2021 (10) TMI 1483 - AT - Income Tax

Mechanical 153D approval for search assessments u/s 153A held invalid, leading to quashing of assessments on appeal

The dominant issue was whether assessments framed u/s 153A were vitiated due to invalid approval granted by the Jt. CIT u/s 153D. The ITAT held that ... Assessment u/s 153A - Validity of Approval from Jt. CIT u/s 153D - HELD THAT:- in Navin Jain & Others [2021 (9) TMI 1068 - ITAT LUCKNOW] and Naresh Kumar Jain & Others [2021 (9) TMI 1080 - ITAT LUCKNOW] wherein, Navin Jain & Others (supra) has been followed, the Tribunal has held to the effect that granting of a mechanical approval u/s 153D of the Act vitiates the entire proceedings. Appeals of the assessee stand allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the statutory 'prior approval' under section 153D, obtained for passing assessment orders under section 153A by an Assessing Officer below the rank of Joint Commissioner, was granted without application of mind / mechanically, thereby vitiating the assessment orders. (ii) If the section 153D approval is invalid for lack of application of mind, whether the assessment orders passed under section 153A/143(3) (and the consequential first appellate orders) are liable to be quashed. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity of section 153D approval-whether mechanical and without application of mind Legal framework (as deliberated by the Court/Tribunal): The Tribunal noted that where the Assessing Officer is below the rank of Joint Commissioner, section 153D mandates that no assessment/reassessment order in a search case be passed except with the prior approval of the Joint Commissioner/competent approving authority. The Tribunal treated this requirement as a substantive safeguard, requiring meaningful scrutiny rather than a ritualistic endorsement. Interpretation and reasoning: The Tribunal found it undisputed that approvals under section 153D were sought on 30/12/2017 and 31/12/2017 and approvals were granted on 31/12/2017 in a bulk set of 123 cases through two approval letters, covering not only the assessee's cases but also cases of other groups. The Tribunal noted that the approvals were granted in extreme temporal proximity to the draft assessment orders and the final assessment orders were passed on the same day the approvals were granted. The Tribunal further observed that, from the approval letters placed on record, even the fact of having granted approval was not clearly mentioned in the manner expected of a reasoned, case-specific supervisory exercise. Given the volume and number of cases approved together, the Tribunal accepted the contention that it was humanly impossible to examine the relevant record in each case and to apply independent mind in the manner contemplated by section 153D. Conclusions: Following the Tribunal's earlier decisions on materially identical facts, the Tribunal held that the section 153D approvals in the present matters were granted mechanically and without due application of mind, failing the statutory mandate. Issue (ii): Consequence of invalid section 153D approval-whether assessments and appellate orders must be quashed Legal framework (as applied in the decision): The Tribunal proceeded on the premise that a valid approval under section 153D is a jurisdictional precondition for an Assessing Officer below the prescribed rank to pass an assessment order under section 153A in search cases. Interpretation and reasoning: The Tribunal relied on its own binding/coordinate precedent where mechanical approval under section 153D was held to vitiate the entire assessment proceedings. It treated the defect as going to the root of the assessment, rendering the assessment orders unsustainable. Since the assessee's additional ground was legal and foundational, and since the approvals were found invalid on the same reasoning as the earlier decisions, the Tribunal did not proceed to examine the merits of additions. Conclusions: The Tribunal allowed the additional legal ground, quashed the assessment orders passed under section 153A/143(3), and consequently quashed the first appellate orders. All other grounds were held not to survive for adjudication.