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TMI Blog2021 (3) TMI 1414X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 assessing officer. In the case on hand it is not an irregularity in the assessment order, it is a jurisdictional error. 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. Decided in favour of assessee. - IT(SS)A No. 55/JAB/2014, 135/JAB/2014, 57/JAB/2014, 125 & 126/JAB/2014, 153/JAB/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achand Khatri vs. ACIT in ITA No. 21/Jab/2019 dated 17.01.2020. The Tribunal on identical set of facts found that unless the JCIT applied his mind to the material available on record while granting approval under section 153D of the Act. The technical approval, cannot be an approved at all. The ld. counsel for the assessee has also filed the copies of the decision of the Bombay Bench of this Tribunal in ACIT vs. Shreelekha Damani and Lucknow Benches of the Tribunal in AAA Paper marketing Ltd. vs. ACIT. 4. On the contrary, Smt. Neerja Pradhan, ld. representative for the revenue submitted that no doubt, the letter of the JCIT says that he was holding the charges of six ranges, therefore, it was not possible for him to go into the deep, however, finally he approved the draft assessment order as per technical requirement u/s 153D of the Act. Before this technical approval was given, according to ld. Departmental Representative there were discussions between the A.O. and the JCIT which is evident from the correspondence between the JCIT and the A.O. Referring to the copy of the letter addressed to the A.O. by the JCIT, the ld. DR submitted that there were discussions between the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e passed unless it is approved by the JCIT. In other words, the A.O. is prohibited from passing any assessment order without approval of the JCIT. The parliament in its wisdom thought it fit in cases of searches, a senior officer of the Department at the rank of the Joint Commissioner has to grant his/her approval before passing the assessment order. This provision of section 153D is not an empty formality. It has its own sanctity in the eye of law. In other words, unless the JCIT approves the proposal/draft assessment of the A.O. by applying his mind to the facts of the matter, the A.O. would not get jurisdiction to pass the assessment order. In other words, the AO will be vested with jurisdiction to pass assessment order only after the approval granted by JCIT u/s. 153D. Hence, the approval of JCIT is mandatorily requirement. 8. We have also carefully gone through the judgment of the Apex Court in Jai Prakash Singh (supra). This judgment of the Apex Court relate to service of notice on the legal heirs of deceased assessee. It is not a case of approval as required by statutory provision. Therefore, the Judgment of the Apex Court is not applicable to the facts of this case. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Lalit Kumar Mittal (HUF) 2004-05 to 2010-11 8. Suresh Kumar Mittal (HUF) 2004-05 to 2010-11 9. Vijay Kumar Mittal (HUF) 2004-05 to 2010-11 2. Due to shortage of time, as I am holding charge of six Ranges, it is not possible for me to go into the deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved u/s 153D as per technical requirement. Case records as received are returned herewith. 3. Please ensure passing of order, issue of demand notice and challan as also service before the limitation date. (Abhishek Shukla) Jt. Commissioner of Income Tax Range-Katni OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX RANGE-1, CR BUILDING, NAPIER TOWN, JABALPUR HOLDING ADDITIONAL CHARGE OF RANGE-II, JABALPUR RANGE-SATNA, KATNI, CHHINDWARA AND SAGAR F.No.JCIT/Range/Katni/Mittail/2011-12 Dated: 26.12.2011 To The Asstt. Commissioner of Income Tax, Circle, Katni Sub: Statutory approval of Draft Assessment order u/s 153D in the cases of different assesses of Mittal Group, Katni- Reg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.Trackway Securities Finance Pvt. Ltd. 2004-05 to 2010-11 6. Mittal Tractors Pvt. Ltd. 2004-05 to 2010-11 2. Due to shortage of time, as I am holding charge of six Ranges, it is not possible for me to go into the deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved u/s 153D as per technical requirement. Case records as received are returned herewith. 3. Please ensure passing of order, issue of demand notice and challan as also service before the limitation date. (Abhishek Shukla) Jt. Commissioner of Income Tax Range-Katni OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX RANGE-1, CR BUILDING, NAPIER TOWN, JABALPUR HOLDING ADDITIONAL CHARGE OF RANGE-II, JABALPUR RANGE-SATNA, KATNI, CHHINDWARA AND SAGAR F.No.JCIT/Range/Katni/Mittail/2011-12 Dated: 26.12.2011 To The Asstt. Commissioner of Income Tax, Circle, Katni Sub: Statutory approval of Draft Assessment order u/s 153D in the cases of different assesses of Mittal Group, Katni- Reg. Please refer to your letter No.ACIT/KTE/MITTAL/153D/11-12 dated 23rd Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ek Shukla) Jt. Commissioner of Income Tax Range-Katni OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX KATNI (MP) F.No.ACIT/Assessment/Approval/Mittal/2011-12 Dated: 22.12.2011 To The Joint Commissioner of Income Tax, Range-Katni, Katni(MP) Sub: Reply to your letter regarding approval of Draft Assessment order u/s 153A/143(3) in case of different assessee of Mittal Group, Katni- Reg. Ref: Your letter F.No.JCIT/R-KATNI/Mittal Group/11-12, dated 21/12/2011 Sir, Please refer to above, in this connection most respectfully and most humbly at my end, I see the following for the kind consideration of your honor that: 1. Directions as given to me, are not clear regarding to which particular case and to which particular assessment year, same are issued, for not making addition? 2. As per Manual of Office procedure, it is an established administrative procedure that in case where the additions as proposed by investigation wing, are considered unwarranted by the AO, then investigation wing has to be consulted compulsorily. It is presumed that necessary consultation has been made. If so, please provide me the copy of minutes recorded of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Investigation wing during the post search enquiry and also the fact that the letters issued by me during the assessment proceedings were received back unserved with the postal remark No such addressee . It is also relevant to mention that those shares were transferred back to the mittal family in later years. During the course of search, such share certificates, transfer forms, power of attorney etc. were seized and all these documents are formed part of the assessment order. In view of the position, the shares sold in a particular financial year and claimed to have repurchased by the family members were treated as the investment of the family members from undisclosed sources. This is the position in respect of all HUFs Individuals. Similar additions were made in the case of companies on protective basis as the amounts were found credited in their account. In view of the specific clarification, still you are in view of not making such additions, the same be clarified. 3. One of the issue raised by you is regarding share capital in various group companies of Mittal Group-It may be made clear that till 19/12/2011, the cases which you are referring, no draft orders in cases of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude the capital gain on sale of jewellery particularly in view of purity and date of acquisition. As regards the purchase of land in the name of Mr Kale, in spite of repeated opportunity, the assessee had not given any detail. In short, the point is clarified as- Mr. Kale is an Adivasi and as per the Govt. guidelines, the land of adivasis cannot be purchased by any other person except adivasi (except some exceptional cases.)In this case, the Mittal family purchased lands of Adivasis in the name of Mr. Kale and later on got transferred as per the exceptional circumstances. It is a well settled fact that the purchase of land in benami name cannot be from known sources of income. When later on transferred into assessee's name, the amount is being transferred to Mr. Kale's account and withdrawn and utilized by the assessee for their own purposes. In the case of assessee, neither the amount which was invested earlier out of unaccounted sources was subjected to tax nor are the persons introducing the capital by way of gift paying tax on such amount. Therefore, it was held in the assessment order that the unaccounted money which was used for purchase of land was brought on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or to delete the additions proposed. Yours faithfully, (Sanjay Kumar) Asstt. Commissioner Of Income tax Circle, K tni. 11. From the above 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. 12. 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved u/s. 153D as per technical requirement. Case records as received are returned herewith. (emphasis, supplied) The facts and circumstances leading to the said approval have been discussed in detail, reproducing the communications exchanged between the Jt. CIT, the approving/competent authority, and the Assistant Commissioner, Katni ( Asst. CIT for short), the Assessing Officer (AO), in the order by my ld. brother. The same cannot, by any score, be regarded as a valid approval. It is not a case of non-application of mind, a question of fact, as the ld. counsel for the assessee, Shri Ghai, would contend before us, but of it being indeed one, i.e., an approval in law, to which the answer must clearly be in the negative. As the exchange afore-referred, coupled with the letter dated 20/12/2011 by the Jt. CIT to the AO (forming part of the paper-book by the Revenue furnished on 03/02/2021), shows, the approving authority, on perusing the records and applying his mind to the various aspects of the assessment/s, finds himself unable to approve the draft assessment order/s as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained by the Hon ble Courts, to be designed to provide a pre-assessment review and a forum to an assessee to know the merits of the proposed assessment order before the actual assessment is made and he saddled with a pecuniary liability resulting from it. The object appears to be to avoid multiplicity of proceedings and to reduce the area of dispute between the assessees and the Department and also to provide for a check and balance against arbitrary assessments causing unnecessary harassment, which could otherwise be avoided [Bhagwat Prasad v. CIT [1998] 232 ITR 480 (All)]. The Board Circulars issued qua the said sections have also explained the same to be an attempt to improve the quality of the scrutiny assessments as well as strengthening the machinery for review of assessments as well as inspection of assessment charges. In recent times, the concept of limited scrutiny has also been introduced with a view to focus the resources of the Revenue on targeted issues, with an inbuilt flexibility for enhancing the scope of assessment in deserving cases by following the procedure prescribed therefor again, clearly, with the same intent and toward the same end. Considered in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant, and doing so would be to intrude upon and usurp his supervisory power and duty with regard to assessment, framing of which is the prerogative of the Revenue. It is equally impermissible to question the bona fides of the approval as given or the truthfulness of what is stated in the approval letter or indeed in the AO s letter dated 22/12/2011 (supra) seeking clarifications. 4. The question of due application of mind, which is often raised by and on behalf of the assessees in such-like situations, as indeed was in the instant case, it may be clarified here, arises for review only from the limited stand-point of whether the condition/s of the section or the provision is met, and not beyond. A parallel in this regard may be drawn to the recording of the reason/s to believe escapement of income from tax by the AO prior to the issue of a reassessment notice. The purview of an Appellate Court, as is well-settled, is limited to ascertaining the existence or otherwise of a live link or a rational nexus between the material or information available with the assessing authority and his honest belief as to the escapement of income chargeable to tax from assessment. The veracity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st vs. CIT (in WP(C) 12347/2005, dated 09/5/2006 (Orissa)). 5.1 An issue that came up in this regard during hearing was of the approval being an administrative approval , lack of which may therefore not be fatal to the assessment. It may be necessary to clarify this aspect as want of administrative action, even as clarified in State of UP v. Manbodhan Lal Srivastava [1958] SCR 533 and K.S. Srinivasan v. UoI [1958] SCR 1295, 1321, noted with approval in Hazari Mal Kathulia (supra), may not affect the validity of the acts done. In the facts of the latter case, the Commissioner had failed to consult the Central Board of Revenue, which he was required to before finalizing the assessment under the Patiala Income Tax Act, as he had proceeded under the Indian Income Tax Act where-under no such consultation was necessary. This non-consultation was held as proof against the presumption of regularity of official acts, challenging the validity of the Commissioner s order. The Apex Court repelled the charge, holding the provision as directory, as follows: (pgs. 16-17) The provision about consultation must be treated as directory, on the principles accepted by this Court in State of U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of failure to consult the Central Board of Revenue, provision regarding which must be regarded as laying down administrative control and as being directory. 5.2 The issue, nevertheless, is not res integra; the decision in CIT vs. Maharaja Pratap Singh Bahadur of Gidhaur [1961] 41 ITR 421 (SC), among others, being on the point. In the facts of that case, reassessment notices u/s. 34 (corresponding to section 148(1) of the Act) were issued by the AO without observing the procedure prescribed therefor. The notices were issued on August 8, 1948 without recording the reasons for doing so and putting them before the Commissioner for his approval. There was in fact no such requirement in law as on 08.8.1948, i.e., the date of issue of the notices. However, subsequently, i.e., on September 8, 1948, an Amending Act was promulgated, which stipulated such a requirement by way of proviso to the amended section, reading as under, and which was given a retrospective effect from March 30, 1948: (pg. 423) Provided that (1) the ITO shall not issue a notice under this sub- section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., March 30, 1948, and substitutes in its place another section containing the proviso abovementioned. The amending Act provides that the amending section shall be deemed to have come into force on March 30, 1948, and thus by this retrospectivity, indicates a different intention which excludes the application of section 6. It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income Tax Officer to obtain prior approval of the Commissioner, and unless that approval was obtained, the notices could not be issued. The notices were thus invalid. The principle which was applied by this Court in Venkatachalam vs. Bombay Dyeing Mfg. Co. Ltd. [1958] 34 ITR 143 (SC) is equally applicable here. No question of law was raised before us, as it could not be in view of the decision of this Court in Y. Narayana Chetty vs. ITO [1959] 35 ITR 388 (SC), that the proviso was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. For these reasons, we are in agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the same reason; an order passed without a valid approval being of no consequence in law. Reference in this regard may also be made to CIT v. Ratanbai N.K. Dubhash [1998] 230 ITR 495 (Bom). There is however no gainsaying that the time constraint, as stated in the approval itself, is the reason for its grant in the manner it has, so that this aspect becomes, even as in Maharaja Pratap Singh Bahadur (supra), academic. In fact, this fact itself, i.e., the grant of approval so as to circumvent the time limitation for assessment, is itself reason enough to invalidate the approval. The impugned assessments are, subject of course to the fulfillment of the other pre-requisite conditions of the provision, non-est in law. 5.3 It is not in dispute that the AO in all the cases 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, all the assessment years under reference, i.e., AYs. 2004-05 to 2010-11, are those specified in s. 153D. The assessment order/s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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