2024 (9) TMI 1661 - AT - Income Tax

Assessment under Section 153A requires prior approval from superior authority per Section 153D mandate

M/s Quality Structures Pvt. Ltd. Versus The DCIT Central Circle II Kanpur

The ITAT Lucknow held that assessment under section 153A requires prior approval from superior authority as mandated by section 153D. The tribunal found ... Assessment u/s 153A - Legality of approval u/s 153D - Addition u/s 69A - HELD THAT:- Legislature wanted that the assessment/re-assessment of the search cases should be made and the order should be passed with the prior approval of the superior authority. In the group of cases of Shri Navin Jain [2021 (9) TMI 1068 - ITAT LUCKNOW] a similar issue has been considered by the Lucknow Bench of the Tribunal, wherein also, the approval under section 153D of the Act was given through the same letter dated 30.12.2018 by the ACIT, Central, Kanpur and the Ground raised in this regard by the assessee was allowed. Issues Involved:1. Legality of assessment under Section 153A without compliance with Section 153C.2. Sustaining additions based on seized documents without proper satisfaction and notice under Section 153C.3. Validity of additions under Section 69A without incriminating material found in the search.4. Validity of jurisdiction assumed by the Assessing Officer and assessment order under Section 127.5. Legality of approval under Section 153D being mechanical and non-judicious.6. Rejection of submissions by the appellant regarding the seized documents.7. Alleged arbitrary additions contrary to natural justice.Detailed Analysis:1. Legality of Assessment under Section 153A:The appellant contended that the assessment completed under Section 153A was in gross violation of Section 153C, rendering the assessment order illegal and void-ab-initio. It was argued that the assessment was based on documents seized during a search of a third party, without recording satisfaction as required under Section 153C, and without issuing a notice under the same section. The Tribunal found that the assessment lacked the necessary compliance with Section 153C, thereby supporting the appellant's claim of illegality.2. Sustaining Additions Based on Seized Documents:The appellant challenged the addition of Rs.1,12,00,000/- made under Section 69A, arguing that it was based solely on documents seized from a third party without proper satisfaction and notice under Section 153C. The Tribunal noted that the Assessing Officer failed to follow the due process of law, as no incriminating material was found at the appellant's premises during the search. Consequently, the addition was deemed unsustainable.3. Validity of Additions under Section 69A:The Tribunal observed that the addition under Section 69A was made without any incriminating material found during the search at the appellant's premises. The absence of such material rendered the assessment under Section 153A and the consequent addition illegal and void-ab-initio. The Tribunal emphasized that the assessment should be based on incriminating evidence found during the search, which was not the case here.4. Validity of Jurisdiction and Assessment Order:The appellant argued that the assumption of jurisdiction by the Assessing Officer was invalid due to an illegal order under Section 127. The Tribunal did not specifically address this issue in detail but focused on the overarching illegality of the assessment proceedings due to the improper approval process under Section 153D.5. Legality of Approval under Section 153D:A significant issue was the mechanical and non-judicious approval granted under Section 153D. The Tribunal highlighted that the approval was granted for 67 assessees on the same day, which was humanly impossible to review thoroughly. The Tribunal referred to precedents where such mechanical approvals were deemed invalid, emphasizing the need for the approving authority to apply its mind independently to each case. The Tribunal concluded that the approval was non-est, rendering the assessment order illegal.6. Rejection of Submissions Regarding Seized Documents:The appellant's submissions regarding the contents of the seized documents were not considered by the Commissioner of Income Tax (Appeals). The Tribunal noted this oversight and found that the appellant was not given a fair opportunity to substantiate their claims, further supporting the appellant's position.7. Alleged Arbitrary Additions:The Tribunal found that the arbitrary additions made by the Assessing Officer were contrary to the principles of natural justice and equity. The lack of incriminating evidence and the mechanical approval process highlighted the unsustainable nature of the additions, leading to their annulment.Conclusion:The Tribunal annulled the assessment orders for the years in question, emphasizing the lack of compliance with statutory provisions and the mechanical nature of the approval process. The appeals of the assessee were allowed, reflecting a comprehensive failure in the procedural and substantive aspects of the assessment process.