2025 (3) TMI 1217 - AT - Income Tax

Assessment u/s 153A - assessment order as passed without the valid approval u/s 153D - HELD THAT - As assessment order was framed by the AO u/s 153A(1)(b) of the Act with the prior approval of the Joint commissioner. The joint commissioner of Income Tax has granted the single approval for the seven years A.Y. i.e 2010-11 to 2016-17 by the letter no F. No. JCIT(CR)/GGN/2017-18/951 in a mechanical manner without due application of mind. Thus no hesitation in holding that the approval u/s 153D of the Act granted by JCIT in the instant case was mechanical manner and without due application of mind. We declared the assessment as bad in law. Accordingly the ground raised by the assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this judgment were:

1. Whether the assessment order passed under section 153A of the Income Tax Act was without jurisdiction, void ab initio, and illegal, thus deserving to be quashed.

2. Whether the assessment proceedings under section 153A were valid in the absence of a warrant of authorization for search under section 132 executed in the name of the assessee.

3. Whether the additions made under section 153A were valid in the absence of incriminating material found during the search.

4. Whether the assessment order was valid given the alleged lack of valid prior approval under section 153D.

5. Whether the assessment should have been conducted under section 153C instead of 153A due to the nature of the material found.

6. Whether the confirmation of the addition of Rs. 31,60,00,000/- was justified, considering it could lead to double taxation.

7. Whether the assessee was denied the opportunity to cross-examine statements relied upon by the AO.

8. Whether the assessment was valid given the alleged procedural improprieties and lack of independent inquiry conclusion by the AO.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction and Legality of the Assessment Order under Section 153A

The Tribunal examined whether the assessment order was void due to lack of jurisdiction. The relevant legal framework includes section 153A of the Income Tax Act, which mandates assessments post-search operations. The Tribunal noted that the absence of a warrant of authorization specific to the assessee could render the proceedings void.

Issue 2: Validity of the Assessment without a Warrant under Section 132

The Tribunal considered whether the absence of a specific warrant for the assessee invalidated the proceedings. The legal framework under section 132 requires a warrant for search operations, and its absence could undermine the assessment's validity.

Issue 3: Additions under Section 153A without Incriminating Material

The Tribunal evaluated whether additions could be made under section 153A without incriminating material. The legal precedent requires that additions post-search should be based on material found during the search. The absence of such material could invalidate the additions.

Issue 4: Validity of the Assessment Order under Section 153D

The Tribunal scrutinized the requirement of prior approval under section 153D. The legal framework mandates that assessments in search cases require prior approval from a superior authority. The Tribunal found that the approval was granted in a mechanical manner without due application of mind, rendering it invalid.

Issue 5: Applicability of Section 153C Instead of 153A

The Tribunal considered whether the assessment should have been conducted under section 153C due to the nature of the material found. Section 153C applies when material found during a search pertains to a person other than the searched person, requiring a different procedural approach.

Issue 6: Double Taxation and Confirmation of Addition

The Tribunal examined the potential for double taxation due to the confirmation of the addition of Rs. 31,60,00,000/-. The assessee argued that the amount was already settled under the Direct Tax Vivad Se Vishwas Act, 2020, and its re-assessment could lead to double taxation.

Issue 7: Denial of Opportunity to Cross-Examine

The Tribunal addressed the procedural fairness regarding the assessee's opportunity to cross-examine statements used against them. The principles of natural justice require that the assessee be given a chance to rebut evidence used in the assessment.

Issue 8: Procedural Improprieties and Incomplete Inquiry

The Tribunal considered whether the assessment was procedurally flawed due to the AO's failure to conclude independent inquiries under sections 133(6)/131. Such procedural lapses could undermine the validity of the assessment.

3. SIGNIFICANT HOLDINGS

The Tribunal held that the approval under section 153D was granted in a mechanical manner without due application of mind, rendering the assessment order invalid. The Tribunal stated, "We have no hesitation in holding that the approval u/s 153D of the Act has been granted by the Id. JCIT in a mechanical manner without due application of mind, thereby making the approval proceedings by a high-ranking authority, an empty ritual."

The Tribunal concluded that the assessment order was bad in law due to the invalid approval process, and thus, the appeal of the assessee was allowed. Consequently, the Tribunal did not adjudicate on all grounds, keeping them open for potential future consideration.