2021 (3) TMI 555 - AT - Income Tax

Validity of assessment - Jurisdiction - Approval by the JCIT as required under section 153D obtained or not? - HELD THAT - Correspondence between the A.O. on one hand and the JCIT on the other hand and the letter addressed by the JCIT to the Commissioner clearly shows that it was at the stage of discussion and the JCIT could not able to make his mind. Ultimately he simply says that due to shortage of time as he was holding charges for six ranges, it is not possible for him to go into the material deep, therefore, he approved the proposal technically as required u/s 153D of the Act, immediately, after the AO brings to his notice that the assessment is getting time barred. From the communications, it is obvious that the JCIT has not applied his mind even though there was a discussion between the A.O. and JCIT, the JCIT could not make his mind. Hence, this kind of casual approval/technical approval without going to the matter and without applying his mind to the material available on record is not an approval at all. Therefore, A.O. has no jurisdiction to pass the assessment order. In other words, the assessment order passed by A.O. as confirmed by C.I.T.(A) is void, nullity, non-est, hence, cannot be stand in the eye of law. An irregularity in the assessment order may be rectified by remitting back the matter to the assessment. In the case on hand it is not an irregularity in the assessment order, it is a jurisdictional error. The A.O. has no jurisdiction to pass the assessment order unless the JCIT granted approval. This Tribunal is of the considered opinion that this is not a rectifiable error since it is a jurisdictional error and not an irregularity in the assessment proceeding. Moreover, even if the matter is remitted back, the AO cannot do anything better, since time limit provided under the Act has already expired. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below were set-aside and the entire assessment order as confirmed by C.I.T.(A) are quashed. Order of assessment or reassessment passed by the AO below the rank of Joint Commissioner - It is not in dispute that the AO is of the rank of the Assistant Commissioner, i.e., below the rank of the Joint Commissioner. Similarly, the year of search being f.y. 2009-10, the assessment year under reference, i.e., AY. 2007-08, is that specified in s. 153D. The assessment order under reference is, thus, not valid in law inasmuch as no order of assessment or reassessment could be passed by the AO below the rank of Joint Commissioner for any of the years specified in section 153D, except with the approval of the Jt. CIT.

Summary

Issues Involved:
1. Approval by JCIT under Section 153D of the Income Tax Act, 1961.
2. Validity of the assessment order without proper approval.
3. Jurisdictional error and its consequences.

Issue-wise Detailed Analysis:

1. Approval by JCIT under Section 153D of the Income Tax Act, 1961:
The primary issue raised by the assessee was the validity of the assessment order under Section 153D of the Income Tax Act, 1961. The representative for the assessee argued that the JCIT did not apply his mind to the material on record and only provided a technical approval due to a shortage of time. This was evidenced by the JCIT's letter stating that he was holding charges for six ranges and could not go into the details. The assessee relied on various tribunal decisions, emphasizing that approval under Section 153D is not a mere formality but a mandatory requirement.

2. Validity of the assessment order without proper approval:
The representative for the revenue contended that despite the JCIT's limited time, there were discussions between the A.O. and JCIT, indicating some level of application of mind. The revenue cited judgments to argue that procedural lapses in machinery provisions do not render the assessment order void if the substantial requirements are met. However, the tribunal noted that the provision under Section 153D clearly states that no assessment order shall be passed without the JCIT's prior approval, highlighting the importance of this approval as a safeguard in search cases.

3. Jurisdictional error and its consequences:
The tribunal examined the correspondence between the A.O. and JCIT, revealing that the JCIT did not fully apply his mind to the assessment order due to time constraints. The tribunal concluded that such a technical or casual approval does not meet the statutory requirement under Section 153D. Consequently, the A.O. lacked jurisdiction to pass the assessment order, rendering it void, nullity, and non-est in the eyes of the law. The tribunal emphasized that this was a jurisdictional error, not a mere irregularity, and could not be rectified by remitting the matter back to the A.O. due to the expiration of the time limit for assessment.

Separate Judgment by Accountant Member:
The Accountant Member concurred with the Judicial Member's conclusion but provided additional reasoning. He emphasized that the approval under Section 153D is essential to ensure a balanced assessment and prevent arbitrary assessments. The Accountant Member noted that the JCIT's approval was not valid as it did not reflect genuine satisfaction with the draft assessment order. He highlighted that the approval must be more than a mere formality and must involve a thorough review of the assessment order. The Accountant Member also pointed out that the statutory provision's mandatory nature means that any assessment order passed without proper approval is invalid.

Conclusion:
The tribunal set aside the orders of both the lower authorities and quashed the entire assessment order as confirmed by the CIT(A). The appeal of the revenue was dismissed, and the cross-objection of the assessee was allowed. The tribunal's decision underscores the critical importance of proper approval under Section 153D, highlighting that any deviation from this requirement results in a jurisdictional error, rendering the assessment order invalid.