Additions under s.153A invalid when no incriminating material found and director's statement recorded later; s.153D approval required

The HC upheld the Tribunal's findings, concluding that additions under s.153A were impermissible where no incriminating material was found during search and the impugned director's statement relied upon was recorded later. The court also held that an assessment passed by an ITO required prior approval of the Joint Commissioner under s.153D; absence of such approval rendered the assessment invalid and non-curable. Consequently the Tribunal was justified in quashing the assessment, and the taxpayer's appeal did not succeed.

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Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961.
2. Deletion of addition under section 68 of the Act.
3. Validity of assessment order passed under section 143(3) consequent to an order under section 263.
4. Lack of approval under section 153D and its impact on the assessment order.
5. Interpretation of section 153A of the Act regarding incriminating material and assessment/re-assessment.

Analysis:
1. The appellant challenged the order of the Income Tax Appellate Tribunal regarding the addition of Rs. 90,00,000 under section 68 of the Income Tax Act, 1961. The Tribunal held that no incriminating evidence was found during the search, which is necessary for section 153A proceedings. The Tribunal relied on a High Court decision stating that additions can only be made based on material collected during the search or requisition. As no incriminating material was found, the addition was deemed invalid under section 153A.

2. The Commissioner (Appeals) directed the Assessing Officer to delete the addition made under section 68 of the Act. The Tribunal dismissed the revenue's appeal and allowed the cross-objection filed by the assessee. The Tribunal found that the assessment order was invalid due to the lack of incriminating material during the search, in line with the High Court's decision.

3. The appellant argued that lack of approval under section 153D would not invalidate the assessment order. However, section 153D mandates that no assessment or reassessment order can be passed without the prior approval of the Joint Commissioner. The Supreme Court has held that requirements expressed in negative language are absolute and mandatory. As the Income Tax Officer passed the assessment order without the Joint Commissioner's approval, the whole proceeding was invalidated, as held by the Tribunal.

4. The Tribunal's decision was based on the mandatory nature of obtaining prior approval under section 153D. The failure to comply with this requirement rendered the assessment order invalid. The Tribunal correctly held that the lack of approval vitiated the assessment order, and thus, the appeal was dismissed. The strict construction of taxing statutes necessitates adherence to procedural requirements, as highlighted in the case law cited.

5. The Tribunal's decision was upheld as it was in line with legal provisions and previous court decisions. The High Court found no legal infirmity in the Tribunal's order and dismissed the appeals, emphasizing the mandatory nature of obtaining approval under section 153D and the importance of incriminating material for assessments under section 153A.

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