Consolidated Approval u/s 153D for Multiple Taxpayers and Years in a Mechanical Manner: ITAT Invalidates Search Assessment [Read Order]
The tribunal held that the Additional Commissioner of Income Tax had granted a "rubber-stamp" approval for ten different persons and entities.
The Guwahati Bench of the Income Tax AppellateTribunal (ITAT) quashed search assessments and held that providing consolidated approval for multiple taxpayers and years in a mechanical manner is legally unsustainable and vitiates the entire search assessment.
Karan Jain was one of the appellant-assesses on whom a search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted on the CMG and SM groups. These included the residential premises of Reshmi Jain, Karishma Jain, and Karan Jain, between June and August 2016. During the search, incriminating documents and cash were seized.
Following the search, notices under Section153A were issued, and the assessees filed returns. The Assessing Officer (AO) framed assessments, making additions, including ₹37 lakhs on account of alleged bogus long-term capital gains.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the assessments. Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT.
The assessee contended that the Additional Commissioner of Income Tax (Addl. CIT) granted approval for ten different entities together in a mechanical manner.
The assessee further argued that Section 153D requires the approving authority to apply an independent mind to the specific material of each case and each year, which is impossible in a consolidated, same-day approval.
The Department argued that the approval was valid because the Addl. CIT had been associated with the assessment proceedings from the beginning and was regularly updated on their progress. The department submitted that the final approval was granted after reviewing the draft orders.
The two-member bench, comprising Rajesh Kumar (Accountant Member) and Manomohan Das (Judicial Member) observed that the Addl. CIT issued a single letter of approval for ten individuals and entities across seven assessment years each.
The bench held that such a "ritualistic formality" or "rubber stamping" fails the legal standard, as it is humanly impossible to judiciously appraise the records of so many cases simultaneously. It also observed that section 153D explicitly requires approval "in respect of each assessment year".
It was concluded that the consolidated approval was invalid and granted in a mechanical manner and held that valid approval under Section 153D is a mandatory prerequisite for passing a search assessment, the underlying assessment orders were quashed. The appeals of the assessees were allowed.Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
