2024 (3) TMI 88 - AT - Income Tax

Validity of Assessment u/s 153C - requirements of approval u/s 153D - as alleged absence of valid and effective approval under section 153D of the Act by the competent authority - HELD THAT - As the facts in the present case with regard to the validity and effectiveness of approval under section 153D of the Act is similar to the one adjudicated by the Income-tax Appel late Tribunal for the assessment year 2014-15 2023 (10) TMI 686 - ITAT DELHI wherein held JCIT, without any consideration of factual and legal position in proposed additions/disallowances and without contents of appraisal report before him or incriminating material collected in search etc. has buckled under statutory compulsion and proceeded to grant a simplicitor approval with caveats and disclaimers. This approach of the JCIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and can not thus be countenanced in law. Accordingly, respectfully following the precedent as above, we hold that the assessment in the assessment year 2009-10 in pursuance of invalid approval accorded u/s 153D is invalid and liable to be quashed and quashed as such. Appeals filed by the Revenue are dismissed.

Summary

Issues Involved:
1. Validity of notice under section 153C.
2. Validity of approval under section 153D.
3. Addition of unsecured loans under section 68.
4. Compliance with procedural requirements.

Summary:

Issue 1: Validity of notice under section 153C
The Revenue argued that the Commissioner of Income-tax (Appeals) erred in holding that there was no incriminating material for the issuance of notice under section 153C. They contended that the material seized during the search constituted 'incriminating material' and that the test for 'incriminating material' is based on prima facie belief. The Commissioner of Income-tax (Appeals) had applied the Supreme Court decision in the case of Sinhgad Technical Education Society, which the Revenue argued was distinguishable. The Commissioner of Income-tax (Appeals) concluded that the notice under section 153C was ab initio invalid and legally not sustainable, leading to the quashing of the assessment.

Issue 2: Validity of approval under section 153D
The assessee's counsel argued that the assessment was invalid due to the absence of valid and effective approval under section 153D. The approval was claimed to be merely technical and given without proper examination of the facts. The Tribunal noted that the Joint Commissioner of Income-tax granted approval on the same day the draft assessment orders were received, indicating a lack of proper examination. The Tribunal found that the approval did not meet the statutory requirements and was therefore invalid. This resulted in the quashing of the assessment orders for the assessment years 2009-10 and 2010-11.

Issue 3: Addition of unsecured loans under section 68
The assessee contended that the addition of unsecured loans was erroneous and beyond the scope of section 153C. The Tribunal did not separately adjudicate this issue as the assessment was already quashed based on the invalid approval under section 153D.

Issue 4: Compliance with procedural requirements
The Tribunal highlighted that the approval under section 153D must involve due application of mind and not be a mere formality. The Tribunal found that the approval granted in this case was a mechanical exercise without proper scrutiny, rendering the assessment orders invalid.

Conclusion:
The Tribunal dismissed the Revenue's appeals and allowed the assessee's cross-objections, holding that the assessments were invalid due to the lack of valid approval under section 153D. The order of the Commissioner of Income-tax (Appeals) was upheld, and the assessments for the relevant years were quashed.