Search Assessment without JCIT’s Approval is invalid

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HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL (L) NO.1416 OF 2012

WITH

INCOME TAX APPEAL (L) NO. 1417 OF 2012

WITH

INCOME TAX APPEAL (L) NO. 1418 OF 2012

WITH

INCOME TAX APPEAL (L) NO. 1419 OF 2012

 

On perusal of the provisions laid down under section 153C, it is apparent that after issuance of notice under section 153C, the Assessing Officer having jurisdiction over such other person (against which incriminating material has been found during the course of search conducted on a person) assess or re-assess income of such other person in accordance with the provisions of section 153A. Section 153B talks about time limit for completion of assessment under section 153A, whereas section 153D talks about necessity of prior approval for framing assessment in case of search or requisition. Thus the provisions laid down under section 153D are very much applicable in case of assessment of income of any other person (i.e., the person other than the person searched). Now the issue for adjudication is as to whether in absence of obtaining prior approval under section 153D of Joint Commissioner, assessment made under section 153C will be void or voidable/curable. The provisions under section 153D have been laid down under the heading ‘prior approval necessary for assessment in cases of search or requisition’. This heading itself suggests that obtaining prior approval for assessment in cases of search or requisition is necessary. Further the provisions under section 153D start with a negative wording ‘no order of assessment or re-assessment’ supported by the further wording ‘shall’ make the intention of the legislature clear that compliance of section 153D requirement is mandatory.

The wordings and language used in section 153D and the heading ‘prior approval necessary for assessment in cases of search or requisition’ do not leave an iota of doubt about the very intention of the legislature to make the compliance under section 153D a mandatory. There is no dispute that if a provision is mandatory, an act done in breach thereof will be invalid, but if it is directory the act will be valid although non-compliance may give rise to some other penalty if provided by the Statute. The general rule that non-compliance of mandatory requirements results in nullification of the Act is subject at least to one exception. If contain requirements or conditions are provided by a statute in the interest of a particular person, the requirements or conditions although mandatory may be waived by him if no public interest is involved and in such case, the act done still be valid even if the requirement or condition has not been performed. The instant case is not a case where consent of assessee will waive the condition of obtaining prior approval under section 153D of the Joint Commissioner by the Assessing Officer for framing assessment under section 153C/153A. Condition of prior approval of Joint Commissioner under section 153D has been put in public interest and not in the interest of a particular person. Thus it cannot be waived by particular person. The use of word ‘shall’ raises a presumption that a particular provision is imperative but this prima facie inference may be reverted by other consideration such as object and scope of the enactment and consequence flowing from such construction. The revenue has not been able to rebut the above inference by pointing out other consideration like object and scope of the enactment and the consequence flowing from such construction. Clause 9 of Manual of Office Procedure, Volume II (Technical) February, 2003 issued by Directorate of Income-tax also provides that an assessment order under Chapter XIV-B can be passed only with the previous approval of the range Joint Commissioner of Income-tax/Additional Commissioner of Income-tax. Chapter XIV-B also deals with assessment of search cases. Sections 153A, 153B and 153C have been introduced to Chapter XIV ‘procedure for assessment’ with effect from 1-6-2003 by the Finance Act, 2003, whereas section 153D has been inserted to the Chapter with effect from 1-6-2007 by the Finance Act, 2007. These provisions, thus, also deal with the assessment in case of search or requisition and when the assessment orders in the instant case were passed the provisions laid down under section 153D were very much in operation.

Therefore, assessment orders impugned framed in absence of obtaining prior approval of the Joint Commissioner for the assessment years under consideration were invalid as null and void.