2024 (9) TMI 1660 - AT - Income Tax

Validity of assessment framed u/s 153A r.w.s. 143(3) r.w.s. 153D - as alleged Approval granted by Additional Commissioner of Income Tax for framing the impugned assessment was without the application of mind - HELD THAT - Admittedly there is no form or the manner specified under the Act in which the approval needs to be obtained by the AO from the ld. Joint Commissioner which has been specified but the approval cannot be treated as mere administrative approval as observed by the learned CIT-A as evident in the light of the case laws cited above. The application of mind of the joint Commissioner is sine qua non while granting the approval under the provisions of section 153D of the Act. Our view is further fortified about the nonapplication of mind by the ld. additional Commissioner of income tax while granting the approval under section 153D of the Act by the fact that the AO in the letter dated 30-03-2024 while taking the approval have enclosed the draft assessment orders and the checklist. On perusal of the letter of the AO dated 30 March 2022 it is mentioned that Addition made in 143(3) orders dated 29.12.2017 whereas the assessment has been made by the AO vide order dated 31-03-2022 and that too under section 153A r.w.s. 143(3) r.w.s. 153D of the Act. Likewise the letter written by the AO for the approval under section 153D of the Act dated 30 March 2022 does not refer to any seized materials statements written submissions of the assessee except the checklist and draft assessment order whereas the ld. CIT-A in his order had made reference that all these documents have been duly verified by the Additional Commissioner of income tax while granting the approval under section 153D of the Act. As observation of the ld. CIT-A does not consonance with the letter written by the AO dated 30 March 2022 for taking the approval from the ld. Additional Commissioner of Income Tax under the provisions of section 153D of the Act. As such the above finding of the ld. CIT-A does not match with the letter written by the AO for seeking the approval under section 153D of the Act. All these details in fact strongly indicate that there was no application of mind by the ld. additional Commissioner of income tax while granting the approval under section 153D of the Act in the given facts and circumstances. Checklist was prepared considering the assessee on hand as the person other than search person and the proceedings were initiated under the provisions of section 153C of the Act. However all these information containing in the checklist are far from the reality for the reasons as discussed above. All these facts clearly establish that the approval was obtained by the AO at the fag end of the assessment from the higher authorities which was subsequently granted in the mechanical manner in a day and without application of mind. Condonation of delay in filing an appeal against intimation under section 143(1) - Admittedly there was no addition made to the total income of the assessee in the intimation generated u/s 143(1) of the Act. As such there was no grievance to the assessee for the year in dispute. But what we find is this that the assessee has preferred an appeal to keep the proceedings pending in view of the fact that if any addition is sustained in the assessment order 2020-21 relating to joint development agreement then it will certainly lead to the double addition which is not desirable under the provisions of the Act. Thus we find force in the argument of the ld. Counsel for the assessee that it is a fit case where the delay in filing the appeal by the assessee deserved to be condoned.

Summary

Issues Involved:

1. Validity of the assessment order under section 153A due to alleged mechanical approval under section 153D.
2. Condonation of delay in filing an appeal against intimation under section 143(1).

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Under Section 153A:

The primary contention raised by the assessee was the validity of the assessment framed under section 153A, which was challenged on the grounds of improper approval under section 153D of the Income Tax Act. The assessee argued that the approval granted by the Additional Commissioner of Income Tax was without the application of mind, thus rendering the assessment order unsustainable and bad in law. The draft orders for multiple assessment years were sent for approval on March 30, 2022, and were approved the next day, suggesting a mechanical approval process. The assessee cited several judgments to support this claim.

The Revenue, on the other hand, argued that the Additional Commissioner applied his mind when approving the draft assessment order. However, the Tribunal found that the legislative intent behind section 153D is to ensure that assessments in search cases are made with the prior approval of a superior authority, who must apply their mind to the materials gathered during the search. The Tribunal referenced the Delhi High Court's decision in PCIT Vs. Anuj Bansal, which emphasized that approval must not be granted mechanically but with due application of mind.

Upon reviewing the facts, the Tribunal noted discrepancies and errors in the checklist and draft orders, indicating a lack of application of mind by the Additional Commissioner. The Tribunal concluded that the approval was granted in a mechanical manner, thus vitiating the assessment order. Consequently, the appeal on this ground was allowed in favor of the assessee.

2. Condonation of Delay in Filing an Appeal Against Intimation Under Section 143(1):

The second issue involved the delay in filing an appeal against the intimation generated under section 143(1) of the Act. The assessee's appeal was dismissed by the CIT(A) due to a delay of 395 days, which was not condoned. The assessee argued that the delay was due to the expectation that the year in question would be scrutinized under Central Circle norms following a search operation. Additionally, the assessee's consultant was preoccupied with GST returns and tax audit reports, and the Managing Partner was engaged with other legal and administrative responsibilities.

The Tribunal found merit in the assessee's argument that the delay should be condoned to avoid double addition of income, which is undesirable under the law. The Tribunal noted that no addition was made to the total income in the intimation under section 143(1), but an appeal was filed to prevent potential double taxation. The Tribunal agreed to condone the delay and directed the CIT(A) to adjudicate the issue on merit, allowing the appeal for statistical purposes.

Conclusion:

In conclusion, the Tribunal partly allowed the appeal regarding the validity of the assessment order due to mechanical approval under section 153D, and allowed the appeal for statistical purposes concerning the condonation of delay in filing an appeal against the intimation under section 143(1). The order was pronounced on September 20, 2024.