Assessment under Section 153A invalid due to mechanical approval without proper verification by Additional Commissioner

ITAT Bangalore held that assessment framed under section 153A read with section 143(3) and 153D was invalid due to lack of application of mind by Additional Commissioner while granting approval. The court found that AO's letter seeking approval contained inconsistencies regarding assessment dates and failed to reference seized materials or statements. The approval was granted mechanically without proper verification, making it administrative rather than judicial. Additionally, ITAT condoned delay in filing appeal against section 143(1) intimation, recognizing assessee's legitimate concern about potential double taxation from joint development agreement additions in subsequent assessment year.

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Issues Involved:

1. Validity of the assessment order under section 153A due to alleged mechanical approval under section 153D.
2. Condonation of delay in filing an appeal against intimation under section 143(1).

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Under Section 153A:

The primary contention raised by the assessee was the validity of the assessment framed under section 153A, which was challenged on the grounds of improper approval under section 153D of the Income Tax Act. The assessee argued that the approval granted by the Additional Commissioner of Income Tax was without the application of mind, thus rendering the assessment order unsustainable and bad in law. The draft orders for multiple assessment years were sent for approval on March 30, 2022, and were approved the next day, suggesting a mechanical approval process. The assessee cited several judgments to support this claim.

The Revenue, on the other hand, argued that the Additional Commissioner applied his mind when approving the draft assessment order. However, the Tribunal found that the legislative intent behind section 153D is to ensure that assessments in search cases are made with the prior approval of a superior authority, who must apply their mind to the materials gathered during the search. The Tribunal referenced the Delhi High Court's decision in PCIT Vs. Anuj Bansal, which emphasized that approval must not be granted mechanically but with due application of mind.

Upon reviewing the facts, the Tribunal noted discrepancies and errors in the checklist and draft orders, indicating a lack of application of mind by the Additional Commissioner. The Tribunal concluded that the approval was granted in a mechanical manner, thus vitiating the assessment order. Consequently, the appeal on this ground was allowed in favor of the assessee.

2. Condonation of Delay in Filing an Appeal Against Intimation Under Section 143(1):

The second issue involved the delay in filing an appeal against the intimation generated under section 143(1) of the Act. The assessee's appeal was dismissed by the CIT(A) due to a delay of 395 days, which was not condoned. The assessee argued that the delay was due to the expectation that the year in question would be scrutinized under Central Circle norms following a search operation. Additionally, the assessee's consultant was preoccupied with GST returns and tax audit reports, and the Managing Partner was engaged with other legal and administrative responsibilities.

The Tribunal found merit in the assessee's argument that the delay should be condoned to avoid double addition of income, which is undesirable under the law. The Tribunal noted that no addition was made to the total income in the intimation under section 143(1), but an appeal was filed to prevent potential double taxation. The Tribunal agreed to condone the delay and directed the CIT(A) to adjudicate the issue on merit, allowing the appeal for statistical purposes.

Conclusion:

In conclusion, the Tribunal partly allowed the appeal regarding the validity of the assessment order due to mechanical approval under section 153D, and allowed the appeal for statistical purposes concerning the condonation of delay in filing an appeal against the intimation under section 143(1). The order was pronounced on September 20, 2024.

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