2018 (2) TMI 1858 - AT - Income Tax

Tribunal nullifies assessment orders for procedural lapses & lack of application of mind by tax authority.

Indra Bansal and Ors. Versus Assistant Commissioner of Income Tax and Ors.

The Tribunal annulled the assessment orders due to procedural lapses and lack of proper application of mind by the Joint Commissioner of Income Tax (Jt. ... Validity of approval granted u/s 153D by the Jt. CIT - non-application of mind - validity of assessment u/s 153C - Reasonable time was not available with the Jt. CIT for the grant of necessary approval as envisaged under s. 153D - HELD THAT:- It is apparent from the documents on record that the approval was given by the Jt. CIT in hasty manner without even going through the records as the records were in Jodhpur while the Jt. CIT was camping at Udaipur. The entire exercise of seeking and granting of approval in all the 22 cases was completed in one single day itself i.e., 31st March, 2013. Thus, it is apparent that the Jt. CIT did not have adequate time to apply his mind to the material on the basis of which the AO had made the draft assessment orders. Whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. In all the cases before us, the Department could not demonstrate, by cogent evidence, that the Jt. CIT had adequate time with him so as to grant approval after duly examining the material prior to approving the assessment order. The circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind.Jt. CIT has failed to grant approval in terms of s. 153D of the Act i.e., after application of mind but has rather carried out exercise in utmost haste and in a mechanical manner and, therefore, the approval so granted by him is not an approval which can be sustained. - Decided in favour of assessee. Issues Involved:1. Validity of approval granted under Section 153D of the Income Tax Act, 1961.2. Application of mind by the Joint Commissioner of Income Tax (Jt. CIT) in granting approval.3. Examination of assessment records by the Jt. CIT.4. Compliance with statutory obligations under Section 153D.5. Annulment of assessment orders due to improper approval.Detailed Analysis:Issue 1: Validity of approval granted under Section 153D of the Income Tax Act, 1961The core issue raised by the assessee was the validity of the approval granted under Section 153D of the Income Tax Act, 1961. The assessee challenged the assessment proceedings on the grounds that the approval granted by the Jt. CIT was not in accordance with the law. The Tribunal noted that the approval was granted on the same day the draft assessment orders were received, suggesting a lack of proper deliberation.Issue 2: Application of mind by the Joint Commissioner of Income Tax (Jt. CIT) in granting approvalThe Tribunal found that the Jt. CIT granted approval to the draft assessment orders without proper application of mind. The approval was granted on 31st March 2013, the same day the draft assessment orders were received. The Tribunal observed that the Jt. CIT was in Udaipur while the records were in Jodhpur, making it physically impossible for the Jt. CIT to have examined the records thoroughly. This indicated that the approval was granted in a mechanical manner.Issue 3: Examination of assessment records by the Jt. CITThe Tribunal emphasized that the Jt. CIT did not examine the assessment records before granting approval. The records were in Jodhpur, and the approval was sent from Udaipur, reinforcing the conclusion that the Jt. CIT did not review the records. The Tribunal highlighted that the approval was granted at 6:56 a.m., before office hours, further questioning the thoroughness of the review process.Issue 4: Compliance with statutory obligations under Section 153DThe Tribunal referred to various judicial precedents, including the case of Sahara India (Firm) vs. CIT, which stressed that the approval under Section 153D must be granted after thorough examination of the material on record. The Tribunal concluded that the Jt. CIT failed to comply with the statutory obligation of granting approval after due application of mind, as mandated by Section 153D.Issue 5: Annulment of assessment orders due to improper approvalGiven the procedural lapses and the lack of proper application of mind by the Jt. CIT, the Tribunal annulled the assessment orders. The Tribunal held that the assessments suffered from an incurable defect due to the improper approval process. Consequently, the Tribunal allowed the assessee's cross-objections and appeals, and dismissed the Department's appeals as infructuous.Conclusion:The Tribunal concluded that the Jt. CIT granted approval to the draft assessment orders in a mechanical manner without proper application of mind. The approval was granted on the same day the draft orders were received, and the Jt. CIT did not examine the assessment records. This failure to comply with the statutory obligations under Section 153D led to the annulment of the assessment orders. The Tribunal allowed the assessee's cross-objections and appeals, and dismissed the Department's appeals as infructuous.