TaxTMI 
TaxTMI 
TaxTMI 
2024 (4) TMI 1207
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....he assessee has challenged the validity of the impugned assessment orders on the ground of invalid approval granted u/s 153D of the Income-tax Act, 1961. Since the issue raised in these grounds is a purely legal and jurisdictional issue, going to the root of the matter, we proceed to adjudicate it at the very outset. For deciding this issue, few relevant facts need to be discussed. 2.1 The assessee, a resident corporate entity, stated to be engaged in the business of construction and sale of real estate properties. As stated by the Assessing Officer, the main objects of the assessee, in brief, are to carry on the business of properties, to purchase, take on lease, hire or acquire, sale and estates, land and buildings, business complex or such other interests in immovable properties. 2.2 Be that as it may, pursuant to a search and seizure operation, carried out u/s 132 of the Act on the assessee, proceedings u/s 153A of the Act were initiated against the assessee. In course of the assessment proceedings, assessee's case was referred for Special Audit in terms of Section 142(2A) of the Act. As observed by the Assessing Officer, assessee did not comply with the queries raised by the....
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.... accordance with law, is invalid. Consequently, the assessment orders passed in pursuance to such approval are also invalid. In this context he drew our attention to the decision of the coordinate Bench in case of MDLR Hotels Pvt. Ltd. & ors. Vs. Assistant Commissioner of Income Tax & ors., (2023) 67 CCH 0100. 3.1 Proceeding further, he submitted, the aforesaid view expressed by the Tribunal has been affirmed by the Hon'ble Delhi High Court in case of PCIT vs. Anuj Bansal 2023 SCC OnLine Del 4159; and in case of PCIT vs. Anuj Bansal ITA 8/2024, order dated 28.03.2024. He also relied on the following decisions: - PCIT v. Subodh Agarwal [2023] 149 taxmann.com 373 (Allahabad); - ACIT v. Serajuddin & Co. [2023] 150 taxmann.com 146 (Orissa). 4. Per contra, learned Departmental Representative strongly relied upon the observations of learned First Appellate Authority. 5. We have considered rival submissions in the light of judicial precedents relied upon and perused the materials on record. As discussed earlier, the preliminary issue arising for consideration is whether the approval granted u/s 153D of the Act is in terms with the provisions contained therein and musters judicial s....
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....idences brought on record. We have also gone through each and every approval granted by the Additional Commissioner of Income tax, Central Range 2, New Delhi vis-a-vis, each and every proposal made by the DCIT, Central Circle-15, New Delhi. 14. The issue which we have to decide is, can these approvals be treated as fulfilling the mandate of provisions of section 153D of the Act vis-à-vis legislative intent of the said section in the statute. Section 153D of the Act reads as under: "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 1534 or the assessment year referred to in clause (b) of sub-section (1) of section 1538, 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 may be, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA." 15. The Legislative intent can be gathered from the CBDT Circular No. 3 of 2008 dated 12.3.2008 which re....
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....of 37 assessment orders as exhibited at pages 138 and 139. Approval dated 18.03.2013 is in respect of 54 assessment orders as exhibited at pages 140 and 141. Approval dated 21.03.2013 is in respect of 24 assessment orders as exhibited at pages 142 and 143 and approval dated 25.02.2013 is in respect of 69 assessment orders as per exhibits in the Convenient Compilation. 19. Thus, the worthy Additional Commissioner of Income tax, Central Range 2, New Delhi gave approval to 246 assessment order by a single approval letter U / s 153D of the Act by mentioning as under: "The above draft orders, as proposed, are hereby accorded approval with the direction to ensure that the orders are passed well before limitation period. Further, copies of final orders so passed be sent to this office for record." 20. In our considered opinion, there is no whisper of any seized material sent by the Assessing Officer with his proposal requesting the approval u/s 153D of the Act. All the requests for approval are exhibited at pages 123 to 135 of the Convenience Compilation. 21. Even the approval granted by the Additional Commissioner of Income tax, Central Range - 2, New Delhi does not refer to any ....
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....er words, the twin conditions of "nature and complexity of the accounts" and "the interests of the revenue" are the prerequisites for exercise of power under section 142(2A) of the Act. Undoubtedly, the object behind enacting the said provision is to assist the Assessing Officer in framing a correct and proper assessment based on the accounts maintained by the assessee and when he finds the accounts of the assessee to be complex, in order to protect the interests of the revenue, recourse to the said provision can be had. The word "complexity" used in section 142(2A) is not defined or explained in the Act. As observed in Swadeshi Cotton Mills Co. Ltd. v. CIT [1988] 171 ITR 634 1 (All.), it is a nebulous word. Its dictionary meaning is: "The state or quality of being intricate or complex or that is difficult to understand. However, all that is difficult to understand should not be regarded as complex. What is complex to one may be simple to another. It depends upon one's level of understanding or comprehension. Sometimes, what appears to be complex on the face of it, may not be really so if one tries to understand it carefully." Thus, before dubbing the accounts to be complex or ....
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....e granted only when the materials for appointment of the extraordinary procedure is required to be taken by the Assessing Officer. The Assessing Officer, therefore, was required to place all materials before the Commissioner of Income-tax or the Chief Commissioner of Income-tax, as the case may be, to show that he intends to take recourse to the said provision having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue. No such materials had been placed before the Chief Commissioner of Income-tax. It further appears that even no previous approval was sought for but merely a proposal was placed for perusal of the Chief Commissioner of Income-tax and for appointment of a special auditor. The Chief Commissioner of Income-tax, therefore, did not apply his mind at all as regards the prerequisite for grant of previous approval and mechanically appointed Sri G. P. Agarwal, as a special auditor. The said order depicts a total non-application of mind on the part of the Assessing Officer as also the Chief Commissioner of Income-tax." 28. Another section relevant to the facts in issue is Sec. 158BG which read as under: "The order of assessme....
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....ench '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." 29. 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 Amarial Bajaj in ITA No. 611/M/2004 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. 258 ITR 317 which read as under: "The proviso to sub-section (1) of section151 of the Act provides that after the expiry ....
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....ore us about the manner in which the approval to the draft assessment orders was granted under Section 153D for the assessment proceedings, by two letters dated 30.12.2017 and 31.12.2017, in 123 cases placed before the approving authority in two days, we are required to examine as to whether a substantial question of law arises for consideration before us so as to admit the present appeals. To answer the same, we are required to go through the relevant provisions of the Income Tax Act. Section 132 provides the procedure for search and seizure operations in consequence of the information in possession of the Income Tax Authorities. Section 153A prescribes assessment in case of search or requisition. Section 153A provides that in the case of a person where a search is initiated under Section 132, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years) referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other....
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..... It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of the Act, requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise of ....
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....held therein 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 above discussion made in the judgement of Tribunal dated 3.08.2021 in the case of Navin Jain Vs. Dy. C.I.T. (Supra) has been relied by the Tribunal, in the instant case, to arrive at the conclusion that the mechanical approval under Section 153D of the Act would vitiate the entire proceedings in the instant case. For the reasoning given in the case of Navin Jain (Supra), as extracted in the impugned order passed by the Tribunal, as noted above, there cannot be any two opinion to the requirement of prior approval of the Joint Commissioner to the draft assessment order prepared by the Assessing Officer, as per the mandate of Section 153D of the Income Tax Act. The approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, 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 admit....
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.... one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. As the facts are admitted before us, the questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeals being in the nature of second appeal. No substantial question of law arises for consideration before us. The Appeals are dismissed being devoid of merit." 31. In the present batch of appeals also, the Additional CIT has given approval in batches of 69, 62, 37, 54 and 24 assessment orders. As observed by the Hon'ble Allahabad High Court [supra) it is humanly impossible to go through the records of more than 50 cases in one day to apply independent mind to appraise the material before the Assessing Officer. Therefore, we have no hesitation to hold that the approval was mechanical." 5.4 Keeping in perspective the legal position enunciated in the judicial precedents discussed above, if we examine the facts of the present ....
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....bsp;-DO 12 M/S MM BUILDCON P LTD AAECM0924E 2006-07 -DO 13 M/S MM BUILDCON P LTD AAECM0924E 2007-08 -DO 14 M/S MM BUILDCON P LTD AAECM0924E 2008-09 -DO 15 M/S OMSHIV BUILDTECH P LTD AAACO7989B 2007-08 -DO 16 M/S OMSHIV BUILDTECH P LTD AAACO7989B 2008-09 -DO 17 M/S MDLR DEVELOPERS & PROMOTERS P LTD AAECM0201E 2005-06 -DO 18 M/S MDLR DEVELOPERS & PROMOTERS P LTD AAECM0201E 2006-07 -DO 19 M/S MDLR DEVELOPERS & PROMOTERS P LTD AAECM0201E 2007-08 -DO 20 M/S MDLR DEVELOPERS & PROMOTERS P LTD AAECM0201E 2008-09 -DO 21 M/S NAGESHWAR BUILDERS P LTD AACCN0116B 2005-06 -DO 22 M/S NAGESHWAR BUILDERS P LTD AACCN0116B 2006-07 -DO 23 M/S NAGESHWAR BUILDERS P LTD AACCN0116B 2007-08 -DO 24 M/S NAGESHWAR BUILDERS P LTD AACCN0116B 2008-09 -DO The above draft orders as proposed are hereby accorded approval with the direction to sure that orders are passed well before the limitation. Further, the copies of the final orders passed be sent to this office for records. Sd/- (Shashi Bhushan Shukla) Addl. Commissioner of Income Tax, Central Range-2, New Delhi." 5.5 A careful rea....