2019 (12) TMI 311 - AT - Income Tax

Assessment u/s 153A - admission of the additional ground - it is submitted that, while granting the approval u/s.153D of the Act, proper procedure has not been followed and there was no application of mind by the approving authority. - Held that - In the present case, the appellants want to challenge the procedure adopted by the revenue authorities while granting approval u/s.153D of the Act on the basis of documentary evidence obtained from the departmental record. The appellants to raise additional ground which is purely legal and goes to the root of the matter and can be decided on the basis of material/relevant appeal record already before the Tribunal without any further exercise or extra material or documentary evidence. - Additional grounds admitted. Adjudication of Additional Ground - Assessing Officer has requested the ld JCIT to grant approval u/s.153D vide letter dated 17.11.2017 in both the cases. The JCIT has granted approval in both the cases by only stating that Approval is hereby accorded as per the provisions of section 153D of the I.T.Act for passing the assessments in respect of the following cases . In this approval, we are unable to see any mention by the approving authority that he has perused the relevant assessment records and draft assessment orders proposed to be passed by the Assessing Officer. - the approving authority i.e. the ld JCIT has not even bothered to mention that he has perused the relevant assessment records and draft assessment orders for which he has granted approval u/s.153D of the Act as per the mandatory requirements of the said provisions of the Act. The ld JCIT has granted approval under section 153D of the Act in a mechanical manner without application of mind to the relevant assessment records and draft assessment orders submitted before him by the AO for grant of approval u/s.153D of the Act before passing the relevant assessment orders u/s.153A r.w.s 143(3) of the Act. In our considered and humble opinion, no procedure for grant of approval has been provided u/s.153D of the Act and the Income tax Rules, 1962. However, when legislature has enacted some provision to be exercised by a higher revenue authority enabling the AO to pass assessment or reassessment orders in the search cases, then, it is the duty of the approving authority to exercise such power by applying his judicious, vigilant and cautious efforts. The approval u/s.153D of the Act cannot be treated as an official formality but the provision has been inserted by the legislature with some specific and useful purpose. It is apparent that the purpose behind enactment of the said provision in the Statute by the legislature are of two folds viz (i) before approval, the Sr. Authority will ensure that the assessee should be protected against undue or irrelevant addition disallowances in the assessment and (ii) the approving granting authority will also ensure that proper enquiry or investigations are carried out by the Assessing Officer on all the relevant materials including material in hands of the department at the time of initiating search proceedings, material or documents found and seized during search operation and materials found and unearthed during post search investigations and enquiries. If an approval has been granted by the approving authority in a mechanical manner without application of mind then the very purpose of obtaining of approval u/s.153D and mandate of enactment by the legislature will be defeated. Accordingly, all assessment orders are vitiated and thus same are void being bad in law. - Orders quashed.

Summary

Issues Involved:
1. Admission of additional ground of appeal.
2. Validity of assessment orders passed under section 153A read with section 143(3) due to alleged improper procedure followed under section 153D.
3. Merits of the additions or disallowances in the assessment orders.

Issue-wise Detailed Analysis:

1. Admission of Additional Ground of Appeal:
The assessees filed a common additional ground of appeal for all the assessment years, challenging the assessment orders on the basis that the proper procedure of law was not followed while granting approval under section 153D of the Income Tax Act. The Tribunal considered the application for admission of this additional ground as a preliminary issue. It was argued that this additional ground is a legal ground that goes to the root of the matter and should be admitted in the interest of justice. The Tribunal, relying on the Supreme Court's decision in the case of National Thermal Power Co. Ltd. vs. CIT, held that any legal ground which can be decided on the basis of facts already available on record should be admitted for adjudication. Consequently, the additional ground was admitted for consideration and adjudication on merits.

2. Validity of Assessment Orders under Section 153A read with Section 143(3):
The main contention of the assessees was that the Joint Commissioner of Income Tax (JCIT) granted approval under section 153D in a mechanical manner without proper application of mind. The Tribunal noted that the JCIT's approval letter merely stated that "approval is hereby accorded as per the provisions of section 153D of the I.T. Act for passing the assessment orders" without mentioning that the relevant assessment records and draft assessment orders were perused. The Tribunal emphasized that the approval under section 153D is not a mere formality but a statutory duty requiring proper application of mind. The Tribunal referred to various judicial precedents, including the decisions of the Bombay High Court in the case of Smt. Shreelekha Damani and the ITAT Delhi in the case of M/s. M3M India Holdings, which held that approval granted without application of mind is invalid. The Tribunal concluded that the JCIT granted approval in a mechanical manner without application of mind, rendering the assessment orders void and bad in law. Consequently, the assessment orders were quashed.

3. Merits of the Additions or Disallowances:
Since the Tribunal quashed the assessment orders on the legal ground of invalid approval under section 153D, the grounds challenging the merits of the additions or disallowances became academic and were not adjudicated upon.

Conclusion:
The Tribunal allowed the additional ground of appeal, quashed the assessment orders due to invalid approval under section 153D, and did not adjudicate on the merits of the additions or disallowances. Appeals filed by the revenue were dismissed, and cross objections filed by the assessee were allowed.