2024 (4) TMI 1025 - AT - Income Tax

Assessment order passed u/s 153A - valid approval granted u/s 153D or not? - as submitted by assessee combined/consolidated approval issued u/s 153D by the Additional CIT/Central Range-7 Delhi without any reference on the order sheet and the same is mechanical one HELD THAT - As referring to approval accorded makes it evident that such approval is generic and listless and accorded in a blanket manner without any reference to any issue in respect of any of 5 assessment years. Apparently, the approval has been granted on a dotted line without any availability of reasonable time which firms up the belief towards non application of mind. Besides, the approval has been granted in a consolidated manner for all assessment years for which voluminous assessment orders were prepared. The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality. It is also alleged on behalf of assessee that the draft assessment orders are not available on record as no such draft Assessment order has been referred while according the approval u/s 153D of the Act. The approval granted under section 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard. Thus in the instant case, approving authority did not mention anything in the approval memo towards his/ her process of deriving satisfaction so as to exhibit his/her due application of mind. We may observe that the above approval letter issued by the Addl. Commissioner says that the approval has been granted subject to certain conditions. Plain reading of the letter of approval granted by the Addl. Commissioner, clearly depicts that the Addl. CIT had routinely given approval to the AO to pass the order only on the basis of letter of the Ld. A.O. without any application of mind. From the said approval, it can be easily inferred that the approved has been accorded with certain conditions. Thus, the sanctioning authority had in effect abdicated its statutory functions and delightfully relegated its statutory duty to the subordinate AO, whose action the Additional CIT, was supposed to supervise. The said approach of the Additional CIT, Central has rendered the Approval to be a mere formality and cannot be sustained in the eyes of law. Thus approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D of the Act. Such perfunctory approval has no legal sanctity in the eyes of the law. See SMT. SHREELEKHA DAMANI 2018 (11) TMI 1563 - BOMBAY HIGH COURT Thus the approvals so granted under the shelter of section 153D of the Act does not pass the test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments orders in the captioned appeals are non-est and a nullity and hence the same are quashed. Appeals filed by the Assessee allowed.

Summary

Issues Involved:

1. Validity of assessment u/s 153A without a search in the assessee's premises.
2. Additions u/s 69C for foreign travel expenses.
3. Additions u/s 68 for unexplained credit entries.
4. Additions u/s 69A for cash and demonetized currency found during search.
5. Validity of assessment orders based on approval u/s 153D.

Summary:

1. Validity of assessment u/s 153A:
The assessee contested the validity of the assessment u/s 153A, arguing that there was no search in their office or residential premises. The tribunal did not specifically address this issue in detail due to the resolution of the case on other grounds.

2. Additions u/s 69C for foreign travel expenses:
The assessee argued that the additions u/s 69C for foreign travel expenses were made on an ad-hoc and arbitrary basis without precise material evidence. The tribunal did not delve into the merits of these additions due to the resolution of the case on the legal ground of invalid approval u/s 153D.

3. Additions u/s 68 for unexplained credit entries:
The assessee contended that the additions u/s 68 were upheld without fulfilling the prerequisites for such additions. Again, the tribunal did not adjudicate on the merits due to the primary issue of invalid approval u/s 153D.

4. Additions u/s 69A for cash and demonetized currency found during search:
For the assessment year 2017-18, the assessee challenged the additions u/s 69A for cash and demonetized currency found during the search. The tribunal did not address these issues on merits due to the invalid approval u/s 153D.

5. Validity of assessment orders based on approval u/s 153D:
The tribunal found that the approval u/s 153D was granted in a mechanical and hurried manner without application of mind. The approval was generic, listless, and accorded in a blanket manner for multiple assessment years without specific reasoning. The tribunal cited several precedents, including the case of Shreelekha Damani vs. DCIT, to emphasize that such perfunctory approval lacks legal sanctity. Consequently, the tribunal quashed the assessment orders as they were based on invalid approval u/s 153D, rendering the assessments non-est and a nullity.

Conclusion:
The tribunal allowed the appeals filed by the assessee in ITA Nos. 294/Del/2022 and ITA No. 295/Del/2022, quashing the assessment orders due to the invalid approval u/s 153D, and did not adjudicate on the merits of the additions/disallowances.