2021 (1) TMI 909 - AT - Income Tax

Tribunal invalidates tax approval, assessment orders quashed for lack of scrutiny.

Sanjay Duggal, Kritika Talwar, Arun Duggal, Ratna Talwar, C/o Kapil Goel, Adv, Neha Duggal, Nany Duggal, Poonam Duggal, Neeru Duggal, Rajnish Talwar, Ratnashri Buildtech Pvt. Ltd, Duggal Estate Pvt. Ltd, Duggal & Sons Buildwell P. Ltd., Versus ACIT, Central Circle-4, New Delhi

Sanjay Duggal, Kritika Talwar, Arun Duggal, Ratna Talwar, C/o Kapil Goel, Adv, Neha Duggal, Nany Duggal, Poonam Duggal, Neeru Duggal, Rajnish Talwar, ... Issues Involved:1. Validity of the approval under section 153D of the Income Tax Act.2. Validity of the assessment orders under section 153A of the Income Tax Act.3. Examination of the incriminating material and appraisal reports.4. Double and triple additions in the assessments.5. Issuance of direction under section 150 of the Income Tax Act.Issue-Wise Detailed Analysis:1. Validity of the Approval under Section 153D:The Tribunal examined whether the approval granted by the JCIT under section 153D was valid. The approval process was scrutinized to determine if it was done with due application of mind and in accordance with the law. It was found that the JCIT granted approval in a mechanical manner without examining the seized material, appraisal reports, or other relevant documents. The Tribunal cited various cases, including the Hon’ble Bombay High Court in the case of Pr. CIT vs. Smt. Shreelekha Damani, to emphasize that the approval must reflect due application of mind. The Tribunal concluded that the approval granted was invalid and bad in law, rendering the assessment orders void.2. Validity of the Assessment Orders under Section 153A:The Tribunal considered the impact of the invalid approval under section 153D on the assessment orders passed under section 153A. Since the approval was found to be invalid, the assessment orders were also deemed to be vitiated. The Tribunal held that the assessments could not stand in the absence of a valid approval, leading to the quashing of the assessment orders.3. Examination of the Incriminating Material and Appraisal Reports:The Tribunal noted that the JCIT did not refer to or examine the seized material or appraisal reports while granting approval. The assessment records alone were forwarded to the JCIT, which was insufficient for a proper approval process. The Tribunal emphasized that the JCIT must verify and consider each assessment year independently, especially distinguishing between abated and non-abated assessments. The lack of examination of the relevant material by the JCIT contributed to the finding that the approval was granted mechanically.4. Double and Triple Additions in the Assessments:The Tribunal observed that the AO made several double or triple additions in the assessments, such as additions on account of share capital, investments, FDRs, loans, and capital gains, without considering the source of funds. The Tribunal highlighted the inconsistencies and the failure to provide telescopic benefits or netting of the money left. This resulted in serious prejudice to the assessees, further supporting the conclusion that the assessments were not conducted properly.5. Issuance of Direction under Section 150:The Tribunal issued a notice to M/s. JIL to consider reopening their case under section 147/148. However, objections were raised, noting that the case of M/s. JIL was already under appeal before the Tribunal. The Tribunal acknowledged that issuing a direction under section 150 could prejudice the pending appeals. It was also noted that the AO would need to satisfy the requirements of section 147 if reopening the case. Given these considerations, the Tribunal decided not to issue any direction under section 150, discharging the notice against M/s. JIL.Conclusion:The Tribunal quashed the assessment orders under section 153A due to the invalid approval granted under section 153D. The assessments were found to be conducted without proper examination of the relevant material, leading to inconsistencies and double additions. The Tribunal allowed the appeals of the assessees and refrained from issuing directions under section 150 against M/s. JIL, considering the pending appeals and potential prejudice.