2025 (4) TMI 142 - AT - Income Tax

Validity of approval granted u/s. 153D - assessee contended that the JCIT has granted approval in a mechanical manner in violation of mandatory provisions of Section 153D and the purported approval was in violation of provisions u/s 153D - HELD THAT - Grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority rather it must reflect an appropriate application of mind. In our considered view a mere endorsement to a list of cases of Assessment Orders in multiple cases by putting signatures with rubber stamping on the letter without application of mind will not satisfy the requirement of the law for approval or sanction u/s 153D of the Act. Therefore we hold that in the present case the prior approval of the Addl/Joint CIT required before passing of the Assessment Orders in pursuant to a search operation being a mandatory requirement of section 153D was not granted as per law because such approval is not meant to be given in mechanical manner without application of mind by the JCIT which resulted in vitiating the assessment orders per se. As considering the peculiar facts of the present case we hold that mandatory approval was being granted mechanically without application of mind by JCIT Central- Range-5 New Delhi and therefore this mechanical exercise of power has vitiated entire assessment proceedings and consequently the said assessment orders are rendered void ab initio. Accordingly the impugned order is held to be infirm illegal and bad in law and same is as such quashed. Appeals of the assessee are allowed.

ISSUES PRESENTED and CONSIDERED

The primary legal question considered was whether the approval granted under Section 153D of the Income Tax Act, 1961, was valid. This issue was central to determining the legality of the assessment orders for the assessment years 2015-16 to 2017-18. The appellant argued that the approval was given mechanically without proper application of mind, thus rendering the assessment orders void. Additional issues included whether the assessee was given a proper opportunity to be heard and the legality of the search procedure conducted under Section 132 of the Act.

ISSUE-WISE DETAILED ANALYSIS

Validity of Approval under Section 153D

Relevant Legal Framework and Precedents: Section 153D of the Income Tax Act mandates that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of subsection (1) of Section 153A, except with the prior approval of the Joint Commissioner. The appellant cited precedents from the Delhi High Court and the Allahabad High Court, which emphasized that such approval must not be a mere formality but should reflect an independent application of mind.

Court's Interpretation and Reasoning: The Tribunal found that the approval was granted on the same day as the assessment orders were passed, indicating a lack of independent scrutiny. The Tribunal referred to the Delhi High Court's observations that approval under Section 153D must be granted for each assessment year separately, and a mechanical approval process undermines the statutory requirement.

Key Evidence and Findings: The Tribunal noted the sequence of events where the draft assessment order and the approval were processed simultaneously on 31.12.2019. This simultaneous processing suggested a lack of thorough examination by the approving authority.

Application of Law to Facts: The Tribunal applied the legal principles established in the cited precedents to the facts of the case, concluding that the approval process was flawed due to its mechanical nature. This failure to apply independent judgment rendered the assessment orders invalid.

Treatment of Competing Arguments: The Tribunal considered the arguments presented by both parties. The appellant's contention that the approval was mechanical was not effectively rebutted by the respondent, who failed to provide any contrary judgments or evidence to support the validity of the approval process.

Conclusions: The Tribunal concluded that the approval under Section 153D was not granted in accordance with the law, as it was done without application of mind, rendering the assessment orders void ab initio.

Opportunity to be Heard and Legality of Search Procedure

While the appellant raised concerns about not being provided a proper opportunity to be heard and questioned the legality of the search procedure under Section 132, these issues were not adjudicated upon, as the primary legal issue regarding Section 153D's approval was dispositive of the appeals.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed the principle that approval under Section 153D must involve a genuine application of mind by the approving authority. A mechanical or rubber-stamping approach is insufficient and invalidates the assessment orders.

Final Determinations on Each Issue: The Tribunal quashed the assessment orders for the assessment years 2015-16 to 2017-18 due to the invalid approval process under Section 153D. Consequently, the Tribunal did not address the merits of the quantum additions or other procedural issues raised by the appellant.

The Tribunal's decision in I.T.A. No. 2812/Del/2022 was applied mutatis mutandis to the related appeals I.T.A. Nos. 2813/Del/2022 and 2814/Del/2022, resulting in the allowance of all three appeals.

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