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TMI Blog2023 (11) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal. 3.1 The assessee vide letter dated 26-10-2020 has also raised the additional grounds of appeal which are reproduced as under: Additional Grounds of appeal a) On the facts and Circumstances of the case and on the basis of information obtained under RTI dated 24.06.2020, the order of AO levying penalty is void ab initio as the same has been initiated in pursuance to an order of assessment, dated 27.12.2016, which itself was a nullity, as the approval granted u/s 153D of the Act is mechanical approval. b) On the facts and under the circumstances of the case the penalty levied under section 271(1)(c) of the Act is void as no specific notice u/s 274 has been issued by the AO. c) On the facts and circumstances of the case the penalty order is bad in law as the approval of JCIT dated 24.05.2017 was an approval without application of mind. 6. It is well settled that an assessee can raise a legal additional ground or even fresh legal plea at any stage of the proceedings. In support the appellant seeks to rely on the judgments of Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. ******** The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 5. On the other hand, the learned DR did not raise any objection to the admission of the additional ground of appeal raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was tested on two counts. 11.1 The contention of the learned AR on the legal point was that the assessment under section 153(3) read with section 143(3) of the Act has been framed without obtaining the proper approval from the Joint Commissioner under the provisions of section 153D of the Act. Therefore, the assessment framed under section 153(3) read with section 143(3) of the Act is bad in law. Thus, the learned AR pointed out that once the assessment is bad in law and liable to be quashed, then the penalty arising out of such assessment order is not sustainable. Thus, the penalty order framed under section 271(1)(c) of the Act is not maintainable under the provisions of law. 12. On the contrary, the learned DR vide letter dated 5 October 2023 supported by the letter of the DCIT dated 5th of September 2023 has submitted as under: 3. Following are the salient aspects of the CBDT instruction relevant to the issue at hand. Para 1.3 mandates that AO and range head should jointly scrutinize appraisal report and seized material. Para 1.8 requires that range head should ensure proper satisfaction is recorded before issue of notice u / s 153C or u/s 148. Para 3.2 mandates that final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(3) of the Act was framed without proper approval under section 153D of the Act. Thus, the order passed under section 153C read with section 143(3) is bad in law and therefore no penalty proceeding can be initiated under section 271(1)(c) of the Act based on invalid assessment order. 13.1 The procedure under section 153D provides that where the assessment order u/s 153A(1)(b) or 153B(1)(b) is passed by AO below the rank of JCIT, he has to seek approval from the JCIT. The issue arises whether assessment/ reassessment made u/s 153C requires approval from JCIT. It seems that such approval is necessary because after receipt of seized material from the AO of the person searched, the AO of "other person" "shall proceed against such other person and issue notice and assess or reassess the income of "other person" in accordance with the provisions of section 153A of the Act, if the AO of the "other person" is satisfied that books of account/ documents/ assets seized/ requisitioned have a bearing on the determination of total income of such "other person". Thus, after initiation of proceedings u/s 153C, the machinery provisions of section 153A will apply and, therefore, approval wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord and the ld. DR has also not controverted the same. 13.5 The issue which we must decide whether the approval on hand given by the Joint Commissioner is fulfilling the mandate of the provisions of Sec. 153D of the Act vis-à-vis the legislative intent of inserting the said section in the statute. The provisions of section 153D of the Act read as under: 153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner: Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner under sub-section (12) of section 144BA. 13.6 The Legislative intent can also be gathered from the CBDT Circular No. 3 of 2008, dated 12.3.2008 which read as under: 50. Assessment of search cases-Orders of assessment and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts etc. was of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant. The Hon'ble Supreme Court observed as under: "Needless to emphasise that before granting approval, the Chief Commissioner or the Commissioner, as the case may be, must have before him the material on the basis whereof an opinion in this behalf has been formed by the Assessing Officer. The approval must reflect the application of mind to the facts of the case." 13.10 The Hon'ble Supreme Court in the case of ACIT Vs Seerajuddin & CO. in ITA Nos. 39 to 45 of 2022 order dated 15-03-2023 has also observed as under: 25. For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or after the 1st day of January, 1997. 13.13 In this section also it is provided that the order cannot be passed without the previous approval. This section was thoroughly scrutinized by the Tribunal Madras Bench in the case of Kirtilal Kalidas & Co. v. Dy. CIT [1998] 67 ITD 573, at para-41 of its order the observations of the Tribunal are as under: 41. In these cases, the Commissioner has passed an order granting approval under section 158BG of the Act through a single order passed on 31-3-1997 without giving any reason whatsoever. As we have recorded elsewhere above, the draft assessment orders of the block period in all these cases were made on 31-3-1997 and on the very same day, i.e., on 31-3-1997 the Commissioner grants approval and that too without giving or recording any reasons whatsoever. The approval order does not disclose the points which were considered by the Commissioner and the reasons for accepting them. In our view, this is totally an unsatisfactory method of granting approval in exercise of judicial power vested in the Commissioner. 13.14 This decision of the Tribunal was considered by Allahabad Bench of the Tribunal in the case of Verma Roadways v. Asstt. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered by the assessee. In other words, the assessee accepted the assessment framed under section 153C read with section 143(3) of the Act despite the fact that the procedures as specified under section 153D of the Act were not complied with by the AO. Now the issue arises whether the assessment order can be challenged in the penalty proceedings and consequently penalty order can be held as invalid. This question has been answered by this Tribunal in the case of M/s Atlanta Electricals Pvt. Ltd. Vs ACIT in ITA Nos. 551 & 552/AHD/2012 vide order dated 26-09-2019 by observing as under: "9.2 We however also advert to another plea raised on behalf of the assessee while assailing imposition of penalty. A plea has been inter alia raised on behalf of the assessee towards non-fulfillment of prerequisites before invocation of provisions of Section 153C of the Act. It is the case of the assessee that in the absence of jurisdiction under s.153C of the Act, the quantum proceedings under s.153C of the Act itself is non est and consequently, penalty under s.271(1)(c) of the Act could not have been imposed. On appraisal, we find force in the aforesaid plea too. The erstwhile provision of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, the assessee succeeds on the technical issue raised by it. Accordingly, we refrain from adjudicating the issue raised by the assessee on merit. In other words, no separate adjudication on the issue raised by the assessee on merit is required in the given facts and circumstances. Accordingly, we dismiss ground raised by assessee on the merit as infructuous. Hence, the ground, of appeal of the assessee is partly allowed. 14. In the result, the appeal of the assessee is partly allowed. Coming to ITA Nos. 308 to 311/AHD/2018 appeals by the assessee for A.Ys. 2012-13 to 2015-16. 15. At the outset we note that the issue raised by the assessee in the captioned appeal for A.Y. 2012-13 to 2015-16 are identical to the grounds of appeal raised by the assessee in ITA No. 307/AHD/2018 for the assessment year 2011-12. Therefore, the findings given in ITA No. 307/AHD/2018 shall also be applicable for the assessment years 2012-13 to 2015-16. The appeal of the assessee for the A.Y. 2011-12 has been decided by us vide paragraph No. 13 to 13.17 of this order wherein we have decided the issue partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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