Sections 153A, 153D – If the approval granted by the Additional Commissioner is devoid of application of mind, mechanical and without considering the materials on record, such an approval renders the assessment order void.
Facts:
In the search carried out on Simplex group of companies and its associates, the office/residential premises of the company and its directors/connected persons were covered. On the basis of incriminating documents/books of account found during the course of search, assessment was completed u/s. 143(3) r.w.s. 153A of the Act. As per endorsement on page 11 of the assessment order, the assessment order was passed with the prior approval of the Addl. CIT, Central Range-7, Mumbai.
Aggrieved by the additions made, the assessee preferred an appeal to the CIT(A).
Aggrieved, by the order passed by CIT(A), the assessee preferred an appeal to the Tribunal.
In the Tribunal, the assessee preferred an application to raise additional ground viz., that the A.O. has not complied with the provisions of section 153D and hence the assessment u/s. 153A was bad in law.
Held:
The Legislative intent is clear inasmuch as prior to the insertion of section 153D, there was no provision for taking approval in cases of assessment and reassessment in cases where search has been conducted. Thus, the legislature wanted the assessments/reassessments of search and seizure cases should be made with the prior approval of superior authorities which also means that the superior authorities should apply their minds on the materials on the basis of which the officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authorities have to approve the assessment order.
The Tribunal noted that the Addl. CIT had granted approval vide his letter dated 31.12.2010 where he mentioned that as per his letter dated 20.12.2010, the AOs were asked to submit the draft orders for approval u/s. 153D on or before 24.12.2010. He had also mentioned that since the draft order in the case of the assessee was submitted on 31.12.2010, there was not much time left for him to analyse the issues of draft order on merit. Therefore, he approved the draft order as it was submitted.
Having noted the language of the approval, it came to a conclusion that the language of the approval letter established that there has been no application of mind by the Addl. CIT. It held that the approval granted is devoid of any application of mind, is mechanical and without considering the materials on record. It held that in its opinion the power vested in the Joint Commissioner to grant or not to grant approval is coupled with a duty. The Addl CIT is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner.
The Tribunal held the assessment order under consideration to be bad in law and annulled it.
The appeal filed by the assessee was allowed.
