AI Structured Summary
Not yet generated for this judgment
Judgment
PER MAHAVIR SINGH, VP:
These 05 appeals by the different assessees are emanating from the separate orders of the Ld. Commissioner of Income Tax (Appeals), New Delhi. Assessment were framed by the Assessing Officer, New Delhi, u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as “Act”) relevant to assessment year 2021-22 in all the 05 appeals. Since one common issue is involved in these appeals, thus the same were heard together and are being disposed of by this common order for the sake of convenience, by dealing with ITA No. 3402/Del/2026 (A.Y. 2021-22)- M-Power Energy India Pvt. Ltd., being lead case.
The first and foremost issue which is jurisdictional in nature involved in all the 05 appeals raised by the assessees is as regards the assessment framed u/s. 143(3) of the Act after obtaining approval from the Additional Commissioner of Income Tax, Central Range-2, New Delhi and after holding discussion from time to time for framing the assessment is bad in law and void.
The brief facts of the case are that the assessment was framed by the ACIT, Central Circle-8, Delhi for the A.Y. 2021-22 u/s. 143(3) of the Act vide order dated 31.12.2022. Ld. Cousnel for the assessee drew our attention towards the assessment order which is enclosed in Assessee’s Appeal Set at Page No. 42 and he took us through para 10 of the assessment order, which reads as under:-
“10.This order is being passed with the prior approval of the Addl. Commissioner of Income Tax, Central Range-2, Delhi conveyed vide letter F. No. Addl. CIT (CR)-02/2022-23/1445 dated 31.12.2022 vide F. No. 299/36/2021-Dir(Inv.III)/577 dated 15.07.2022 and the discussion during the course of assessment proceedings in this case were also held with the Addl. Commissioner of Income Tax, Central Range-02, New Delhi from time to time.”
Ld. Counsel for the assessee stated that in the Act there is no provision of prior approval by the Additional Commissioner of Income Tax or any scope for discussion during the course of assessment proceedings by the Assessing Officer with the Additional Commissioner of Income Tax for framing of assessment on the issues. Ld. Counsel for the assessee stated that this is the only requirement in assessment u/s. 144A or any assessment u/s. 147 read with section 148 read with section 143(3) or search assessment u/s. 153A or 153C. According to him, this is a simple scrutiny assessment u/s. 143(3) as is clear from the body of assessment order. According to Ld. Counsel for the assessee once there is no provision or requirement in law for obtaining approval or having discussion with Additional Commissioner of Income Tax, as is clear from the above, the discussion carried out as per the Assessing Officer with the Additional Commissioner of Income Tax and approval obtained is bad in law. Ld. Counsel for the assessee explained that the power of framing of assessment is quasi-judicial power and it vests exclusively with the Assessing Officer and it is not permissible in law, unless and otherwise specifically mandated by the statute, for any other officer, however, high he may be, much less the Additional Commissioner of Income Tax, to interfere in the quasi-judicial function of framing of assessment. Ld. Counsel for the assessee explained and referred the following provisions in the Act:-
Section 144A – empowers the Jt. CIT to issue binding directions to the Assessing Officer to guide him and enable him to complete assessment, provided that no such directions which are prejudicial to the assessee, shall be issued unless the assessee is granted an opportunity of being heard;
Section 148B – No order of assessment / reassessment shall be passed by an Assessing Officer in respect of an assessment year covered under Explanation 2 to section 148, except with prior approval of Addl. CIT/Jt. CIT (Search Cases);
Section 153D – No order of assessment / reassessment shall be passed by an Assessing Officer, in respect of assessment year referred to in section 153A or 153B, except with prior approval of Jt. CIT (Search Cases);
Section 158BG : No order of assessment for the block period shall be passed without previous approval of Addl. CIT/Jt. CIT in respect of search / survey initiated on or after 01.09.2024 (Search Assessment).
Ld. Counsel for the assessee submitted that the above itself explains that the Act contemplates situation where the Assessing Officer is required to seek prior approval or discussions before passing of assessment order. In the absence of any statutory mandate for passing a regular assessment u/s. 143(3) of the Act it is patently clear that it is not at all the intent of the legislature that a regular scrutiny assessment u/s. 143(3) of the Act shall be passed after taking approval / discussion with the Additional Commissioner of Income Tax. Ld. Counsel for the assessee relied upon the case law of Hon’ble Punjab and Haryana High Court in the case of FinDoc Finvest (P) Ltd. vs. DCIT [2025] 481 ITR 58 (P&H) wherein, the Hon’ble High Court has considered the provisions of section 119 as well as section 116 of the Act and also relied upon the judgement of the Hon’ble Supreme Court in the case of Anirudhsinhji Karansinhji Jadeja vs. State of Gujarat [1995] 5 SCC 302 (SC) and the Hon’ble High Court also relied on the decision in the case of CIT vs. SPL Siddhartha Ltd. [2012] 345 ITR 223 (Del.); Nazir Ahmed vs. King Emproer 1936 (BC) 253 (2) and CIT vs. Anjum M.H. Ghaswala 119 Taxman 352/252 ITR 1 (S.C.).
On the other hand, Ld. CIT-DR relied on the assessment order and the order of the CIT(A) and argued that the approval granted by the Addl. Commissioner of Income Tax or discussion held with him is the regular feature in the department and it is just a technical breach and therefore it cannot vitiates the assessment. Ld. CIT(DR) argued that at the best, the matter can be restored back to cure the defect and assessment can be reframed by the Assessing Officer independently. He relied on the assessment order as well as order of the CIT(A).
We have considered the rival contentions and pleadings placed before us. We find that the assessment order dated 31.12.2022 passed by the DCIT, CC-8, New Delhi in the instant case has been passed with the prior approval of the Addl. Commissioner of Income Tax, Central Range-2, Delhi conveyed vide letter F. No. Addl. CIT (CR)-02/2022-23/1445 dated 31.12.2022 vide F.No. 299/36/2021-Dir(Inv.III)/577 dated 15.07.2022 and the discussion during the course of assessment proceedings in this case were also held with the Addl. Commissioner of Income Tax, Central Range-02, New Delhi from time to time. Even otherwise, there is no provision of prior approval by the Additional Commissioner of Income Tax or any scope for discussion during the course of assessment proceedings by the Assessing Officer with the Additional Commissioner of Income Tax for framing of assessment on the issues in a simple scrutiny assessment u/s. 143(3) of the Act of the present case. Also, once there is no provision or requirement in law for obtaining approval or having discussion with Additional Commissioner of Income Tax, the discussion carried out as per the Assessing Officer with the Additional Commissioner of Income Tax and approval obtained, the assessment/reassessment is not sustainable in the eyes of law. Also the power of framing of assessment is quasi-judicial power and it vests exclusively with the Assessing Officer. In the absence of any statutory mandate for passing a regular assessment u/s. 143(3) of the Act it is abundantly clear that it is not at all the intent of the legislature that a regular scrutiny assessment u/s. 143(3) of the Act shall be passed after taking approval / discussion with the Additional Commissioner of Income Tax, which is happened in the instant case. We note that the jurisdictional issue in dispute in the present case in is no longer res integra, in view of the decision of the Hon’ble Punjab and Haryana High Court passed in the case of FinDoc Finvest (P) Ltd. vs. DCIT [2025] 481 ITR 58 (P&H) wherein, the Hon’ble High Court has considered the provisions of section 119 as well as section 116 of the Act by relying upon the judgement of the Hon’ble Supreme Court in the case of Anirudhsinhji Karansinhji Jadeja vs. State of Gujarat [1995] 5 SCC 302 (SC) CIT vs. Anjum M.H. Ghaswala 119 Taxman 352/252 ITR 1 (S.C.); Hon’ble Delhi High Court decision in the case CIT vs. SPL Siddhartha Ltd. [2012] 345 ITR 223 (Del.) & Nazir Ahmed vs. King Emproer 1936 (BC) 253 (2) and held as under:-
“18.Before we deal with the facts of the case, it would be apposite to quote relevant provisions of Section 119, 153 and 275:
Instructions to subordinate authorities.
119
(1)The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:
Provided that no such orders, instructions or directions shall be issued :-
(a)so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or
(b)so as to interfere with the discretion of the [the Joint Commissioner (Appeals) or] the [Commissioner (appeal] in the exercise of his appellate functions.
(2)Without prejudice to the generality of the foregoing power:-(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 3[115P, 115S, 115WD, 115WE, 115WF, 115WG, 115WH, 115WJ, 115WK,] 4[139,] 143, 144, 147, 148, 154, 155 5[, 158BFA], 6[sub-section (1A) of section 201, sections210, 211, 234A, 234B, 234C 7 [, 234E]], 8[270A,] 271 9[, 271C, 271CA] and 273 or otherwise), general or special orders in respect of 10[any class of incomes or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income- tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;
(b)xx xx
Time limit for completion of assessment, reassessment and re- computation.
153.
(1)No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable.:
Provided: xx
Provided further: xx
Provided also: xx
Provided: xx
Provided further: xx
Provided also: xx
Provided also: xx
Provided: xx
Provided further : xx
Provided also: xx
Provided also: xx
Provided: xx
Provided further: xx
Provided : xx
Provided further: xx
Provided also: xx
Provided also: that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2022, the provisions of this sub-Section shall have effect, as if for the words 'twenty-one months', the words 'twelve months' had been substituted.
Bar of limitation for imposing penalties.
275
2[(1)] No order imposing a penalty under this Chapter shall be passed.
(a)In a case where the relevant assessment or other order is the subject-matter of an appeal to the [Joint Commissioner (Appeals) or to the Commissioner (Appeals) under Section 246] [or section 246A] or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the (Joint Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner], whichever period expires later:
Provided : xx xx"
(b)xx xx
(c)xx xx
19.From the perusal of the aforesaid provisions, we find that the limitation provided under Section 153(1) of the Act, for issuance of notice and making of an order of assessment under Section 143 or 144 of the Act, is only twelve months for the assessment year commencing on or after 1st day 12 of April, 2022 from the end of assessment year in which the income was first assessable. Thus, the period would end on 31.03.2024.
20.As regards Section 119 of the Act as noticed above, we find that while Section 119(1) of the Act, restrains the Board from issuing any instructions to subordinate authorities, which may lay down instructions of such a nature requiring the Income Tax Authorities to make particular assessment in a particular manner or to interfere with the discretion of the Joint Commissioner and Commissioner (Appeals) while exercising their appellate function. However, the Board would be within its powers to instruct and lay down guidelines for efficient management of assessment work and collection of revenue or issue guidelines/principles/procedure which are to be followed by Income Tax Authorities for work relating to assessment. The Circular dated 15.07.2022, issued by the CBDT relied upon by the respondents directs the Assessing Officer to seek approval of the assessment made by him under Section 143 or 144 of the Act from the Joint Commissioner. The Circular dated 15.07.2022, cannot be objected to and comes within the ambit of powers available to the CBDT as above.
Although, the approval can be taken from the Joint Commissioner of the assessment order, the question arises that while examining the return and conducting assessment, can the Assessing Officer seek guidance or discuss the case with the Joint Commissioner and whether his consultation with the Joint Commissioner would amount to abdication of his powers. In Anirudhsinhji Karansinhji Jadeja case (supra), the Hon'ble Supreme Court was examining the issue relating to the powers vested with DSP by Section 20-A of the Terrorist and Disruptive Activities (Prevention) Act, 1987 and has observed as under:-
11.The case against the appellants originally was registered on 19th March, 1995 under the Arms Act. The DSP did not give any prior approval on his own to record any information about the commission of an offence under TADA. On the contrary, he made a report to the Additional Chief Secretary and asked for permission to proceed under TADA. Why? was it because he was reluctant to exercise jurisdiction vested in him by the provision of Section 20A (1)? This is a case of power conferred upon one authority being really exercised by another. If a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If the discretion is exercised under the direction or in compliance with some higher authority's instruction, then it will be a case of failure to exercise discretion altogether. In other words, the discretion vested in the DSP in this case by Section 20A (1) was not exercised by the DSP at all.
12.Reference may be made in this connection to Commissioner of Police vs. Gordhandas Bhanji, 1952 SCR 135, in which the action of Commissioner of Police in cancelling the permission granted to the respondent for construction of cinema in Greater Bombay at the behest of the State Government was not upheld, as the concerned rules had conferred this power on the Commissioner, because of which it was stated that the Commissioner was bound to bear his own independent and unfettered judgment and decide the matter for himself, instead of forwarding an order which another authority had purported to pass.
13.It has been stated by Wade and Forsyth in 'Administrative Law', 7th Edition at pages 358 and 359 under the heading 'SURRENDER, ABDICATION, DICTATION' and sub- heading "Power in the wrong hands" as below:-"Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with some one else, or may allow some one else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them.....".
"Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise....".
14.The present was thus a clear case of exercise of power on the basis of external dictation. That the dictation came on the prayer of the DSP will not make any difference to the principle. The DSP did not exercise the jurisdiction vested in him by the statute and did not grant approval to the recording of information under TADA in exercise of his discretion."
In SPL Siddhartha Ltd. case (supra), it was held that the procedure laid down under the Income Tax Act, has to be strictly followed. Thus, principally the law is settled as held in Nazir Ahmed v. King Emproer1936 (BC) 253 (2), applying the principle of 'taylor v. taylor' Ch.D (431), that 'where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden, applied to Judicial Officers making a record under Section 164.'. Thus, as held in CIT vs. Anjum M.H.Ghaswala & Ors.2002 (1) SCC 633, by the Constitutional Bench that 'it is a normal rule of construction that when a statue vests certain powers in a authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statue itself. If that be so, since the Commission cannot exercise the power of relaxation found in Section 119(2) (a)in the manner provided therein it cannot invoke that power under Section 119(2)(a) to exercise the same in its judicial proceedings by following a procedure contrary to that provided in sub-section (2) of Section 119.
Section 116 of the Act, defines the Income Tax Authorities as different and distinct authorities. Such different and distinct authorities have to exercise its powers in accordance with law in specified circumstances. Thus, the Assessing Officer would have to exercise its own discretion to reach a conclusion and would not be influenced by any other officer. In view thereto, we find force in the contention raised by the learned senior counsel for the petitioner that the concerned Assessing Officer was influenced by the consultation and discussion with his superior officers. In fact the order passed by the Assessing Officer appears to have been already prepared even before the reply was received as the consultations have been conducted on 26.10.2023, 11.01.2024 and 14.03.2024 by the Assessing Officer as mentioned by him in the order itself. Again after the reply was received and the order was passed by the Assessing Officer, the same has been approved by the Joint Commissioner. As such, we find that the Joint Commissioner has in fact comprehensively and actively participated in the making of the assessment order while his role was only limited to the approval of the assessment order in terms of the CBDT Circular. Thus, we find the order to be vitiated in law.
In view of the above, the assessment order cannot be result of an independent application of mind and exercise of discretionary power by the Assessing Officer in terms of Section 143(3) of the Act and but is an order passed under the influence and directions of the superior officers. It is to be noticed that the consultation with a superior officer would be akin to directions of the superior. There is no room available for discretion where consultation is sought from a superior officer while if a superior officer consults his subordinates, the discretion continues to stay with him. He may choose not to follow the advice of his subordinate but the opposite would be untrue. We are, thus, of firm view that the order has been passed whereby the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law.”
In view of the aforesaid factual matrix and binding precedents as referred above, we are of the considered view that in the instant case, the Assessing Officer, without any statutory mandate, involved the Additional Commissioner of Income Tax throughout the course of assessment proceedings u/s. 143(3) of the Act and thereafter, sought and obtained his approval before passing the assessment order, which is not permissible in law, hence, the assessment framed is not sustainable in the eyes of law and void ab initio, thus, the assessment is hereby quashed. Accordingly, the jurisdictional issue raised by the Assessee is allowed. Resultantly, the appeal No. 3402/Del/2026 (A.Y. 2021-22) in the case of M. Power Energy India Pvt. Ltd. is allowed in the very terms.
In so far as other remaining 04 appeals of the different assessee viz. ITA Nos. 3421/Del./2026 (A.Y. 2021-22); 3434/Del/2026 (A.Y. 2021-22); 3380/Del/2026 (A.Y. 2021-22) & 3519/Del/2026 (A.Y. 2021-22) are concerned, our decision taken in ITA No. 3402/Del/2026 (A.Y. 2021-22) will apply mutatis mutandis in these 04 appeals also. Accordingly, the ITA Nos. 3421/Del./2026 (A.Y. 2021-22); 3434/Del/2026 (A.Y. 2021-22); 3380/Del/2026 (A.Y. 2021-22) & 3519/Del/2026 (A.Y. 2021-22) filed by different assesses are also allowed in the aforesaid terms.
In the result, all the 05 appeals filed by the different assessees are allowed.