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TMI Blog2019 (9) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... its mind then there was no reason to incorporate even for approval of the superior authority and it would not have been worded in the mandatory manner. Because the language used in the provision is in the form of mandatory direction therefore it cannot be argued that even if the approval is granted without application of mind then also it is valid in the eyes of law Civil and penal consequences would flow from completion of assessment and therefore if the approval is denied then crystallize right will accrue in favour of the assessee and the assessee will have a right to assert that the assessment made is bad in law. Similarly if the approval is granted without application of mind which is discernible from the record then the said approval loses its character to be approval in the eyes of law. We had already mentioned that the assessee is not entitled to any personal hearing before passing of the approval order by the authority under section 153D of the Act. But, while holding this in favour of the revenue, we cannot close our eyes and close the right of the assessee to challenge the approval granted by the superior authority in violation of the basic fundamental principle e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the direction of the assessing officer to pass the assessment order and the same cannot be rectified or improved by the revenue in the 2nd round of litigation. Undoubtedly the assessee is contesting the matter from the date of search before various forms including before the Hon ble High court and the assessee cannot be made to run again for many more years for contesting the litigation. In view of these peculiarity of the facts we are of the opinion that 2nd inning for rectifying or removing the defects cannot be granted to the revenue. - Decided in favour of assessee - ITA No. 263 to 267/Agr/2017, ITA No. 260 to 262/Agr/2017, ITA No. 272 & 273/Agr/2017, ITA No. 268/Agr/2017, ITA No. 276/Agr/2017, ITA No. 269/Agr/2017 - - - Dated:- 18-9-2019 - Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member For the Assessee : Sh. Anil Verma, Advocate And Sh. Anurag Sinha, Advocate For the Revenue : Sh. Waseem Arshad, Sr. DR ORDER PER BENCH, J.M.: This bunch of appeals are directed by the assessee and the Revenue, feeling aggrieved by the orders of the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (CC)/Agra/DSJ Group/2013- 14/1560 dated 21/03/2014 which was reported to be received in this office at 05:10 PM on 27/03/2014 alongwith draft assessment orders pertaining to the cases as detailed in the said letter seeking approval U/s 153D of the Income Tax Act, 1961. In this regard it is noticed that prior to submission of these draft assessment orders, no discussion has been made at any stage of proceedings with the undersigned including at the stage of preparation / finalization of questionnaires U/s 142(1) of the Income Tax Act, 1961. Accordingly, keeping in view the limitation aspect in the matter and also the fact that only 02 working days are left in this financial year and also the fact that approval is sought by submitting the draft assessment order through speed post including the fact that relevant case records are also not enclosed, approval is accorded in the following 69 cases, solely relying on your undertaking to the effect that while completing the assessment as per draft assessment order, all the observations made in the appraisal report relating to examination / investigation as also the issues identified in the course of examination of seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the basis of the above, it was submitted that the additional CIT before granting approval has not applied his mind and has approved the draft assessment order etc. without himself examining the record of the assessment. 2.3 The ld. AR for the assessee had submitted that the approval envisaged under section 153D, is not merely an administrative approval but there is a statutory duty on the higher authorities to apply its mind before granting the approval. It was submitted that this duty is not required to be mechanically discharged by the officers as there is inbuilt purpose to safeguard the interest of the citizen s. 2.4 it was submitted that the plain reading of the additional CIT observation clearly shows the total nonapplication of mind by the additional CIT and he had even not bother to look into the draft and the documents and close thereto. It was submitted that the additional CIT was required to independently applied mind before according the approval, though there may not be set formula for inferring the application of mind but nonetheless in the present case the facts are so glaring that additional CIT himself has recorded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore the approval cannot be formed basis of challenging the assessment order. 3.2 He further submitted that it administrative approval granted by the supervisory authority is not justifiable. He relied upon SpaceWood Furnishers Private Limited of the honourable Supreme Court. 3.3 it was submitted by the learned DR that Bombay High Court in the matter of CIT versus RatanbaiN.K.Dubash 230 ITR 495 had held as under: the power to determine the income vest in the authority exercising the quasijudicial function, and it is in violation of principle of quasi-judicial function that can render the assessment invalid. The act of administrative approval by additional CIT does not take away the quasi-judicial powers which still vests in AO and therefore administrative act cannot invalidate the assessment 3.4 The DR had submitted that the subject matter of the challenge in the present appeal is assessment order for which the jurisdictional fact is the existence of approval, therefore the approval itself cannot be the subject matter of adjudication. He had further relied upon the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Board of Direct Taxes, as urged by the learned Counsel for the Assessee, bereft of the statutory provisions in Section 153D of the Act cannot bind the approving Authority, namely, the Joint Commissioner to comply with the principles of natural justice by the said Authority. The Assessing Authority undoubtedly has of course given adequate and reasonable opportunity of hearing to the Assessee and all objections on merits were considered by him. Merely because, Section 153D of the Act requires a prior approval of the Draft Assessment Order by the higher Authority, namely, the Joint Commissioner in the present case, because the Assessment Order was passed by the Authority below the rank of the Joint Commissioner, the provisions of the Act do not mandate that a fresh round of opportunity of hearing should Date of Judgment 28-06-2018, I.T.A. No.37/2017 Gopal S. Pandit Vs. The Commissioner of Income Tax Another be given to the Assessee by such Authority, namely, Joint Commissioner also even for approving Draft Assessment Order. 4.1 Similarly, Gujrat High Court in the matter of Pr. CIT v. Sunrise Finlease P. Ltd. [2018] 89 taxmann.com 1 (Gujarat)Vin para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or approval of the Joint Commissioner has to be regarded as mandatory in nature. 11. In the facts of the present case, as the assessment order has been passed by an Income Tax Officer, the requirement of obtaining the prior approval of the Joint Commissioner under section 153D of the Act was absolute. The Tribunal, however, has recorded a finding of fact that there is nothing on record to indicate that the prior approval of the Joint Commissioner was obtained. As a natural corollary therefore, in the absence of the requirement of prior approval of the Joint Commissioner being satisfied, the whole proceeding would stand invalidated. The Tribunal was, therefore, wholly justified in holding that the impugned order of assessment would stand vitiated in view of non-compliance of the provisions of section 153D of the Act. On this count also, therefore, the appeal, does not merit acceptance. 4.2 Similarly in the matter of AkilGulamaliSomji20 taxmann.com 380 (Pune) tribunal had held as under 11. We have considered the above submissions and have gone through the decisions relied upon by the parties in view of orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above provisions u/s. 153 D have been laid down under the heading prior approval necessary for assessment in cases of search or requisition . This heading itself suggests that obtaining prior approval the assessment in cases of search or requisition is necessary. We further note that the provisions u/s. 153D start with a negative wording no order of assessment or re-assessment supported by the further wording shall makes the intention of the Legislature clear that compliance of Sec. 153D requirement is mandatory. No universal rule can be laid down as to whether mandatory enactment shall be considered directory or obligatory with an implied nullification for disobedience. As per the decision of Hon'ble Supreme Court in the cases of Banwari Lal Agarwalla v. State of Bihar AIR 1961 SC 849 ; Raza Buland Sugar Co.Ltd. , v. Municipal Board AIR 1965 SC 895 if object of the enactment will be benefited by holding the same directory, it will be construed as mandatory, whereas if by holding it mandatory, serious general inconvenience will be created to nascent persons without very much further object of enactment, the same will be construed as directory. But all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT. (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.) The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself. Chapter XIVB also deals with assessment of search cases. Sections 153A, 153B 153 C have been introduced to Chapter XIV procedure for assessment w.e.f. 1.6.2003 by the Finance Act 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer completed the assessment himself on the basis of the draft order without forwarding the draft order and the objections to the Inspecting Assistant Commissioner and obtaining directions from him. Such an order, on the face of it, is beyond the powers of the Income-tax Officer under section 143 read with section 144B of the Act and, hence, without jurisdiction. The Tribunal, in our opinion, was, therefore, justified in its conclusion that the assessment was liable to be annulled. It was right in holding that the assessment order passed by the Income-tax Officer the instant case without reference to the Inspecting Assistant Commissioner had rightly been annulled by the Commissioner of Income-tax (Appeals). In view of the above, we answer the question referred to us accordingly in favour of the assessee and against the Revenue. This reference is disposed of accordingly with no order as to costs. 14. In the case of SPL's Siddharth Ltd. ( Supra ), before the Hon'ble Delhi High Court, the facts were that notice issued by the A.O u/s. 147 r.w.s 148 of the Act for re-opening the assessment for the A.Y. 2002-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n contained u/s. 275 of the Act would attenuate or curtail the powers of CIT, vested in him u/s. 263 of the said Act. The Hon'ble Madras High Court was pleased to hold that it is not hit by provisions of Sec. 275 of the Act. In PrabhudayalAmichand ( Supra ), the Hon'ble High Court of Madhya Pradesh with reference to Sec. 271(1)(c) of the Act was pleased to hold that a procedural irregularity not involving the question of jurisdiction can be cured. It is not helpful to the revenue in the present case because in the present case, the A.O was having no jurisdiction to frame assessment order without prior approval of JCIT as necessary requirement to comply with u/s. 153D of the Act. In the case of DamoderdasMurarilal ( Supra ), the Hon'ble High Court did not approve the view of the Tribunal in holding that in view of Clause (b) of Sec. 251(1) of the Act, the first appellate authority had no power of remand and therefore, the procedural illegality would not be corrected by recourse to remanding the case to the ITO. Here in the present case, as we have already discussed, and also cited the recent decision of Hon'ble jurisdictional Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax before making an order approving the order of assessment made by the Assessing Officer in exercise of his powers under Section 158BG(a) need not give a hearing to the assessee . Similarly, in the case of Shree Rama Medical and Surgical Agencies ( supra ), it was observed that : ... The provisions of Section 158BG do not contemplate that the Commissioner should come face to face with the assessee while according approval for the proposed assessment under Chapter XIB-B of the Act. Apart from the language of the provision, the nature of the functions confided to the Commissioner is inconsistent with the application of the principles of natural justice. 4.5 Similar decision was rendered by the Hon ble Karnataka High Court in the matter of RishabhchandBhansail, 136 Taxman 579, where the Karnataka High Court had held that the approval granted by the Commissioner u/s. 158BG is an administrative approval and there is no necessity of giving hearing to the assessee. For the purpose of that, we reproduce paragraph No. 4 to 4.4 which is to the following effect : 4. Section 158BG provides that no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es an appeal against the order of assessment; and thirdly the order passed by the Joint Commissioner granting previous approval under the proviso to section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does not decide upon any rights of the assessee. The Joint Commissioner, while examining the matter under the proviso to section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV-B. 4.3 In V.C. Shukla v. State AIR 1980 SC 962, the Supreme Court gave the following example : In cases where law requires sanction to be given by the appointing authority before a prosecution can be launched against a Government servant, it has never been suggested that the accused must be heard before sanction is accorded. . . . 4.4 Where a statute requires the Executive to take an administrative action after being satisfied or after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144BA.] [ Authority competent to make the block assessment. 158BG. The order of assessment for the block period shall be passed by an Assessing Officer not below the rank of an Assistant Commissioner 7[or Deputy Commissioner] or an Assistant Director 7[or Deputy Director], as the case may be : Provided that no such order shall be passed without the previous approval of- ( a ) the 8 [Principal Commissioner or] Commissioner or 8 [Principal Director or] Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997; ( b ) the 9 [Joint] Commissioner or the 9 [Joint] Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997.] 4.7 in view of the above and also on account of the fact that the issue had alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval order by the authority under section 153D of the Act. But, while holding this in favour of the revenue, we cannot close our eyes and close the right of the assessee to challenge the approval granted by the superior authority in violation of the basic fundamental principle enshrined in the income tax Act as well as in general law whereby, it has been held that the authority while granting the approval should not grant the approval mechanically without even looking into the document and without applying its mind. 4.10 The right to challenge the approval, is also based on various principal including the non-application of mind by the superior authority or granting approval by an authority which is not vested with the power to grant the approval or the approval granted was after the passing of the assessment order in all these cases and any other cases the direction of the tribunal and also the other courts are not barred and the tribunal and the other courts can very well examine the approval granted by the superior authority in the context of our aforesaid observation and also the other preparation of law laid down by the high courts and the tribunal . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 difficult to understand, there has to be a genuine and honest attempt on the part of the Assessing Officer to understand accounts maintained by the assessee; appreciate the entries made therein and in the event of any doubt, seek explanation from the assessee. But opinion required to be formed by the Assessing Officer for exercise of power under the said provision must be based on objective criteria and not on the basis of subjective satisfaction. There is no gainsaying that recourse to the said provision cannot be had by the Assessing Officer merely to shift his responsibility of scrutinizing the accounts of an assessee and pass on the buck to the special auditor. Similarly, the requirement of previous approval of the Chief Commissioner or the Commissioner in terms of the said provision being an inbuilt protection against any arbitrary or unjust exercise of power by the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit. 22. We shall now deal with the submission of learned counsel appearing for the revenue that the order of special audit is only a step towards assessment and being in the nature of an inquiry before assessment, is purely an administrative act giving rise to no civil consequence and, therefore, at that stage a predecisional hearing is not required. In Rajesh Kumar's case (supra) it has been held that in view of section 136 of the Act, proceedings before an Assessing Officer are deemed to be judicial proceedings. Section 136 of the Act stipulates that any proceeding before an Income-tax Authority shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of Indian Penal Code, 1860 and also for the purpose of section 196 of I.P.C. and every Income-tax Authority is a court for the purpose of section 195 of Code of Criminal Procedure, 1973. Though having regard to the language of the provision, we have some reservations on the said view expressed in Rajesh Kumar's case (supra), but having held that when civil consequences ensue, no distinction between quasijudicial and administrative order survives, we deem it unnecessary to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirement of observance of principles of natural justice is to be read into the said provision. Accordingly, we reiterate the view expressed in Rajesh Kumar's case (supra). 4.13. Further, the coordinate bench in the matter of ShreelekhaDamani 88 Taxmann.com 383 had held as under : 11.9 This decision of the Tribunal was considered by Allahabad Bench of the Tribunal in the case of Verma Roadways v. Asstt. CIT[2000] 75 ITD 183 wherein also the assessee-appellant has challenged the validity of approval to the assessment order accorded by the CIT Kanpur. The Tribunal at Para-47 has held as under: Coming to the aspect of the application of mind, while granting approval, we are of the view that requirement of approval presupposes a proper and thorough scrutiny and application of mind. In the case of Kirtilal Kalidas Co. (supra), the I.T.A.T Madras Bench '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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval'. 12. Coming to the facts of the case in hand in the light of the analytical discussion hereinabove and as mentioned elsewhere, the Addl. Commissioner has showed his inability to analyze the issues of draft order on merit clearly stating that no much time is left, inasmuch as the draft order was placed before him on 31.12.2010 and the approval was granted on the very same day. Considering the factual matrix of the approval letter, we have no hesitation to hold that the approval granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid judgment. 4.15 we may mention that in the approval granted by additional Commissioner of income tax on 27 March 2014 it is clearly mentioned that he has not applied its mind and he has not even look into the draft assessment order and he solely relied upon the undertaking of the assessing officer who had completed the assessment proceedings. He has also not gone into the record of investigation and seized material and has granted the approval without any meaningful discussion and going through the record. In our view such a practice is required to be deprecated and we deprecate the same. It is the duty of the additional Commissioner of income tax to apply his mind while according the approval and should not grant approval in a callous and clandestine manner. There is a statutory duty on the additional Commissioner of income tax with a corresponding obligation on him to examine the record and thereafter accord the approval. The reason for granting the approval may not be subject matter of the proceedings but the manner and the material on the basis of which the approval was granted can always be examined by the tribunal and also by the other courts to come to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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