2022 (12) TMI 887 - HC - Income Tax

Assessment u/s 153A - Prior approval necessary for assessment in cases of search or requisition - Necessity to get approval to the draft assessment order was granted u/s 153D - HELD THAT - Section 153D requires that the AO shall obtain prior approval of the Joint Commissioner in respect of each assessment year referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years). The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to each assessment year is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A. In the instant case, the draft assessment order in 85 cases, i.e. for 85 assessment years placed before the Approving Authority on 30.12.2017 was approved on same day i.e. 30.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 85 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. The questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeal being in the nature of second appeal.

Issues Involved:
1. Validity of the assessment order under Section 153A/143(3) of the Income Tax Act.
2. Requirement and validity of prior approval under Section 153D of the Income Tax Act.
3. Allegation of mechanical approval by the Approving Authority.
4. Examination of substantial question of law regarding the Tribunal's decision.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 153A/143(3):
The case pertains to the assessment year 2014-15, following a search and seizure operation under Section 132 of the Income Tax Act on 31.08.2015. The assessee filed the return under Section 153A on 12.07.2017, originally e-filed on 19.08.2016. The assessment was completed under Section 153A/143(3) by the Dy. C.I.T., Central Circle-1, Kanpur, on 31.12.2017, with various additions made.

2. Requirement and Validity of Prior Approval under Section 153D:
The assessee contended that the Assessing Officer, before passing the assessment order under Section 153A, must obtain prior approval from the Joint C.I.T. under Section 153D if the officer is below the rank of Joint C.I.T. This approval should be based on a thorough review of all search materials, seized documents, appraisal reports, and other evidence. In this case, the draft assessment order was prepared on 30.12.2017, and the approval was granted on the same day, with the final assessment order passed on 31.12.2017.

3. Allegation of Mechanical Approval by the Approving Authority:
The Tribunal noted that the Additional C.I.T. granted approval for 85 cases, including the present assessee, on 30.12.2017. The Tribunal concluded that it was humanly impossible for the Approving Authority to peruse all the material in one day, indicating a mechanical approval process. This mechanical approval vitiated the entire proceedings. The Tribunal relied on its earlier decision in Navin Jain & Others vs. Deputy C.I.T., where it was held that the approval must involve due application of mind and cannot be a mere formality.

4. Examination of Substantial Question of Law Regarding the Tribunal's Decision:
The Revenue argued that the prior approval under Section 153D was valid and the Tribunal erred in quashing the assessment order on the grounds of mechanical approval. The Revenue cited the High Court of Karnataka's judgment in Commissioner of Income Tax, Bangalore vs. Smt. Annapoornamma Chandrashekar, emphasizing that "approval" in an administrative context involves confirming or consenting to the act of a lower authority. However, the Tribunal's decision was defended, noting that the approval process under Section 153D is a safeguard against arbitrary or unjust exercise of power by the Assessing Officer.

Conclusion:
The High Court examined the relevant provisions of the Income Tax Act, particularly Sections 132, 153A, and 153D. It concurred with the Tribunal's finding that the approval process was mechanical and lacked due application of mind. The Court emphasized that the approval under Section 153D must be an independent and thorough review of the material for each assessment year. The Tribunal's reliance on the Navin Jain case was upheld, affirming that mechanical approval vitiates the proceedings. The appeal was dismissed, with the Court concluding that no substantial question of law arose for consideration.

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