Invalid approval process under section 153D leads to quashing of assessment order

The Tribunal allowed the appeal of the assessee, quashing the assessment order passed under section 153A due to the invalid approval process under section 153D. The Tribunal found the approval granted by the Additional Commissioner of Income Tax to be a mere formality lacking proper application of mind, rendering the assessment order invalid. The decision was based on established judicial precedents emphasizing the need for detailed and considered approval under section 153D. The assessment was quashed solely on the jurisdictional issue of improper approval, without delving into the merits of the grounds raised.

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Issues Involved:
1. Admissibility of additional ground raised by the assessee.
2. Validity of the assessment order passed under section 153A due to alleged mechanical and ritualistic approval under section 153D.
3. Application of relevant case laws and judicial precedents.

Detailed Analysis:

1. Admissibility of Additional Ground Raised by the Assessee:
The assessee raised an additional ground challenging the validity of the assessment order passed under section 153A of the Income Tax Act, 1961, due to the alleged mechanical and ritualistic approval under section 153D. The Tribunal considered this ground to be purely legal in nature, requiring no new facts for adjudication. The Tribunal admitted the additional ground, referencing the Supreme Court's decision in the case of National Thermal Power Co. Ltd. (NTPC) Vs. CIT (1998) 229 ITR 383(SC), which permits raising purely legal grounds at any stage of the proceedings.

2. Validity of the Assessment Order Passed Under Section 153A:
The assessee contended that the approval granted under section 153D was mechanical and lacked proper application of mind by the Additional Commissioner of Income Tax (Addl. CIT). The Tribunal examined the approval process and found that the draft assessment order was submitted by the Assessing Officer (AO) to the Addl. CIT on 29.06.2017, and the approval was granted on the same day. The Tribunal noted that the Addl. CIT's approval merely stated, "Necessary statutory approval u/s. 153D is given to pass the above assessment order as such," without any detailed analysis or application of mind.

The Tribunal referred to several judicial precedents, including the Bombay High Court's decision in the case of PCIT Vs. Shreelekha Damani (2019) 307 CTR 218, where similar mechanical approval was deemed invalid. The Tribunal also cited other relevant case laws, such as Sanjay Duggal Vs. ACIT, M3M India Holdings Vs. DCIT, and Arch Pharmalabs Ltd. Vs. ACIT, which emphasized the requirement of a detailed and considered approval process under section 153D.

3. Application of Relevant Case Laws and Judicial Precedents:
The Tribunal relied heavily on judicial precedents to support its decision. Key cases included:
- PCIT Vs. Shreelekha Damani: The Bombay High Court held that approval granted without proper analysis and application of mind is invalid.
- Arch Pharmalabs Ltd. Vs. ACIT: The Tribunal emphasized the need for a detailed and objective evaluation by the approving authority under section 153D.
- Sanjay Duggal Vs. ACIT: The Tribunal reiterated that mechanical approval without proper scrutiny and application of mind renders the assessment order invalid.

The Tribunal concluded that the Addl. CIT's approval in the present case was a mere formality, lacking the necessary application of mind. Consequently, the assessment order passed under section 153A was quashed on the grounds of invalid approval under section 153D.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order passed under section 153A due to the invalid approval process under section 153D. The Tribunal did not adjudicate the grounds raised on merits, as the assessment was quashed on the jurisdictional issue of improper approval. The decision was pronounced on 07.06.2021.

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