Case Law Details
Indra Bansal & Ors. Vs ACIT (ITAT Jodhpur)
It is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 22 cases was completed in one single day itself i.e., 31-3-2013.
Thus, it is apparent that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order.
It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order.
The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co-ordinate Benches of Mumbai and Allahabad as afore-mentioned and also applying the ratio of the judgment of the Hon’ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained.
FULL TEXT OF THE ITAT JUDGMENT
This is a bunch of twenty-two appeals and three cross-objections. Out of the twenty-two appeals, three appeals viz., ITA Nos. 514-516/Jodh/2015have been preferred by the Department for the various assessment years whereas the remaining nineteen appeals and the three cross-objections have been preferred by the assessee. The COs and the appeals of the assessee raise an essentially legal ground challenging the validity of approval granted under section 153D of the Income Tax Act, 1961 (in short “the Act”) by the Joint Commissioner in the case of the captioned assessees.
2. The learned Authorized Representative submitted that as the assessees were raising a legal ground challenging the very foundation of assessment proceedings, it was essential that this legal ground of the assessees may be heard and adjudicated first and the arguments on merits, both in the Department’s appeals as well as the assessee’s appeals, may be taken up at a later stage. The learned Commissioner-Departmental Representative had no objection to the request of the learned Authorised Representative. Therefore, we proceed to hear both the parties on the legal ground taken by the assessees in their COs and appeals on the validity of assessment proceedings and, thereafter, the arguments on merits will be heard, if we deem it necessary to do so.
3. Since the COs and the assessees’ appeals have raised an identical legal ground, takingCO No. 09/Jodh/2016 for assessment year 2010-11 as the lead case, the learned Authorized Representative submitted that in this case, the assessee had filed his return of income showing an income of Rs. 3,19,21,250 which was initially processed under section 143(1) of the Act. The learned Authorised Representative submitted that earlier, a search operation under section 132 of the Act had been carried out by the Department on 1-4-2010 and 2-4-2010 at the residential premises and bank lockers, etc. of the assessees pertaining to Shri Shyam Lai Bansal group of cases/his family members where several documents were found and seized along with cash, jewellery and other valuables etc., from the various premises searched. Subsequently, assessment proceedings were initiated under section 153A of the Act and in compliance to the notice under section 153A of the Act, the assessee filed return of income declaring the same income as was declared in the original return. The assessing officer made certain additions and completed the assessment at Rs. 5,02,87,200. On appeal before the learned Commissioner (Appeals), the assessee was granted partial relief. The learned Authorized Representative submitted that now the Department is in appeal challenging the deletion of certain additions by the learned Commissioner (Appeals) whereas the assessee has filed the CO. The learned Authorised Representative read out the grounds in the CO which are as under :–
“1. Impugned order was erroneously held as valid and sustainable by Commissioner (Appeals) :–
That, in the facts and in the circumstances of the case, in view of the material facts available and were brought on record by the appellant, the learned Commissioner (Appeals) erred in law and facts and was unjustified :–
(a) in upholding the impugned order passed by learned assessing officer and dismissing the ground of appellant, relating to validity and sustainability of the assessment order, which otherwise was neither valid nor sustainable in law.
(b) in upholding the order as was approved by Range Head Joint Commissioner, in accordance with law and dismissing the ground and rejecting the submission of the appellant in ignoring the settled position of law as laid down by Apex Court, as well as the jurisdictional High Court that ‘if an act or a thing is required to be done in a particular manner as prescribed by law, then, either such thing or act should be carried out and done strictly in accordance with the prescribed procedure or not at all otherwise’.
(c) in not holding the impugned assessment order under appeal as barred by limitation, as well as null and void for want of lawful and legal approval required under section 153D of the Joint Commissioner on the order or reassessment made by assessing officer, below the rank of Joint Commissioner.
Hence, the learned Commissioner has erred in law and facts. His action therefore, may please be corrected and assessment order may kindly be quashed/annulled as unsustainable and invalid.
2. The appellant craves leave to add, alter, amend, modify, substitute or delete any ground of cross-objection on or before hearing of the cross-objection.
3. The respondent-cross-objector prays that the CO may very kindly be allowed.”
3.1 The learned Authorised Representative submitted that the impugned assessment order was incorrectly upheld by learned Commissioner (Appeals), as the validity of the assessment order itself was not established. It was submitted by the learned Authorized Representative that the assessment order was passed on 31-3-2013 which was passed after obtaining prior approval of the Joint Commissioner, Central Range, Jodhpur. The learned Authorised Representative submitted that the approval to the assessment order was accorded vide office letter No. Joint Commissioner/Central Range/Ju/2012-13/889, dt. 31-3-2013. The learned Authorised Representative further submitted that the case records were received in the office of Joint Commissioner on 31-3-2013 itself and the order was also approved on 31-3-2013 and, therefore, the Joint Commissioner had granted the approval to the draft assessment order without application of mind as the draft assessment order was received and approved on the very same day. The learned Authorised Representative submitted that the same was the case in respect of all three COs and nineteen appeals of the assessee. It was submitted that since the records itself were received in the office of the Joint Commissioner on 31-3-2013, at the most, only 7 hours or so were available to the Joint Commissioner for approval of the 22 assessment orders of the entire group during which the draft assessment orders were mailed, seen and cross-verified from Jodhpur where the seized material was lying. It was submitted that the learned Commissioner (Appeals) was wrong in his observation that this ground was not pressed before him. The learned Authorised Representative reiterated that the Joint Commissioner had granted the approval to the draft assessment orders without application of mind as the draft assessment orders were received and approved on the very same day. It was also submitted that the Joint Commissioner on that particular day, i.e., 31-3-2013, was camping at Udaipur and was not in Jodhpur and, therefore, it was very much apparent that the assessment records were lying at the Jodhpur office and only the draft assessment orders were sent for approval. It was submitted that in view of the fact that the Joint Commissioner had only given approval to the draft assessment orders without perusing the assessment records, it was clearly established that the assessment orders were approved without application of mind and in a mechanical manner.
3.2 Our attention was drawn to p. 13 of the paper book wherein a copy of the reply dt. 9-3-2015 to the assessee’s application under Right to Information Act, 2005 was placed wherein the assessee was informed that the assessment records were received in the Range office at Jodhpur and the Inspector of the range office had verified the same. The learned Authorised Representative pointed out that this reply also mentioned that the assessment order was sent by mail/fax to the Joint Commissioner at Udaipur for approval and after approval, the assessment records were returned to the assessing officer by the Range Office at Jodhpur. It was submitted that it was evidently clear that the approval was granted without examination of the assessment records.
3.3 Our attention was further drawn to p. 2 of the paper book which was a copy of letter dt. 30-3-2013 from the assessing officer addressed to the Joint Commissioner, Jodhpur submitting the copy of draft assessment order for necessary approval. Learned Authorised Representative pointed out that the date of receiving of this letter in the Jodhpur Range Office was 31-3-2013 i.e., the day on which the approval was granted. The learned Authorised Representative vehemently argued that the assessment order suffered from the inherent defect of the approval not having been granted after due application of mind. It was submitted that the assessment order had to be annulled as no approval was legally granted which was mandatory and essential in search cases as per the mandate of section 153D of the Act.
3.4 Our attention was also invited to clause 9 of Manual of Office Procedure, Vol. -2 (Technical) issued by the Directorate of IT on behalf of the CBDT, Department of,Revenue, Government of India which prescribes the procedure for approval of assessment. It was submitted that this procedure would apply mutatis mutandis in approval of cases by the Joint Commissioner also.
3.5 Reliance was also placed on a plethora of case laws, by the learned Authorized Representative, for the proposition that when section 153D of the Act is violated and not adhered to, the assessment order is unsustainable.
4. The learned Authorized Representative also submitted year-wise detailed synopsis for all the COs and appeals filed by the assessee and submitted that this issue of the defect in approval was common in all the COs and the appeals of the assessee(s) and, therefore, the outcome ofCO No. 09/Jodh/2016 will decide the outcome of all the other COs and appeals of the assessee as the same decision would apply.
5. In response, the learned Commissioner-Departmental Representative submitted that the assessee had a poor case, on merits and, therefore, was not arguing on merits but was raising mere technical grounds so as to avoid arguments on merits. It was also submitted that it was not the case that the assessment records were not examined by the Joint Commissioner while granting of approval as the letter of granting approval mentions that the case records were being returned. Learned Commissioner-Departmental Representative also submitted that the time of the fax giving the approval was mentioned at top of the copy of the letter granting the approval which was 6.56 a.m. on 31-3-2013 and, thus, it was apparent that the Joint Commissioner had applied his mind throughout the night before granting approval. The learned Commissioner-Departmental Representative submitted that it was evident that the Joint Commissioner was functioning even beyond office hours and, therefore, the contention of the learned Authorised Representative that the Joint Commissioner had not applied his mind was incorrect. It was also submitted that the assessment order should not be set aside on a mere technicality and the issues should be argued at length on merits.
6. We have heard the rival contentions and have perused the material on record. The main contention of learned Authorised Representative is that reasonable time was not available with the Joint Commissioner for the grant of necessary approval as envisaged under section 153D of the Act. We have perused the forwarding letter dt. 30-3-2013 seeking approval of the draft assessment order. The date of receipt of this letter in the office of Joint Commissioner is indisputably on 31-3-2013 which is apparent from the date stamped on it by the office of the Joint Commissioner. Thus, this leaves no doubt that the letter requesting grant of approval and the granting of approval, both, are within one day of each other. This lends credence to the contention of the learned Authorized Representative that the draft assessment order was approved without much deliberation by the Joint Commissioner. Further, the time of the fax granting approval is 6.56 a.m. on 31-3-2013 which is prior to the office hours and, thus, it brings out a reasonable doubt that the approval was granted even before the letter requesting the approval was received in the office of the Joint Commissioner. Further, the response received by the assessee in response to his application under Right to Information Act, 2005 also establishes the correctness of the claim of the assessee that the assessment records were not before the Joint Commissioner when the approval was granted as the records were with the Range Office in Jodhpur whereas the approval was sent by fax on the morning of 31-3-2013 from Udaipur. Thus, it is our considered opinion that the Joint Commissioner had granted approval in a mechanical manner without examining the case records because the approval has been granted at 6.56 a.m. on 31-3-2013 from Udaipur wherein it has already been mentioned that the assessment records were being returned whereas the draft assessment order along with the assessment records were handed over to the office of the Joint Commissioner on 31-3-2013 and as such it was physically impossible that all the case records along with the draft assessment order were received by the Joint Commissioner at Udaipur.
6.1 Tribunal, Mumbai Bench in the case of Smt. Shreelekha Damani v. Dy. CIT (2015) 125 DTR (Mumbai)(Trib) 263 : (2015) 173 TTJ (Mumbai) 332 has held that the legislative intent behind the insertion of section 153D of the Act was that the assessments in search and seizure cases should be made with the prior approval of superior authority which means that the superior authorities should apply their mind to the material on the basis of which the assessing officer is making the assessment. In this case, the Addl. CIT had expressed his inability to analyze the issues of the draft order on merits clearly stating that not much time was left and granted the approval under section 153D of the Act on the same day and Tribunal, Mumbai Bench held that the approval granted by Addl. CIT was mechanical and had been passed without considering the material on record and was, therefore, devoid of any application of mind. The impugned assessment order was annulled.
6.2 Similarly, Tribunal, Allahabad Bench in Verma Roadways v. Asstt. CIT (2001) 70 TTJ (All) 728 ; (2000) 75 ITD 183 (All) held that while granting approval, Commissioner is required to examine the material before approving the assessment order. In this case, Tribunal, Allahabad Bench was examining the issue of approval under section 158BG of the Act and it opined that the object for entrusting the job of approval to a superior and a very reasonable (sic-responsible) officer of the rank of Commissioner is that he with his ability, experience and maturity of understanding can scrutinize the documents, can appreciate its factual and legal aspects and can properly supervise the entire progress of assessment. Tribunal, Allahabad Bench held that the concerned authority while granting the approval is expected to examine the entire material before approving the assessment order and further that whenever any statutory obligation is cast on any authority, such authority is legally required to discharge the obligation not mechanically, nor formally but by application of mind.
6.3 Similarly, the Hon’ble Apex Court in the case of Sahara India (Firm) v. CIT & Anr. (2008) 216 CTR (SC) 303 : (2008) 7 DTR (SC) 27 : (2008) 300 ITR 403 (SC), while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said high-ranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon’ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case.
6.4 Coming to the facts of the case, it is apparent from the documents on record that the approval was given by the Joint Commissioner in hasty manner without even going through the records as the records were in Jodhpur while the Joint Commissioner was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 22 cases was completed in one single day itself i.e., 31-3-2013. Thus, it is apparent that the Joint Commissioner did not have adequate time to apply his mind to the material on the basis of which the assessing officer had made the draft assessment orders. Tribunal, Mumbai Bench and Tribunal, Allahabad Bench in their orders, as discussed in the preceding paragraphs, have laid down that the power to grant approval is not to be exercised casually and in routine manner and further the concerned authority, while granting approval, is expected to examine the entire material before approving the assessment order. It has also been laid down that whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Joint Commissioner had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Joint Commissioner in a mechanical manner without proper application of mind. Accordingly, respectfully following the ratio of the Co-ordinate Benches of Mumbai and Allahabad as afore-mentioned and also applying the ratio of the judgment of the Hon’ble Apex Court in the case of Sahara India (Firm) v. CIT (supra), we hold that the Joint Commissioner has failed to grant approval in terms of section 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained. Accordingly, assessments in three COs and nineteen appeals of the assessee(s), on identical facts, are liable to be annulled as suffering from the incurable defect of the approval not being proper. Accordingly, we annul the assessment orders in CO Nos. 8 to 10/Jodh/2016 and ITA Nos. 325 to 331/Jodh/2016. Thus, all the three COs and the nineteen appeals of the assessee, as aforesaid, are allowed.
7. Since we have already allowed the assessee’s COs corresponding toITA Nos. 514 to 516/Jodh/2016 preferred by the Department wherein we have annulled the assessment orders, the Department’s appeals become infructuous and they are dismissed as such.
8. In the final result, the three COs and 19 appeals filed by the assessee are allowed and three appeals filed by the Department are dismissed.
