2025 (1) TMI 651 - AT - Income Tax

Proceedings initiated u/s 153C r.w.s. 153A - Validity of approval granted u/s.153D - HELD THAT - We quash the entire proceedings initiated under section 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the Ld. ACIT, Central Range-4, New Delhi. Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

Whether the assessment orders for the years 2012-13, 2013-14, and 2014-15 were valid, given the alleged lack of incriminating material found during the search.
Whether the approval obtained under Section 153D of the Income Tax Act for passing the assessment orders was valid and not mechanical.
Whether the addition of Rs. 29,91,534/- as Long Term Capital Gain and Rs. 1,49,576/- as commission was justified without incriminating evidence.
Whether the absence of a DIN number on the approval under Section 153D invalidated the assessment orders.
Whether the lack of opportunity for cross-examination of deponents affected the validity of the assessment orders.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Assessment Orders in Absence of Incriminating Material

Legal Framework and Precedents: The judgment refers to the requirement of incriminating material for assessments under Section 153A post-search, as established in precedents like PCIT Central-3 v. Abhisar Buildwell P. Ltd.
Court's Interpretation and Reasoning: The court noted that no incriminating material was found during the search, which is crucial for sustaining additions under Section 153A.
Application of Law to Facts: The absence of incriminating material meant that the additions made were not sustainable under the legal framework.
Conclusion: The assessment orders were deemed invalid due to the lack of incriminating material.

Issue 2: Validity of Approval under Section 153D

Legal Framework and Precedents: Section 153D requires that the approval for assessment orders must be given with due application of mind. Precedents like Shreelekha Damani vs. DCIT emphasize the need for non-mechanical approval.
Court's Interpretation and Reasoning: The court found the approval process to be mechanical, as the approval was granted for multiple cases on the same day without individual consideration.
Key Evidence and Findings: The court highlighted that the approval was a blanket approval for multiple years, which indicated a lack of due diligence.
Conclusion: The approval under Section 153D was invalid, rendering the assessment orders null.

Issue 3: Justification of Additions without Incriminating Evidence

Legal Framework and Precedents: Additions under Section 69 and 69C require substantive evidence, which was absent in this case.
Court's Interpretation and Reasoning: The court found that the additions were made without any incriminating evidence, which is against the principles laid down in relevant case laws.
Conclusion: The additions were unjustified and were thus quashed.

Issue 4: Absence of DIN Number on Approval

Legal Framework and Precedents: The requirement for a DIN number is mandated by CBDT Circular No. 19/2019.
Court's Interpretation and Reasoning: The absence of a DIN number was a procedural lapse, further invalidating the approval.
Conclusion: The procedural lapse contributed to the quashing of the assessment orders.

Issue 5: Lack of Opportunity for Cross-Examination

Legal Framework and Precedents: The opportunity for cross-examination is a fundamental right in tax proceedings.
Court's Interpretation and Reasoning: The denial of this opportunity was seen as a violation of procedural fairness.
Conclusion: This procedural unfairness further supported the decision to quash the assessment orders.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D of the Act."
Core Principles Established: Approval under Section 153D must be given with due application of mind and cannot be a mere formality.
Final Determinations on Each Issue: The assessment orders were quashed due to the invalidity of the approval process, lack of incriminating material, procedural lapses, and denial of cross-examination rights.

The judgment comprehensively addressed each issue, ultimately leading to the quashing of the assessment orders for the years in question. The court emphasized the importance of procedural compliance and the necessity of substantive evidence for sustaining tax additions.

← Previous Next →