2024 (8) TMI 1138 - HC - Income Tax

Validity of the approval accorded in terms of Section 153D - Mechanical approval without application of mind - ITAT allowing the appeal of the assessee and quashing the assessment order by holding that the approval has been given mechanically without application of mind despite the fact that Range Head HELD THAT - An identical challenge of approval having been accorded mechanically and without due application of mind had arisen for our consideration in Pioneer Town Planners Pvt. Ltd 2024 (3) TMI 828 - DELHI HIGH COURT it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression Yes could be considered to be a valid approval. In fact, the approval in the instant case is apparently akin to the rubber stamping of Yes in the case of Central India Electric Supply 2011 (1) TMI 89 - DELHI HIGH COURT . In view of the aforesaid, we find no justification to interfere with the view expressed by the Tribunal. No substantial question of law arises. The appeals fail and shall stand dismissed.

Summary

Issues Involved:
1. Delay in refiling appeals.
2. Validity of the approval under Section 153D of the Income Tax Act, 1961.
3. Mechanical approval without application of mind.
4. Non-compliance by the assessee with notices issued by the Revenue.
5. Non-application of mind by the Additional CIT.
6. Deletion of addition on technical grounds.
7. Alleged perversity of the ITAT order.
8. General error and untenability of the ITAT order.

Detailed Analysis:

1. Delay in Refiling Appeals:
The court condoned the delays of 135 days and 103 days in refiling ITA 2/2024 and ITA 3/2024, respectively, based on the disclosures made. The applications for condonation of delay were disposed of accordingly.

2. Validity of the Approval under Section 153D:
The primary issue concerned the validity of the approval accorded under Section 153D of the Income Tax Act, 1961. The Tribunal found that the competent authority approved 246 proposed assessments via a single letter, which read: "The above draft orders, as proposed, are hereby accorded approval with the direction to ensure that the orders are passed well before limitation period. Further, copies of final orders so passed be sent to this office for record."

3. Mechanical Approval Without Application of Mind:
The Tribunal observed that the approval was given mechanically without due application of mind. It noted that the Additional Commissioner of Income Tax did not refer to any seized material or assessment records in the approval letter, suggesting a lack of thorough examination.

4. Non-Compliance by the Assessee with Notices Issued by the Revenue:
The Tribunal noted that the assessee had wilfully chosen not to comply with various notices issued by the Revenue during the assessment and revision proceedings. Despite numerous opportunities provided, the assessee did not furnish the required details.

5. Non-Application of Mind by the Additional CIT:
The Tribunal held that the Additional CIT's approval lacked application of mind. The approval letters did not mention any seized material or documents, indicating that the Additional CIT did not thoroughly review the assessment proposals before granting approval.

6. Deletion of Addition on Technical Grounds:
The Tribunal deleted the additions on technical grounds without discussing the merits of the case. It found that the approval process did not meet the legislative intent of Section 153D, which requires a superior authority to apply their mind to the material before approving the assessment order.

7. Alleged Perversity of the ITAT Order:
The Revenue argued that the ITAT order was perverse as it deleted total additions amounting to Rs. 51,45,24,370 based on the flawed conclusion that no additions were made in the hands of the investors. The Tribunal found that the approval process was flawed and did not address the merits of the additions.

8. General Error and Untenability of the ITAT Order:
The Tribunal's order was challenged as erroneous and untenable in law and on facts. However, the High Court found no justification to interfere with the Tribunal's view, noting that the approval process was mechanically handled without due application of mind.

Conclusion:
The High Court dismissed the appeals, upholding the Tribunal's findings that the approval under Section 153D was given mechanically without proper application of mind. The court left open the question of the effect and impact of Section 144A of the Act and provisions in the Search and Seizure Manual, 2007, to be addressed in appropriate proceedings.