2024 (12) TMI 66 - AT - Income Tax

Validity of assessment completed u/s 153A - No valid and lawful approval u/s.153D - assessee agued statutory approval given to the Assessing Officer for the assessment orders was not based on application of mind - approval was given by Addl. CIT in a mechanical manner within a short period of time during which it was humanly impossible for the Addl. CIT to go through exhaustive assessment records, search seizure materials and to thereafter give approval after due application of mind - HELD THAT - We are of the view that the issue in dispute is squarely covered by the order Subodh Agarwal 2023 (2) TMI 1072 - ALLAHABAD HIGH COURT order of Serajuddin Co. 2023 (3) TMI 785 - ORISSA HIGH COURT and Shiv Kumar Nayyar 2024 (6) TMI 29 - DELHI HIGH COURT in favour of the assessee. Further the issue in dispute is also squarely covered in favour of the assessee by the orders of Khoday Ehshwarsa and Sons 2024 (9) TMI 1660 - ITAT BANGALORE . and in the case of Sanjay Duggal and Others 2021 (1) TMI 909 - ITAT DELHI and in the case of Quality Structure Pvt. Ltd. 2024 (9) TMI 1661 - ITAT LUCKNOW In view of the foregoing, we set aside the impugned appellate orders of learned CIT(A) deserve to be set aside; and the assessment orders passed by the Assessing Officer deserve to be annulled. Additions made in absence of incriminating material - Following the order of Hon'ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd. 2023 (4) TMI 1056 - SUPREME COURT no additions could be made in the assessment orders passed by the AO in the aforesaid assessment orders. Accordingly, the additions made in the aforesaid assessment orders deserve to be deleted.

Issues Involved:

1. Validity of assessment orders under Section 153A of the Income Tax Act.
2. Mechanical approval under Section 153D.
3. Additions made in absence of incriminating material.
4. Procedural fairness and adequate opportunity for the appellant.
5. Jurisdictional issues concerning the assessment orders.

Detailed Analysis:

1. Validity of Assessment Orders under Section 153A:

The appellants challenged the validity of the assessment orders under Section 153A, arguing that they were invalid and unlawful due to lack of jurisdiction. The contention was that the assessment orders were completed without any incriminating material found during the search, which is a prerequisite for invoking Section 153A. The Tribunal noted that the assessments were unabated and no incriminating material was found during the search, thus following the Supreme Court's decision in Pr. CIT vs. Abhisar Buildwell (P) Ltd., the additions made in such cases cannot be upheld. The Tribunal annulled the assessment orders on this ground.

2. Mechanical Approval under Section 153D:

The appellants argued that the statutory approval given by the Additional Commissioner of Income Tax (Addl. CIT) under Section 153D was mechanical and without application of mind. It was highlighted that the Addl. CIT approved 110 cases in two days, which included the cases in the present appeals, making it humanly impossible to review the exhaustive assessment records and search materials. The Tribunal agreed with the appellants, citing precedents where approvals given mechanically without due diligence were deemed invalid. The Tribunal found that the approval process lacked legal validity and quashed the assessment orders on this basis.

3. Additions Made in Absence of Incriminating Material:

The appellants contended that the additions made by the Assessing Officer were arbitrary and lacked relevance or nexus to any seized material. The Tribunal noted that in several cases, no incriminating material was found during the search, and the assessments were unabated. Relying on the Supreme Court's ruling in Pr. CIT vs. Abhisar Buildwell (P) Ltd., the Tribunal held that no additions could be made in the absence of incriminating material and ordered the deletion of such additions.

4. Procedural Fairness and Adequate Opportunity for the Appellant:

The appellants argued that the assessment proceedings were conducted in an arbitrary and prejudicial manner without providing proper and adequate opportunity to present their case. The Tribunal observed that the Assessing Officer failed to provide cross-examinations and did not conduct inquiries requested by the appellants. It was found that the assessment proceedings were rushed at the fag end of the limitation period, contributing to procedural unfairness. The Tribunal noted these procedural lapses and found them to be a violation of the principles of natural justice.

5. Jurisdictional Issues Concerning the Assessment Orders:

The appellants challenged the jurisdiction of the assessment orders, arguing that they were completed without valid and lawful approval under Section 153D. The Tribunal found that the approval process was flawed and lacked the required application of mind, rendering the assessment orders jurisdictionally invalid. The Tribunal emphasized that the statutory obligation under Section 153D was not discharged appropriately, leading to the annulment of the assessment orders.

Conclusion:

The Tribunal allowed all the appeals, setting aside the impugned appellate orders and annulling the corresponding assessment orders. The Tribunal's decision was based on the findings that the assessments were conducted without incriminating material, approvals were given mechanically, and procedural fairness was not adhered to, thus lacking legal validity. The Tribunal declined to adjudicate on other matters as they were deemed academic in nature following the annulment of the assessment orders.

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