2023 (11) TMI 795 - AT - Income Tax

Validity of penalty levied u/s 271(1)(c) where the validity of assessment order itself is in doubt - Assessment u/s 153A questioned on approval Granted u/s 153D - addition to the total income of the assessee in the assessment framed u/s 153C r.w.s. 143(3) - difference in profit and capital balance reported in books of account maintained for income tax return purpose viz-a-viz books of account seized during the search - HELD THAT - We find that the ACIT has granted approval under section 153D of the Act in a mechanical manner and without the application of mind and without considering the materials on record. Furthermore, the approval was granted on the very same day. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the JCIT Commissioner before granting the approval. Therefore, we have no hesitation holding that the assessment order made u/s 143(3) of the Act r.w. sec. 153C of the Act is bad in law and deserves to be annulled. The assessee accepted the assessment framed under section 153C read with section 143(3) of the Act despite the fact that the procedures as specified under section 153D of the Act were not complied with by the AO - As decided in M/s Atlanta Electricals Pvt. Ltd. 2019 (9) TMI 1235 - ITAT AHMEDABAD wherein as held in such like non-descript and innocuous situation, where the quantum assessment itself is susceptible, the consequences in form of penalty under s.271(1)(c) of the Act would not, in our view, be justified - Decided in favour of assessee.

Issues Involved:
1. Ex parte order by the Commissioner of Income-tax (Appeals).
2. Levy of penalty under Section 271(1)(c) of the Income Tax Act.
3. Validity of the penalty order based on the approval process under Section 153D of the Act.

Summary:

1. Ex parte order by the Commissioner of Income-tax (Appeals):
The assessee contended that the Commissioner of Income-tax (Appeals)-11, Ahmedabad erred in passing an ex parte order without a speaking order. The Tribunal did not specifically address this issue, focusing instead on the penalty and approval process.

2. Levy of penalty under Section 271(1)(c) of the Income Tax Act:
The primary issue was the confirmation of a penalty of Rs. 60,738/- under Section 271(1)(c) of the Act. The assessee argued that the penalty was invalid because the assessment order was based on a mechanical approval under Section 153D, which lacked proper application of mind. The Tribunal noted that the assessment under Section 153C read with Section 143(3) was framed without proper approval from the Joint Commissioner, rendering the penalty order unsustainable.

3. Validity of the penalty order based on the approval process under Section 153D of the Act:
The Tribunal examined whether the approval granted under Section 153D was valid. It was found that the approval process was mechanical and lacked proper scrutiny and application of mind by the Joint Commissioner. The Tribunal cited several judgments, including those from the Supreme Court and High Courts, emphasizing that prior approval must reflect application of mind and cannot be granted mechanically. Consequently, the Tribunal held that the assessment order was invalid, and thus, the penalty based on such an order could not be sustained.

Conclusion:
The Tribunal concluded that the penalty levied under Section 271(1)(c) was not maintainable due to the invalidity of the assessment order. The appeals for the assessment years 2011-12 to 2015-16 were partly allowed, focusing primarily on the technical invalidity of the penalty orders due to improper approval under Section 153D.

Order:
All five appeals of the assessee for the assessment years 2011-12 to 2015-16 were partly allowed. The order was pronounced on 08/11/2023 at Ahmedabad.

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