1,513 total views
Assessment under section 153A is invalid if there is no independent application of mind by Jt. CIT before granting approval under section 153D
Short Overview As Jt. CIT had not applied his mind before according approval under section 153D, section 153A assessment was quashed as invalid.
Assessee challenged validity of assessment framed under section 153A on the ground that Jt. CIT without going to the material available on record including draft assessment order approved only for technical requirement under section 153D.
It is held that Correspondence between AO on one hand and the Joint Commissioner on the other hand and letter addressed by the Jt. CIT to the CIT clearly showed that it was at the stage of discussion and the Jt. CIT could not able to make his mind. Ultimately he simply said that due to shortage of time as he was holding charges for six ranges, it was not possible for him to go into the material deep, therefore, he approved the proposal technically as required under section 153D, immediately, after AO brought to his notice that assessment was getting time-barred. Thus, it was obvious that Jt. CIT had not applied his mind before according approval and accordingly, assessment was quashed as invalid.
Decision: In assessee’s favour.
IN THE ITAT, JABALPUR BENCH
NRS GANESAN, J.M. & SANJAY ARORA, A.M.
Asstt. CIT v. Mittal Roadways (P) Ltd.
IT(SS)A No. 143/JAB/2014, C.O. No. 64/JAB/2014
4 March, 2021
Appellant by: Neerja Pradhan, Commissioner–Departmental Representative
Respondent by: Dhiraj Ghai, CA
The appeal of the revenue and Cross Objection of assessee are directed against the orders of learned Commissioner (Appeals)-1, Jabalpur (‘the Commissioner (Appeals)’ hereinafter) for assessment year 2007-08.
- Shri Dhiraj Ghai, the learned representative for assessee submitted that the first ground taken by him is with regard to approval by the Joint Commissioner as required under section 153D of the Income Tax Act, 1961 (‘the Act’ hereinafter). According to learned representative for the assessee, no assessment order shall be passed unless it is approved by the Joint Commissioner.
Referring to Paper Book, the learned representative for the assessee submitted that the Joint Commissioner in categorically terms says that due to shortage of time as he was holding charges of six ranges, it was not possible for him to go into deep. Therefore, the Joint Commissioner without going to the material available on record including the draft assessment order approved only for technical requirement under section 153D of the Act. Referring to section 153D of the Act, the learned representative for the assessee vehemently argued that unless the Joint Commissioner applies his mind to the material available on record and the draft assessment order as proposed by assessing officer, it cannot be construed as approval as required under section 153D of the Act. Placing reliance on the order of the Delhi Benches of this Tribunal in Sanjay Dungal & Others v. M/s. ACIT in ITA No. 1813/Del/2019 & Ors. (copies of which available in the P.B). Submitted that approval of Joint Commissioner is not a mere formality or ritual. It is mandatory requirement of the statutory provision.
- The learned representative for the assessee further submitted that since the Joint Commissioner has not applied his mind to the facts of the matter and granted only a technical approval, the assessing officer has no jurisdiction to pass the assessment order. Therefore, the entire assessment order as confirmed by the Commissioner (Appeals) is invalid,non-est and void, hence, the assessment order as confirmed by Commissioner (Appeals) cannot stand in the eye of law. The learned representative for assessee also placed a copy of the order of this bench of the Tribunal in the Paper Book in case of Tarachand Khatri v. ACIT in ITA No. 21/Jab/2019, dated 17-1-2020 : 2020 TaxPub(DT) 0631 (Jab-Trib). The Tribunal on identical set of facts found that unless the Joint Commissioner 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 learned counsel for the assessee has also filed the copies of the decision of the Bombay Bench of this Tribunal in ACIT v. Shreelekha Damani and Lucknow Benches of the Tribunal in AAA Paper Marketing Ltd. v. ACIT.
- On the contrary, Smt. Neerja Pradhan, learned representative for the revenue submitted that no doubt, the letter of the Joint Commissioner 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 under section 153D of the Act. Before this technical approval was given, according to learned Departmental Representative there were discussions between the assessing officer and the Joint Commissioner which is evident from the correspondence between the Joint Commissioner and the assessing officer. Referring to the copy of the letter addressed to the assessing officer by the Joint Commissioner, the learned Departmental Representative submitted that there were discussions between the assessing officer and the Joint Commissioner, therefore, it cannot be said that there was no application of mind. The assessing officer also has responded to the letter of theJoint Commissioner, dated 21-12-2011 by this Letter, dated 22-12-2011.
The assessee was also invited for the discussion along with the assessing officer in the chambers of the Joint Commissioner. The Joint Commissioner has also written a letter to the Commissioner on 20-12-2011 in order to take the Commissioner into confidence. The assessing officer also by his Letter, dated 26-12-2011 reminded the Joint Commissioner to give approval at the earliest opportunities, since, the assessment is getting time barred.
- The learned Departmental Representative placed her reliance on the judgment of the Supreme Court inCIT v. Jai Prakash Singh (1996) 219 ITR 737 (SC) : 1996 TaxPub(DT) 1021 (SC) and submitted that charging sections fix the liability to tax and any violation of machinery provision will not render the assessment order void. Once the superior authority agreed to the finding of the lower authorities then it is not necessary to record reasons for so agreeing. Referring to the judgment of the Bombay High Court in CIT v. Ratanbai N.K. Dubash (1998) 230 ITR 495 (Bom) : 1998 TaxPub(DT) 0893 (Bom-HC), the learned Departmental Representative submitted that the power to determine the income vest in the authority exercising the quasi-judicial function. It is in violation of principle of quasi-judicial function that can render the assessment invalid.
The Act of Administrative Approval by Additional Commissioner does not take away the quasi-judicial powers which still vests in assessing officer. Therefore, even if there is some defect in the technical approval granted by the Joint Commissioner, the same may not invalidate the order of assessment.
- We have carefully gone through the orders of both the authorities below in the light of the arguments advanced on both the sides and the material available on record. The issue of approval under section 153D goes to the very root of the matter. For the purpose of convenience, the provision of section 153D is reproduced herewith.
(Section 153D. Prior approval necessary for assessment in cases of search or requisition
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.)
- This provision clearly says that no assessment order shall be passed unless it is approved by the Joint Commissioner. In other words, the assessing officer is prohibited from passing any assessment order without approval of the Joint Commissioner. 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 requirement of approval under section 153D is not an empty formality. It has its own sanctity in the eye of law. In other words, unless the Joint Commissioner approves the proposal/draft assessment of the assessing officer by applying his mind to the facts of the matter, the assessing officer would not get jurisdiction to pass the assessment order. In other words, the assessing officer will be vested with jurisdiction to pass assessment order only after the approval granted by Joint Commissioner under section 153D.
Hence, the approval of Joint Commissioner is mandatorily requirement.
- We have also carefully gone through the judgment of the Apex Court inJai 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.
- We have also gone through the judgment of the Bombay High Court inMrs. Ratanbai N.K. Dubash (supra). In this case, the assessing officer passed the order without obtaining direction from Inspecting assisting Commissioner.
Hence, the assessment was annulled. This judgment of the Bombay High Court in fact supported the case of the assessee. Moreover, this Bench of the Tribunal in Tarachand Khatri (supra) has found that on identical circumstances, there was no approval under section 153D of the Act. One of us Accountant Member is party to the order.
- Now, let us examine whether the Joint Commissioner granted approval for passing the assessment order. Under the scheme of the Act, under section 153D, the Commissioner has no role to play. It is not known, why the Joint Commissioner intended to take the Commissioner into confidence by addressing a letter to him.
The Commissioner has all the powers under section 263 of the Act, in case, he/she is satisfied that the assessment order is erroneous or prejudicial to the interest of revenue. We are reproducing the correspondence between the Joint Commissioner on the one hand and assessing officer on other and also a letter written by Joint Commissioner to the Commissioner.
OFFICE OF THE
RANGE-I, CR BUILDING, NAPIER TOWN. JABALPUR
HOLDING ADDITIONAL CHARGE OF RANGE-11, JABALPUR,
RANGE-SATNA, KATNS, CHTIINDWARA & SAGAR
Tel: 0761-211637, 0701-2211670)
F.No. Jt. CIT/R-KATNI/Mittal Group/11-12/Dated 21-12-2011
The Assistant Commissioner,
Circle, Katni (MP)
Sub :–Approval of Draft Assessment order under section 153A/143(3) in the ease of different assessees of Mittal Group, Katni…reg.
Please refer to draft orders submitted by you in 14 cases till 19-12-201.
After studying these draft orders, a note was prepared highlighting the issues in these orders incorporating the reasoning given by you for making additions vis-a-vis submissions/explanations offered by the assessee. This note was prepared in view of the fact that when opportunity was allowed to the assessed to confront the evidences brought by you on record for making addition. It was observed that explanations and submissions of the assessee have not been properly related and proper clarity has not been brought for making additions.
This note was discussed with you in my chamber and later in view of the fact that neither sufficient material is being brought or making justifiable additions nor proper enquiries have been made me thus arguments of the assessee as baseless and in fructuous, it was thought necessary to bring this state of affairs in the knowledge of Hon’ble Commissioner.
The discussion on live major issues involved in the case was made in the chamber of Hon’ble Commissioner with you on 20-12-2011 at 4.00 p.m. onwards, which are as under :–
(i) Share capital in various group companies of Mittal Group
(ii) Fixed Deposit Receipts in the cases of Ankit/Novas/Nippon
(iii) Investment in Jewellery and capital gain on sale of these jewellery items linked to land purchased by the assessee in the name of on Shri Kale (iv) Issue related to sale of land having Dolomite mines through route of sale purchase of shares of the company.
(v) Excavation and local cartage charges.
In this meeting, all the points of addition and replies of the essence were discussed in length and you were directed to proceed as per line of action laid down in the discussion. For your convenience and clarity of action to be taken the main point are discussed here below :–
(i) Share capital in various group companies of Mittal Group :–
Without reproducing the contents of the note, it is to observe that you have not given any basis for including some part of share capital in the hands of family members of assessee. The specimen case was of Smt. Sarla Mittal for assessment year 2004-05 in which the proposed addition of Rs. 1,3,00,000 could not be explained by you. You were specifically asked by Hon’ble Commissioner to explain how this working has been done and what is the basis of arriving at this figure and the particular assessment year. You have stated that this figure is worked out in the appraisal report on the basis of some loose papers but you could not produce the particular seized paper on the basis of which these calculations have been made. Clearly this type of addition, where you yourself are not confident/supported by loose paper or proper identifiable document cannot be approved.
Further, it is observed that assessee has produced so many evidences to prove the identity/existence and creditworthiness of the companies by providing their PAN, acknowledgement of Income Tax Return. balance sheet, confirmation, companies master data from site of Ministry of Corporate Affairs and other evidences in some cases other evidences like assessment orders, verification letters from the Income Tax Department and orders under section 143(3) in cases of companies of assessee group and investor companies. The assessee has also cited various case laws in his favour which are as under :–
(i) CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 : 2009 TaxPub(DT) 0261 (SC)
(ii) ACIT v. Venkateshwar ispat (P) Ltd. (HC of Chhattisgarh (2010, 41 DTR (Chhattisgarh) 350 : (2009) 319 ITR 393 (Chhattisgarh-HC) : 2009 TaxPub(DT) 1706 (Chhattisgarh-HC)
(iii) CIT v. Steller Investment Ltd. (HC of Delhi) (1991) 99 CTR (Del) 10 :(1991) 192 ITR 287 (Del) : (1991) 59 Taxman 568 (Del) : 1991 TaxPub(DT) 1347 (Del-HC)
(iv) CIT v. STL Extrusion (P) Ltd. (HC of M.P. : Indore Bench) (2011) 53 DTR (MP) 97: (2011) 333 ITR 269 (MP) : 2011 TaxPub(DT) 0574 (MP-HC)
(v) CIT v. Daulat Ram Rawatmull (1973) 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC) : 1973 TaxPub(DT) 0323 (SC)
(vi) Dwarkadhish Investment (P) Ltd. (HC of Delhi) (2010) 6 taxman.com 8.1 (Delhi) : 2011 TaxPub(DT) 0374 (Del-HC)
(vii) CIT v. M/s. Jay Dee Securities & Finance Ltd. 166 Taxmann 7 (All-HC) : 2013 TaxPub(DT) 0347 (All-HC)
It is also learnt that you have issued section 133(6) letters to the investor companies. However, in spite of specific request to produce a chart of these companies where these letters have been issued indicating the status of response in each case, no such chart has been brought on record. On the other hand assessee has claimed that in majority of investor companies, the replies have been received in your office, which have not been incorporated in the body of assessment order. This fact has been brought in the knowledge of Hon’ble Commissioner. who has stated that in such cases no additions can be made.
In view of these facts, you may proceed ahead following Hon’ble Apex Court judgment and other High court judgment. In case you wish to differ on this matter, you may put up your view point before undersigned.
(ii) Fixed Deposit Receipts in the cases of Ankit/Novas/Nippon.
In this matter also, detailed discussion was made and Hon’ble Commissioner, has clearly indicated that you should examine whether any investments in purchase of share of these companies/liquidation of investments of these companies has been made by the assessee in cash. Wherever any such investment is found. it should be properly examined and may be considered for additions as undisclosed investment of these companies
(iii) Investment in Jewellery and capital gain on sale of these jewellery items linked to land purchased by the assessee in the name of on Shri Kale
On this issue, during discussion, il was found that assessee has already surrendered the amount of cash investment in the said land. Later on the assessee paid to Shri Kale by cheque and got withdrawn the same amount in cash as per copy of bank account furnished. It is also found that this cash was available with the assessee and he may have utilized it for the purchase of jewellery etc. as per details submitted. If this contention is found probable, no addition is required.
You may also examine and brig on record the basis of addition on account of capital gain working adopting date of acquisition as 1-4-1981.
(iv) Issue related to sale of land having Dolomite mines through route of sale/purchase of shares of the company.
During discussion, this addition was found to be totally baseless as assessee has already provided copies of accounts payee cheques, bank statements etc. to prove that amount has been received from Jaypee Group. You have not made any enquiries from Jaypee Group except sending a letter. In view of’ evidence furnished by assessee, no addition appears to be justified. It is also observed that asses see has already declared capital gain on this transaction in his return under section 139(1).
(v) Excavation and local cartage charges.
During discussion this addition was also found to be totally baseless a assessee has already provided Copies of returns of contractors and other evidence to show that these contractors were working on the site and TDS was made on their payments.
Regarding labour payment the evidence of agreement duly signed by Asst. Labour Commissioner, Labour union leader, Local MLA and Management has been seen and found to be proper evidence.
In this connection, you have not brought any cogent evidence for not accepting these evidences brought by the assessee except relying on statement of Shri Babulal Burman and other staff members. These statements should have been strengthened by further enquiries, which has not been done. You may also go through the affidavit of Shri Babulal Burman in this regard.
Similarly, no efforts have been made to counter the explanation of the assessee regarding local cartage which includes RC book of trucks utilized. their truck numbers, the payment vouchers. AS no enquires have been made, the evidence brought by the assessee has to accepted.
After discussion in the chamber of Hon’ble Commissioner some further issues have been brought to my notice by 1he assessee where your proposed additions dose not appear to be proper viz.
(a) Dividend income.
(b) Gifts received by family members, which are duly received by the assessee.
(c) Indira vikas patra encashed, which are duly recorded by the assessee.
(d) Cash deposits in savings banks accounts, which are duly recorded by the assessee.
(e) Interest on loans taken against FDRs, which are duly recorded by the assessee.
Further your may also verify correct value to be adopted for sale of property in in the case of Shri Pawan Kuamr Mittal (HUF).
On the other issues, which may come across in other draft orders, instructions will be issued separately. Copy of note addressed to Hon’ble Commissioner is enclosed.
Copy to: The Commissioner-1, Jabalpur with reference to discussion made. With your honor in this connection.
Office of the Assistant Commissioner
Circle Katni, Katni(MP)
F.No ACIT TE/M/1530 approval/Camp-Jabalpur, dated the 22-12-2011
The Joint Commissioner, Range Katni Jabalpur,
Sir, (By name
Sub : Approval of Draft assessment order under section 153A/143(3) in the case of Different Assessees of Mittal Group Katni Regarding
Ref. Your office Letter No. JCIT/R-Katni/Mittal Group/11-12, dated 20-12-2011–addressed to CIT-I Jabalpur and copy endorsed to me &, dated 21-12-2011 addressed to me and copy to CIT-I Jabalpur clarification regarding
Please refer to the above.
It may be clarified that till 20-12-2011 in 21 cases draft orders were submitted to your office. However, from the letter address to me, I am unable to understand it is whether approval under section 153D or directions to reframe the assessments. Please clarify assessee wise and assessment year wise.
- As regard the addition in the case ofSmt. Sarfa Mittal, one of the member of mittal family, it was clearly stated before your honour and also before Shri Lalit Mittal and RN Mittal, CA that the amounts of Rs. 13,00,000 was the shares claimed to have been sold by the relevant companies to various fictitious persons of Delhi and Kolkatta, the identity of these persons (companies) could not be traced by the 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.
- 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 companies were furnished. In that situation, without going to the merit of the assessment order how a prudent person can decide what additions are to be made or otherwise. It may be mentioned here that on this issue, during the personal discussion, your honour had advised me to refer the decision of the ITAT Indore in the case ofAgrawal Coal Corporationwherein the case laws suggested by the assessee and also in the present letter you had quoted have been elaborately discussed and held that merely filing of PAN, copy of return, profit and loss account is not sufficient. In view of your advise, and Following the decision of ITAT Indore bench, such additions were made.
- Another point raised is Fixed deposit Receipts in the cases ofAnkit/Novas/Nippon. It may be clarified that the case ofNippon is neither assessed at Katni nor where it is being assessed has given by Mittal. As regards this I want to say that the issue of Nippon is beyond the jurisdiction.
As regards the Ankit & Novas, the draft order is yet to be finallred and the decision is still pending at my end due to the fact that on 20-12-2011 during the course of discussion, it was told to me that the matter is being referred to Dl(Inv) for clarification. Only on receipt of the clarification, the assessment order need to be finalized. It may further be stated that in the case of Ankit Tracom (P) Ltd., the standing counsel had informed telephonically that passing of assessment order is stayed. However, it was made clear that assessment order may be prepared and not to be released.
- Investment in Jewellery and capital gain on sale of these Jewellery Items linked to land purchased by the assessee in the name of Shri Kale-First of all, I may made it clear that the capital gain on sale of jewellery was made on account of purity of gold i.e. the gold jewellery purchased/possessed having purity of 79.96 and when it was sold, the purity was around 90.
Some of the Jewellery was claimed to have been acquired by gift from various family members. In spite of repeated opportunities given, the assessee had not given any details regarding the name of the person or the date of acquisition by those persons gifted the jewellery. In that situation, In my view except to apply the provisions of section 49(1), I have no other alternative. In view of this, It is requested that specific directions be given to exclude 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 Aadivasi and as per the Govt guldelines, the land of adivasis cannot be purchased 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 account, therefore, the investment in Jewellery was thought to be taxed in this year. If the decision of mine is wrong, please clarify.
- Issue related to sale of land having Dolomite mines though routes of sale/purchase of shares of the company. In my knowledge, no such issue had came to any of the draft assessment orders submitted to you. It appears that all the above issues are raised by your honour as per the version of Mr. Lalit Mittal and Shri RN Mittal, CA.
- Similar is the position regarding Excavation and cartage charges-the matter relates to unaccounted purchases and non debiting of expenses based on various seized documents, statements of various employees at the time of search and post search enquirles. The addition was made on account of unaccounted transactions.
- From the perusal of theLetter, dated 21-12-2011, it is not clear, whether the assessment orders submitted to your office was approved or otherwise under section 153D or the instructions are under section 144A.
- As per the appraisal report the proposed additions were more than 125 crores and if there is major deviation from such proposal, as per instructions of the Board, deviation report should be famished to the Investigation wing.
From your above referred letter, It is not clear, whether any deviation report was furnished to the Investigation wing or not. This may also be made clear to me so that with the short time span, I could complete the search & seizure assessments,
- It may be made clear that recently my sister in law (Bhabhl) expired on 21-12-2011 and due to these time barring cases, I could not even see her during her alling time or otherwise to attend the funeral which was held on 22-12-2011. At the same time, my mother was already a paralytic patient and recently suffered a second paralytic attack,
- It may further be stated here that the valuation reports In the cases of Shri Vijay Kumar Mitital, MP Minerals and Mittal Roadways were received recently, and the assessee was given an opportunity to furnish their objections to the proposed valuation. Only on receipt of the objections, these cases could be finalized. At the end, it may be mentioned that all the assessments in Mittal group are getting barred by limitation on 31-12-2011, keeping in view the peculiar situation, may I request you to kindly issue clear instructions whether to maintain the addition or to delete the additions proposed.
Copy to the Commissioner-II, Jabalpur with reference to the Joint Commissioner, Katni’s Letter, dated 20th & 21-12-2011 referred above
Asstt. Commissioner Circle, Katni.
OFFICE OF THE JOINT COMMISSIONER,
RANGE-I, CR BUILDING, NAPIER TOWN, JABALPUR
HOLDING ADDITIONAL CHARGE OF RANGE-11, JABALPUR,
RANGE-SATNA KATNI, CHINDWARA & SAGAR
F.No. Jt. CIT/R-KATNI/Mittal Group/11-12/Dated 20-12-2011
Sub: Approval of Draft Assessment order with section’s 153A/143(3) in the case of different assessces of Mittal Group, Katni…reg..
In this connection, it is to submit that ACommissioner, Circle Katni, Shri Sanjay Kumar has submitted draft assessment orders in the cases of some assessees belonging to the Mittal Group, in which search was conducted by the department and block assessments orders under section 153A/153(3) are to be passed by 31-12-2011. It is further submit that these draft orders for companies and some other assessee of this group are yet to be submitted for perusal of this office.
Due to paucity of time available and large number of assessments pending in this Range and other Ranges, it was thought fit to discuss the issues involved in each draft assessment order with the assessee and the assessing officer and simultaneously refer to appraisal report so that a proper and balanced view or the issues may be taken in shortest possible time. The major issues crystallized are presented below for your kind consideration and necessary directions.
- Share capital in various group companies of Mittal Group
It is observed that some companies have subscribed to the share capital of group companies of Mittal Groups. This capital contribution by the Subject to verification by the investigation wing and it was opined by it that this was introduction of undeclared income by the Mittals in their group companies in the name of these companies. In appraisal report, year-Wise introduction of capital in the name of various companies of Mittal family has been worked out, which is the basis of proposed additions in different years in the cases of family members of Mittal group. The A0 is of the view that these transactions are sham transactions as some of the papers related to transfer of shares found in the possession of Mittal family blank and in all probability these shares were held by the family members of Mittal family in the period of 2000-2005 and were purported to have been transferred to these bogus companies and later on in the period of 2005-2010 they were again purchased by the family members of Mittal family. In fact, these were never transferred/subscribed by these bogus companies. The assessing officer is relying on the findings/conclusions drawn by the investigation wing. which in turn based on statement of some Vijay Goyal of Gefece group of Delhi. Stated to be fake entry provider. Although, this statement is heavily relied by the investigation wing, the same is not incorporated in the Appraisal report. The assessing officer has requested investigation wing for supply of this statement but it was not made available. Barring this, the assessing officer has given opportunity to the assessee and the replies of the assessee have been brought on record.
It is explained by the assessee that these corporate assessees, who subscribed to the capital of group companies of Mittal Group are well established companies whose Permanent Account Number, certificate of incorporation, copies of acknowledgements of income returns and balance sheet, the evidence of banking transaction by which amount has been received etc have been submitted by the assessee. The assessee has shown in some sample cases that these companies are being assessed regularly and they were having substantial net-worth as on date of investment. In some cases, the companies like Gefcee Finance Ltd., Steller Investments Lid., Mahanivesh India Ltd., and Adonis Securities (P) Ltd., were having net-worth of Rs. 15 crores to Rs. 60 crores whereas amount of Rs. 7 to 30 lacs was subscribed through cheque in the case of assessee group company. It was further brought out that section 143(3) assessments have been completed in the some of group companies of assessee, where capital subscription has been verified by the then assessing officer viz. ACommissioner, Katni. The assessee has also brought on record some letters of verification issued by the assessing officers of Investor companies, which were received by the assessee in past. From the website of ROC, the assessee has drawn latest status of some of these investors companies to show that these companies are live companies and in some cases they are listed companies also. The Assessee also claims that some of the letters issued by the assessing officer for confirmation have been duly responded by the said companies. In some other cases, the report from local income tax department at Kolkata and New Delhi have been received.
In my view, the presumption of these investors companies being bogus companies is not established. On the other hand, the assessee has proved beyond doubt the existence of these companies and the fact of subscription of shares by them through banking channels. However, you honors kind directions are solicited as this issue are common in most of the companies of Mittal Group as well as family members of Mittal Groups.
- Fixed Deposit Receipts in the cases of Ankit/Novas/Nippon
It is observed that FDRs amounting Rs. 66 crores approximately were found in the premises of the assessee during search. Initially, during search these were listed but no impounding of them was made. Later, it is claimed by the assessee that the department has attached these FDRs. The source of investment in these FDR has been treated as unexplained in appraisal report, which is the basis of assessing officers addition on this point However, it is claimed by the assessee that these FDRs were made out of liquidation of companies’ investments with various companies, in which the assessee has subscribed shares sometime back. The version of assessee is that these companies were having investment mostly in shares of some other companies and some minor other investments, which were not profitable investment and those companies were not having sufficient profits. However, as soon as assessee stepped-in, these company the assessee liquidated those un profitable investment and the entire sale proceeds were invested in FDRS./Unsecured loans given.
It is observed from appraisal report that intensive enquiries were conducted by the Investigation Wing to find out the actual source of investment, presume to be Mittal’s own undisclosed money routed through chain of companies investing in each other. It is further seen that these efforts have been successful to some extent and Department has pierced the corporate veil to find out that approximately Rs. 5 crores was invested in cash in third or fourth layers of companies. In my view, addition to this extent is justifiable.
However, it is explained by the assessee that there is no direct evidence in the hand of department to claim that the amount of cash has come from Mittal’s as this cash amount has been found in third or fourth layer of company to which assessee does not have any link. It is further said that this amount is very small in comparison to total amount of Rs. 66 crores and further assessee has provided all necessary documents to proof the source of investment made by him.
- Investment in Jewellery and capital gain on sale of these 3. jewellery items linked to land purchased by the assessee in the name of one Shri Kale.
It is admitted fact that assessee purchased some piece of land in the name of a tribal person, namely, Shri Kale somewhere between 2003 to 2005 nearby Katni town. Obviously, the payment was made in cash. Later, the assessee got the land in his name by paying sale consideration by cheque to Shri Kale and getting back withdrawal of the same amount from his bank account in cash. Assessee states that the some of the jewelleries found from the members of family, or sold by them, are purchased from the amount of this cash withdrawal available with the assessee. However, assessee has not been able to directly link this amount with the purchase of jewellery as no purchase bills are available with the assessee. It is claimed by the assessee that these jewelleries were already in the WT return of these lady members.
As per finding of the appraisal report, the assessing officer has proposed investment in these jewelries to be made from undeclared income of the assessee.
The assessee has further raised objection to long-term capital gain calculation on the sale of these jewelleries taking purchase value as on 1-4-1981, while these jewelries were purchased after taking withdrawal from land transactions related to Shri Kale. No positive evidence regarding this has been brought on record either by the assessing officer.
- Issue related to sale of a company having Dolomite mines through route of sale/purchase of shares of the company.
The one of the company of the assessee was owner of land having Dolomite mines, which was subject matter of sale to Jaypee Group. The assessee chose the route of sale through transfer of shares of the owner company. In this transaction, the amount of capital gain received was partly invested in REC bonds to avail benefits of section 54EC and remaining amount was offered for taxation. The assessee has shown photo-copies of cheques and MOU reached between assessee and Jaypee Group, which were impounded also during search proceedings.
The assessing officer is of the view that this transaction is a shani transaction as it is unbelievable that the share of company would be sold at the value of 56 times of face value. Further, he found that although amount of consideration is shown to be received by cheque but no bank charges have been debited out of this sale consideration
On going through the records, it is to observe that no sustainable addition can be made on this point.
- Excavation and local cartage charges
The assessee is having mining work of Bauxite around Katni. It is claimed by the assessee that excavation work is got done partly through contractors, who are responsible for supply of labours and also supply of mining equipment used for excavation. Similarly, it is also stated that the excavated Bauxite, laterite and Soil has to be carried to some nearby plain surface for temporary storage purposes. Later, Bauxite is further transported to Railway siding. For this local carting also, help of contractors is availed by the assessee. It is claimed by the assessed that payment for labour work has to be made as per labour rate agreement agreed among Asstt. Labour Commissioner, Labour Union, Local MLA and representative of Management. The assessee has produced copy of said agreement, which is stated to be impounded during scratch.
However, Investigation Wing has given its finding that all these payments are bogus expenditures claimed to reduced tax liabilities. It is further claimed that this amount has been invested in the FDRs already discussed in para 2. The contention of the Wing is based on the statement of Shri Babulal Burman and 2-3 clerical staff recorded by the Wing. Shri Babulal Burman is stated to be blaster at the mines and he is employee of M P State Mining Corporation. This corporation is co-owner of the company, which is managing the excavation work at site. It is stated by the assessee that excavation work is independently managed and supervised by the assessee at site. It is further explained that this mine was managed directly by this corporation and from December, 2006, it has been let out to the assessee on commission basis with understanding that existing employees and labours of corporation working at this mine will be retained by the assessee. It is claimed by the assessee by producing an affidavit of Shri Burman that he is not well educated and could not understand the contents of the statement stated to be signed by him during his examination in the Investigation Wing,
Apart from this affidavit, the assessee is supported by copies of returns filed by these contractors supplying labours and doing excavation work. On the face of these documentary evidences regarding these contractors who have received payments from the assessee after TDS and who have also filed their returns in the Income Tax Department, the claim of the assessee appears to be proper and no disallowance of expenses on the basis of statement can be made. Regarding expenses of local carting, the assessee has produced evidence in the form of truck numbers, payment vouchers, registration book of trucks, details of payments etc. The list of payments was found at the premises of the assessee during search.
- Purchase of lands.
The additions have been proposed by the assessing officer, on the presumption that the assessee has paid some extra money over and above the value declared in sale deed without bringing any evidence on record to support his addition.
The assessee has explained that during search no any lose paper or any other evidence has been found to reach any such conclusion regarding excess payment over and above the amount in the books accounts,
The contention of the assessee appears to be correct.
OFFICE OF THE ASSISTANT COMMISSIONER KATNI (MP)
F.No. ACIT/Assessment/Approval/Mittal/2011-12 Dated: 22-12-2011
The Joint Commissioner,
Range-Katni, Katni (MP)
Sub: Reply to your letter regarding approval of Draft Assessment order under section 153A/143(3) in case of different assessee of Mittal Group, Katni–Reg.
Ref: Your letter F.No. Jt. CIT/R-KATNI/Mittal Group/11-12, dated 21-12-2011
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 :–
- 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?
- 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 assessing officer, 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 consultation with the Investigation Wing.
- You are aware that as an assessing officer in this case, I have examined each and every document along with the submission and gone through all the aspects of the cases and the findings are based on concrete evidence gathered by me during the course of assessment proceedings and as gathered by investigating wing during search and seizure proceedings.
- The copy of directions addressed by you to me is without any DAK number and the photocopy of some original letter, which has not been received by me till now. It is requested your honor to provide me original copy of the same.
- Since the directions are not clear I am withholding the passing of assessment orders till the specific directions are received. I would also like to mention that the time barring date in said assessment orders is 31-12-2011. Hence you are requested to issue clear directions in each and every case assessment year wise.
OFFICE OF THE JOINT Commissioner
RANGE-1, CR BUILDING, NAPIER TOWN, JABALPUR
HOLDING ADDITIONAL CHARGE OF RANGE-II, JABALPUR
RANGE-SATNA, KATNI, CHHINDWARA AND SAGAR
F.No. Jt. CIT/Range/Katni/Mittail/2011-12 Dated: 26-12-2011
The Asstt. Commissioner,
Sub: Statutory approval of Draft Assessment order under section 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 26-12-2011 forwarding therewith draft assessment orders in Mittal Group of cases for assessment year 2004-05 to 2010-11 :–
|Covering letter date
||Name of the assessee
||1. Vijay Kumar Mittal (HUF)
||2004-05 to 2010-11
||2. M/s. Mittal Roadways
||2004-05 to 2010-11
||3. M.P. Minerals (P) Ltd.
||2004-05 to 2010-11
- Due to shortage of time, as I am holding charge of six Ranges, itis not possible for me to go into the deep, therefore, the draft assessment orders in the following cases submitted by you are hereby approved under section 153D as per technical requirement. Case records as received are returned herewith.
- Please ensure passing of order, issue of demand notice and challan as also service before the limitation date.
- From the above correspondence between the assessing officer on one hand and the Joint Commissioner on the other hand and the letter addressed by the Joint Commissioner to the Commissioner clearly shows that it was at the stage of discussion and the Joint Commissioner 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 under section 153D of the Act, immediately, after the assessing officer brings to his notice that the assessment is getting time barred.
- From the above communications, it is obvious that the Joint Commissioner has not applied his mind even though there was a discussion between the assessing officer and Joint Commissioner, the Joint Commissioner 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, assessing officer has no jurisdiction to pass the assessment order. In other words, the assessment order passed by assessing officer as confirmed by Commissioner (Appeals) 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 assessing officer has no jurisdiction to pass the assessment order unless the Joint Commissioner 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 assessing officer 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 Commissioner (Appeals) are quashed.
- In the result, appeal of the revenue is dismissed and C.O. of the assessee stands allowed.
Order pronounced in the open court on 4-3-2021.
|(As per my separate, assent order)
In Re: Mittal Roadways (P) Ltd. (IT(SS)A No. 143/Jab/2014 & CO 64/Jab/2014)
- I have perused the Order proposed by my learned brother, J.M., and am principally in agreement therewith in that the impugned assessments fail for want of the necessary approval under section 153D. My reasons for the same take a different trajectory and, accordingly, are being stated per a separate, assent order, which is to be read in conjunction with the said order.
- The appeal raises the issue of maintainability of the impugned assessments in view of the approval under section 153D of the Act, dated 26-12-2011 by the Joint Commissioner, Jabalpur (‘Jt. CIT’ for short).
Section 153D reads as under :–
153D. Prior approval necessary for assessment in cases of search or requisition
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.
The operative part of the approval letter afore-referred reads as under :–
‘Due to shortage of time, as 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 under section 153D as per technical requirement. Case records as received are returned herewith.’
The facts and circumstances leading to the said ‘approval’ have been discussed in detail, reproducing the communications exchanged between the Joint Commissioner, the approving/competent authority, and the Assistant Commissioner, Katni (‘Asst. CIT’ for short), the assessing officer (AO), in the order by my learned 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 learned 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 letters, dated 20 & 21-12-2011 by the Joint Commissioner to the assessing officer (forming part of the paper-book by the Revenue furnished on 3-2-2021), 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 as such. He, however, instead of requiring the assessing officer to make change/s therein as deemed proper or, time permitting, even requiring him to, for the purpose, undertake inquiry on the lines he considers necessary, cites the reasons of overload of work and paucity of time, and grants-what he calls, ‘technical’ approvals. How, one wonders, could he do so, i.e., in law, being obliged thereby to, and even as required of him by the assessing officer vide his Letter, dated 22-12-2011, either agree with the draft assessment order or advise necessary changes therein before according his approval. This is as the law contemplates an order of assessment or reassessment only upon his approval and, of course, within the time prescribed therefor. That his directions to the assessing officer in the matter were not in clear terms and, besides, did raise concerns, not addressed, is the substance of assessing officer’s Letter, dated 22-12-2011 to the Joint Commissioner. The assessment order as passed-the said non-approval being manifest from the order granting ‘approval’, can therefore only be regarded as not bearing his approval.
- It was vehemently argued before us on behalf of the Revenue that the approval cannot be regarded as invalid only for want of the approving authority having, as clearly stated therein, not gone into ‘depth’, i.e., as much as he would have otherwise, i.e., without the time constraint, preferred to, that being itself a subjective matter, which would vary from person to person. Rather, as the communications exchanged between the two authorities would reveal, there was consideration of and application of mind to the various aspects of the assessment/s.
It may, toward this, be relevant to traverse the provision, considering it in light of the legislative intent leading to its enactment. The provision of section 153D was brought on the statute-book by Finance Act, 2007, with effect from 1-6-2007. The scope and effect of its insertion has been elaborated in Board Circular 3/2008, dated 12-3-2008. It states of the law providing thus for an approval of an assessment in cases where search has been conducted or requisition made. Not much guidance also flows from the Notes on Clauses explaining the statutory change; the sections 153A to 153C having been inserted on the statute-book by Finance Act, 2003, with effect from 1-4-2003.
A review of the provisions of section 144A and, since omitted, section 144B, reveal them, and even as explained 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 this backdrop, the legislative intent behind section 153D could be no different, or at least materially so. In fact, the need for framing a balanced assessment, i.e., providing a check on the arbitrary use of power through high pitched assessments, as well as to strengthen the internal monitoring and review system of the Department, is imperative and cannot be over-emphasized. It appears that inasmuch as no pre-decisional hearing to the assessees, as in sections 144A/144B, has been provided in section 153D, its primary purpose is to improve the quality of the assessments in search and search-related cases. This perhaps also explains the absolute bar on the issue of an order of assessment/reassessment without prior approval by the Range head in such cases. Where, therefore, the approving authority states of being constrained for time to go into the depth of the matter, it only indicates his non-satisfaction with the draft order. That this non-satisfaction obtains despite his examination of the various aspects of the assessment/s makes it all the more relevant. The same results from his application of mind and not otherwise. At the same time, he using the same phrase in all the ‘approvals’, given at the same time, it could-and as it appears, that while he had gone into some depth in some cases, though not satisfied therewith, he might not have in others and, overwhelmed by the volume of work involved in the short span of time available, recused himself-so to speak, by issuing ‘technical’ approvals. Either way, the object and intent of the law gets defeated. Nothing, therefore, turns in law on the fact of deliberations between the assessing and the reviewing authority-which Ms. Pradhan, the learned Commissioner–Departmental Representative, was at pains to emphasize before us, as the assessment order/s that came to be finally passed cannot be regarded as an approved order/s, being ‘approved’, as apparent, to meet, in the given facts and circumstances of the case, the technical requirement of ‘approval’! It is also not open for this Tribunal to travel beyond the express statement by the competent authority in the ‘approval letter’, and to, upon a review of the correspondence exchanged (including the material referred to therein) between the Revenue authorities, form an opinion as to whether the approving authority ought to have been, or been not, satisfied.
It is his, and his satisfaction alone that is relevant, 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 assessing officer’s Letter, dated 22-12-2011 (supra) seeking clarifications.
- 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 assessing officer 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 this material/information, as long as it is from a reliable source, cannot be examined at the stage of assumption of jurisdiction for reassessment; the scope being the relevancy of the reason/s recorded for the purpose with a view to determining the validity thereof. Application of mind by the assessing officer becomes a necessary ingredient toward this. Sufficiency of reason/s, which falls within the realm of the subjective satisfaction of the assessing officer, cannot be gone into. Further, even this the Court does, not to review the manner of the exercise of the power of reassessment per se, but only to see as to whether the requirement of law, providing a condition precedent for the exercise of the said power, has been met or not. In the instant case/s as well, it would be a different matter where the Joint Commissioner had issued some direction/s to the assessing officer, subject to and on the basis of which he accords his approval. It will not, in that case, be open for an appellate court to review the same or sit in judgment thereon. No criterion for ‘approval’, except of course his satisfaction with the draft order, which is in fact implicit-as otherwise the exercise (of approval) itself would be rendered meaningless, has been provided by the statute. The requisite of ‘due application of mind’ is also toward this satisfaction inasmuch as there could be circumstances, as indeed have been found by the Appellate Courts, as inTarachand Khatri v. Asst. CIT (in ITA No. 21/Jab/2019, dated 17-1-2020 : 2020 TaxPub(DT) 0631 (Jab-Trib)), of there being in fact no satisfaction inasmuch as the same could not arise under the given facts and circumstances, as, for example, apparent inconsistencies and anomalies in the ‘approved’ assessment order. Needless to add, this again can be examined by the Courts only from the stand-point of a prima facie satisfaction of the competent authority.
- The question that arises next for consideration is the legal consequence of such an approval, i.e., which cannot be regarded as one in the eyes of law. Without doubt, there has been thus, in fact, non-compliance of section 153D of the Act. The provision, cast in negative terms, coupled with the use of word ‘shall’, clarifies a mandatory intent, law on which is well-settled (see:Montreal Street Railway Co. v. Normadin (1917) A.C. 170, relied upon and applied in, to cite some, Hazari Mal Kathulia v. ITO (1961) 41 ITR 12 (SC) : 1961 TaxPub(DT) 0117 (SC) and Bhakta Vedanta Swami Charitable Trust v. CIT (in WP(C) 12347/2005, dated 9-5-2006 (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 U.P. 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.P. v. Manbodhan Lal Srivastava (1958) S.C.R. 533 and K.S. Srinivasan v. Union of India (1958) S.C.R. 1295. In the former case, this Court dealt with the provisions of Article 320(3)(c) of the Constitution, under which consultation with the Union Public Service Commission was necessary. This Court relied upon the decision of the Privy Council in Montreal Street Railway Co. v. Normandin (1917) A.C. 170 where it was observed as follows :–
“…..The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at. The cases on the subject will be found collected in Maxwell on Statutes, 5th Edn. p. 596 and following pages. When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done.”
The principle of the Privy Council case was also applied by the Federal Court in Biswanath Khemka v. King Emperor (1945) F.C.R. 99 and there, as pointed out by this Court, the words of the provision were even more emphatic and of a prohibitory character. The essence of the rule is that where consultation has to be made during the performance of a public duty and an omission to do so occurs, the action cannot be regarded as altogether void, and the direction for consultation may be treated as directory and its neglect, as of no consequence to the result. In view of what has been said in these cases, the failure to consult the Central Board of Revenue does not destroy the effectiveness of the order passed by the Commissioner, however wrong it might be from the administrative point of view. The power which the Commissioner had, was entrusted to him, and there was only a duty to consult the Central Board of Revenue. The failure to conform to the duty did not rob the Commissioner of the power which he exercised, and the exercise of the power cannot, therefore, be questioned by the assessee on the 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 v. Maharaja Pratap Singh Bahadur of Gidhaur (1961) 41 ITR 421 (SC) : 1961 TaxPub(DT) 0148 (SC) , among others, being on the point. In the facts of that case, reassessment notices under section 34 (corresponding to section 148(1) of the Act) were issued by the assessing officer without observing the procedure prescribed therefor. The notices were issued on 8-8-1948 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 8-8-1948, i.e., the date of issue of the notices. However, subsequently, i.e., on 8-9-1948, 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 30-3-1948: (pg. 423)
(1) the Income Tax Officer 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 that it is a fit case for the issue of such notice.’
The assessments, on challenge, were regarded as not valid, from the stage of the Tribunal-whereat the issue of their being not maintainable was raised for the first time, onwards. The Revenue relying on section 6 of the General Clauses Act, 1897, the Apex Court held as under: (pgs. 423-425)
‘The question is whether the notices which were issued were rendered void by the operation of this proviso. The Commissioner contends that section 6 of the General Clauses Act, particularly cls. (b) and (c), saved the assessments as well as the notices. He relies upon a decision of the Privy Council in John Lemm v. Mitchell (1912) A.C. 400, Eyre v. Wynn-Mackenzie (1896) 1 Ch. 135 and Butcher v. Henderson (1868) LR 3 QBD 335 in support of his proposition. The last two cases have no bearing upon this matter, but strong reliance is placed upon the Privy Council case. In that case, the earlier action which had been commenced when the Ordinance had abrogated the right of action for criminal conversation, had already ended in favour of the defendant and no appeal therefrom was pending, and it was held that the revival of the right of action for criminal conversation did not invest the plaintiff with a right to begin an action again and thus expose the defendant to a double jeopardy for the same act, unless the statute expressly and by definite words gave him that right. The Privy Council case is thus entirely different.
No doubt, under section 6 of the General Clauses Act it is provided that where any Act repeals any enactment, then unless a different intention appears, the repeal shall not affect the previous operation of any enactment so repealed or anything duly done thereunder or affect any right, obligation or liability acquired, accrued or incurred under any enactment so repealed. It further provides that any legal proceedings may be continued or enforced as if the repealing Act had not been passed. Now, if the amending Act had repealed the original section 34, and merely enacted a new section in its place, the repeal might not have affected the operation of the original section by virtue of section 6. But the amending Act goes further than this. It repeals the original section 34, not from the day on which the Act received the assent of the Governor-General but from a stated day, viz., 30-3-1948, 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 30-3-1948, 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 8-8-1948, 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 v. Bombay Dyeing & Mfg. Co. Ltd. (1958) 34 ITR 143 (SC) : 1958 TaxPub(DT) 0182 (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 v. ITO (1959) 35 ITR 388 (SC) : 1959 TaxPub(DT) 0095 (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 agreement with the High Court in the answers given, and dismiss this appeal with costs.’
True, it is not the validity of the jurisdictional notice-as in Maharaja Pratap Singh Bahadur (supra), resulting in the proceedings taken without such a notice or in pursuance of an invalid such notice being void and illegal, and the assessments, in consequence, without jurisdiction, which is under question in the instant case. The ‘approval’ under section 153D, as aforenoted, is primarily towards safeguarding the interest of the Revenue in search and search-related cases, giving it a mandatory status. It thus becomes as much integral to the procedure for assessment as is the issue of the notice for reassessment. And, further, in discharge of his quasi judicial functions by the Joint Commissioner who, as the Range head, has been for the purpose allowed the requisite powers (see sections 2(7A), 120(4), 124(5), 131, 132, 133). There is, thus, no inconsistency between section 153D, the scope of which has been found as toward improving that quality of the assessments by providing for internal review by the supervisory head (refer para 3), and the powers and duties of the Joint Commissioner under the Act. The assessment order/s in the instant case, passed in breach of the qualifying, mandatory condition of its passing, i.e., an approval under section 153D, is an invalid order/s, to which no cognizance in law can be given. The plea of the ‘approval’ thereunder being an ‘administrative approval/action’ is thus to no moment. As explained in Panchamahal Steel Ltd. v. ITO (1997) 225 ITR 458 (SC) : 1997 TaxPub(DT) 0767 (SC), in the context of section 144B, the assessing officer becomes practically functus officio after forwarding the draft assessment order along with the assessee’s objections to the approving authority, and is to thereafter only follow the directions by the latter, which he cannot vary or depart from.
His acceptance of the revised return by the assessee thereafter, even though furnished within the time period stipulated by law therefor, was accordingly disapproved by the Hon’ble Court, explaining that the provision of section 139(5) for furnishing a revised return is to be understood and construed in a reasonable manner.
Sure, time permitting, it is open for the assessing officer to, as in Maharaja Pratap Singh Bahadur (supra), seek fresh approval (under section 153D), and issue an assessment order-marking the culmination of the process of framing the assessment. This is, again, for 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) : 1998 TaxPub(DT) 0893 (Bom-HC). 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 assessing officer is of the rank of the Assistant Commissioner, i.e., below the rank of the Joint Commissioner. Similarly, the year of search being financial year 2009-10, the assessment year under reference, i.e., assessment year 2007-08, is that specified in section 153D. The assessment order under reference is, thus, not valid in law inasmuch as no order of assessment or reassessment could be passed by the assessing officer below the rank of Joint Commissioner for any of the years specified in section 153D, except with the approval of the Joint Commissioner.
- Before parting with this order, one cannot help note the irony of the situation, i.e., a measure adopted by law to protect the interest of the Revenue in critical cases should itself become the reason for the destruction thereof, an extremely unfortunate incident. This Court, however, cannot do anything beyond expressing its anguish at the sorry state of affairs with regard to the management of work as well as the commitment thereto of the officers concerned, and hope that the Revenue, so keen and anxious to improve the quality of the assessments and avoid unnecessary litigation, takes steps to prevent a recurrence, which has an opposite effect-being detrimental to the cause of the Revenue as well as the morale of its’ officers. Where, one wonders, was the scope for hearing the assessee and his counsel by the Joint Commissioner in the section 153D proceedings? One cannot also help mentioning here the hard work and the painstaking efforts put in by the assessing officer, which is commendable indeed, particularly considering the difficult circumstances he was placed in at the time.
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