2024 (12) TMI 858 - AT - Income Tax

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 ... Validity of approval granted by the Addl. CIT u/s.153D - whether approval granted in mechanical manner without any application of mind? - HELD THAT:- We fail to understand that as to what prevented the Addl.CIT in giving reasons for according approval u/s. 153D of the Act. In identical set of facts in the preceding assessment years the coordinate Bench of the Tribunal in assessee's own case for AY 2011-12 to 2015-16 [2023 (7) TMI 1399 - ITAT DELHI] and in the case of Neetu Nayyar for AY 2016-17 & 2017-18 [2023 (11) TMI 1321 - ITAT DELHI] has quashed the assessment order holding approval u/s. 153D by the Addl.CIT mechanical and without application of mind. The findings of the Tribunal have been further upheld by the Hon'ble High Court. Once the same very approval u/s. 153D has been held to be mechanical and without application of mind, we see no reason to deviate from the view taken by the co-ordinate Bench especially when the view of Tribunal has been upheld by the Hon'ble Jurisdictional High Court. Thus we hold the approval u/s. 153D is held to be invalid, consequently the assessment order based on said approval is vitiated, hence, quashed. The assessee succeeds. 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.