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2017 (12) TMI 674 - HC - Income TaxAddition under section 153A - addition u/s 68 - Held that - In the facts of the present case, the Tribunal has recorded a finding of fact to the effect that no incriminating material had been found during the course of the search proceedings and that the statement of the director which is stated to have been recorded during the course of search under section 131 of the Act, and which forms the basis for the impugned addition, was recorded much later on 7.12.2009. In the light of the cited decision Principal Commissioner of Income Tax v. Saumya Construction P. Ltd., 2016 (7) TMI 911 - GUJARAT HIGH COURT it was not permissible for the Assessing Officer to make any addition under section 153A of the Act when no incriminating material had been found during the course of the search. Lack of approval under section 153D - Whether it would invalidate the assessment order and was not a curable defect? - Held that - In the facts of the present case, as the assessment order has been passed by an Income Tax Officer, the requirement of obtaining the prior approval of the Joint Commissioner under section 153D of the Act was absolute. The Tribunal, however, has recorded a finding of fact that there is nothing on record to indicate that the prior approval of the Joint Commissioner was obtained. As a natural corollary therefore, in the absence of the requirement of prior approval of the Joint Commissioner being satisfied, the whole proceeding would stand invalidated. The Tribunal was, therefore, wholly justified in holding that the impugned order of assessment would stand vitiated in view of non-compliance of the provisions of section 153D of the Act. On this count also, therefore, the appeal, does not merit acceptance.
Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961. 2. Deletion of addition under section 68 of the Act. 3. Validity of assessment order passed under section 143(3) consequent to an order under section 263. 4. Lack of approval under section 153D and its impact on the assessment order. 5. Interpretation of section 153A of the Act regarding incriminating material and assessment/re-assessment. Analysis: 1. The appellant challenged the order of the Income Tax Appellate Tribunal regarding the addition of ?90,00,000 under section 68 of the Income Tax Act, 1961. The Tribunal held that no incriminating evidence was found during the search, which is necessary for section 153A proceedings. The Tribunal relied on a High Court decision stating that additions can only be made based on material collected during the search or requisition. As no incriminating material was found, the addition was deemed invalid under section 153A. 2. The Commissioner (Appeals) directed the Assessing Officer to delete the addition made under section 68 of the Act. The Tribunal dismissed the revenue's appeal and allowed the cross-objection filed by the assessee. The Tribunal found that the assessment order was invalid due to the lack of incriminating material during the search, in line with the High Court's decision. 3. The appellant argued that lack of approval under section 153D would not invalidate the assessment order. However, section 153D mandates that no assessment or reassessment order can be passed without the prior approval of the Joint Commissioner. The Supreme Court has held that requirements expressed in negative language are absolute and mandatory. As the Income Tax Officer passed the assessment order without the Joint Commissioner's approval, the whole proceeding was invalidated, as held by the Tribunal. 4. The Tribunal's decision was based on the mandatory nature of obtaining prior approval under section 153D. The failure to comply with this requirement rendered the assessment order invalid. The Tribunal correctly held that the lack of approval vitiated the assessment order, and thus, the appeal was dismissed. The strict construction of taxing statutes necessitates adherence to procedural requirements, as highlighted in the case law cited. 5. The Tribunal's decision was upheld as it was in line with legal provisions and previous court decisions. The High Court found no legal infirmity in the Tribunal's order and dismissed the appeals, emphasizing the mandatory nature of obtaining approval under section 153D and the importance of incriminating material for assessments under section 153A.
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