Proper Procedure and Application of Mind shall be made while granting Approval u/s 153D of Income Tax Act: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) while granting relief to the assessee held that proper procedure and application of mind shall be made while granting approval under Section 153D of the Income Tax Act, 1961.

Shri Mukesh Surajprakash Gupta, residing at 101, Shiv Darshan Apartments, Chandanwadi, Thane was in possession of huge cash. The information was given to the Income-tax Department. A search action under Section 132 of the Income Tax Act, 1961 was conducted at the residence of Shri Mukesh Gupta, where cash to the tune of ₹.4,66,73,200/- was found.

During questioning it was found that the cash lying at his residence had been given to him by Shri Premchand Ashok Kamble who is the Proprietor of 'Unique Finance' and he was an employee of 'Unique Finance. Shri Mukesh Gupta's nature of duties includes looking after the cash and bank transactions of Unique Finance under the instructions of Shri Premchand Kamble.

A survey was initiated at the office of Unique Finance and later was converted into search action under Section 132 of the Income Tax Act. Cash to the tune of ₹.45,15,615/- was found at the office of M/s Unique Finance. None of the employees could satisfactorily explain about the cash and hence an amount of ₹.43,00,000/- was seized.

During the course of survey operations incriminating documents, diaries, CDs, etc. were found and seized. Cash of ₹.4.65 crores was seized from the residential premises of Mr. Mukesh Gupta. a special audit under Section 142(2A) of the Income Tax Act was proposed in order to arrive at the correct book results and the profit of the assessee.

The Assessing Officer proceeded to complete the assessment based on the material available on record and a special audit report under Section 142(2A) of the Income Tax Act. The Commissioner of Income Tax (Appeal) [CIT(A)] deleted the additions made on the protective basis and the rest of the additions were confirmed by him.

The Authorized Representative of the assessee heavily argued on the technical grounds, whether the approval obtained by the Assessing Officer under Section 153D of the Income Tax Act is proper and whether approval granted by the Additional Commissioner of Income Tax (ACIT) is as per provisions of Section 153D of the Income Tax Act. The Two-member bench comprising of Kuldip Singh (Judicial member) and S. Rifaur Rahman (Accountant member) held that the approval process should indicate that proper procedure and the officer has applied his mind as per the procedures laid down by the legislature and as per the provisions. Therefore, the assessment made under Section 144 read with Section 143(3)/153C of the Income Tax Act is also bad in law. Therefore, the additional ground raised by the assessee was allowed.

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