2024 (5) TMI 1494 - AT - Income Tax

Validity of the notice issued u/s 153C - no valid approval granted u/s 153D - HELD THAT - We find that the approval has been granted not separately for each assessment year for the assessee whereas the provision of Section 153D of the Act stipulates conditions that no order of assessment or reassessment shall be made by an Assessment Officer below the rank of Joint Commissioner in respect of each assessment year referred to in Clause (b) of Sub Section (1) of Section 153A of the Act or the assessment year referred to in Clause (b) of Sub Section 153B of the Act except the prior approval of the Joint Commissioner. It further appears from the approval dated 08.06.2018 that the same was a common and composite order whereas the Addl. Commissioner is required to verify and approve that each of assessment year is complied with as well as procedural laid down under the Act. Such fact clearly reveals non-application of mind on the part of the Learned Addl. Commissioner of Income Tax, Central Range-7, New Delhi. Thus granting approval for all the common years instead of approval u/s 153B for each assessment year separately de horse the rules. The said approval is found to have been given in a mechanical and routine manner. We find that the order issuing authority has not discharged its statutory duties cast upon him even by assigning cogent reasons in respect of the issues involved in the matter. Thus granting approval in the absence of due application of independent mind to the material on record for each assessment year in respect of the assessee s case separately vitiates the entire proceedings; the same is found to be arbitrary and erroneous and therefore, liable to be quashed. We quash the entire proceeding initiated u/s 153C r.w.s 153A of the Act in the absence of a valid approval granted ACIT. Appeal filed by the assessee is allowed.

Summary

Issues Involved:

1. Validity of the notice issued under Section 153C of the Income Tax Act.
2. Jurisdictional error due to lack of valid approval under Section 153D of the Income Tax Act.

Detailed Analysis:

1. Validity of the Notice under Section 153C:

The appellant challenged the validity of the notice issued under Section 153C of the Income Tax Act, arguing that the documents seized during the search at the premises of PSK Finance Solutions Pvt. Ltd. were only 'relating to' and not 'belonging to' the appellant company. According to Section 153C(1) of the Act, applicable from Assessment Year 2015-16, proceedings under this section can only be initiated if the Assessing Officer (AO) of the searched party and the AO of the third party are satisfied that the documents seized belong to the third party. The appellant contended that this condition was not met, rendering the notice invalid.

2. Jurisdictional Error Due to Lack of Valid Approval under Section 153D:

The appellant also raised an issue regarding a jurisdictional error, claiming that the assessment order suffered from a lack of valid approval under Section 153D of the Act. The approval was allegedly granted in a common and consolidated manner for multiple assessment years without separate reasoning for each year, which the appellant argued was not in accordance with the law. The appellant relied on the judgment of the Hon'ble Supreme Court in National Thermal Power Corporation Ltd. vs. CIT, which allows legal questions to be raised at any stage to correctly assess the tax liability. The tribunal found merit in this argument, noting that the approval was granted on the same day the request was made, indicating a lack of application of mind. The tribunal referred to the precedent set by the Hon'ble Delhi High Court in Veena Singh vs. ACIT, which emphasized that approval under Section 153D must reflect due application of mind and not be a mechanical exercise.

The tribunal concluded that the approval granted was not in accordance with the law, as it was generic and did not reflect the necessary application of mind. The tribunal observed that the approval process was hurried and lacked specific reasoning for each assessment year, violating the statutory obligation to ensure due application of mind. Consequently, the tribunal quashed the proceedings initiated under Section 153C read with Section 153A of the Act due to the absence of a valid approval by the Additional Commissioner of Income Tax.

In conclusion, the appeal filed by the assessee was allowed, and the appeal filed by the Revenue was dismissed as infructuous, as the underlying assessment order was quashed.