The Allahabad High Court (HC) has held that assessment under section 153 A of the Income Tax Act is invalid in absence of independent application of mind by JCIT before granting Approval.
The Department-Revenue challenged the order dated 7.10.2021 passed by the Income Tax Appellate Tribunal, Lucknow Bench ‘A’, Lucknow whereby the appeals filed by the assessee have been allowed to quash the assessment orders and the consequent orders of CIT (A).
Under a search and seizure operation under Section 132 of the Income Tax Act conducted on 31.8.2015, Siddarth Gupta, the assessee was required to file Income Tax returns under Section 153A of the Income Tax Act. The assessee filed returns under Section 153A of the Act for the aforesaid assessment years which were originally e-filed on Form ITR-2. The assessments were completed under Section 153A/143(3) of the Act by C.I.T. and various additions were made.
It was submitted by the assessee that in search cases, the Assessing Officer before passing the assessment order, framed under Section 153A, 153C and 143(3), is required to take approval from the Joint C.I.T. under Section 153D of the Income Tax Act.
If the Assessing Officer is below the rank of Joint C.I.T. For approval, the Approving Authority is required to see all search material including incriminating material, seized documents, appraisal reports, enquiries made by the investigation wing and various enquiries made by the Assessing Officer during the assessment proceedings.
The Assessing Officer prepared the draft assessment orders on 31.12.2017 for the assessment year 2015-16 and 2016-17 and on 30.12.2017 for the assessment year 2013-14where the approval was given only on 31.12.2017 itself and the final assessment order was passed on the same dayby the Assessing Officer.
The Tribunal observed that it was humanly impossible for the Approving Authority to peruse the material based on which, the draft assessment orders were passed. It was, thus, concluded that the Approving Authority approved under Section 153D of the Income Tax Act in a mechanical manner which vitiated the entire proceedings.
The Tribunal ignored the findings recorded by the Assessing Officer and set aside the assessment orders on the sole ground of defect in the approval of the draft assessment orders granted by the competent Approving Authority.
The approval of a draft assessment order being an in-built protection against any arbitrary or unjust exercise of power by the Assessing Officer, cannot be said to be a mechanical exercise, without the application of independent mind by the Approving Authority on the material placed before it and the reasoning given in the assessment order.
Justice Sunita Agarwal and Justice Chandra Kumar Rai observed that the draft assessment orders in 123 cases, i.e. for 123 assessment years placed before the Approving Authority on 30.12.2017 and 31.12.2017 were approved on 31.12.2017, which was humanly impossible to go through the records of 123 cases in one day to apply independent mind to appraise the material before the Approving Authority.
The conclusion drawn by the Tribunal that it was a mechanical exercise of power cannot be said to be perverse or contrary to the material on record. While dismissing the appeal, the Court upheld the order passed by the ITAT. The appellant was represented by Gaurav Mahajan and the respondent was represented by Ashish Bansal.
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