2026 (4) TMI 118 - AT - Income Tax

Mechanical approval under Section 148B vitiates reassessment when the authority fails to apply independent mind.

Prior approval under Section 148B is a statutory safeguard requiring the approving authority to independently examine the draft assessment order and ... Validity of assessment order passed by the A.O. u/s 143(3) - approval u/s 148B accorded by Addl.CIT/JCIT - approval granted by the Range Head is mechanical and without any application of mind HELD THAT: - The Tribunal found from the approval orders that they did not disclose any independent consideration of the draft assessment orders, the proposed additions, or the supporting material. It held that approval under section 148B, like analogous statutory approval requirements in search assessments, is not an empty formality but a mandatory safeguard intended to check arbitrary exercise of power by the Assessing Officer. The approving authority must therefore examine the draft order and record at least some indication of the thought process leading to approval. Mere grant of approval without such indication amounts to a mechanical exercise. On that basis, the Tribunal concluded that the approvals in the lead appeal and the connected appeals were invalid, and the consequential assessments were non-est in law. [Paras 15, 16, 20, 21, 22] Final Conclusion: The Tribunal admitted the additional legal ground and held that the approvals granted under section 148B were mechanical and devoid of application of mind. On that basis, the assessments for assessment years 2022-23 and 2023-24 in all the connected appeals were quashed, leaving the grounds on merits unexamined. Issues: Whether the assessment order under Section 143(3) of the Income-tax Act, 1961 was vitiated because the approval under Section 148B was granted mechanically and without application of mind.Analysis: The Tribunal held that prior approval under Section 148B is a statutory safeguard and not a mere formality. The approval order must reflect that the approving authority examined the draft assessment order and the relevant material before granting consent. On the facts, the approval was found to be a brief, non-discernible exercise that did not reveal any independent consideration of the additions proposed by the Assessing Officer. The Tribunal treated the approval as mechanical and inconsistent with the legal requirement of meaningful scrutiny by the approving authority.Conclusion: The assessment order was held unsustainable in law and was quashed. The additional ground was allowed, and the remaining grounds on the merits of the additions became academic and were not adjudicated.Final Conclusion: The appeals were allowed because the impugned assessments failed at the threshold for want of valid approval.Ratio Decidendi: Where the statute requires prior approval for a draft assessment, the approving authority must independently apply its mind to the relevant facts and material, and a mechanical or rubber-stamp approval vitiates the consequent assessment.