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2024 (12) TMI 1553 - AT - Income TaxAssessment u/s 153A - validity of the approval accorded in terms of Section 153D - HELD THAT - We are of the considered view that an approval of superior officer cannot be a mechanical exercise and this has been emphasised in several decision. A reference can be made in the context of Section 142(2A) of the Act which empowers the AO to direct a special audit. The obtaining of the prior approval was held to be mandatory when the Hon ble Supreme Court in the case of Rajesh Kumar 2006 (11) TMI 135 - SUPREME COURT as held an order of approval is also not to be mechanically granted. The same should be done having regard to the materials on record. The explanation given by the assessee if any would be a relevant factor. The approving authority was required to go through it. Thus where the approval is granted mechanically it would vitiate the assessment order itself. Considering the approval granted by the competent authority we have no hesitation in holding that the approval granted by the Addl. Commissioner of Income-tax Central Range-4 Mumbai is not only mechanical but against the ratio laid down in M/s. MDLR Hotels Pvt. Ltd. 2024 (8) TMI 1138 - DELHI HIGH COURT . Therefore the resultant assessment orders deserve to be quashed. Assessee appeal allowed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered in this judgment was the validity of the approval accorded under Section 153D of the Income Tax Act, 1961, which was challenged by the assessee on grounds of being mechanical and lacking application of mind. The core legal question was whether the approval granted by the Additional Commissioner of Income-tax, Central Range-4, Mumbai, met the mandatory provisions of Section 153D and aligned with the legislative intent requiring meaningful application of mind by the approving authority. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 153D of the Income Tax Act mandates that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner without prior approval from the Joint Commissioner. This provision aims to ensure that superior authorities apply their minds to the material on which the assessment is based, thus safeguarding the integrity of the assessment process. The legislative intent, as clarified by CBDT Circular No. 3 of 2008, underscores the necessity for prior approval in search and seizure cases to ensure that assessments are conducted with due diligence and oversight. Court's Interpretation and Reasoning The Tribunal scrutinized the approval process, noting that the Additional Commissioner granted approval for 21 assessment orders via a single letter. The Tribunal emphasized that the approval process should not be mechanical and must reflect a genuine application of mind by the approving authority. The Tribunal drew upon several judicial precedents, including decisions from the Hon'ble High Court of Orissa and the Hon'ble Supreme Court, which highlighted the necessity for approvals to be more than mere formalities, requiring some indication of the approving authority's thought process. Key Evidence and Findings The Tribunal noted the absence of any reference to seized materials or assessment records in the approval letter, which would indicate that the Additional Commissioner applied his mind to the facts of each case. The Tribunal also considered the explanations provided by the Revenue, which argued that the approval process involved regular consultations between the Range Head and the Assessing Officer. However, the Tribunal found these explanations insufficient to demonstrate that the approval was not mechanical. Application of Law to Facts The Tribunal applied the principles established in previous judicial decisions to the facts of the case, concluding that the approval granted by the Additional Commissioner was mechanical. The Tribunal noted that the approval letter lacked any substantive indication of the Additional Commissioner's examination of the draft orders, which is a critical requirement under Section 153D. Treatment of Competing Arguments The Tribunal considered the Revenue's argument that the approval process involved regular consultations and was not merely a formality. However, the Tribunal found that the absence of any written record of these consultations and the lack of reference to specific materials in the approval letter undermined the Revenue's position. The Tribunal emphasized that the approval process must be documented in a manner that demonstrates a meaningful application of mind, rather than being a mere rubber-stamping exercise. Conclusions The Tribunal concluded that the approval granted under Section 153D was mechanical and did not meet the statutory requirements. Consequently, the resultant assessment orders were deemed invalid and were quashed. SIGNIFICANT HOLDINGS The Tribunal's decision reinforced the principle that approvals under Section 153D must involve a genuine application of mind by the approving authority. The Tribunal cited the Hon'ble Supreme Court's observation that an order of approval should not be granted mechanically and must be based on the materials on record. The Tribunal's decision aligns with the broader judicial consensus that mere formal approval without substantive examination is insufficient under the law. The Tribunal also highlighted the importance of documenting the approval process in a manner that reflects the approving authority's engagement with the materials and issues at hand. This decision underscores the necessity for transparency and accountability in the approval process for assessments and reassessments under the Income Tax Act. In conclusion, the Tribunal allowed the appeals by the assessee, quashing the impugned assessment orders due to the mechanical nature of the approval process under Section 153D.
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