2024 (6) TMI 404 - AT - Income Tax

Validity of Assessment u/s 153A - no valid approval u/s. 153D granted - allegation of non-application of mind by the approving authority - HELD THAT - There should be some indication that the approving authority examined relevant material in detail while granting the approval u/s. 153D of the Act. The approval u/s. 153D is a mandatory requirement and such approval is not meant to be given mechanically. Such approval granted mechanically without application of mind by the Addl. CIT resulting in vitiating the assessment orders. See M/s. Serajuddin Co. 2023 (3) TMI 785 - ORISSA HIGH COURT We find in the present case that the AO sought approval u/s. 153D of the Act on 18-03-2016 the JCIT granted approval on 21-03-2016 and the final assessment order u/s. 143(3) r.w.s. 153A of the Act was passed on 30-03- 2016 which clearly indicates that the approving authority granted approval in one day mechanically without examining the relevant material. According to the AO the case of the assessee was covered by search action u/s. 132 of the Act conducted at Bhilwara concerning Mantri-Soni Group of Jalna/Bhilwara and their family members and business concerns at the business and residential premises of different members/associate which is evident from para 1 of the assessment order. The approving authority has to examine number of evidences documents statements of various persons etc. recorded which were necessarily to be taken into consideration while granting approval u/s. 153D of the Act by the JCIT. On an examination of the approval dated 21-03-2016 which is on record placed by the ld. DR on 09-10-2023 we find no such indication of examination of evidences documents statements of various persons etc. at least no reference whatsoever made by the JCIT i.e. approving authority. JCIT granted approval u/s. 153D of the Act mechanically without application of mind which resulting in vitiating the present final assessment order dated 30- 03-2016 u/s. 143(3) r.w.s. 153A of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of approval u/s 153D of the Act.
2. Validity of assessment orders passed u/s 143(3) r.w.s. 153A of the Act.

Summary:

Issue 1: Validity of Approval u/s 153D of the Act

The assessee challenged the action of the CIT(A) in confirming the action of AO in initiating proceedings u/s 153A of the Act and passing the assessment order u/s 153A r.w.s. 143(3) of the Act. The assessee argued that the Joint Commissioner of Income Tax (JCIT), Central Range, Nashik, granted approval u/s 153D of the Act on a mechanical basis without any independent application of mind. The approval was granted subject to compliance with various procedures and checks, but it did not address the merits of the case or provide any justification for the approval. The assessee contended that the approval was given in a mechanical manner without proper examination of the facts and details of the search proceedings, which included voluminous records and numerous evidences.

The Revenue argued that the assessment proceeding is a continuous process under the active guidance and monitoring of the JCIT/Addl.CIT and that the approval process involves regular supervision and guidance. The JCIT/Addl.CIT frequently reviews the seized documents and discusses the observations with the AO throughout the assessment proceedings. The JCIT/Addl.CIT applied their mind to the draft order and the seized documents during the entire assessment period, and the approval granted within four days was sufficient given the ongoing supervision and guidance.

The Tribunal referred to the judgment of the Hon'ble High Court of Orissa in the case of M/s. Serajuddin & Co., which emphasized that the approval u/s 153D of the Act is a mandatory requirement and should not be given mechanically. The Tribunal found that the JCIT granted approval in one day without examining the relevant material, which indicated a mechanical approval without application of mind. The Tribunal concluded that the approval granted by the JCIT was invalid, resulting in the vitiation of the final assessment order dated 30-03-2016 passed u/s 143(3) r.w.s. 153A of the Act.

Issue 2: Validity of Assessment Orders Passed u/s 143(3) r.w.s. 153A of the Act

Based on the invalidity of the approval u/s 153D, the Tribunal quashed the final assessment orders for the assessment years 2009-10 to 2014-15. The Tribunal held that the approval granted by the JCIT was without application of mind and was given in a mechanical manner, which invalidated the final assessment orders. Consequently, the Tribunal allowed the appeals of the assessee and dismissed the appeals of the Revenue.

In conclusion, the Tribunal held that the approval dated 21-03-2016 granted by the JCIT u/s 153D of the Act was invalid due to non-application of mind, resulting in the quashing of the final assessment orders dated 30-03-2016 passed u/s 143(3) r.w.s. 153A of the Act. All the appeals by the assessee were allowed, and all the appeals filed by the Revenue were dismissed.