Fresh approval u/s 153D not required in remand case u/s 263 where assessment in search case was originally framed u/s 153A after approval u/s 153D of the Income Tax Act-HC
The appeal was filed by the appellant assessee is against the order of Income Tax Appellate Tribunal (Tribunal/ITAT) allowing the appeal of the Income Tax Department (Revenue) by holding that There is no requirement under Section 153D if the Income Tax Act, (the Act) for obtaining prior approval for complying with the remand directions.
ABCAUS Case Law Citation:
ABCAUS 2313 (2018) (04) HC
The appellant assessee is a limited company. A search was conducted at the business premises of the assessee and some incriminating documents were seized. Subsequently a notice u/s 153A of the Act was issued in response to which the assessee filed return of income. The Assessing Officer (AO) framed the assessment u/s 153A read with Section 143(3) of the Act by making an addition of Rs. 2 lacs to the declared income. The order was passed after seeking approval under Section 153D of the Act from Additional CIT.
However, a show cause notice u/s 263 was issued by the Commissioner of Income Tax (CIT) for revising the assessment order. The Commissioner finally set aside the assessment order and directed the AO to make fresh assessment denovo after properly examining the issues, conducting an inquiry and affording opportunity of hearing. The AO in pursuant to the remand u/s 263, passed order making an addition of Rs. 55 lacs approx.
Aggrieved of the order, the assessee filed an appeal before the CIT(Appeals). The said appeal was allowed only on the ground that no fresh approval was taken by the AO under Section 153D of the Act before passing order pursuant to remand.
The Income Tax Department filed appeal before the Tribunal. The appeal was allowed and the Tribunal set aside the order of the CIT. The matter was restored to CIT for deciding the case on merits irrespective of the fact that there was no approval under Section 153D before passing the order.
Now, it was the turn of the assessee to approach the High Court against the order of the ITAT by way of the present appeal.
The Hon’ble High Court observed that the substantial questions of law involved was as to whether under Section 153D of the Act there is a requirement of fresh approval for complying with the remand directions under Section 263, in a case where the assessment under Section 153A of the Act was originally framed after compliance of Section 153D of the Act?”
The Hon’ble High Court observed that as per Section 153-D, no order of assessment under Sections 153A and 153B can be passed by the AO without prior approval of the Joint Commissioner.
It was noted that the original assessment order was passed under Section 153A read with Section 143(3) of the Act after obtaining approval under Section 153D of the Act. Thereafter the said order was taken up in revision and finally set aside and the matter was remitted to the AO to pass a fresh assessment order.
The Hon’ble High Court opined that though the original assessment order was set aside, however, the approval u/s 153D was not set aside. There was no question thereupon of the AO seeking fresh approval under Section 153D. The order passed pursuant to remand passed by the AO was in compliance with the remand directions. It was not a case of the AO assuming jurisdiction under Section 153A of the Act. That stage was over when original order was passed.
The Hon’ble High Court went on to observe that the AO was complying with the directions of the revisional authority. Section 153D of the Act is only applicable for passing an assessment order or re-assessment order. There is no requirement under Section 153D for prior approval for complying the remand directions. The original approval in fact was to the effect that assessment of assessee can be passed under Section 153A. Remand direction was that the assessment under Section 153A should be framed again. There was no occasion of fresh assumption of jurisdiction to frame assessment. Rather it was in continuation of earlier proceeding which was duly approved. Even otherwise there is no question of seeking an approval from the Joint Commissioner or the Additional Commissioner Officer lower in rank than Commissioner for complying with the directions given by the Commissioner.
The Hon’ble High Court disagreed with the CIT (Appeals) in allowing the appeals of the assessee on the basis that compliance of Section 153D of the Act was mandatory. The Hon’ble High Court clarified that it was not the issue whether the provision is procedural or the requirement of approval is mandatory. The fact was that Section 153D of the Act had been duly complied with by the AO. The contention raised that even an order of remand cannot be passed without complying with Section 153D of the Act is beyond the scope of the section. The Tribunal rightly held that Section 153D of the Act is for assuming jurisdiction to pass an assessment order under Section 153A of the Act and the AO would not loose the jurisdiction to frame assessment while complying with remand order.
Accordingly, the questions of law were answered against the appellant and the appeal was dismissed.
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