2023 (2) TMI 1072 - HC - Income Tax

Assessment u/s 153A - approval with respect to each assessment year - prior approval of the Joint Commissioner to the draft assessment order prepared by the Assessing Officer, as per the mandate of Section 153D - HELD THAT - Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of each assessment year referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years). The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to each assessment year is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A. In the instant case, the draft assessment order in 38 cases, i.e. for 38 assessment years placed before the Approving Authority on 31.12.2017 was approved on same day i.e. 31.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 38 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. As the facts are admitted before us, the questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeal being in the nature of second appeal. No substantial question of law

Summary

Issues Involved:
1. Validity of the assessment order under Section 153A/143(3) of the Income Tax Act.
2. Requirement and validity of prior approval under Section 153D of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the assessment order under Section 153A/143(3) of the Income Tax Act:
The dispute pertains to the assessment year 2015-16, following a search and seizure operation conducted on 31.8.2015. The assessee was required to file an Income Tax return under Section 153A of the Act. The assessment was completed under Section 153A/143(3) by the Dy. C.I.T., Central Circle-1, Kanpur, on 31.12.2017, with various additions made. The Tribunal quashed the assessment order and the consequent order of CIT (A), concluding that the approval under Section 153D was granted mechanically, vitiating the entire proceedings.

2. Requirement and validity of prior approval under Section 153D of the Income Tax Act:
The primary contention was the necessity and validity of prior approval from the Joint C.I.T. under Section 153D before passing the assessment order. The Tribunal noted that the approval was given on the same day the draft assessment order was prepared, which included 38 cases. The Tribunal concluded that it was humanly impossible for the Approving Authority to peruse the material for all 38 cases in one day, deeming the approval a mechanical exercise, thus invalidating the proceedings.

The Tribunal relied on its earlier decision in Navin Jain & Others Vs. Deputy C.I.T., emphasizing that the approval under Section 153D must be a judicious exercise with due application of mind. The Tribunal highlighted that the approval process serves to protect against arbitrary or unjust assessments. The Tribunal's decision was based on the premise that the approval must reflect an independent and thorough examination of the material on record for each assessment year and each assessee separately.

The Tribunal referred to various judicial precedents, including the High Court of Karnataka's decision in Commissioner of Income Tax, Bangalore vs. Smt. Annapoornamma Chandrashekar and the Apex Court's decision in Ashok Kumar Sahu Vs. Union of India, to underline the importance of the approval process as a safeguard against arbitrary actions by the Assessing Officer.

The Tribunal's conclusion was that the approval granted in a mechanical manner without proper application of mind vitiated the entire assessment proceedings. The High Court upheld the Tribunal's decision, agreeing that the approval process under Section 153D is a crucial safeguard and must be conducted with due diligence and independent assessment.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision that the mechanical approval under Section 153D invalidated the assessment order. The Court emphasized that the approval process must involve a thorough and independent examination of the material for each assessment year, ensuring the protection of both the revenue's interest and the taxpayer's rights. No substantial question of law arose for consideration, and the appeal was deemed devoid of merit.