2018 (11) TMI 1563 - HC - Income Tax

Assessment u/s 153A - mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with - not enough time left with Additional CIT to analyze the issues of draft order on merit - Held that - Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises.

Summary

Issues:
Validity of approval granted by the Additional Commissioner of Income Tax under Section 153D of the Income Tax Act, 1961 for Assessment Year 2007-08.

Analysis:
The High Court of Bombay heard an appeal filed by the Revenue challenging the judgment of the Income Tax Appellate Tribunal dated 19th August, 2015. The main issue before the court was whether the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval under Section 153D of the Act. The Tribunal had set aside the order of the Assessing Officer for Assessment Year 2007-08, stating that the approval granted by the Additional Commissioner of Income Tax lacked application of mind and was not valid in the eyes of the law. The Tribunal emphasized that the approval process should involve a genuine consideration of relevant factors and not be a mere formality. The court noted that the Additional CIT's approval was granted without sufficient time to analyze the draft order on merit, indicating a mechanical exercise without independent application of mind.

The Revenue argued that the question of the legality of the approval was raised by the assessee for the first time before the Tribunal and that the approval was indeed granted by the Additional CIT. However, the court upheld the Tribunal's decision after considering the documents on record. The Additional CIT's approval letter clearly showed that he did not have enough time to analyze the issues arising from the draft order, leading to a mechanical approval without proper consideration. The court emphasized that the approval process should involve a genuine consideration of relevant issues, and in this case, the approval was granted without such consideration, making it invalid in the eyes of the law.

The court highlighted that while the statute does not prescribe a specific format for granting approval, it is essential that the approval must involve a genuine consideration of relevant factors. The Additional CIT's failure to properly analyze the draft order before granting approval rendered the approval invalid. The court concluded that the question of the validity of the approval was crucial and could have been raised at any time. Therefore, the Tax Appeal was dismissed, affirming the Tribunal's decision that the approval granted by the Additional CIT was not valid due to lack of application of mind and proper consideration of relevant factors.