2019 (7) TMI 1659 - AT - Income Tax

Validity of assessment u/s 153A - non obtaining prior approval of the Joint Commissioner of Income Tax as required as required u/s 153D - correctness of JCIT s approval - HELD THAT - As decided in GEETARANI PANDA, MANJUSMITA DASH VERSUS ACIT, CIRCLE-2 (2) , BHUBANESWAR. 2018 (7) TMI 1888 - ITAT CUTTACK has taken into consideration the settled legal position on the very issue of sec. 153D approval in light of earlier provision sec. 158BG vis-a-vis sec. 153D (supra) to conclude that the JCIT is not to accord a mere mechanical approval but he has to apply his mind in order to ensure that the assessing authority conducts appropriate enquiry and investigation. And also that there is no undue or irrelevant addition made in the assessment in issue. We also find that the tribunal s leading decision in case of PCIT vs. Shreelekha Damani 2015 (8) TMI 1250 - ITAT MUMBAI stands affirmed in hon'ble Bombay high court in 2018 (11) TMI 1563 - BOMBAY HIGH COURT . We conclude in these facts and circumstances that the department has not proceeded to finalise the impugned assessment(s) in true light of the relevant mandatory provision sec. 153D of the Act mainly for the reason neither the Assessing Officer had sent anything more than the draft assessment order(s) nor the JCIT had an occasion to apply his mind to ensure the twin purpose of his statutory exercise (supra). We further make it clear that since the entire exercise was carried out from both the authorities end on the same date i.e. 28.03.2016 itself in absence all the corresponding records, the impugned approval does not satisfy the relevant parameters of law as settled in preceding case law. We therefore quash all the impugned assessment(s) framed u/s. 153A r.w.s. 143(3) for this precise reason alone. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of Assessments under Section 153A due to lack of appropriate approval under Section 153D.
2. Whether the Joint Commissioner of Income Tax (JCIT) applied his mind while granting approval.
3. Compliance with the Manual of Office Procedure.
4. Whether the assessments were barred by limitation.

Issue-wise Detailed Analysis:

1. Validity of Assessments under Section 153A due to lack of appropriate approval under Section 153D:
The primary issue raised by the assessees was the validity of the assessments framed by the Assistant Commissioner of Income Tax (ACIT) without obtaining prior approval from the JCIT as mandated under Section 153D of the Income Tax Act, 1961. The Revenue contended that the JCIT had duly accorded prior approval to the ACIT’s draft assessment on 28.03.2016. The approval letter from the JCIT was presented, which confirmed the approval of the draft assessment orders for the relevant assessment years.

2. Whether the Joint Commissioner of Income Tax (JCIT) applied his mind while granting approval:
The assessees argued that the JCIT had not applied his mind while granting approval, citing a tribunal decision in Akil Gulamali Somji vs. ITO, which emphasized that such approval must involve a thorough review and application of mind. The tribunal noted that the JCIT’s approval letter did not indicate that the necessary records were reviewed. The tribunal highlighted that the approval process was completed on the same day the draft orders were submitted, suggesting a lack of detailed scrutiny. The tribunal referenced decisions in Geetarani Panda vs. ACIT and other cases, reiterating that mechanical approval without proper application of mind renders the assessments invalid.

3. Compliance with the Manual of Office Procedure:
The assessees contended that the approval process did not comply with the Manual of Office Procedure. However, the tribunal found no merit in this argument, stating that the Manual is for internal circulation and does not have the binding force of CBDT instructions under Section 119 of the Act. The tribunal emphasized that the statutory provisions under Section 119 were not confirmed by the Manual, and thus, the argument was rejected.

4. Whether the assessments were barred by limitation:
The assessees also argued that the assessments were barred by limitation, as the assessment orders were served manually after the statutory period. The tribunal referred to its decision in M/s. Nidan vs. ACIT, which held that the assessment order must be communicated within the prescribed period to be valid. The tribunal found that the assessments were communicated after the statutory period, rendering them barred by limitation. Additionally, the tribunal noted that the JCIT’s approval letter indicated a lack of time for proper scrutiny, further invalidating the assessments.

Conclusion:
The tribunal concluded that the assessments were invalid due to the lack of proper approval under Section 153D, as the JCIT did not apply his mind while granting approval. The assessments were also barred by limitation as they were communicated after the statutory period. Consequently, all the impugned assessments were quashed, and the Revenue’s appeals were dismissed, while the assessees’ appeals and cross-objections were allowed. The tribunal emphasized the importance of thorough scrutiny and adherence to statutory requirements in the approval process to ensure valid assessments.