2021 (10) TMI 1448 - AT - Income Tax

Invalid approval given by the JCIT u/s 153D to the order passed u/s 153A - HELD THAT - We find that it is undisputed fact that the approval u/s 153D has been sought on 31/12/2017 and on the same day approval has been granted in 38 cases which included cases of other groups also. We find that the issue involved in this appeal is duly covered in favour of the assessee by the order of this Tribunal in the case of Shri Navin Jain and Others 2021 (9) TMI 1068 - ITAT LUCKNOW wherein held approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. Also see Naresh Kumar Jain Others 2021 (9) TMI 1080 - ITAT LUCKNOW . Thus granting of a mechanical approval u/s 153D of the Act vitiates the entire proceedings. It is on this basis that the issue was decided in favour of the assessee in both these cases under facts and circumstances exactly similar to those present herein. Thus we allow additional ground of appeal and quash the assessment order. Assessee appeal allowed.

Summary

Issues Involved:

1. Admission of Additional Ground of Appeal.
2. Validity of Approval under Section 153D of the Income Tax Act.
3. Application of Mind by Approving Authority.
4. Mechanical Approval and its Consequences.

1. Admission of Additional Ground of Appeal:

The appeal initiated by the assessee included an additional ground of appeal, which was admitted without objection from the CIT, D.R. The additional ground was deemed purely legal and fundamental to the case, thus warranting its admission. The assessee's counsel referenced the Supreme Court judgment in NTPC Limited vs. CIT to support the admission of this additional ground.

2. Validity of Approval under Section 153D of the Income Tax Act:

The crux of the appeal revolved around the validity of the approval granted under Section 153D. The assessee argued that the approval was granted in a mechanical manner, without proper application of mind, rendering the assessment order void. The approval was granted on the same day the draft assessment orders were presented, covering 38 cases, which the assessee contended was humanly impossible to review thoroughly in a single day. The Tribunal noted that the approval letter did not explicitly mention the approval process, raising concerns about the validity of the approval.

3. Application of Mind by Approving Authority:

The Tribunal emphasized the necessity for the approving authority to apply its mind to the material on record before granting approval under Section 153D. The approval process should involve a thorough review of the incriminating material, seized documents, and the assessment officer's draft order. The Tribunal cited various judicial precedents, highlighting that the approval must not be a mere formality but a quasi-judicial function requiring due diligence and independent application of mind.

4. Mechanical Approval and its Consequences:

The Tribunal found that the approval was granted in a mechanical manner, without the necessary application of mind, as evidenced by the simultaneous approval of 38 cases on the same day. This mechanical approach was deemed insufficient to meet the statutory requirements of Section 153D. The Tribunal referenced multiple cases where similar mechanical approvals were invalidated, reinforcing the principle that such approvals must reflect a genuine exercise of discretion and judgment. Consequently, the Tribunal quashed the assessment order and the subsequent order of the CIT(A), as the flawed approval under Section 153D vitiated the entire proceedings.

Conclusion:

The Tribunal allowed the appeal in favor of the assessee, primarily due to the mechanical and inadequate approval process under Section 153D, which did not meet the legal standards of due application of mind. The judgment underscores the importance of a thorough and judicious approval process in tax assessments involving search and seizure cases.