2023 (11) TMI 1321 - AT - Income Tax

Assessment under section 153A invalid due to defective approval under section 153D lacking proper application of mind

The Dy. C.I.T., Central Circle – 20, New Delhi Versus Neetu Nayyar AND Neetu Nayyar Versus The A.C.I.T., Central Circle – 1, New Delhi.

ITAT DELHI held that assessment under section 153A was invalid due to improper approval under section 153D. The approval was granted mechanically without ... Assessment u/s 153A - No valid approval obtained u/s 153D - approval obtained not only mechanical but also without application of mind which makes the impugned assessment order non-est - HELD THAT:- As can be seen from the approval, there is a reference to 7 appeals by Shri Shiv Kumar Nayyar who happens to be the brother of the assessee. This Tribunal in the appeals by Shri Shiv Kumar Nayyar [2023 (7) TMI 1399 - ITAT DELHI] held that the approval u/s 153D of the Act has been granted by the Addl.CIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual. Decided in favour of assessee. Issues Involved:1. Validity of approval under Section 153D of the Income Tax Act, 1961.2. Mechanical approval without application of mind.3. Quashing of assessment orders due to procedural defects.Detailed Analysis:1. Validity of Approval under Section 153D:The primary issue in these appeals is the validity of the approval granted under Section 153D of the Income Tax Act, 1961. The assessee challenged the approval on the grounds that it was mechanical and lacked application of mind, thereby rendering the assessment orders non-est. The Tribunal examined whether the approval met the legislative intent of Section 153D, which requires that no order of assessment or reassessment be passed without the prior approval of the Joint Commissioner. The Tribunal noted that the legislative intent, as clarified by CBDT Circular No. 3 of 2008, mandates that the superior authorities should apply their minds to the material on which the assessment is based before granting approval.2. Mechanical Approval without Application of Mind:The Tribunal found that the approval granted in these cases was mechanical, as evidenced by the language of the approval letter, which did not reflect any consideration of the seized material or assessment records. The Tribunal referred to previous cases, including the decision in the case of MDLR Hotels Pvt Ltd, where approvals were granted for multiple assessment orders in a single letter without specific reference to the material considered. The Tribunal emphasized that the approval process should not be an empty ritual and must involve a thorough scrutiny and application of mind by the approving authority.3. Quashing of Assessment Orders Due to Procedural Defects:Given the mechanical nature of the approval, the Tribunal held that the entire search assessments were illegal and bad in law. The Tribunal relied on judicial precedents, including the decisions of the Hon'ble Orissa High Court and Hon'ble Allahabad High Court, which underscored the necessity of a judicious application of mind in granting approvals under Section 153D. The Tribunal concluded that the procedural defects in the approval process warranted the quashing of the assessment orders. Consequently, the appeals of the assessee were allowed, and the appeals of the Revenue were dismissed.Conclusion:The Tribunal's decision underscores the importance of adherence to procedural requirements in the approval process under Section 153D. The decision highlights the necessity for the approving authority to engage in a detailed examination of the material before granting approval, ensuring that the process is not reduced to a mere formality. The quashing of the assessment orders serves as a reminder of the critical role that procedural compliance plays in upholding the integrity of the assessment process.