2023 (6) TMI 1333 - AT - Income Tax

Validity of assessment order passed u/s 153A - whether a valid approval granted by the additional commissioner of income tax u/s 153D? - HELD THAT - Approving authority has not mentioned any indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. Even the approving authority has not written or repeated the words of the statute, in granting the approval u/s 153D - mere endorsing a list of cases by signature with rubber stamping of the letter without mentioning even the words like 'seen' or 'approved' will not satisfy the requirement of the law for approval or sanction u/s 153D. Therefore, we hold that in the present case, the prior approval of the Additional CIT before passing the order of assessment in pursuant to a search operation being a mandatory requirement of section 153D of the Act was not as per law because such approval is not meant to be given mechanically. Without application of mind by the Additional CIT which resulted in vitiating the assessment orders themselves. In the above view, we hold that mandatory approval was being granted mechanically without application of mind by ACIT, Central-Range, Jalandhar, and therefore, this mechanical exercise of power has vitiated entire assessment proceedings. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of approval granted by the Additional Commissioner of Income Tax under Section 153D of the Income Tax Act.
2. Issue of notice under Section 143(2) on the date of filing the return of income.

Summary:

Validity of Approval under Section 153D:

The appellants challenged the validity of the approval granted under Section 153D of the Income Tax Act, arguing that it was granted in a mechanical manner without the application of mind. The Tribunal admitted this additional legal ground, citing the Supreme Court's judgment in NTPC Limited, which allows raising new legal grounds that do not require new facts to be investigated.

During the hearing, the appellant's counsel argued that the approval was granted on the same date as the assessment order, indicating a lack of independent consideration by the Additional Commissioner. The Tribunal observed that it was humanly impossible for the competent authority to apply an independent mind to multiple cases on the same day, thereby concluding that the approval was a mechanical exercise of power.

The Tribunal referred to several High Court judgments, including "Principal Commissioner of Income-tax v. Siddarth Gupt," "Principal Commissioner of Income-tax v. Subodh Agarwal," and "ACIT vs. Serajuddin & Co.," which emphasized that the approval under Section 153D must reflect the application of mind and cannot be a mere formality.

In the present case, the Tribunal found that the approval was granted mechanically without proper examination of the draft orders, rendering the assessment orders void ab initio. Consequently, the impugned orders were quashed as being illegal and bad in law.

Issue of Notice under Section 143(2):

The appellant's counsel withdrew the additional legal issue regarding the issuance of notice under Section 143(2) on the date of filing the return of income. Therefore, this issue was dismissed as withdrawn.

Conclusion:

The Tribunal held that the mandatory approval under Section 153D was granted mechanically without application of mind, vitiating the entire assessment proceedings. As a result, the assessment orders were rendered void ab initio and quashed. Since the legal issue was decided in favor of the assessee, the Tribunal did not proceed to decide the issue on merits. Both appeals were disposed of accordingly.

Order pronounced in the open court on 21/06/2023.