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2023 (3) TMI 785 - HC - Income TaxAssessment u/s 153A - Valid Approval for assessment granted or not? - mandation of Approving Authority application of mind for giving approval u/s 153D - whether ITAT was correct in holding that the Approving Authority has not applied his mind for giving approval under Section 153D? - HELD THAT - The mere repeating of the words of the statute, or mere rubber stamping of the letter seeking sanction by using similar words like see or approved will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of Section 158BG of the Act, it would equally apply to Section 153D - There are three or four requirements that are mandated therein, (i) the AO should submit the draft assessment order well in time . Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind; (ii) the final approval must be in writing; (iii) The fact that approval has been obtained, should be mentioned in the body of the assessment order. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure. The above manual is meant as a guideline to the AOs. Since it was issued by the CBDT, the powers for issuing such guidelines can be traced to Section 119 of the Act. It has been held in a series of judgments that the instructions under Section 119 of the Act are certainly binding on the Department. The Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves. - Decided in favour of assessee.
Issues Involved:
1. Whether the ITAT was correct in holding that the Approving Authority has not applied his mind for giving approval under Section 153D? Summary: Issue 1: Approval under Section 153D 1. Background: The appeals by the Revenue were against a common order dated 21st January 2022 by the ITAT, Cuttack Bench, concerning assessment orders for AYs 2003-04 to 2009-10 under Sections 143(3)/144/153A of the Income Tax Act, 1961. 2. Revenue's Argument: The Revenue contended that prior approval had been taken by the AO from the Additional CIT and that such approval was not justiciable. They argued that any irregularity in granting approval was not fatal to the assessment order and that the mere administrative order of approval should not be open to challenge. 3. Assessee's Argument: The Assessee argued that the approval granted under Section 153D was mechanical and without application of mind. They referenced the CBDT Circular No.3 of 2008 and various judicial precedents to assert that the approval process was mandatory and required careful consideration by the approving authority. 4. ITAT's Findings: The ITAT referred to the decision of the Bombay High Court in Akil Gulamali Somji and other ITAT decisions, concluding that the approving authority did not apply his mind to the relevant assessment records or draft assessment orders before granting approval, thereby vitiating the assessment orders. 5. Court's Analysis: The Court emphasized that Section 153D mandates prior approval by a superior officer and that such approval cannot be mechanical. The Court referenced several Supreme Court decisions, including Rajesh Kumar v. Dy. CIT and Sahara India (Firm) Lucknow v. Commissioner of Income Tax, to highlight that an approval must reflect the application of mind and cannot be a mere formality. 6. Approval Process: The Court noted that the AO's letter seeking approval and the Additional CIT's approval letter lacked any indication of the draft orders being perused or considered. This mechanical approval was insufficient to meet the statutory requirements. 7. Guidelines and Compliance: The Court pointed out that the assessment orders did not mention the fact of approval, violating the guidelines in the Manual of Office Procedure issued by the CBDT, which are binding on the Department. 8. Conclusion: The Court concurred with the ITAT's finding that the approval was mechanical and without application of mind, thereby vitiating the assessment orders. The question of law was answered in the affirmative, in favor of the Assessee and against the Department. 9. Judgment: The appeals were dismissed with no order as to costs.
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