2024 (4) TMI 1206 - AT - Income Tax

Assessment orders under section 153A invalid due to mechanical approval under section 153D without proper examination

ITAT Delhi held that assessment orders passed under section 153A were invalid due to improper approval under section 153D. The AO sent only draft ... Validity of assessment orders passed u/s 153A - invalid approval granted u/s 153D - HELD THAT:- As noted that the AO sent draft assessment orders in respect of six different assessees for various assessment years for approval of the Additional Commissioner in terms of section 153D of the Act. Perusal of copies of the aforesaid letters placed in the paper book reveals that the AO has simply sent the draft assessment orders without the assessment records and seized material. Interestingly enough, on the very same day i.e. 21.03.2013 the Additional Commissioner has granted approval u/s 153D of the Act in respect of six different assessees involving multiple assessment years. Letter of the Assessing Officer seeking approval also makes it clear that only draft assessment orders were sent for approval without any assessment record or seized material. It is further clear that on the very same day the letter of the Assessing Officer with draft assessment orders were received, approval u/s 153D of the Act was granted by the Approving Authority. The aforesaid facts clearly reveal that the Approving Authority, while granting approval u/s 153D of the Act has acted as a mere rubber stamp. The approval granted is completely mechanical without application of mind. Thus, in our view, the approval granted u/s 153D of the Act is not in accordance with the provisions contained u/s 153D. Assessee appeal allowed. Issues Involved:1. Validity of the assessment orders due to alleged improper approval under Section 153D of the Income-tax Act, 1961.2. Procedural compliance with Section 153D requirements for approval of assessment orders.Detailed Analysis:1. Validity of the Assessment Orders Due to Alleged Improper Approval Under Section 153D:The primary issue raised by the assessee was the validity of the assessment orders based on the claim that the approval granted under Section 153D was invalid. The assessee argued that the approval process was mechanical and lacked the necessary application of mind by the Approving Authority. The Tribunal noted that Section 153D mandates that no assessment or reassessment order in a search-related case can be passed without prior approval from the Competent Authority. The Tribunal emphasized that the term 'approval' requires a thorough examination and application of mind to the draft assessment orders and related materials. Judicial precedents, including those from the Hon'ble Delhi High Court and Orissa High Court, were cited to support the view that approval should not be a mere formality or mechanical exercise. The Tribunal found that in the present case, the Additional Commissioner granted approval for multiple assessees and assessment years on the same day the draft orders were received, without reviewing the assessment records or seized materials. This indicated a lack of due diligence and application of mind, rendering the approval invalid. Consequently, the assessment orders based on such approval were deemed invalid and were quashed.2. Procedural Compliance with Section 153D Requirements for Approval of Assessment Orders:The Tribunal scrutinized the procedural compliance with Section 153D, which requires that the Approving Authority must apply independent judgment and verify the issues raised in the draft assessment orders. The Tribunal highlighted that the legislative intent behind Section 153D is to ensure that assessments in search cases are conducted with due oversight by senior officers to prevent arbitrary or unjust assessments. The Tribunal observed that the approval process in the present case did not meet these requirements, as the Additional Commissioner approved numerous orders in a single day without evidence of reviewing the necessary records. The Tribunal referenced several judicial decisions underscoring the necessity for a thorough and considered approval process, which was absent in this case. As a result, the Tribunal concluded that the procedural requirements of Section 153D were not met, leading to the invalidation of the assessment orders.Conclusion:The Tribunal allowed the assessee's appeals, quashing the assessment orders due to the invalid approval under Section 153D. The Revenue's appeals were dismissed as infructuous in light of this decision. The judgment underscores the importance of a meticulous and informed approval process under Section 153D, ensuring that assessments are conducted with proper oversight and adherence to legal standards.