2024 (7) TMI 1562 - AT - Income Tax

Validity of approval granted by the ld. JCIT u/s 153D - allegation of non application of mind - non application of mind in the approval process - HELD THAT - Hon'ble Jurisdictional High Court in the case of PCIT vs Shiv Kumar Nayyar 2024 (6) TMI 29 - DELHI HIGH COURT wherein it was held that where order of approval u/s 153D of the Act for relevant assessment year was granted by Additional Commissioner who had granted approval for 43 cases on a single day without perusing the draft assessment orders at all and without an independent application of mind, impugned assessment order was rightly declared to be illegal by Tribunal. We find that similar issue has been addressed by the Hon'ble Jurisdictional High Court in the case of PCIT vs. Anju Bansal 2023 (7) TMI 1214 - DELHI HIGH COURT wherein, under similar circumstances, the Hon'ble Delhi High Court categorically held that statutory approval given by a quasi judicial authority without due application of mind as contemplated in section 153D of the Act would be fatal to the entire search assessment proceedings We have no hesitation in holding that the approval u/s 153D of the Act has been granted by the ld. JCIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decisions of as relied upon.

Issues Involved:

1. Validity of the approval granted under Section 153D of the Income Tax Act, 1961.
2. Whether the assessment order is void ab initio due to the alleged mechanical approval.
3. Application of mind in the approval process under Section 153D.
4. The role of the Joint Commissioner of Income Tax (JCIT) in the search assessment proceedings.
5. The impact of procedural irregularities on the legality of the assessment order.

Issue-wise Detailed Analysis:

1. Validity of the approval granted under Section 153D of the Income Tax Act, 1961:

The primary issue raised by the assessee was regarding the validity of the approval granted by the Joint Commissioner of Income Tax (JCIT) under Section 153D of the Income Tax Act, 1961. The assessee argued that the approval was granted in a mechanical manner without due application of mind, rendering the assessment order invalid and bad in law. The Tribunal examined the process followed by the JCIT and found that 232 files, including the assessee's, were approved on a single day, which raised questions about the thoroughness and judiciousness of the approval process.

2. Whether the assessment order is void ab initio due to the alleged mechanical approval:

The Tribunal considered whether the assessment order could be declared void ab initio due to the alleged mechanical manner in which the JCIT granted approval. The assessee argued that such mechanical approval without due application of mind could not be considered valid. The Tribunal found merit in this argument, particularly in light of precedents where similar approvals were quashed due to lack of application of mind, as highlighted in the decisions of various High Courts.

3. Application of mind in the approval process under Section 153D:

The Tribunal emphasized that the approval process under Section 153D is a quasi-judicial function requiring the JCIT to apply his mind judiciously. The JCIT is expected to verify the issues raised in the draft assessment order, examine the seized documents, and consider the replies filed by the assessee. The Tribunal found that granting approval for 232 cases on a single day indicated a lack of application of mind, making the approval an empty ritual rather than a substantive legal requirement.

4. The role of the Joint Commissioner of Income Tax (JCIT) in the search assessment proceedings:

The Tribunal noted the argument by the Revenue that the JCIT's role in a Central Range involves close involvement in the assessment proceedings from the inception, which could justify the same-day approval. However, the Tribunal held that despite such involvement, the JCIT is required to independently apply his mind when granting approval under Section 153D, irrespective of his prior involvement in the proceedings. The Tribunal rejected the Revenue's argument that mere involvement from the beginning could substitute for the statutory requirement of independent application of mind.

5. The impact of procedural irregularities on the legality of the assessment order:

The Tribunal concluded that the procedural irregularities in the approval process, specifically the lack of due application of mind by the JCIT, rendered the assessment order void ab initio. The Tribunal relied on judicial precedents where similar procedural lapses led to the quashing of assessment orders. The Tribunal held that statutory approvals given without due application of mind are fatal to the legality of the assessment proceedings.

Conclusion:

The Tribunal allowed the assessee's appeal and cross objections, declaring the assessment order for the Assessment Year 2013-14 as void ab initio due to the invalid approval under Section 153D. Consequently, the appeal by the Revenue was dismissed, and other grounds raised by both parties were deemed academic and left open. The order was pronounced in the open court on 23/07/2024.

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