2020 (7) TMI 430 - AT - Income Tax

Validity of the assessment order framed u/s 153A read with section 143(3) - whether such order was passed without obtaining the proper approval from the Additional CIT and that too in mechanical matter? - Unexplained cash found during search - HELD THAT - Assessment has been framed by the AO under section 143(3) of the Act, without obtaining the valid approval from the joint Commissioner of income tax. Accordingly, such assessment is not valid under the provisions of law. In holding so we draw support and guidance from the judgment of Hon ble jurisdictional High Court in case of CIT vs. Sunrise Finlease 2017 (12) TMI 674 - GUJARAT HIGH COURT . Revenue has not brought anything on record contrary to the arguments advanced by the learned AR for the assessee. As the assessee succeeds on the preliminary issue raised by him, we do not find any reason to adjudicate the other issue raised by the assessee challenging the validity of the assessment as well as on merits. Hence the ground of appeal of the assessee is allowed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Issues Involved:
1. Validity of the assessment order under section 153A read with section 143(3) due to alleged mechanical approval under section 153D.
2. Addition of ?35,67,200/- as unexplained cash found during the search.
3. Treatment of proceeds from the sale of land as trade income instead of long-term capital gain.
4. Disallowance of interest payment of ?14,40,475 to ICICI Bank as personal expenditure.
5. Addition of ?2,28,990/- as unexplained investment in jewelry.
6. Treatment of remuneration income of ?42,00,000/- from Om Kirti Constructions Pvt. Ltd. as income from other sources.

Detailed Analysis:

1. Validity of the Assessment Order under Section 153A read with Section 143(3) Due to Alleged Mechanical Approval under Section 153D:
The assessee challenged the validity of the assessment order on the grounds that the approval from the Additional CIT under section 153D was mechanical and not obtained prior to the passing of the assessment order. The Tribunal noted that the approval was granted on 4th March 2013 but was received by the AO on 5th March 2013, after the assessment order was passed. The Tribunal held that the assessment order was invalid as it was not in compliance with section 153D, which mandates prior approval. The Tribunal relied on the judgment of the Hon’ble jurisdictional High Court in the case of CIT vs. Sunrise Finlease, which held that non-compliance with section 153D invalidates the assessment proceedings. Consequently, the Tribunal allowed the additional ground raised by the assessee, rendering the assessment order void ab initio.

2. Addition of ?35,67,200/- as Unexplained Cash Found During the Search:
Since the Tribunal found the assessment order invalid due to non-compliance with section 153D, it did not adjudicate on the merits of the addition of ?35,67,200/- as unexplained cash.

3. Treatment of Proceeds from the Sale of Land as Trade Income Instead of Long-term Capital Gain:
The Tribunal did not address this issue on merits due to the preliminary finding that the assessment order was invalid.

4. Disallowance of Interest Payment of ?14,40,475 to ICICI Bank as Personal Expenditure:
This issue was also not adjudicated on merits by the Tribunal due to the invalidation of the assessment order.

5. Addition of ?2,28,990/- as Unexplained Investment in Jewelry:
The Tribunal refrained from discussing this issue on merits following its decision to invalidate the assessment order.

6. Treatment of Remuneration Income of ?42,00,000/- from Om Kirti Constructions Pvt. Ltd. as Income from Other Sources:
Similar to the other issues, the Tribunal did not delve into the merits of this issue due to the preliminary finding on the invalidity of the assessment order.

Conclusion:
The Tribunal allowed the appeals of the assessee on the preliminary ground that the assessment order was invalid due to non-compliance with section 153D, as the necessary approval from the Additional CIT was not obtained prior to the passing of the assessment order. Consequently, the Tribunal did not adjudicate on the merits of the other issues raised in the appeals. The appeals were partly allowed, and the assessment orders were declared void ab initio.

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