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2025 (2) TMI 543 - AT - Income TaxAssessment u/s 153A - additions dehors incriminating material found in the course of search from the premises of the assessee in concluded assessment - as argued assessment for AYs 2013-14 to AY 2015-16 in question for captioned assessee were not pending and stood concluded either u/s 143(1) or u/s 143(3) at the time of initiation of search on 19.11.2018 and thus remained unabated - HELD THAT - As observed that there does not appear to be any reference to any incriminating material found in the course of search of the assessee per se. The alleged incriminating material referred are primarily in the nature of Financial capacity of donor evaluated subsequent to search/survey proceedings. Guided by the schematic interpretation of sec 153A rendered in Abhisar Buildwell (P.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT we find force in the legal plea placed on behalf of the assessee. Hence in the absence of any incriminating material in an unabated assessment additions/ disallowances made by the AO in all captioned appeals requires to be quashed. Propriety of approval u/s 153D to the respective draft assessment orders placed before him by the AO - As discernible from the combined approval memo the sanctioning authority (Addl. CIT) has in fact relegated his statutory duty to the subordinate AO whose action the Addl. CIT was supposed to supervise as per the scheme of the Act. Manifestly the Addl. CIT without any consideration of factual and legal position in proposed additions and without ensuring the availability of incriminating material collected in search etc. has buckled under statutory compulsion and proceeded to grant a symbolic approval to meet the statutory requirement. This approach of the Addl. CIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and is thus incapable of being sustainable in law. CIT(A) has brushed aside the legal objection summarily merely on an inept indifferent premise that the assessment order makes mention of the approval from Addl. CIT under 153D and such powers are in the nature of administrative powers and a purely internal matter. The cryptic conclusion drawn by the CIT(A) is bereft of any plausible reasons whatsoever and thus cannot be reckoned to be a judicial finding on the point. The observations so made runs contrary to position of law expounded in the judicial precedents and hence not tenable in law. We are unhesitatingly disposed to hold that the integrity and propriety of impugned assessments under captioned appeals based on such combined approval memo under s. 153D in question cannot be countenanced in law. Legal objection answered in favour of the Assessee on maintainability of additions on touchstone if sec 153A and sec 153D. Invalid approval accorded u/s 153D - AY 2019-20 - Additional CIT has accorded approval without showing his own involvement and application of mind to facts emanating and law involved. The approval so accorded was thus held to be in the nature of a technical approval in symbolic exercise of powers u/s 153D. In sync with the delineations made on approval without meeting pre-requisites of application of mind the consequential assessment orders based on such repugnant approval u/s 153D are bad in law and thus stands quashed.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered the following core legal issues: (a) Whether additions made under Section 153A of the Income Tax Act, 1961, in assessments that were concluded and not abated at the time of search, are valid in the absence of incriminating material found during the search. (b) Whether the approval granted by the Additional Commissioner of Income Tax (Addl. CIT) under Section 153D was mechanical and lacked the necessary application of mind, thereby invalidating the assessments. ISSUE-WISE DETAILED ANALYSIS Issue (a): Validity of Additions under Section 153A Relevant Legal Framework and Precedents: The legal framework under Section 153A permits the reassessment of income based on incriminating material found during a search. The Supreme Court in Pr. CIT v. Abhisar Buildwell (P.) Ltd. and subsequent judgments clarified that in cases of unabated assessments, additions can only be made if incriminating material is found during the search. Court's Interpretation and Reasoning: The Tribunal noted that the assessments for AYs 2013-14 to 2015-16 were concluded and not pending at the time of the search. The Tribunal found no reference to incriminating material in the assessment orders, indicating that the additions were based on re-evaluation of existing records rather than new evidence from the search. Key Evidence and Findings: The Tribunal observed that the alleged incriminating material was related to the financial capacity of donors, which was not newly discovered during the search but rather evaluated post-search. Application of Law to Facts: The Tribunal applied the legal principle that in the absence of incriminating material, additions under Section 153A in unabated assessments are unsustainable. Treatment of Competing Arguments: The Tribunal considered the Revenue's argument but found that the absence of incriminating material rendered the additions invalid. Conclusions: The Tribunal concluded that the additions made under Section 153A were invalid due to the lack of incriminating material. Issue (b): Validity of Approval under Section 153D Relevant Legal Framework and Precedents: Section 153D requires prior approval from a supervisory authority for assessments in search cases. Judicial precedents emphasize that such approval should involve due application of mind and not be a mere formality. Court's Interpretation and Reasoning: The Tribunal found that the approval granted by the Addl. CIT was mechanical, based on assurances from the AO without independent verification. The Tribunal emphasized that the approval should reflect a substantive review, not just a procedural formality. Key Evidence and Findings: The Tribunal noted that the approval memo indicated reliance on the AO's assurances rather than a thorough review by the Addl. CIT. Application of Law to Facts: The Tribunal applied the principle that mechanical approvals under Section 153D invalidate the assessments, as they fail to meet the statutory requirement of independent application of mind. Treatment of Competing Arguments: The Tribunal considered the Revenue's defense of the approval process but found it lacking in substance and adherence to legal standards. Conclusions: The Tribunal concluded that the approval under Section 153D was invalid, rendering the assessments null and void. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal established that for unabated assessments, additions under Section 153A require incriminating material found during a search. Furthermore, approvals under Section 153D must involve substantive review and application of mind, not merely procedural compliance. Final Determinations on Each Issue: The Tribunal quashed the additions made under Section 153A due to the absence of incriminating material and invalidated the assessments based on the mechanical approval under Section 153D. Consequently, all the appeals were allowed in favor of the assessee.
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