Tribunal quashes assessment order citing flawed approval process under Section 153D, sets precedent

The tribunal allowed the additional ground of appeal, quashing the assessment order due to the mechanical and non-judicious approval under Section 153D. Consequently, the order of the CIT(A) was also quashed. The appeal of the assessee was allowed, setting a precedent for the necessity of a thorough and mindful approval process under Section 153D.

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Issues Involved:

1. Admission of additional ground of appeal.
2. Validity of approval under Section 153D of the Income Tax Act.
3. Application of mind by the approving authority.
4. Mechanical approval and its consequences.

Issue-wise Detailed Analysis:

1. Admission of Additional Ground of Appeal:
The appellant filed an additional ground of appeal, arguing that the approval given by the JCIT under Section 153D was without application of mind and purely mechanical. The tribunal admitted this additional ground as it was a legal ground going to the root of the matter, citing the Supreme Court judgment in NTPC Limited vs. CIT.

2. Validity of Approval under Section 153D:
The appellant contended that the JCIT granted approval for 85 cases in a single day, which included the appellant's case, making it humanly impossible to review all draft assessment orders and associated documents properly. The tribunal examined the approval letter dated 30/12/2017 and noted that the approval was granted on the same day the draft assessment orders were submitted, raising doubts about the thoroughness of the review.

3. Application of Mind by the Approving Authority:
The tribunal emphasized that the approving authority must apply their mind to all material on record, including incriminating material, seized documents, and appraisal reports. The approval should not be a mere formality but should reflect a judicious application of mind. The tribunal cited various judicial precedents, including the Supreme Court's judgment in Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer, which held that approval implies knowledge and the exercise of discretion after knowledge.

4. Mechanical Approval and Its Consequences:
The tribunal found that the approval granted in the appellant's case was mechanical and lacked proper application of mind. It referenced several cases where similar mechanical approvals were held invalid, including the Lucknow Bench's decision in Shri Navin Jain vs. DCIT and the Bombay High Court's dismissal of the department's appeal in Shreelekha Damani vs. DCIT. The tribunal concluded that a mechanical approval vitiates the entire assessment proceedings, leading to the quashing of the assessment order.

Conclusion:
The tribunal allowed the additional ground of appeal, quashing the assessment order due to the mechanical and non-judicious approval under Section 153D. Consequently, the order of the CIT(A) was also quashed. The appeal of the assessee was allowed, setting a precedent for the necessity of a thorough and mindful approval process under Section 153D.

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