2024 (9) TMI 1671 - AT - Income Tax

Assessment u/s 153A - Validity of the approval taken u/s 153D as the same has been obtained in a mechanical manner - HELD THAT - We find no mentioning of perusal of the draft assessment order by the concerned authority and no separate application of mind in the instant case in hand while granting approval altogether 110 assessment orders in a single day the same is nothing but the product of total non-application of mind and therefore, we do not hesitate to find the same arbitrary, erroneous and thus, liable to be treated as non-est in the eye of law. The Assessment Order passed on the basis of such approval is therefore, found to be without any basis and thus, quashed. Appeal of the assessee is allowed.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Validity of approval under Section 153D of the Income Tax Act.
3. Legality of assessment order based on the approval process.

Analysis:
1. The appeal was filed by the assessee challenging an order passed under Section 153A r.w.s 143(3) of the Income Tax Act, 1961. The appeal was initially barred by limitation, and the assessee sought condonation of delay due to financial constraints and blockage of bank accounts. The Tribunal, after considering the circumstances, granted relief and condoned the delay in filing the appeal.

2. The assessee contested the validity of the approval obtained under Section 153D of the Act, arguing that the approval process was mechanical and lacked separate approval for each Assessment Year. The Tribunal admitted this additional ground as it was crucial to the matter and relied on a judgment of the Supreme Court in National Thermal Power Company Ltd. Vs. CIT. The Tribunal found merit in the argument and admitted the ground challenging the approval process.

3. The search and seizure operation under Section 132 of the Act led to the issuance of a notice under Section 153A, culminating in the assessment order being challenged. The assessee raised concerns about the approval process, highlighting that 110 cases were approved in a single day without individual scrutiny or application of mind. Citing a judgment of the Delhi High Court in PCIT vs. Shiv Kumar Nayyar, the Tribunal concluded that the approval lacked proper assessment of draft orders, rendering the final assessment invalid. Relying on the Delhi High Court's ruling, the Tribunal quashed the assessment order based on the flawed approval process.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing the importance of a valid approval process under the Income Tax Act. The judgment highlighted the necessity of individual scrutiny and proper application of mind in granting approvals for assessment orders to ensure the legality and validity of the assessments.