2021 (8) TMI 1336 - AT - Income Tax

Assessments under s.153A void without prior written approval under s.153D; oral or belated approvals impermissible

Sh. Madan Lal Versus DCIT Central Circle-I, Jhalandhar

ITAT AMRITSAR - AT allowed the assessee's appeals, holding that assessments under s.153A were void for want of prior written approval under s.153D. The AO ... Validity of assessment u/s 153A - Requirement of prior approval of the Joint Commissioner u/s 153D - Whether CIT(A) has erred in law by upholding the alleged approval u/s 153D being illegal, bad in law and without any application of mind and the Assessment order is passed without obtaining requisite approval? - HELD THAT:- As approval was received in the office of the Assessing Officer on 28.7.2016, whereas the Assessment Order was passed by the AO on 27.7.2016. In the remand report, the Assessing Officer had submitted that in the era of technology where communication between the persons via phone /fax, date of receipt of physical letter by post is immaterial. In our considered opinion, the requirement of Section 153D is clear and unambiguous, which requires prior approval of the Addl. CIT before passing the order by the Assessing Officer. Prior approval as contemplated u/s 153D cannot be granted over the phone, sometimes the approving agency may not agree in the complete draft order and suggest some modification, changes or deletion in the draft assessment orders. At times, the approving agency may also suggest the assessing officer to consider some material which has been missed by the assessing officer, for consideration and incorporating in the proposed assessment order. All the above said cannot be conveyed over the telephone. There has to be some written more for conveying the approval either by fax/ email/ letter after due deliberation or consideration of the relevant material and draft assessment order. In no case, oral approval can be granted by the Addl. CIT. The order granting the approval can be subject matter of judicial review if it is passed without application of mind, without assigning the reason or non-consideration of the relevant material or passing the order considering the irrelevant or extraneous material or reason. As the Assessing Officer has passed the assessment order without having the approval in his record, in our considered opinion, the assessment order passed in all the cases before us is null and void and cannot be acted upon. In view of the above, all the appeals from the assessee are required to be allowed. When the Assessment Order was passed by the Assessing Officer, than there was no prior approval in the record of the Assessing Officer, from the Addl. CIT. Further, the approval granted after passing of the order was non-est in the eyes of law as it was granted in the mechanical, stereotype manner, without assigning any reasons and without considering the draft assessment order and the assessment record. Appeal of assessee allowed. Issues Involved:1. Validity of the assessment order under Section 153D of the Income Tax Act due to alleged lack of proper approval.Detailed Analysis:Validity of Approval under Section 153D:The primary issue in this case revolves around the validity of the assessment order passed under Section 153D of the Income Tax Act, which mandates prior approval from the Joint Commissioner or Additional Commissioner before passing the assessment order.Arguments by the Assessee:1. Lack of Proper Approval:- The assessee argued that the assessment order was passed without obtaining the requisite approval under Section 153D, rendering the order null and void.- It was submitted that the approval was granted in a mechanical manner without application of mind, as evidenced by the absence of reasons for granting approval and the fact that the approval was given for multiple years in a single communication.- The assessee highlighted that the approval was sought and allegedly granted on the same day, which is impractical for a thorough review of the draft assessment orders and related records.2. Timing of Approval:- The assessee contended that the assessment order was passed on 27.07.2016, while the approval letter was received on 28.07.2016, indicating that the order was passed before obtaining the necessary approval.3. Mechanical Approval:- The assessee pointed out that the Additional CIT granted approval without reviewing the draft assessment orders or the assessment records, as admitted by the Assessing Officer in the remand report. This lack of review and application of mind was argued to be contrary to the requirements of Section 153D.Arguments by the Respondent:1. Technical Error:- The respondent argued that the issue was a technical error that could be cured under Section 292B of the Income Tax Act, which deals with procedural errors that do not affect the substance of the assessment.- It was suggested that if the Tribunal found merit in the assessee's argument, the matter should be remanded back to the lower authorities for passing a fresh order.Tribunal's Findings:1. Requirement of Prior Approval:- The Tribunal emphasized that Section 153D requires prior approval from the Additional CIT before passing the assessment order. The statute's language is clear and unambiguous, mandating prior approval to ensure that the assessment order is not arbitrary and is based on proper scrutiny.2. Approval Received After Passing the Order:- The Tribunal noted that the approval letter was received in the office of the Assessing Officer on 28.07.2016, while the assessment order was passed on 27.07.2016. This sequence of events confirmed that the order was passed without the necessary prior approval, violating Section 153D.3. Mechanical and Non-Application of Mind:- The Tribunal observed that the approval was granted in a mechanical manner without application of mind. The Additional CIT's approval letter did not provide any reasons or indicate that the draft assessment orders and related records were reviewed.- The Tribunal referred to various judicial precedents, including decisions from the ITAT and High Courts, which held that such mechanical approvals without application of mind are invalid and render the assessment orders null and void.4. Non-Compliance with Section 153D:- The Tribunal concluded that the assessment orders were passed without complying with the mandatory requirement of obtaining prior approval under Section 153D. This non-compliance invalidated the assessment orders.Conclusion:The Tribunal allowed the assessee's appeal, setting aside the assessment orders and the subsequent orders passed by the CIT(A). The Tribunal held that the assessment orders were null and void due to the lack of proper prior approval under Section 153D, which is a mandatory requirement. The Tribunal did not adjudicate the remaining grounds of appeal raised by the assessee, as the primary issue itself was sufficient to annul the assessment orders.Result:All appeals by the assessee were allowed, and the assessment orders were set aside due to non-compliance with Section 153D of the Income Tax Act.