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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED, ACCOUNTANT
PER BENCH,
These appeals filed by the Assessee are directed against the order of the Ld. CIT(A)-11, Ahmedabad dated 29.01.2015 pertaining to A.Y. 2011-12
ITA 97/Rjt/2015 Dinesh bhai
The assessee has raised the following grounds of appeal: 1. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming addition of Rs.35,67,200/- made by the assessing officer by way of unexplained cash found during search.
The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming the action of the assessing officer in treating proceeds from sale of land as in the nature of trade and not in the nature of long term capital gain as claimed and thereby computing the profit thereon at Rs. 86,56,527/-.
The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming disallowance of interest payment of Rs. 14,40,475 to 1C1CI bank made by the A.O. by treating it as personal expenditure.
The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming addition of Rs. 2,28,990/- made by the assessing officer by way of unexplained investment in jewellery.
5.The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming the action of the assessing officer in treating the remuneration income of 42,00,000/- from Om Kirti Constructions Pvt. Ltd. as income from other sources.
The assessee vide letter dated 20th February 2020 has also filed the additional grounds of appeal as reproduced under: a) On the facts and Circumstances of the case and on the basis of information obtained under RTI dated 13.12.2019, the order of assessment passed by the AO on 04.03.2013, for the impugned year, is void ab initio as the approval granted u/s 153D of the Act is mechanical approval.
b) On the facts and circumstances of the case the Assessment Order passed under section 153A/143(3) of the I. T. Act, 1961 is bad in law as the approval of Additional CIT dated 04.03.2013, received by the AO after the passing of the assessment order and hence the same cannot be termed as prior approval as mandated in section 153D of the Act.
ITA Nos. 96 & 97/RJT/2015 3 . A.Y. 2011-12
First, we take up the additional grounds of appeal raised by the assessee.
The assessee in the additional ground of appeal has challenged the validity of the assessment order framed under section 153A read with section 143(3) of the Act on the reasoning that such order was passed without obtaining the proper approval from the Additional CIT and that too in mechanical matter.
The facts in brief are that the assessee in the present case is an individual and partner in various firm and also director in the M/s Om Kirti Construction P Ltd. There was a search conducted under section 132 of the Act at the premises of the assessee dated 25th February 2011 i.e. in the PY 2010-11 corresponding to AY 2011-12 which is before us for consideration. As the year under consideration before us is the search year, therefore the assessment was framed under section 143(3) of the Act. However, the provision of section 153D of the Act mandates that the approval of the joint Commissioner has to be obtained before passing the assessment order. The relevant provisions of section 153D of the Act reads as under:
153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner
The provisions specified in clause (b) of subsection (1) of section 153B has a direct bearing on the issue raised by the assessee in the additional ground of appeal. The relevant extract of the provisions of clause (b) of subsection (1) to section 153B reads as under: 153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,— (a) *********** (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of twenty-one months from the end of the financial year in which the last of the
ITA Nos. 96 & 97/RJT/2015 4 . A.Y. 2011-12
authorisations for search under section 132 or for requisition under section 132A was executed:
Admittedly, the year before us i.e. AY 2011-12 is the year in which search was conducted under section 132 of the Act. Accordingly, in our considered view the assessment framed under section 143(3) of the Act was subject to the compliance of the provisions specified under section 153D of the Act as elaborated above.
In the light of the above provision we proceed to analyze the contentions of the learned AR for the assessee. The learned AR before us filed a paper book running from pages A to E, 1 to 80 and submitted as under:
The present appeals are arising from the order of CIT (A) Ahmadabad dated 29.01.2015 in ITA Number 97 and 27.01.2015 in ITA number-96 and relates to AY 2011- 12. The assessee in order to assist the Hon'ble Bench has prepared this synopsis.
Assessee by virtue of his application dated 20.02.2020 has raised two additional grounds. 1) that the approval u/s 153D is not a prior approval as the same has been received by the Jurisdictional AO after the passing of assessment order.2) the approval received is a mechanical approval.
Certain dates which goes to the root of the matter are as under-
Date Event Reference
25.02.2011 Search taken place in Admitted fact mentioned in assessee's premises order of assessment
03.201 Proposal letter for Page No-B filed in decisions 3(Friday) approval of 13 assessee's paper book covered by the search dated was sent to the Baroda Additional CIT
04.03.201 Proposal for approval has Page No-E Question number-2 3(Monday) been received by the office of Additional CIT- Baroda
04.03.2013 Approval for 13 assessees See Page No-C was granted
ITA Nos. 96 & 97/RJT/2015 5 . A.Y. 2011-12
05.03.2013 Approval for 13 assessees Page NO-E Question number - was received by the 3 Jurisdictional AO
Perusal of the above sequence of event would show that on the date when the assessment was framed i.e. 04.03.2013, there was no approval of the Additional CIT. Hence the order passed by the AO is non-est, void ab initio. It is submitted that provisions of section 153D are reproduced hereunder for ready reference.
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 section 153A or the assessment year referred to in clause (b) of subsection (1) of section 153B, except with the prior approval of the Joint Commissioner.
Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case maybe, is required to be passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA."
A perusal of the above provisions would show that the legislature has used the word shall in section 153-D, which means that the provisions of section 153D are mandatory. Further the Manual of procedure as mandated by the CBDT, applicable in search assessment would show that the CBDT has categorically mentioned in the provisions that assessment order would be passed only after the receipt of the approval. Copy of Manual of Procedures is annexed in decisions Paper Book Page No-36.
It is next submitted that now it is settled law as laid down by various High Courts that the provisions of section 153D are mandatory. A reference can be made to the following decisions.
a: CIT Vs Akil Gulam Ali- 80CCH-53 (Bom)
b. CIT Vs Sunrise Finlease reported in 252 Taxman 407(Guj)
c. CIT Vs shree lekha Damini- 307 CTR 218(Bom)
d. CIT vs SPL Sidhartha - Delhi High Court:-
It is next submitted that in the case of M3M also the AO has received the approval after the passing of assessment order. Which approach is annulled by the ITAT. The relevant observation of the decision are as under:-
the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion, we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirements of Section 153D of I.T. Act, 1961,
ITA Nos. 96 & 97/RJT/2015 6 . A.Y. 2011-12
are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void(Para-
Without prejudice to the above, it is next submitted that the approval granted by the Additional CIT is a mechanical approval. It is submitted that perusal of the language of the approval would prove beyond doubt that there is absolutely no application of mind to the records of assessment before granting the approval.
It is submitted that mentioning of words "approved" without referring to any material is not appreciated by the various court. It has been held by the courts that approval granted under section 153D is not a formal exercise. It has to be done with great caution and application of mind. Such approval cannot be granted in routine manner.
It is submitted that recently the following Benches of the ITAT has held as under:-
a) M3M India Holding Vs DCIT reported in 198 TTJ 0921 (Del) :- In Para 13.1 Hon'ble Bench has observed as underlie /Add/. CIT, Chandigarh did not mention in the approval, if he has gone through the assessment record or whether assessment record have been produced before him before granting approval in the matter. The assesses fifed RTI application to the Revenue Department, copy of reply is filed at page 469 of the PB, in which it was explained that letter of the Assessing Officer, Faridabad dated 30th January 2014 was forwarded to the /Add/. CIT, Chandigarh on 30th January 2014. No reply was given to assessee as to when the letter of the assessing officer was received by /Add/. CIT, Chandigarh. It was also intimated that no such record is available in the .office of Assessing Officer regarding mode by which assessment record along with the letter of the assessing officer dated 30th January 2014 were forwarded to the /Add/. CIT, Chandigarh. No details/explanation were furnished as to on which date the assessment record was received by the /Add/. CIT, Chandigarh. The assessee, on inspection of the record, intimated the assessing officer that no original approval under section 153D is available on record. Learned Counsel for. the Assessee referred to PB 48, which is Fax message received on 5th February 2014, communicating the approval of /Add/. CIT to the assessing officer...........
In Para-14 Hon'ble Bench has further observed as under :-
The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced before him. Since no details are available on record about the mode, through which, assessment record was transmitted by the assessing officer at Faridabad to Addl. CIT in Chandigarh and vice-versa by Addl. CIT, Chandigarh to Assessing Officer at Faridabad on the very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time or if the Addl. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part
ITA Nos. 96 & 97/RJT/2015 7 . A.Y. 2011-12
b) It is submitted that in the present case the assessee vide his application dated 17.01.2010 has also asked the similar question as to whether the assessment records of all the assessees(13) were sent to the Office of Additional CIT Baroda. However no clear reply has been given by the revenue. Copy of RTI reply dated 14.02.2020 is at Page No- E of the Paper Book. Question number -4 of this reply is relevant in this regard.
c) In the RTI application dated 17.01.2020, the assessee in question number 5 has also categorically questioned as to whether the records of all 13 assessees were sent to the Additional CIT. It is interesting to note that in reply to this question it has been answered that draft order was submitted by the ACIT vide letter dated 1.03.2013, which means neither the assessment orders of 13 assessee nor the records of 13 assessee have been sent to the Additional CIT Baroda. The respondent (revenue) has used the express draft order (singular) not plural. Use of this expression clearly suggests that only letter from the office of ACIT Rajkot was sent and not the entire records of assessment.
d) The next case on the above issue that is approval must not be mechanical is the judgment of Cuttack Bench of the ITAT in the case of Dilip Construction;- ITA No-
In this approval, we are unable to see any mention by the approving authority that he has perused the relevant assessment records and draff assessment orders proposed to be passed by the Assessing Officer. The Assessing Officer issued letter seeking approval on 17.11.2017 and approval has been granted on 23.11.2017 that after a passage of five days time from the approval order as reproduced hereinabove. From the above, it is very much clear that the approving authority i.e. the Id JCIT has not even bothered to mention that he has perused the relevant assessment records and draft assessment orders for which he has granted approval u/s.153D of the Act as per the mandatory requirements of the said provisions of the Act.
In view of foregoing discussion, we are inclined to hold that the Id JCIT has granted approval under section 153D of the Act in a mechanical manner without application of mind to the relevant assessment records and draft assessment orders submitted before him by the AO for grant of approval u/s.153D of the Act before passing the relevant assessment orders u/s.153A r.w.s 143(3) of the Act
In Conculsive portion Hon'ble ITAT has observed as under:-
From the relevant approval orders dated 23.11.2017, it is vivid that Id JCIT has not mentioned in the approval orders that he has gone through the relevant assessment records/files/folders and draft assessment orders for granting approval. These facts clearly show that the approval had been granted in a mechanical manner without application of mind and, thus, no valid approval has been granted by the Id JCIT before authorising the AO to pass assessment orders u/s.153A of the Act. Accordingly, all assessment orders are vitiated and thus same are void being bad in law. The requirement of mandate of section 153D of the Act has not been satisfied in both the cases and accordingly we hold that the all assessment orders are vitiated and thus same are void being bad in law. We, accordingly set aside the impugned orders of lower authorities and quash the assessment orders by allowing
ITA Nos. 96 & 97/RJT/2015 8 . A.Y. 2011-12
additional ground of the assessees in all appeals filed by both the assessees having identical and similar facts and circumstances 11. In view of the above it is prayed that the appeals of the assessee may be allowed on the legal grounds alone
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the dispute have already been discussed in detail in the preceding paragraph. Therefore we are not inclined to repeat the same for the sake of brevity and convenience. Admittedly the approval was granted by the learned joint Commissioner of Income Tax dated 4th of March 2013 but the same was received by the AO having jurisdiction over the assessee dated 5 March 2013. This fact can be verified from the order of the Income Tax Department under section 7 (1) of the RTI Act which is placed on page E of the paper book. The relevant extract of the question raised under the RTI by the assessee and the reply of the same by the Department stand as under:
On which date the ACIT Rajkot has received the approval dated 04.03.2013 of Additional Baroda. Reply: The records suggest that the said approval letter have been received in the office of the ACIT, CC-1, Rajkot on 05.03.2013.
Thus, from the above it is the beyond doubt that the assessment has been framed by the AO under section 143(3) of the Act, without obtaining the valid approval from the joint Commissioner of income tax. Accordingly, such assessment is not valid under the provisions of law. In holding so we draw support and guidance from the judgment of Hon’ble jurisdictional High Court in
ITA Nos. 96 & 97/RJT/2015 9 . A.Y. 2011-12
case of CIT vs. Sunrise Finlease reported in 252 Taxman 407 where it was held as under:
In the facts of the present case, as the assessment order has been passed by an Income Tax Officer, the requirement of obtaining the prior approval of the Joint Commissioner under section 153D of the Act was absolute. The Tribunal, however, has recorded a finding of fact that there is nothing on record to indicate that the prior approval of the Joint Commissioner was obtained. As a natural corollary therefore, in the absence of the requirement of prior approval of the Joint Commissioner being satisfied, the whole proceeding would stand invalidated. The Tribunal was, therefore, wholly justified in holding that the impugned order of assessment would stand vitiated in view of non-compliance of the provisions of section 153D of the Act. On this count also, therefore, the appeal, does not merit acceptance. 12. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal gives rise to any question of law, much less, a substantial question of law, so as to warrant interference. The appeals, therefore, fail and are summarily dismissed.
At the time of hearing, the learned DR for the revenue has not brought anything on record contrary to the arguments advanced by the learned AR for the assessee. As the assessee succeeds on the preliminary issue raised by him, we do not find any reason to adjudicate the other issue raised by the assessee challenging the validity of the assessment as well as on merits. Hence the ground of appeal of the assessee is allowed.
In the result the appeal of the assessee is partly allowed.
Coming to the ITA No. 96/RAJKOT/2015 for A.Y. 2011-12
At the outset we note that identical issue has been decided by us in favour of the assessee in ITA No. 97/RAJKOT/2015 vide paragraph no. 11 to 13 of this order. For the detail discussion please refer the relevant paragraph as discussed above. Therefore respectfully following the same and to maintain parity with the findings, we allow the additional ground raised by the assessee in its favour.
ITA Nos. 96 & 97/RJT/2015 10 . A.Y. 2011-12
Before we part with the issue/appeal as discussed above, it is pertinent to note that the clause © of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing.
However, during the prevailing circumstances where the entire world is facing the unprecedented challenge of Covid 2019 outbreak, resulting the lockdown in the country, the orders though substantially prepared but could not be pronounced for the unavoidable reasons within the maximum period of 90 days. In such circumstances we find that the Hon’ble Mumbai Tribunal in the case of JSW Limited Vs Deputy Commissioner of Income Tax in ITA No. 6103/MUM/2018 vide order dated 14-5-2020 extended the time for pronouncing the order within 90 days of time by observing as under:
Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended
ITA Nos. 96 & 97/RJT/2015 11 . A.Y. 2011-12
accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case. 11. To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.
Considering the above, we express to pronounce the order beyond the period of 90 days. Accordingly, we proceed to pronounce the order as on date.
ITA Nos. 96 & 97/RJT/2015 12 . A.Y. 2011-12
In the result the appeal of the assessee is partly allowed.
In the combined result, both the appeal of the different assessee are partly allowed.
Order pronounced in Open Court on 01- 06 - 2020
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 01/06/2020 Rajesh True Copy Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad