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2019 (12) TMI 814 - AT - Income TaxAssessment u/s 153A - no approval in the eye of law having been granted without application of mind - Faulty approach of the Additional CIT - HELD THAT - Additional CIT without any consideration on merit in respect of issues on which addition was made granted the Approval on the undertaking of the AO in view of stated paucity of time with him for granting Approval.This approach of the Additional CIT Central has rendered the Approval to be an eyewash and idle formality and such a mechanically granted Approval is no approval in the eyes of law. As rightly pointed out by the Ld. AR that in the facts of case of AAP Paper Marketing Limited 2017 (4) TMI 1371 - ITAT LUCKNOW there may be some justification for the qualified approval in view of the fact that the limitation in that case was getting expired on the day when the draft assessment orders were put up before the Additional CIT Central Circle Kanpur for his approval. However to the disadvantage of the revenue in the case on hands there can be no little justification for qualified approval as the proposal for approval was put up before the Additional CIT on 26.03.2015 and at the same time it was granted without any application of mind on the pretext that limitation is going to get expired on 31.03.2015. Thus in the case at hand despite availability of time the Additional CIT taking excuse of limitation has chosen to grant approval without application of his own mind but on the undertaking of the AO that while completing the assessment as per the draft assessment order all the observations made in the appraisal report relating to examination/investigation as also the issues identified in the course of examination of seized material have carefully considered . In our view such a practice is required to be deprecated and we deprecate the same. - Decided in favour of assessee.
Issues Involved:
1. Validity of assessment under section 153A without material found during the search. 2. Sustaining disallowance of ?31,51,200/- as bogus revenue expenditure. 3. Excessive interest charged under sections 234A and 234B. 4. Various observations and conclusions by CIT(A) contrary to facts. 5. Arbitrariness and illegality of the assessment order. 6. Validity of approval under section 153D by the Additional Commissioner of Income Tax. Issue-wise Detailed Analysis: 1. Validity of Assessment under Section 153A: The assessee contended that the Assessing Officer (AO) should have accepted the income returned in the absence of any material found during the search corresponding to the additions made. The tribunal considered the legal requirement that any addition under section 153A must be based on material found during the search. 2. Sustaining Disallowance of ?31,51,200/-: The assessee argued that the disallowance of ?31,51,200/- as bogus revenue expenditure was erroneous. The tribunal noted that the Commission was duly paid by account payee cheques, subjected to Tax Deduction at Source (TDS), and the parties were identifiable. The addition was made without discrediting the evidence brought on record, and the assumption that the commission was re-routed as an unsecured loan was based on incorrect presumptions. 3. Excessive Interest Charged under Sections 234A and 234B: The assessee claimed that the interest under sections 234A and 234B was either not chargeable or had been excessively charged. The tribunal did not specifically address this issue in detail due to the ultimate decision to quash the assessment orders. 4. Various Observations and Conclusions by CIT(A): The assessee contended that the CIT(A) made various observations and conclusions contrary to the facts on record. The tribunal found that the CIT(A) ignored documentary evidence and confirmed the disallowance based on incorrect assumptions. 5. Arbitrariness and Illegality of the Assessment Order: The assessee argued that the assessment order was arbitrary, illegal, and contrary to the principles of natural justice. The tribunal agreed, noting that the assessment order was based on mechanically granted approval without proper application of mind. 6. Validity of Approval under Section 153D: The tribunal focused extensively on the validity of the approval granted under section 153D by the Additional Commissioner of Income Tax. The tribunal found that the approval was granted mechanically without due application of mind. The Additional CIT’s order dated 26.03.2015 was based on an undertaking from the AO rather than an independent evaluation of the material. This rendered the approval invalid and the assessment order null and void. Conclusion: The tribunal quashed the assessment orders for the assessment years 2012-13 and 2013-14, declaring them null and void due to the invalid approval under section 153D. Consequently, all other issues challenging the merits of the addition were rendered academic and not adjudicated upon. The appeals of the assessee were allowed, and the assessment orders and all collateral proceedings were quashed.
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