Tax Appeal Allowed: Invalid Approval under Section 153D Quashes Assessment

The Tribunal allowed the appeal of the assessee, deleting the addition of Rs. 2.50 crores and quashing the assessment order due to the invalid approval under section 153D. The decision emphasized the need for evidence-based additions and proper application of mind in granting approvals under section 153D.

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Issues Involved:
1. Confirmation of addition of Rs. 2,50,00,000/- disclosed before ADIT but not shown in the return of income.
2. Validity of the addition made without any seized material.
3. Validity of the approval given by JCIT under section 153D without application of mind.

Detailed Analysis:

1. Confirmation of Addition of Rs. 2,50,00,000/-:
The assessee challenged the addition of Rs. 2.50 crores on merit, arguing that the addition was based solely on a letter dated 05.01.2016, which was conditional and not corroborated by any evidence or material found during the search. The letter mentioned that the assessee believed he and his family had undisclosed income of Rs. 2.50 crores recorded in loose papers, but these papers were not available to the assessee at the time. The Tribunal noted that the letter was qualified and subject to the production of documents, which were not provided to the assessee. Consequently, the addition was deemed unjustified as it was not based on any concrete evidence. The Tribunal cited various judgments, including those of the Hon’ble Allahabad High Court and the Hon’ble Supreme Court, which held that an admission could be retracted if proven incorrect or not based on facts. The addition of Rs. 2.50 crores was deleted, and the ground was allowed in favor of the assessee.

2. Validity of the Addition Made Without Any Seized Material:
The Tribunal observed that the addition was made based on the letter dated 05.01.2016, without any seized material or corroborative evidence. The Board Circular dated 10.03.2003 emphasized the need for evidence collection rather than obtaining confessions. The Tribunal found that no incriminating material was found during the search to justify the addition. The assessee's retraction from the letter in his return of income was considered valid, as no evidence was found during the search to support the addition of Rs. 2.50 crores. This ground was also allowed in favor of the assessee.

3. Validity of the Approval Given by JCIT Under Section 153D Without Application of Mind:
The assessee contended that the approval given by JCIT under section 153D was without application of mind, as the JCIT did not examine any material or assessment records before granting approval. The Tribunal noted that the approval letter dated 22.12.2017 from JCIT merely mentioned that the A.O. had verified the material and provided an opportunity to the assessee. There was no indication that the JCIT had reviewed the assessment records or any material before granting approval. The Tribunal cited judgments from the Hon’ble Supreme Court and various High Courts, emphasizing that approval under section 153D must reflect the application of mind and consideration of relevant material. The Tribunal concluded that the JCIT granted approval mechanically without reviewing the records, making the approval invalid and the assessment order null and void. This ground was allowed, and the assessment order was quashed.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the addition of Rs. 2.50 crores and quashing the assessment order due to the invalid approval under section 153D. The decision emphasized the need for evidence-based additions and proper application of mind in granting approvals under section 153D.

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