ASHTHA LAND DEVELOPERS, SURAT V. DCIT, CC-2, SURAT

ITSSA 7/SRT/2020

AI Insights

The case involves Ashtha Land Developers, the appellant, contesting an addition of Rs. 73,83,000 to their income under Section 68 of the Income Tax Act, which was confirmed by the Commissioner of Income Tax (Appeals)-4, Surat. The addition pertained to booking money for industrial plots that were booked and subsequently cancelled. The primary legal contention raised by the appellant was the lack of prior approval from the JCIT for the assessment order under Section 143(3) read with Section 153C, which was mandatory as per Section 153D due to the search conducted under Section 132. The Tribunal, referencing various precedents and the CBDT Circular No. 3/2008, found that the assessment order was passed without the necessary approval, rendering it invalid.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302042 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-07-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 02-07-2020
• Other Referred Cases: Sh. Inder Pal Singh Arora Vs DCIT, Sh. Surinder Pal Singh Kohli Vs DCIT, Shri Rupam Rajendra Gorecha Vs ITO, M/s United Engineers Vs DCIT, HiKlass Moving Picture Pvt Ltd. Vs ACIT, M/s Akshata Realtors Pvt. Ltd. Vs ACIT, PCIT Vs Sapna Gupta
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Document seized; Documents seized
• Section: 68; 132; 143(3); 153A; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A No. 07/SRT/2020 (AY: 2013-14) (Hearing in Virtual Court) Ashtha Land Developers, At Amroli-Sayan Road, Gothan Road, Nr. Railway Station Crossing, Surat. PAN: AAWFA 9480 C Vs. D.C.I.T., Central Circle-2 Surat. APPELLANT RESPONDEDNT Assessee by Shri Ashwin K. Parekh, CA Department by Shri Ashok B. Koli, CIT-DR Date of hearing 24/07/2023 Date of pronouncement 27/07/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax, (Appeals)-4, Surat [in short the ld. CIT(A)] dated 21/11/2019 for the Assessment Year (AY) 2013-14 wherein the assessee has raised following grounds of appeal: “(1) The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 73,83,000/- u/s 68 of the Act for the booking money received and cancelled during the year for Industrial plots booked by appellant firm without appreciating the evidences of Name, Address, PAN, Booking receipts and Cancellation Endorsements. The addition of Rs. 73,83,000/- should therefore be deleted. (2) The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 73,83,000/- without obtaining the prior approval from Additional Commissioner of Income tax for the order u/s 143(3) r.w.s. 153C of the Act. The order be held as null and void. IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 2 The appellant reserves the right to add, alter, modify, amend or withdraw any of the grounds of appeal before hearing.” Further vide application dated 05/06/2023, the assessee has raised following amended ground of appeal: “Grounds No.2. The learned CIT(A) has grievously erred in law in holding that assessment order u/s 153C of the Act does not require prior approval of Joint Commissioner of Income-tax without correctly appreciating the Provisions of Section 153D of the Act. The assessment order passed without approval of Joint Commissioner of Income Tax be quashed.” 2. Rival submissions of both the parties have been heard and record perused. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that he has filed amended/substituted ground of appeal for substituting ground No. 2. The ld. AR of the assessee submits that the amended ground is only clarificatory in nature and does not require to bring any additional or new fact on record. The ld AR for the assessee prayed that substituted/ amended ground of appeal may be adjudicated. 3. On the merit of the additional/ amended ground, the ld. AR of the assessee submits that a search action under Section 132 of the Income Tax Act, 1961 (in short, the Act) was carried out on 17/07/2012. The case of assessee was centralized by the order of Commissioner of Income Tax-2, Surat to Central Circle. The assessee filed its return of income on 01/01/2014 declaring NIL income. The case of assessee was selected for scrutiny. Assessment was completed under Section 143(3) of the Act on 27/03/2015. The Assessing Officer while passing the IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 3 assessment order, made addition under Section 68 of Rs. 73.83 lacs on account of cash credit under Section 68 of the Act. The ld. AR of the assessee submits that the assessment was completed by the Deputy Commissioner of Income Tax (DCIT). No approval of Joint Commissioner of Income Tax (JCIT) as required under section 153D of the Act was obtained by the Assessing Officer. Approval of JCIT was mandatory. The assessment order was passed under Section 143(3) which is to be read with Section 153B(1)(b) and subject to fulfillment of conditions of provisions of Section 153D of the Act which mandates for approval of Joint or Additional Commissioner of Income Tax. Admittedly no such approval of Additional Commissioner was obtained by Assessing Officer, while passing the assessment order on 27.03.2015. Though, the Assessing Officer has obtained approval of JCIT in other cases wherein the search was initiated in earlier year. The ld. AR further submits that Central Board of Direct taxes (CBDT) vide its Circular No. 3/2008 date 12/03/2008 clarified that a new Section 153D is inserted to provide that no assessment or reassessment shall be passed by an officer below the rank of JCIT except with the approval of JCIT. Such provision has been made applicable to the orders of assessment or reassessment passed under clause (b) of Section 153A in respect of each assessment year falling within six assessment years immediately the preceeding assessment year relevant to the previous year in which search is IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 4 conducted under Section 132 or requisition is made under Section 132A of the Act. Further the provision of section 153D has also been made applicable to the orders of assessment passed under clause (b) of Section 153B in respect of assessment year relevant to previous year in which search is conducted under Section 132 or requisition is made under Section 132A of the Act. The ld. AR of the assessee carried us through the provisions of Section 153B(b) and would submit that the present case falls within the previous year relevant to the assessment year under consideration wherein search was conducted. The ld. AR of the assesse reiterated that search was conducted on 17/07/2012 which falls in the period of impugned assessment year i.e. 2013-14, therefore, approval of JCIT/Additional CIT was mandatory. 4. To support his submission, the ld. AR of the assessee relied upon the decision of Circuit Bench of Dehradun in Sh. Inder Pal Singh Arora Vs DCIT in ITA No. 3900/Del/2015 and Sh. Surinder Pal Singh Kohli Vs DCIT in ITA No. 2784/Del/2015 dated 31/05/2021. The ld. AR of the assessee submits that this ground No. 2 of appeal is directly covered by the decision of Circuit Bench of Dehradun Tribunal (supra). The ld. AR of the assessee also relied upon the decision of Ahmedabad Tribunal in the case of Shri Rupam Rajendra Gorecha Vs ITO in IT(SS)A No. 151/Ahd/2018 dated 24/07/2019, Rajkot Bench of Tribunal in M/s United Engineers Vs DCIT in ITA No. 305/Rjt/2018 order dated 08/07/2021, IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 5 Mumbai Benches of Tribunal in HiKlass Moving Picture Pvt Ltd. Vs ACIT in ITA No. 926 to 931/Mum/2013 order dated 30/09/2016 and Raipur Bench of Tribunal in M/s Akshata Realtors Pvt. Ltd. Vs ACIT in IT(SS)A No. 09/Rpr/2018 order dated 27/03/2023. 5. On the other hand, the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue supported the orders of lower authorities. The ld. CIT-DR for the revenue submits that the assessment for the year under consideration i.e. A.Y. 2013-14 was completed under Section 143(3) of the Act on 27/03/2015. The assessment order was passed as a regular assessment. Six assessment years prior to search year were covered by assessment year 2007-08 to 2012-13. The ld. CIT-DR submits that in his view, no approval of JCIT or Addl. CIT/ JCIT was required before passing the assessment order, which was passed as a regular assessment order, thus, there is no ambiguity in passing such assessment order for want of such approval. 6. We have considered the submissions of both the parties and perused the record carefully. Before adverting to decide the amended ground of appeal, we may note that amended ground of appeal raised by the assessee is merely clarificatory in nature. No new facts are required or to be brought on record to adjudicate such grounds. Hence, the filing of amended grounds of appeal is allowed. On merit of the ground of appeal, we find that there is no dispute that search was conducted on IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 6 17/07/2012. The assessment for A.Y. 2013-14 was completed under Section 143(3) on 27/03/2015. The time period for passing the assessment order is not in dispute. The ld. AR of the assessee vehemently submitted that his case falls in clause (b) of sub-section (1) of Section 153B of the Act. For appreciation of fact, the language of Section 153A(1)(b) and 153D of the Act is reproduced below: “153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 61 [but on or before the 31st day of March, 2021], the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified xxxxxxx (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years : xxxxxx 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:” 7. We find that CBDT issued a clarificatory note vide circular No. 3/2008, the relevant part of which is extracted below; 50. Assessment of search cases—Orders of assessment and reassessment to be approved by the Joint Commissioner. 1. The existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132A, does not provide for any approval for such assessment. 2. A new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by an Assessing IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 7 Officer below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisitioned is made under section 132A. 3. Applicability- These amendments will take effect from the 1 st day of June, 2007.” 8. We find that Hon’ble Allahabad High Court in a recent decision in PCIT Vs Sapna Gupta (2023) 147 taxmann.com 288 (All) while considering the contention of the assessee that before passing the assessment order, framed under section 153A, 153C and 143(3), is required to take approval from the Joint C.I.T. under section 153D of the Act, if the Assessing Officer is below the rank of Joint C.I.T. For the purpose of approval, the Approving Authority is required to see all search material including incriminating material, seized documents, appraisal reports, enquiries made by the investigation wing and various enquiries made by the Assessing Officer during the assessment proceedings and the reply submitted by the assessee, and after due application of mind and ascertaining that the Assessing Officer has appreciated the search material and other evidences in proper perspective, has to give approval to the draft assessment order and only on such approval, the Assessing Officer can pass an assessment order. The High Court on considering the submissions of the parties noted that Section 153A provides that in IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 8 the case of a person where a search is initiated under section 132, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years) referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may apply accordingly as if such return were a return required to be furnished under section 139. 9. In para-19 of the order High Court held that the approval of draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order. It is admitted by learned counsel for the appellant-revenue that the approval order is an administrative exercise of power on the part of the Approving Authority but it is sought to be submitted that mere fact that the approval was in existence on the date of the passing of the assessment order, it could not have been vitiated. This submission is found to be a fallacy, in as much as, the prior approval of superior authority means that it should appraise the material before IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 9 it so as to appreciate on factual and legal aspects to ascertain that the entire material has been examined by the Assessing Authority before preparing the draft assessment order. It is trite in law that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. The requirement of approval under section 153D is pre-requisite to pass an order of assessment or re-assessment. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of "each assessment year" referred to in clause (b) of sub-section (1) of section 153A which provides for assessment in case of search under section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of "each assessment year" falling within six assessment years (and for the relevant assessment year or years), referred to in clause (b) of sub-section (1) of section 153A. The proviso to section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years). In para-20 of the order High Court held that the careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 10 obtained by the Assessing Officer on the draft assessment order before passing the assessment order under section 153A. 10. In view of the aforesaid legal discussion and on considering the CBDT Circular No. 3/2008, we are of the view a plain reading of section 153D itself makes it abundantly clear that the legislative intent was to be obtaining of "prior approval" by the AO when he is below the rank of a Joint Commissioner, before he passes an assessment order or reassessment order under section 153A(1)(b) or 153B(2)(b) of the Act. Thus, we find that assessment order dated 27/02/2015 is passed without mandate of Section 153D and the same is held invalid being void ab initio, accordingly, ground No. 2 (amended) raised by assessee is allowed. No contrary facts or law is brought to our notice to take other view. In the result, the ground No.2 (amended) of the appeal is allowed. 11. Considering the fact that we have allowed the appeal of assessee on legal issue, therefore, adjudication on merit of the case are become academic. 12. In the result, this appeal of assessee is allowed. Order pronounced on 27/07/2023 in open court. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 27/07/2023 *Ranjan IT(SS)A No. 07/SRT/2020 Ashtha Land Developers Vs DCIT 11 Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By Order 5. Guard File Sr. Private Secretary, ITAT Surat