2021 (4) TMI 986 - AT - Income Tax

Validity of assessment order us 153A - Approval by the JCIT as required under section 153D - Prior approval necessary for assessment in cases of search or requisition - As per assessee, no assessment order shall be passed unless it is approved by the JCIT - HELD THAT - From the 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 above 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. Appeals of the assessee stand allowed.

Summary

Issues Involved:
1. Validity of assessment orders under Section 153D of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) in the absence of proper approval by the Joint Commissioner of Income Tax (JCIT).
3. Consequences of technical or non-application of mind by the JCIT while granting approval.

Detailed Analysis:

1. Validity of Assessment Orders under Section 153D:
The primary issue revolves around the validity of the assessment orders passed under Section 153D of the Income Tax Act, 1961. The section mandates that no assessment or reassessment order shall be passed by an AO below the rank of Joint Commissioner without prior approval from the JCIT. The Tribunal emphasized that this approval is not a mere formality but a mandatory requirement, ensuring that a senior officer applies their mind to the material on record before granting approval.

2. Jurisdiction of the Assessing Officer (AO) in the Absence of Proper Approval by the JCIT:
The representative for the assessee argued that the JCIT did not apply his mind to the material available on record and granted only a technical approval. This lack of proper approval renders the AO's jurisdiction to pass the assessment order invalid. The Tribunal found that the JCIT's approval, given due to a shortage of time and holding charge of six ranges, was merely technical and did not involve a thorough examination of the material. Consequently, the assessment orders passed by the AO without proper approval were deemed void, non-est, and invalid.

3. Consequences of Technical or Non-application of Mind by the JCIT while Granting Approval:
The Tribunal scrutinized the correspondence between the AO and JCIT, revealing that the JCIT's approval was given without a detailed examination due to time constraints. The JCIT's letters indicated that the approval was granted to meet the technical requirement under Section 153D, without applying his mind to the material facts. This kind of casual or technical approval does not satisfy the statutory requirement, leading to a jurisdictional error. The Tribunal concluded that such an error is not rectifiable and renders the assessment orders void.

Separate Judgment Analysis:
In a separate but concurring judgment, the Accountant Member also agreed that the assessments failed for want of necessary approval under Section 153D. The member elaborated that the legislative intent behind Section 153D is to improve the quality of assessments in search and search-related cases by ensuring a senior officer's review. The JCIT's failure to provide a valid approval, citing workload and time constraints, defeats the purpose of the provision. The member emphasized that the approval must involve the JCIT's satisfaction with the draft assessment order, which was not evident in this case.

The Tribunal highlighted the mandatory nature of Section 153D, stating that non-compliance with this provision renders the assessment orders invalid. The Tribunal also noted that the AO becomes functus officio after forwarding the draft assessment order to the JCIT, and any subsequent actions must align with the JCIT's directions. The failure to obtain a valid approval within the prescribed time frame further invalidates the assessment orders.

Conclusion:
The Tribunal set aside the orders of both the lower authorities and quashed the entire assessment orders as confirmed by the Commissioner of Income Tax (Appeals). All the appeals of the assessee were allowed, emphasizing the importance of proper approval under Section 153D and the jurisdictional limitations of the AO in its absence.