In a significant case, the Income Tax Appellate Tribunal ( ITAT ) of the New Delhi bench held that assessment or reassessment in a search-related case cannot be passed without proper approval of the competent authority and quashed the same. It was observed that the approval granted under section 153D of the Income Tax Act clearly indicates that the Approving Authority has neither examined the assessment records nor the seized materials.
The assessee is engaged in the business of chartered services, ground handling of international aircraft; to maintain, repair aircrafts etc. A search and seizure operation, carried out under Section 132 on the assessee, proceedings under section 153A were initiated against the assessee. In course of the assessment proceedings, assessee’s case was referred for Special Audit in terms of Section 142(2A). As observed by the AO, assessee did not comply with the queries raised by the AO as well as the Special Auditor. Thus, ultimately, assessment orders were passed under Section 153A r.w.s. 143(3) r.w.s 144.
The assessee filed a revision application under section 264. While disposing of the revision applications, CIT set aside the assessment orders with direction to the AO to complete them de novo after providing due and reasonable opportunity of being heard to the assessee. Assessment proceedings for the impugned assessment years were taken up again by the AO. However, he ultimately completed the assessments more or less, repeating the additions made in the original assessment orders.
Against the assessment orders so passed, assessee preferred appeals before First Appellate Authority on the ground that the assessment orders are invalid due to lack of proper approval under Section 153D. The First Appellate Authority, however, did not find any infirmity in the approval granted under Section 153D.
It was viewed that by plain reading of Section 153D that no order of assessment or reassessment in a search related case can be passed except with the prior approval of the Competent Authority.
The Bench found that the AO sent draft assessment orders in respect of six different assessees for various assessment years for approval of the Additional Commissioner in terms of section 153D, and on the very same day the Additional Commissioner has granted approval under section 153D.
Section 153D of the Income Tax Act, mandates that no order of assessment or reassessment shall be passed by an AO below the rank of Joint Commissioner without the prior approval of the Joint Commissioner or a higher-ranking officer.
The two-member Bench comprising of Saktijit Dey (Vice President) and Naveen Chandra (Accountant Member) observed that the approval granted under Section 153D of the Act clearly indicated that the Approving Authority has neither examined the assessment records nor the seized materials.
“It is further clear that on the very same day the letter of the Assessing Officer with draft assessment orders were received, approval under section 153D of the Act was granted by the Approving Authority. The aforesaid facts clearly reveal that the Approving Authority, while granting approval under section 153D of the Act has acted as a mere rubber stamp. The approval granted is completely mechanical without application of mind.” the bench held.
The ITAT allowed the assessee’s appeal.
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