2021 (6) TMI 933 - AT - Income Tax

Validity of assessment u/s 153A(1)(b) - no valid approval granted u/s 153D - HELD THAT - The approval granted u/s 153D of the Act suffers from various infirmities and same is not in accordance with the letter and spirit of the law and is liable to be quashed. As we have negated the approval u/s 153D, the assessment order passed u/s 153A r.w.s 143(3) of the act stands vitiated for want of approval u/s 153D of the Income Tax Act, 1961 and is hereby quashed. Accordingly, the additional grounds are allowed.

Summary

Issues Involved:
1. Validity of the assessment order due to alleged invalid approval under Section 153D of the Income Tax Act, 1961.
2. Sustaining additions as unexplained cash credit and unexplained investment.
3. Incorrect invocation of Section 68 in the absence of incriminating documents found during the search.
4. Treatment of advance and interest as undisclosed income.

Detailed Analysis:

1. Validity of the Assessment Order Due to Alleged Invalid Approval Under Section 153D:
The core issue revolves around the validity of the assessment order based on the approval granted under Section 153D. The assessee argued that the approval granted by the Additional Commissioner of Income Tax (Addl. CIT) was invalid as it was done mechanically without a proper application of mind. The approval was granted on the same day the draft assessment order was forwarded, which raised doubts about the thoroughness of the review. The Tribunal noted that the approval was granted to multiple draft assessment orders on a single day, and the approving authority admitted that only broad issues were discussed due to time limitations. This indicated a lack of detailed examination, rendering the approval invalid and the assessment order null and void.

2. Sustaining Additions as Unexplained Cash Credit and Unexplained Investment:
The assessee challenged the additions sustained by the Commissioner of Income Tax (Appeals) [CIT(A)], which included ?36,00,950 as unexplained cash credit and ?36,05,000 as unexplained investment. The Tribunal did not delve into the merits of these additions since the assessment order itself was quashed due to invalid approval under Section 153D.

3. Incorrect Invocation of Section 68 in the Absence of Incriminating Documents Found During the Search:
The assessee contended that the invocation of Section 68, which deals with unexplained cash credits, was incorrect as no incriminating documents were found during the search. This argument was also rendered moot as the Tribunal quashed the assessment order on procedural grounds.

4. Treatment of Advance and Interest as Undisclosed Income:
The assessee argued against the addition of ?35,00,000 as an advance to an individual and ?1,05,000 as interest thereon, treating them as undisclosed income. Again, this issue was not adjudicated upon due to the quashing of the assessment order.

Conclusion:
The Tribunal quashed the assessment orders for both assessees due to the invalid approval under Section 153D, which was granted without proper application of mind. This procedural lapse rendered the assessment orders null and void. Consequently, other grounds raised by the assessees became academic and were not adjudicated. Both appeals were allowed, and the assessment orders were quashed.