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2018 (7) TMI 1888 - AT - Income TaxValidity of assessment u/s 153A - order of assessment being issued after the statutorily permitted time is barred by limitation - order of assessment as approved u/s 153D by the Ld. Addl. Commissioner of Income Tax before completion of the assessment - Held that - In the instant case, it is not in dispute that though the impugned order of assessment is dated 31.3.2015 was issued and served manually only on 8.4.2015 on the Authorised Representative of the assessee. As relying on M/S. NIDAN, INFRONT OF DIG OFFICER VERSUS ACIT, CENTRAL CIRCLE-1, BHUBANESWAR 2018 (5) TMI 1024 - ITAT CUTTACK in the instant case, the communication process of the assessment was not initiated admittedly within the prescribed period of limitation, hence it did not become an order of assessment within the period of limitation. We, therefore, have no hesitation in holding that the impugned order of assessment is barred by limitation. Referring to the alleged approval letter dated 27.3.2015 of the Addl. CIT, Range-1, Bhubaneswar the provisions contained in Section 153D as enacted by the Parliament cannot be treated as an empty formality. The provision has certain purpose. The purpose behind the enactment of the above provision in the Statute by the Parliament are two folds. Firstly, the approval of the Senior Authority will ensure that the assessee is not prejudiced by the undue or irrelevant addition or assessment. Secondly, the approval by Senior Authority will also ensure that proper enquiry or investigation are carried out by the Assessing Authority. Thus, the above provision provides for mental application of a Senior Officer of the Department, which in turn, provides safeguard to both i.e. Revenue as well as the assessee. Therefore, this important provision laid down by the legislature cannot be treated as a mere empty formality. The same view was expressed in the case of Akil Gulamali Somji vs ITO 2012 (4) TMI 318 - ITAT, PUNE wherein, it was held that when the approval was granted without proper application of mind, the order of assessment will be bad in law, alsoconfirmed by HC 2013 (1) TMI 790 - BOMBAY HIGH COURT 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. We find that the approving authority has required the assessing authority to conduct further enquiry in respect of opening cash in hand. The Assessing Authority thereafter has never communicated his findings of the further enquiry to the Supervisory Authority and not taken the approval of justification of his findings. Thus, in our considered opinion, alleged approval letter dated 27.3.2015 of the Addl. CIT, Range- 1, Bhubaneswar does not constitute the approval which is envisaged by the provisions of section 153D - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order under Section 153A(a) without proper approval under Section 153D. 2. Whether the assessment order was barred by limitation. Detailed Analysis: 1. Validity of the Assessment Order under Section 153A(a) without Proper Approval under Section 153D: The appellants contested that the assessment orders passed under Section 153A(a) were invalid as they lacked proper approval under Section 153D. The CIT(A) observed that the assessment orders were approved by the Additional Commissioner of Income Tax before completion. The CIT(A) held that the approval process was not a mere formality and required the application of mind by the approving authority. The CIT(A) cited the case of "Smt. Shreelekha Damani Vs. Dy. CIT," where it was emphasized that the superior authorities should apply their minds to the materials on which the assessment is based. The appellants argued that the approval was granted mechanically without considering all relevant documents and submissions, as evidenced by the timeline of notices and submissions. The CIT(A) referred the matter to the Assessing Officer, who confirmed that the assessment orders were approved in principle by the Additional CIT. The CIT(A) found no merit in the appellants' argument, stating that the approval letter from the Additional CIT indicated that due process was followed. During the hearing, the appellants reiterated that the approval was not valid as it was granted before all necessary documents were reviewed. They relied on the Mumbai Tribunal's decision in "Smt. Shreelekha Damani vs DCIT," which highlighted the necessity of proper application of mind by the approving authority. The Departmental Representative argued that the approval was valid and cited the Additional CIT’s directive to verify the opening balance before finalizing the assessment. The Tribunal found that the approval process under Section 153D was not followed correctly, as the Additional CIT did not have adequate time to review the materials thoroughly. The Tribunal cited several cases, including "Smt. Indra Bansal & Ors vs ACIT," where approvals granted in a mechanical manner without proper application of mind were deemed invalid. Consequently, the Tribunal held that the assessment orders were void and bad in law due to the lack of proper approval under Section 153D. 2. Whether the Assessment Order was Barred by Limitation: The appellants argued that the assessment orders were barred by limitation as they were served after the statutory deadline. The CIT(A) rejected this argument, stating that the orders were completed on 31.03.2015 and served on 08.04.2015, which was within a reasonable timeframe. The CIT(A) cited several cases, including "CIT Vs. Kailasho Devi Burman," to support the view that the service of the order does not need to occur within the limitation period. The Tribunal, however, found merit in the appellants' argument. It referred to its own decision in "M/s. Nidan vs ACIT," where it was held that the assessment order must be communicated within the prescribed period of limitation to be valid. The Tribunal also cited the Karnataka High Court's decision in "CIT vs. B J N Hotels Ltd.," which emphasized that the order must be issued and beyond the control of the authority within the limitation period. In the present case, the Tribunal noted that the assessment orders were dated 31.03.2015 but were served only on 08.04.2015. The Tribunal held that the orders were barred by limitation as the communication process was not initiated within the prescribed period. Consequently, the Tribunal annulled the assessment orders on the grounds of being time-barred. Conclusion: The Tribunal allowed the appeals, holding that the assessment orders were invalid due to the lack of proper approval under Section 153D and were also barred by limitation. The other grounds of appeal on the merits of the additions were rendered academic and not adjudicated. The appeals were thus allowed, and the assessment orders were annulled.
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