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2023 (9) TMI 884 - AT - Income TaxAssessment u/s 153C - Proper procedure of approval not followed - Mechanical approval - whether the approval obtained by the Assessing Officer u/s. 153D is proper and approval granted by the Addl. CIT is as per provisions of section 153D? - HELD THAT - It is fact on record that AO has passed draft Assessment Order making huge additions and such huge additions were approved without there being any application of mind. Further, the basis of addition was also not shared with the assessee. The facts in this appeal are squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Arch Pharmalabs Ltd 2021 (4) TMI 533 - ITAT MUMBAI . We are inclined to decide the issue in favour of the assessee that approval granted u/s. 153D is not as per law. Even Ld. DR submitted based on the affidavit filed by the JCIT that the Range Head guides the Assessing Officer till final approval is granted. However, in our view, the approval process should indicate that proper procedure and the officer has applied his mind as per the procedures laid down by the legislature and as per the provisions. The claim made in affidavit is only afterthought. Therefore, the assessment made u/s. 144 r.w.s. 143(3)/153C of the Act is also bad in law. Accordingly, additional grounds filed by the assessee are allowed.
Issues Involved:
1. Validity of assumption of jurisdiction under section 153C of the Income Tax Act. 2. Validity of additions made based on the Special Audit Report. 3. Validity of approval under section 153D of the Income Tax Act. 4. Specific additions made by the Assessing Officer and confirmed by the CIT(A). Summary: 1. Validity of Assumption of Jurisdiction under Section 153C: The assessee challenged the assumption of jurisdiction under section 153C, arguing that the additions were made solely based on the Special Audit Report without any incriminating material found during the search. The Tribunal noted that the additions were indeed based on the Special Audit Report and not on any incriminating material found during the search, thereby making the assumption of jurisdiction under section 153C invalid. 2. Validity of Additions Based on the Special Audit Report: The Tribunal observed that the additions made by the Assessing Officer were primarily based on the Special Audit Report. It was held that additions in a case under section 153A or 153C cannot be sustained solely on the basis of a Special Audit Report as it is not considered incriminating material found during the search. The Tribunal relied on several judicial precedents to support this view. 3. Validity of Approval under Section 153D: The approval granted by the Additional Commissioner of Income Tax (Addl. CIT) under section 153D was challenged on the grounds of being mechanical and without application of mind. The Tribunal found that the approval was given without any detailed consideration or application of mind, merely stating "Draft Assessment Order is Approved." This mechanical approval was deemed invalid, making the entire assessment process under section 153C void. 4. Specific Additions Made by the Assessing Officer and Confirmed by the CIT(A): The Tribunal examined the specific additions made by the Assessing Officer and confirmed by the CIT(A), including: - Addition of Rs. 60,362 for business expenses, reduced to Rs. 25,000 by the CIT(A). - Addition of Rs. 4,50,000 for unexplained purchase of a motor car. - Addition of Rs. 1,05,212 for undisclosed commission received. - Addition of Rs. 9,00,000 for undisclosed investment in Reliance Life Insurance Co. - Addition of Rs. 2,00,000 for unexplained receipt from Mr. Bhange. - Addition of Rs. 6,25,000 for loan given to M/s. Unique Finance. - Addition of Rs. 10,64,95,163 for loans given to Shri Premchand Kamble and Shri Sanjay Shinde. - Addition of Rs. 15,00,000 for loan given to M/s. Unique Finance. - Addition of Rs. 32,900 for undisclosed income (cash in hand). - Addition of Rs. 1,59,183 for undisclosed income from Prime Motors and Prime Holidays. - Addition of Rs. 9,00,000 for deposits in the bank account maintained with Thane Janata Sahakari Bank. The Tribunal noted the non-cooperation of the assessee during the assessment and appellate proceedings. However, due to the invalidity of the approval under section 153D, the Tribunal quashed the assessment order, making it unnecessary to adjudicate on the specific additions. Conclusion: The Tribunal allowed the appeal of the assessee on the grounds of invalid jurisdiction under section 153C and invalid approval under section 153D. The assessment order was quashed, and the specific grounds of appeal were not adjudicated.
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