2023 (2) TMI 1145 - AT - Income Tax

Tribunal Invalidates Assessment Orders for Lack of Thoughtful Consideration

The Tribunal invalidated the assessment orders due to the mechanical approval lacking application of mind under Section 153D of the Income-tax Act. The ... Assessment u/s 153A - mandation of valid approval obtained in accordance with law u/s 153D - undisclosed income as alleged to emanate from sale of land and immovable properties as such, and as is apparent from electronic data and other seized documents dedicated and focused efforts were made in this area - HELD THAT:- In the present batch of appeals the Additional CIT has given approval in batches of 69, 62, 37, 54 and 24 assessment orders. As observed by the Hon'ble Allahabad High Court in Siddharth Gupta [2022 (12) TMI 1021 - ALLAHABAD HIGH COURT] it is humanly impossible to go through the records of more than 50 cases in one day to apply independent mind to appraise the material before the Assessing Officer. Therefore, we have no hesitation to hold that the approval was mechanical. As investment of the share applicants/subscribers have been accepted in their respective assessment orders by same AO who has sent proposal to the Additional CIT for making addition in the hands of the assessee. This clearly shows that the Additional CIT did not even care to ask the officer when he has accepted the investment in the hands of the subscribers, then why he is proposing addition in the hands of the assessees. Since, as mentioned elsewhere, approval was completely devoid of any application of mind, these facts got completely ignored by the approving authority. We have no hesitation to hold that the approval granted by the Addl. CIT is mechanical and without application of mind and the assessment order so framed pursuant to such approval u/s 143(3) r.w.s 153A of the Act is bad in law and deserves to be annulled. Issues Involved:1. Validity of approval under Section 153D of the Income-tax Act, 1961.2. Assessment and reassessment procedures in search and seizure cases.3. Application of mind by the approving authority.Issue-wise Detailed Analysis:1. Validity of Approval under Section 153D:- The assessee argued that the approval under Section 153D was illegal, invalid, and void ab initio, stating that the assessment records, seized material, and appraisal report must be available before the approving authority, and the approval must reflect the application of mind to the facts of the case.- The Revenue contended that the approval was valid and that the Additional Commissioner had inspected the seized material and directed the Assessing Officer accordingly.- The Tribunal noted that the approval letters did not mention any seized material or assessment records, indicating a lack of application of mind by the Additional Commissioner.- The Tribunal referenced several judicial precedents, including the Supreme Court's decision in Sahara India vs. CIT, which emphasized that approval must reflect the application of mind to the facts of the case.- The Tribunal concluded that the approval granted by the Additional Commissioner was mechanical and without application of mind, thus invalidating the assessment orders.2. Assessment and Reassessment Procedures in Search and Seizure Cases:- The Tribunal examined the legislative intent behind Section 153D, which requires prior approval from a superior authority for assessments and reassessments in search and seizure cases to ensure thorough scrutiny and application of mind.- The Tribunal highlighted the procedural requirements, including the necessity for separate approvals for each assessment year and each assessee, which were not followed in the present case.- The Tribunal cited the Allahabad High Court's decision in Siddharth Gupta, which held that mechanical approval without application of mind vitiates the entire assessment proceedings.3. Application of Mind by the Approving Authority:- The Tribunal emphasized that the approval process under Section 153D is not a mere formality but requires a judicial or quasi-judicial approach with due application of mind.- The Tribunal observed that the Additional Commissioner had approved multiple assessment orders in batches, making it humanly impossible to apply independent mind to each case.- The Tribunal noted that the approving authority failed to consider the factual matrix and the acceptance of share application money in the respective assessment orders of the share applicants.- The Tribunal concluded that the lack of application of mind by the Additional Commissioner rendered the approval invalid and the subsequent assessment orders bad in law.Conclusion:- The Tribunal annulled the assessment orders on the grounds that the approval under Section 153D was mechanical and devoid of application of mind.- The Tribunal allowed the additional ground and application under Rule 27 raised by the assessee, dismissing the Revenue's appeals and allowing the assessee's appeals and cross objections.