The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) set aside an assessment order that was passed without the application of mind. The order was quashed as it was contrary to Section 153 of the Income Tax Act observing that the mechanical approval of superior authority for income tax search defeats the purpose of Section 153D of the Act.
The tribunal stated that approval given under Section 153D of the Act must necessarily demonstrate a reasonable application of mind, and if it is to be scrutinized by the courts, it must be able to stand on its own and defend itself.
The assessee, Mysore Bhaskara Pankaja, had filed an income return, declaring income of Rs. 26,61,930, which was processed in accordance with Section 143(1) of the Income Tax Act,1961. On July 26, 2017, a search and seizure operation was conducted in the Goenka Group of cases under Section 132 of the taxing statute. The assessment was concluded by computing the assessee’s income to be Rs. 50,27,095/-.
The assessee who was aggrieved by the assessment order preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) affirmed the addition of Rs. 15,19,998/- made due to seized jewelry as an unexplained investment and deleted the addition of Rs. 2,39,757/- made by the Assessing Officer (A.O.). Being aggrieved by the CIT(A) order, the assessee preferred an appeal to ITAT.
The assessee being represented by Amit Goel contended that, with reference to the facts of the case and in law, the assessment order passed by the Income Tax AO is liable to be quashed because it is contrary to provisions of Section 153D of the Act.
On December 28, 2019, the Assessing Officer sent the letter of approval to the Additional Commissioner of Income Tax (ACIT). The ACIT then approved the 178 requests under Section 153D of the Act by a single acceptance letter containing the instances of 29 assessees.
The bench observed that a bare glance at the approval made by the ACIT makes it clear that such approval is generic and is accorded in a blanket manner without any reference to any issue in respect of any of the 178 cases of 29 assessees, including that of the assessee’s.
Several assessment year’s approvals have been consolidated, for which voluminous assessment orders were prepared. The bench was of the opinion that the entire course of proceedings seems to be fictitious, just carried out in order to satisfy legal requirements as a meaningless formality. When a statutory obligation is cast upon any statutory authority, it should not be mechanical and is required to discharge its obligation with the application of mind.
The bench also considered the case ofACIT v. Serajuddin and Co. , in which the Supreme Court upheld the order by the High Court of Orissa, which had quashed the Income Tax Assessment Order on the ground of inadequacy in the procedure adopted for issuing approval under Section 153D of the Income Tax Statute by expressing discontent with such mechanical exercise of responsibility given to a statutory authority under Section 153D of the Act.
The two-member ITAT bench, comprising Pradeep Kumar Kedia and Yogesh Kumar US, held that the approvals granted under Section 153 of the Income Tax law do not pass the test of legitimacy. The impugned assessment is non-est and a nullity and has been quashed by the bench. Thus, the appeal filed by the assessee was allowed.
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