2024 (12) TMI 186 - AT - Income Tax

Validity of the assessment order in absence of proper approval u/s 153D - as alleged approval granted u/s 153D by the Joint Commissioner of Income Tax (JCIT) being without proper application of mind - HELD THAT - We find that in the case of PCIT vs. Shiv Kumar Nayyar 2024 (6) TMI 29 - DELHI HIGH COURT has held that where approval under section 153D for relevant assessment year was granted by Addl. Commissioner for 43 cases on a single day without perusing draft assessment order at all and without an independent application of mind, impugned assessment order was rightly declared to be illegal by Tribunal. We find in the case of PCIT vs. Sapna Gupta 2022 (12) TMI 887 - ALLAHABAD HIGH COURT has held that where Approving Authority approved draft assessment order in 85 cases including that of assessee in one day in a mechanical manner without applying independent mind to appraise material before it, Tribunal rightly concluded that approval so granted under section 153D vitiated entire proceedings. Since the JCIT in the instant case has given his approval in a mechanical manner without due application of mind and nowhere has mentioned that he has gone through the draft assessment orders while giving the approval, therefore, respectfully following the decisions cited above, we hold that the approval given by the JCIT u/s 153D is not in accordance with law. Accordingly, the order passed by the Assessing Officer is liable to be quashed. We accordingly quash the assessment order for want of due approval u/s 153D as per law. The additional grounds raised by the assessee are accordingly allowed. Since the assessee succeeds on the additional grounds, the grounds challenging the addition on merit become academic in nature and therefore, are not being adjudicated. The appeal filed by the assessee is accordingly allowed.

Issues Involved:

1. Validity of the assessment order under section 143(3) read with section 153A due to alleged improper approval under section 153D.
2. Addition of unaccounted expenditure on the construction of a hospital building.
3. Admission of additional legal grounds by the assessee.
4. Disallowance of certain expenditures related to anesthesia and medicine expenses.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Under Section 143(3) Read with Section 153A:

The primary contention raised by the assessee was that the assessment order passed under section 143(3) read with section 153A was invalid due to the approval granted under section 153D by the Joint Commissioner of Income Tax (JCIT) being without proper application of mind. The Tribunal noted that the approval was granted on the same day the draft orders were submitted, indicating a mechanical and conditional approval. The Tribunal referred to several precedents, including the Supreme Court's decision in the case of Serajuddin & Co., which emphasized that approval under section 153D must not be given mechanically and requires a thorough review of the draft assessment orders. Consequently, the Tribunal held that the approval granted was invalid, thereby quashing the assessment orders.

2. Addition of Unaccounted Expenditure on Construction:

The assessee challenged the addition of Rs 33,43,635/- on account of alleged unaccounted expenditure incurred on the construction of a hospital building. The CIT(A) had confirmed this addition without appreciating the lack of concrete evidence. The Tribunal, however, did not adjudicate on this issue due to the quashing of the assessment order based on the invalid approval under section 153D, rendering this ground academic.

3. Admission of Additional Legal Grounds:

The assessee raised additional legal grounds challenging the validity of the assessment order due to the alleged improper approval under section 153D. The Tribunal admitted these additional grounds, citing that they were purely legal in nature and did not require further investigation of facts. The Tribunal referred to the Supreme Court's decision in the case of National Thermal Power Co. Ltd. v. CIT, which allows for the admission of purely legal grounds at any stage of the proceedings.

4. Disallowance of Certain Expenditures:

The assessee argued for the allowance of expenditures related to anesthesia and medicine expenses, which were incurred but not recorded in the books. The CIT(A) granted partial relief by allowing anesthesia charges at a specific percentage of gross receipts but denied the claim for medicine expenses. The Tribunal did not delve into the merits of this issue due to the quashing of the assessment order based on the invalid approval under section 153D, making this ground academic.

Conclusion:

The Tribunal quashed the assessment orders for want of valid approval under section 153D, allowing the appeals filed by the assessee. The additional grounds raised by the assessee regarding the invalid approval were upheld, rendering the other grounds concerning additions and disallowances academic. The decision underscores the necessity for a thorough and non-mechanical approval process under section 153D, aligning with judicial precedents.

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