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2025 (6) TMI 404 - AT - Income TaxValidity of assessment proceedings u/s.153A r.w.s. 153D - as alleged statutory approval so granted u/s.153D is merely mechanical without application of mind - HELD THAT - Approval u/s. 153D is invalid as it is a consolidated approval for various years however the said approval was required to be given for each year . We further note that AO/ACIT CC-08 New Delhi sent a common letter dated 07.12.2018 for approval u/s. 153D of the Act for the assessment years 2013-14 to 2016-17 to the Addl. Commissioner of Income Tax and the Addl. Commissioner of Income Tax granted approval for all the assessment years from AY 2013-14 to 2016-17 by a common letter dated 08.12.2018 i.e. on the very next day. It is observed that the approval granted by the Additional CIT u/s 153D of the IT Act on the very next day for all the assessment years i.e. from AY 2010-11 to 2016-17 by way of single letter was without application of mind and mechanical in nature. Approval granted u/s. 153D of the Act granted by the Additional Commissioner of Income Tax Central Range-02 New Delhi in the instant case is mechanical and without due application of mind. The approval of Additional CIT should reflect application of mind which is absent in this case. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the Approving Authority has to act in a judicious manner by due Application of mind in a manner of a quasi judicial authority. Additional CIT failed to consider any seized material which have been relied upon by the AO while framing the draft assessment orders in the case of the assessee. A bare perusal of the letter dated 08.12.2018 of the Additional CIT of approval would show that the Additional CIT has simply mentioned that Approval u/s. 153D of the I.T. Act 1961 is accorded in the above mentioned cases with the direction to ensure that the orders should be passed well before the limitation which clearly establishes that the Additional CIT has given approval in a mechanical manner. The affidavits of Revenue submitted by the AO and the Range Head cannot replace the evidences quite clear on record. Accordingly we quash the assessment and allow the ground raised by the assessee.
The primary legal issue considered by the Tribunal was whether the approval granted under section 153D of the Income Tax Act, 1961, by the Additional Commissioner of Income Tax was valid, given that it was issued in a consolidated manner for multiple assessment years and multiple assessees on the same day, without apparent application of mind.
Specifically, the Tribunal examined the following core legal questions:
Regarding the first issue, the Tribunal relied on the plain language of section 153D and binding judicial precedents, particularly the recent decision of the Delhi High Court in PCIT vs. Shiv Kumar Nayyar. The Court emphasized that the statutory provision mandates that approval must be granted for "each assessment year" separately. The Allahabad High Court decision in PCIT v. Sapna Gupta was also cited to reinforce that the phrase "each assessment year" cannot be ignored or treated as a mere formality. The Tribunal held that a single consolidated approval letter covering multiple assessment years and multiple assessees does not meet the statutory requirement. On the second issue, the Tribunal scrutinized the facts surrounding the approval granted on 08.12.2018 by the Additional Commissioner of Income Tax. The approval letter was a single communication granting approval for multiple assessment years from AY 2013-14 to AY 2016-17 in respect of several assessees, issued the day after the requisition was received. The letter merely stated that approval was accorded with a direction to ensure orders were passed before limitation, without any reference to examination of assessment records, seized material, or any objective reasoning. The Tribunal found that the approval was granted in a mechanical manner without any application of mind, which is a statutory requirement. The Tribunal further noted the practical impossibility of the Additional Commissioner having perused and appraised all relevant records for multiple assessees and years within such a short timeframe. The Tribunal also considered the affidavits filed by the Revenue from the Assessing Officer and Range Head, which asserted that mind was applied. However, the Tribunal held that these affidavits could not substitute for the absence of any objective indication in the approval letter itself and the circumstances under which it was granted. The approval must reflect a quasi-judicial exercise of power, and a mere formality or rubber-stamping would defeat the legislative intent behind section 153D. In applying the law to the facts, the Tribunal concluded that the approval under section 153D was invalid because it was granted mechanically, without application of mind, and in a manner inconsistent with the statutory mandate that approval be given separately for each assessment year and each assessee. The Tribunal relied heavily on the precedent set by the Delhi High Court in PCIT vs. Shiv Kumar Nayyar, which held that approval granted mechanically for multiple cases on the same day was invalid and that the approving authority must apply mind to each case individually. The Tribunal also addressed competing arguments raised by the Revenue, who contended that the affidavits demonstrated due application of mind. The Tribunal rejected this contention on the ground that statutory approval must be evidenced by the approval document itself and the process followed, not merely by after-the-fact affidavits. The Tribunal emphasized that the statutory obligation is mandatory and requires a judicious exercise of power, which was absent in the present case. Consequently, the Tribunal held that the assessment orders passed under section 153A read with section 143(3) of the Act, in consequence of such invalid approval, were void ab initio and liable to be quashed. The Tribunal allowed the ground raised by the assessee challenging the validity of the approval and quashed the assessment for AY 2013-14. The Tribunal further extended this reasoning to the other 11 appeals involving similar facts and legal grounds, allowing them on the same basis. The Revenue's appeal was dismissed as infructuous in light of the decisions in favor of the assessee. Significant holdings of the Tribunal include the following verbatim excerpt from the judgment, encapsulating the core principle: "Whenever any statutory obligation is cast upon any authority, such authority is legally required to discharge the obligation by application of mind. The approval of Additional CIT should reflect application of mind, which is absent in this case. The requirement of approval cannot be treated as mere formality and the mandate of the Act is that the Approving Authority has to act in a judicious manner by due application of mind in a manner of a quasi judicial authority. It is settled law that if the approval has been granted by the approving authority in a mechanical manner, the very purpose of obtaining approval u/s. 153D of the Act and the mandate of the enactment by the legislature will be defeated." Another key principle established is that approval under section 153D must be granted separately for each assessment year and each assessee, as underscored by the Tribunal's reliance on the Delhi High Court's decision: "A plain reading of the provision of section 153D evinces an uncontrived position of law that the approval under section 153D has to be granted for each assessment year referred to in clause (b) of sub-section (1) of section 153A... The authority granting approval has to apply its mind for 'each assessment year' for 'each assessee' separately." In conclusion, the Tribunal's final determinations on the issues were:
Accordingly, the Tribunal quashed the assessments for the relevant years and allowed the appeals of the assessees, while dismissing the Revenue's appeal as infructuous.
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