2024 (11) TMI 1307 - AT - Income Tax

Validity of approval granted u/s 153D - authority to approval granted by Ld. JCIT - JCIT had granted 39 approvals - HELD THAT - Impugned approvals is invalid as approval has to be granted for separately for each assessment year for each assessee and in absence of it approval granted is not in accordance with law. We have no hesitation in holding that the approval u/s 153D of the Act granted by Learned JCIT in the instant cases were in mechanical manner without due application of mind. Accordingly, the grounds by all the assessees for all the assessment years under consideration are allowed. Since, the entire search assessment in the hands of all the assesses have been declared as bad in law and illegal the other grounds raised by assessee need not be gone into.

Issues Involved:

1. Validity of approval granted under Section 153D of the Income Tax Act, 1961.
2. Allegations of mechanical approval without due application of mind.
3. Compliance with procedural requirements for search assessments under Sections 153A and 153C.
4. Impact of judicial precedents on the validity of the assessment orders.

Detailed Analysis:

1. Validity of Approval under Section 153D:

The primary issue in these appeals was the validity of the approval granted by the Joint Commissioner of Income Tax (JCIT) under Section 153D of the Income Tax Act, 1961. The assessees challenged the approval granted for multiple assessment years, arguing that it was not in accordance with the law. The Tribunal examined whether the JCIT had applied his mind judiciously when granting approval for the draft assessment orders. The Tribunal noted that the JCIT granted 39 approvals on the same day, which raised questions about the thoroughness of the review process.

2. Allegations of Mechanical Approval:

The Tribunal found that the approval process was mechanical, lacking due application of mind. The JCIT granted approvals for 40 cases for various assessment years on a single day, which the Tribunal deemed humanly impossible to achieve with the necessary scrutiny. The Tribunal emphasized that the approval process under Section 153D is a quasi-judicial function requiring careful consideration of the draft assessment orders, seized documents, and replies filed by the assessees. The Tribunal cited precedents where courts held that such mechanical approvals are invalid.

3. Procedural Compliance for Search Assessments:

The Tribunal highlighted the procedural requirements under Sections 153A and 153C for search assessments, which mandate obtaining prior approval from the JCIT. The Tribunal reiterated that the JCIT must independently apply his mind, separate from the conclusions drawn by the Investigation Wing or the Assessing Officer (AO). The Tribunal underscored that the approval must be granted for each assessment year individually, rather than as a blanket approval for multiple years.

4. Judicial Precedents and Impact on Assessment Orders:

The Tribunal relied on several judicial precedents, including decisions from the Orissa High Court, Allahabad High Court, and Delhi High Court, which invalidated mechanical approvals under Section 153D. These precedents emphasized that approval must reflect a judicious application of mind and cannot be a mere formality. The Tribunal concluded that the approvals in the present cases were granted mechanically, rendering the entire search assessments void ab initio. As a result, the Tribunal allowed the appeals filed by the assessees and dismissed those filed by the Department.

In conclusion, the Tribunal's judgment focused on ensuring that the statutory approval process under Section 153D is conducted with due diligence and application of mind. The Tribunal's decision underscores the importance of adherence to procedural requirements and the need for a substantive review process in search assessments.

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