2021 (9) TMI 1068 - AT - Income Tax

Validity of assessment u/s 153A - No valid approval u/s 153D - Whether mechanical approval under section 153D granted by the Joint Commissioner of Income Tax (Central Range) Kanpur? - JCIT passed combined order u/s 153D with respect to different assessee's/group/searches for different assessment years in 67 cases instead of separate order(s) as envisaged under the provisions of Section 153D - HELD THAT - In this case, the Addl. Commissioner has showed his inability to analyze the issues of draft order clearly stating that no much time was left as the draft order was placed before him on 31/12/2010 and approval was granted on the same day. In the case before us the Addl. CIT has though not expressly expressed his inability to analyze the issues of draft order but it is abundantly clear that he had not analyzed the issues in the draft order as in the present cases the approval has been given in 67 cases on the same date which is humanly impossible. If an ACIT cannot express his opinion on a single case in one day how another ACIT can express his opinion in 67 cases in a single day.- Approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case Hon'ble Supreme Court in the case of Sahara India vs. CIT Others 2008 (4) TMI 4 - SUPREME COURT while discussing the requirement of prior approval of Chief Commissioner or Commissioner in terms of provision of section 142(2A) of the Act, opined that the requirement of previous approval of the Chief Commissioner or Commissioner in terms of said provision being an inbuilt protection against arbitrary or unjust exercise of power by the assessing officer, casts a very heavy duty on the said highranking authority to see it that the approval envisaged in the section is not turned into an empty ritual. The Hon'ble Apex Court held that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. - Decided in favour of assessee.

Issues Involved:
1. Validity of approval granted under Section 153D of the Income Tax Act.
2. Application of mind by the approving authority.
3. Compliance with procedural requirements for search assessments.

Detailed Analysis:

1. Validity of Approval Granted Under Section 153D:
The primary issue in these appeals was the validity of the approval granted by the Additional Commissioner of Income Tax (Addl. CIT) under Section 153D of the Income Tax Act. The assessees contended that the approval was mechanical and lacked proper application of mind. They argued that the Addl. CIT granted approval for 67 cases on the same day, which included the present assessees, and it was humanly impossible to review all the documents and draft assessment orders in a single day. The Tribunal noted that the approval letter dated 30/12/2018 did not reflect any detailed examination or application of mind by the Addl. CIT, and it was granted in a hurried manner.

2. Application of Mind by the Approving Authority:
The Tribunal emphasized that the approving authority must apply its mind to all material on record, including incriminating material, seized documents, appraisal reports, and replies submitted by the assessee. The Tribunal referred to various judicial precedents, including the Supreme Court's judgment in South Carolina in State vs. Duckett and Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer, which highlighted that approval implies knowledge and exercise of discretion after knowledge. The Tribunal concluded that the Addl. CIT did not apply his mind independently to each assessment year and each assessee, as required under Section 153D.

3. Compliance with Procedural Requirements for Search Assessments:
The Tribunal observed that the provisions of Section 153D were inserted to ensure that assessments in search cases are made with the prior approval of a superior authority to prevent arbitrary or baseless tax liabilities. The Tribunal noted that the approval process should not be a mere formality but should involve a judicious application of mind. The Tribunal referred to the CBDT Circular No. 3/2008, which mandates that the Assessing Officer should seek approval from the approving authority at least one month before the time-barring date. In the present cases, the draft assessment orders were made on 30/12/2018, approval was taken on the same day, and the final assessment orders were also passed on the same day, violating the CBDT instructions.

Conclusion:
The Tribunal concluded that the approval granted by the Addl. CIT was invalid as it was granted in a mechanical manner without proper application of mind. Consequently, the assessment orders based on such approval were annulled. The Tribunal relied on various judicial precedents, including decisions of the Delhi Bench and Mumbai Bench of the Tribunal, which held that approvals granted without application of mind are invalid. The Tribunal allowed the appeals filed by the assessees and annulled the assessment orders.

Order Pronouncement:
The appeals filed by the assessees were partly allowed, and the assessment orders were annulled. The rest of the grounds were dismissed as not pressed. The order was pronounced in the open court on 03/08/2021.

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