be quashed. Since we have held that approval under section 153D is invalid and bad in law, therefore, A.O. cannot pass the assessment orders under section 153A of the I.T Act against all the assessees. Therefore, all assessment orders are vitiated for want of valid approval under section 153D of the I.T. Act and as such no addition could be made against all the assessees. In view of the above, we set aside the Orders of the authorities below and quash the assessment orders passed under section 153A of the I.T. Act as well as the impugned appellate Order. Resultantly, all additions are deleted. The additional grounds are allowed. In view of the above findings, the other issues on merits are left with academic discussion only. Accordingly, all the appeals of the Assessees are allowed." 41. In the light of the above, we note, in the present case ....
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....B(5) of the Act is more in the nature of a ministerial function because he can pass the order only in accordance with the directions of the Inspecting Assistant Commissioner. He cannot vary or depart from the directions given by the Inspecting Assistant Commissioner. Moreover, the requirements of section 144B of the Act re mandatory. The Income-tax Officer has no option but to follow the same. He cannot make the final order on the basis of the draft order without forwarding the same to the Inspecting Assistant Commissioner along with the objections and without obtaining the directions of the Inspecting Assistant Commissioner. An assessment made by the Income-tax Officer in violation of the provisions of section 144B of the Act would be an assessment without jurisdiction. In the instant case, the admitted position is that on receipt of the draft Akil Gulamali Somji A.Y. 2001- 02 to 2004-05 Page of 14 order of assessment, the assessee did file objections and the Income-tax Officer completed the assessment himself on the basis of the draft order without forwarding the draft order and the objections to the Inspecting Assistant Commissioner and obtaining directions from him. Such an ord....
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....e draft assessment order. Therefore, the ratio laid down by the Hon'ble High Court of Bombay in the case of Mrs. Ratnabai N.K. Dubhash (supra) is applicable to the facts on hand and thereby, the final assessment order dated 30-09-2021 passed u/s. 153A r.w.s 144 of the Act is liable to be quashed. 44. Further, the ld.AR placed on record the decision of Hon'ble High Court of Bombay in the case of Akil Gulamali Somji reported in Income Tax Appeal (L) Nos. 1416 to 1419 of 2012 and submits the Hon'ble High Court rejected the alternative submission of Revenue in setting aside to the file of AO for obtaining approval, the relevant portion of which is reproduced herein below for ready reference: "2) The question of law as framed proceeds on the basis that the approval of the Joint Commissioner of Income Tax under Section 153D of the Income Tax Act, 1961 has not been obtained. This is factually incorrect as the impugned order dated 30/3/2012 in Para 7 records as under : "In an alternative submission, the learned D.R. requested to set aside the file to the A.O. or learned CIT(A), so that defect in not obtaining the approval of the Joint Commissioner of Income Tax can be cured". 45. I....
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....similar to ground No. 1 raised in IT(SS)A No. 11/PUN/2023 for A.Y. 2014-15, wherein, we allowed ground No. 1 raised by the assessee and held approval dated 30-09-2021 is invalid for the reason of non-mentioning of DIN, consequently, quashed the final assessment order dated 30-09-2021 passed in pursuance of such invalid approval dated 30-09-2021. The view taken by us in ground No. 1 in IT(SS)A No. 11/PUN/2023 is equally applicable to ground No. 1 in IT(SS) No. 12/PUN/2023. Accordingly, ground No. 1 raised by the assessee is allowed. 52. In view of our decision in ground No. 1 in quashing final assessment order dated 30-09-2021, ground Nos. 2 to 6 becomes academic, requiring no adjudication. 53. In ground No. 7 the assessee has assailed levy of interest u/s. 234A of the Act. The levy of interest u/s. 234A is consequential. Accordingly, ground No. 7 is dismissed. 54. In the result, the appeal of the assessee is allowed. IT(SS)A Nos. 13/PUN/2023 for A.Y. 2016-17 by the assessee. 55. We find ground No. 1 raised in this appeal is similar to ground No. 1 raised in IT(SS)A No. 11/PUN/2023 for A.Y. 2014-15, wherein, we allowed ground No. 1 raised by the assessee and held approval date....
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....n IT(SS) No. 15/PUN/2023. Accordingly, ground No. 1 raised by the assessee is allowed. 64. In view of our decision in ground No. 1 in quashing final assessment order dated 30-09-2021, ground Nos. 2 to 7 becomes academic, requiring no adjudication. 65. In ground No. 8 the assessee has assailed levy of interest u/s. 234A of the Act. The levy of interest u/s. 234A is consequential. Accordingly, ground No. 8 is dismissed. 66. In the result, the appeal of the assessee is allowed. IT(SS)A Nos. 16/PUN/2023 for A.Y. 2019-20 by the assessee. 67. We find ground No. 1 raised in this appeal is similar to ground No. 1 raised in IT(SS)A No. 11/PUN/2023 for A.Y. 2014-15, wherein, we allowed ground No. 1 raised by the assessee and held approval dated 30-09-2021 is invalid for the reason of non-mentioning of DIN, consequently, quashed the final assessment order dated 30-09-2021 passed in pursuance of such invalid approval dated 30-09-2021. The view taken by us in ground No. 1 in IT(SS)A No. 11/PUN/2023 is equally applicable to ground No. 1 in IT(SS) No. 16/PUN/2023. Accordingly, ground No. 1 raised by the assessee is allowed. 68. In view of our decision in ground No. 1 in quashing final asse....