Assessment order quashed after mechanical approval under section 153D found invalid without proper consideration

ITAT Delhi quashed the assessment order after finding that the approval granted by Additional CIT under section 153D was mechanical and without application of mind. The Tribunal followed its earlier decisions in identical cases for assessment years 2011-12 to 2015-16 and another case for 2016-17 and 2017-18, where similar approvals were held invalid. The HC had upheld these findings. Since the same approval under section 153D was deemed mechanical and lacking proper consideration, the Tribunal invalidated the approval, consequently vitiating the entire assessment order. The assessee's appeal succeeded.

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Issues Involved:

1. Validity of approval granted by the Additional Commissioner of Income Tax (Addl. CIT) under Section 153D of the Income Tax Act, 1961.
2. Mechanical nature of the approval process by the Addl. CIT.
3. Application of mind by the Addl. CIT in granting approval.
4. Impact of the Tribunal and High Court's previous decisions on the current case.

Issue-wise Detailed Analysis:

1. Validity of Approval Granted by Addl. CIT under Section 153D:

The primary issue in these appeals was the validity of the approval granted by the Addl. CIT under Section 153D of the Income Tax Act. The assessee challenged the approval on the grounds that it was granted in a mechanical manner without application of mind. The Tribunal noted that the approval was a combined one for multiple assessment years and did not indicate any examination of the draft assessment orders by the Addl. CIT. The Tribunal relied on its previous decisions in the assessee's own case for earlier assessment years, where similar approvals were quashed for being mechanical and without due application of mind.

2. Mechanical Nature of the Approval Process:

The Tribunal observed that the Addl. CIT granted approval for 43 assessment years in a single day, which was considered humanly impossible to do with due diligence. This mechanical nature of the approval process was highlighted by the assessee, who argued that the Addl. CIT did not even mention reviewing the draft assessment orders. The Tribunal found that such an approval process rendered the proceedings an "empty ritual," lacking the necessary scrutiny and application of mind required by law.

3. Application of Mind by the Addl. CIT:

The Department argued that the Addl. CIT was involved in the assessment process from the beginning and had revised questionnaires based on seized materials. However, the Tribunal noted that the Addl. CIT failed to provide reasons for the approval, which indicated a lack of independent application of mind. The Tribunal emphasized that the approval should not be a mere formality but should reflect a thorough examination of the assessment orders.

4. Impact of Tribunal and High Court's Previous Decisions:

The Tribunal's decision was influenced by its previous rulings in the assessee's case for earlier years, where similar approvals were quashed. The High Court had upheld these decisions, reinforcing the Tribunal's stance on the necessity of a non-mechanical approval process. The Tribunal also referenced decisions from other High Courts, which supported the view that approvals under Section 153D should involve a substantive application of mind.

Conclusion:

The Tribunal concluded that the approval granted by the Addl. CIT under Section 153D was invalid due to its mechanical nature and lack of application of mind. Consequently, the assessment orders based on such approvals were quashed. The Tribunal allowed the appeals of the assessee for the assessment years 2016-17 and 2017-18, while dismissing the appeal of the Revenue for the assessment year 2017-18. The decision underscored the importance of a diligent and thoughtful approval process in tax assessments.

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