2025 (3) TMI 650 - AT - Income Tax

Search assessments under section 153A quashed due to invalid mechanical approval lacking proper examination under section 153D

ITAT Jaipur allowed the assessee's appeals, quashing search assessments under section 153A for lack of proper prior approval under section 153D. The ... Assessment u/s 153A - No proper Prior approval u/s 153D as granted mechanically - HELD THAT:- Hon’ble Orissa High Court in its judgment in the case of ACIT vs. Serajuddin & Co. [2023 (3) TMI 785 - ORISSA HIGH COURT] considered a similar question of ‘Approval’, wherein the draft assessment orders were placed by the AO before the ld. Addl.CIT on 27/29.12.2010 for seven assessment years. The approval was granted by the Addl. Commissioner for seven assessment years u/s 153D on 30.12.2010 by merely saying that the draft orders submitted by the officer in the above case for the seven assessment years are hereby approved. The Hon’ble Orissa High Court took note of this fact and quashed the search assessment and decided the issue in favour of the assessee. As in case of PCIT vs. Anuj Bansal [2023 (7) TMI 1214 - DELHI HIGH COURT] affirmed the decision of held that the approval was granted without examining the assessment record or the search material and thus, was held as invalid and bad-in-law. Thus, the impugned approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D of the Act. Appeals of the assessee are allowed. 1. ISSUES PRESENTED and CONSIDEREDThe Tribunal considered several core legal issues in the appeals filed by the assessee:Whether the assessment orders were invalid due to the absence of a Document Identification Number (DIN) as required by CBDT Circular No. 19/2019.Whether the approval granted under Section 153D of the Income Tax Act was mechanical and without application of mind, thus rendering the assessment orders null and void.Whether the additions made by the Assessing Officer (AO) during the assessment under Section 143(3) read with Section 153A were valid in the absence of incriminating material found during the search.Whether the interest charged under Section 234D was justified.2. ISSUE-WISE DETAILED ANALYSISAbsence of Document Identification Number (DIN)Relevant Legal Framework and Precedents: The CBDT Circular No. 19/2019 mandates that all communications by Income Tax Authorities must contain a DIN. If a communication is issued without a DIN, it is treated as invalid unless specific exceptions are noted.Court's Interpretation and Reasoning: The Tribunal noted that the absence of a DIN in the assessment order was a significant procedural lapse. The CBDT circulars are binding on tax authorities, and failure to comply renders the order non-est.Key Evidence and Findings: The assessment order dated 27.12.2019 lacked a DIN, which was a clear violation of the CBDT circular requirements.Application of Law to Facts: The Tribunal found that the absence of a DIN in the assessment order invalidated the order, as it failed to comply with mandatory procedural requirements.Conclusions: The Tribunal did not decide this issue conclusively due to the matter being sub-judice before the Supreme Court.Approval under Section 153DRelevant Legal Framework and Precedents: Section 153D requires prior approval from a Joint Commissioner for assessments under Section 153A. The approval must not be mechanical and should reflect application of mind.Court's Interpretation and Reasoning: The Tribunal emphasized that the approval process is not a mere formality and requires a thorough review of the draft assessment orders and related materials.Key Evidence and Findings: The Tribunal observed that the approval for multiple cases was granted in a single day, which suggested a lack of due diligence and application of mind.Application of Law to Facts: The Tribunal found that the approval was granted mechanically without examining the assessment records or search materials, thus violating Section 153D requirements.Conclusions: The Tribunal held that the mechanical approval rendered the assessment orders invalid and quashed them.Additions in Absence of Incriminating MaterialRelevant Legal Framework and Precedents: Additions in assessments under Section 153A should be based on incriminating material found during the search.Application of Law to Facts: The Tribunal did not address this issue in detail due to the quashing of the assessment orders on procedural grounds.Interest Charged under Section 234DRelevant Legal Framework and Precedents: Section 234D pertains to the interest on excess refund granted to the assessee.Application of Law to Facts: The Tribunal did not address this issue due to the quashing of the assessment orders on procedural grounds.3. SIGNIFICANT HOLDINGSThe Tribunal held that the approval under Section 153D was granted in a mechanical manner without due application of mind, rendering the assessment orders invalid.The absence of a DIN in the assessment orders was a significant procedural lapse, but the Tribunal did not decide this issue conclusively due to pending adjudication by the Supreme Court.The Tribunal quashed the assessment orders due to procedural defects, thus not addressing the substantive issues of additions and interest under Section 234D.'The impugned approval given u/s 153D has been granted in a mechanical manner and without application of mind and thus it is invalid and bad in law and consequently vitiated the assessment order for want of valid approval u/s 153D of the Act.'