2024 (6) TMI 1293 - AT - Income Tax

Section 153A assessment proceedings invalid due to improper Section 153D approval lacking application of mind

ITAT Delhi held that assessment proceedings under Section 153A were invalid due to improper approval process under Section 153D. The DCIT granted approval ... Validity of assessment proceedings u/s 153A - Sec 153D approval process not followed by the AO - HELD THAT:- Considered the rival submissions and material placed on record, we observed that the approval granted by DCIT, Central Circle, Noida dated 30/12/2016 in which the approval granted u/s 153 were granted to the eighteen assessees including the case of the assessee. Letter granting of such approval is placed on record. In the case of M.G. Metolloy Pvt. Ltd [2023 (10) TMI 686 - ITAT DELHI], is one of the assessee, who was also granted approval by the same letter dated 30/12/2016 sanctioning authority (JCIT) has, in fact, under the force of circumstances, relegated his statutory duty to the subordinate AO, whose action the JCIT, was supposed to supervise as per the scheme of the Act. Manifestly, the JCIT, without any consideration of factual and legal position in proposed additions/disallowances and without contents of appraisal report before him or incriminating material collected in search etc. has buckled under statutory compulsion and proceeded to grant a simplicitor approval with caveats and disclaimers. This approach of the JCIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and cannot thus be countenanced in law. The identical issue has been favourably adjudicated in assessee's own case in ITA 3306/Del./2018 order dated 23-08-2021 concerning other AY 2015-16 where co-ordinate bench found total lack of propriety in such statutory approval - We are unhesitatingly disposed to hold that the assessment order for AY 2014-15 in question, in pursuance of a hollow & cosmetic approval accorded u/s 153D and undeniably without application of mind, is rendered unenforceable in law and hence quashed. - Decided in favour of assessee. Issues Involved:1. Validity of initiation of assessment proceedings and issuance/service of notices.2. Addition of Rs. 12,35,18,351/- under Section 68 of the Income Tax Act, 1961.3. Confirmation of addition by CIT(A).4. Adverse inferences drawn by the Assessing Officer (AO) and CIT(A).5. Compliance with Section 153D of the Income Tax Act, 1961.Detailed Analysis:1. Validity of Initiation of Assessment Proceedings and Issuance/Service of Notices:The assessee challenged the initiation of assessment proceedings and the issuance/service of notices, arguing that they were not in accordance with the provisions of law. The CIT(A) did not hold the assessment order invalid on this basis. The tribunal did not provide a separate detailed analysis on this issue, focusing instead on the compliance with Section 153D.2. Addition of Rs. 12,35,18,351/- under Section 68 of the Income Tax Act, 1961:The assessee contested the addition of Rs. 12,35,18,351/- made by the AO on account of alleged unexplained cash credit under Section 68, arguing that it was beyond the scope/jurisdiction of Section 153A. The CIT(A) upheld the addition. However, the tribunal did not delve into the merits of this issue separately, as the decision on Section 153D compliance rendered further analysis unnecessary.3. Confirmation of Addition by CIT(A):The CIT(A) confirmed the addition made by the AO. The tribunal's decision to quash the assessment order due to non-compliance with Section 153D effectively nullified the CIT(A)'s confirmation of the addition.4. Adverse Inferences Drawn by the AO and CIT(A):The assessee argued that the adverse inferences drawn by the AO and CIT(A) were erroneous and not sustainable in law. The tribunal did not address this issue separately, as the primary focus was on the procedural compliance under Section 153D.5. Compliance with Section 153D of the Income Tax Act, 1961:The primary issue argued by the assessee was the non-compliance with Section 153D. The assessee contended that the JCIT granted approval without proper examination of the facts, rendering the approval invalid. The tribunal examined the approval process and found that the JCIT granted approval on the same day he received the draft assessment orders, indicating a lack of proper examination and application of mind.The tribunal referenced several cases, including:- DCIT v. MG Metalloy Pvt. Ltd.- Ruchi Garg ITAT No. ITA Nos. 1436 to 1438 & 1440/Del/2022- DCIT, Central Circle -II Versus Zync Global Pvt. Ltd., Noida- PCIT v Sapana Gupta- PCIT v Siddharth Gupta- PCIT v Subhodh AgarwalIn these cases, similar approvals were deemed invalid due to lack of proper application of mind. The tribunal concluded that the approval granted by the JCIT was 'an empty ritual' and 'not a statutory approval as required under the Act.' Consequently, the assessment order was considered a nullity in law.The tribunal's decision was based on the following points:- The JCIT admitted that the approval was technical and without proper examination of facts.- The approval was granted hurriedly, affecting its validity.- The approval was a combined approval for multiple assessment years and assessees, contrary to legal requirements.Conclusion:The tribunal quashed the assessment order due to non-compliance with Section 153D, rendering further analysis on other grounds unnecessary. The appeals for all assessment years (2012-13 to 2015-16) were partly allowed based on the findings related to Section 153D compliance.Result:All four appeals filed by the assessee were partly allowed.