2023 (5) TMI 1094 - AT - Income Tax

Tribunal quashes assessment orders due to invalid approval under section 153D

The Tribunal allowed the cross objections, quashing the assessment orders passed under section 153A read with section 143(3) due to the invalid approval ... Prior approval under section 153D - Approval must reflect application of mind - Mechanical or bulk approval vitiates assessment - Validity of assessment under section 153A where 153D approval is defective - Approval cannot be conditional or based on presumptionPrior approval under section 153D - Approval must reflect application of mind - Mechanical or bulk approval vitiates assessment - Approval cannot be conditional or based on presumption - Validity of assessment under section 153A where 153D approval is defective - Whether the approval granted by the Joint Commissioner under section 153D was valid and whether assessments framed under section 153A r.w.s. 143(3) could stand where such approval was given in a mechanical manner. - HELD THAT: - The Tribunal examined the approval letter and surrounding circumstances and found the approval to be a common/bulk approval for multiple assessees, containing no indication that the approving authority perused the draft orders or the assessment records or seized material, and expressly resting on presumption about the AO's actions. The Bench noted that statutory approval under section 153D is mandatory and must demonstrate an independent application of mind; mere use of the word 'approved', a conditional endorsement or reliance on presumption does not satisfy the statutory requirement. The Tribunal relied on consistent precedents of coordinate Benches and High Courts which hold that prior approval under section 153D is not a mere formality, cannot be a pro forma or bulk exercise, and must be grounded on examination of material such that the approving authority's satisfaction is discernible. Applying those principles to the facts of the case - short interval between proposal and approval, identical wording for multiple assessees, absence of reference to materials examined and presence of conditional language - the Tribunal concluded that the approval was given without application of mind and was therefore invalid. Consequentially, assessments passed under section 153A r.w.s. 143(3) on the basis of that defective approval are vitiated and cannot be sustained.Approval under section 153D was granted mechanically and without application of mind; therefore the assessments framed under section 153A r.w.s. 143(3) are quashed.Final Conclusion: The Tribunal allowed the assessee's legal ground: the JCIT's approval under section 153D was invalid for want of independent application of mind, and accordingly the assessments for AYs 2003-04 to 2007-08 framed under section 153A r.w.s. 143(3) were cancelled; Revenue's appeals were rendered infructuous and dismissed. Issues Involved:1. Legality of the approval granted by the Joint Commissioner of Income Tax (JCIT) under section 153D.2. Validity of the assessment orders passed under section 153A read with section 143(3).Summary:Issue 1: Legality of the approval granted by JCIT under section 153DThe assessee contended that the approval granted by the JCIT was devoid of application of mind and was done in a mechanical manner. The approval did not indicate what material and facts were perused before granting the approval. It was argued that the approval was granted within 24 hours, making it humanly impossible to review the assessment records and draft orders objectively. The approval was conditional and based on presumptions, thus making it invalid.The Tribunal noted that the JCIT's approval was a mere mechanical exercise without independent application of mind. The approval letter did not show that the JCIT had reviewed the assessment records or the seized material. The Tribunal referred to multiple judicial precedents, emphasizing that the approval under section 153D is not a mere formality but requires a thorough review and application of mind by the approving authority.Issue 2: Validity of the assessment orders passed under section 153A read with section 143(3)The Tribunal found that the assessment orders were invalid as they were based on an invalid approval under section 153D. The JCIT's approval was granted without proper application of mind, making the subsequent assessment orders unsustainable. The Tribunal quashed the assessment orders on this ground.Conclusion:The Tribunal allowed the cross objections filed by the assessee, quashing the assessment orders passed under section 153A read with section 143(3) due to the invalid approval granted by the JCIT under section 153D. Consequently, the appeals filed by the Revenue were dismissed as infructuous.