Statutory Authority Must Not Grant Approval U/s 153D Mechanically: Delhi ITAT Criticizes On Unjust Exercise Of Discretion By AO

The ITAT also clarified that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind.

The Division Bench of Yogesh Kumar U.S (Judicial Member) and Pradip Kumar Kedia (Accountant Member) and observed that the approval granted u/s 153D in a consolidated manner for several assessment years for which voluminous assessment orders were prepared, apparently appears to be illusory to merely meet the requirement of law as an empty formality.

Facts of the case:

The assessee filed its return declaring income at Rs. 26,61,930/- which was processed u/s 143(1). Later, search operation was carried out in Goenka Group of cases, wherein documents & digital data belonging to assessee were found and seized. Consequently, the case of assessee was centralized u/s 127 and the assessment was completed at Rs. 50,27,095/-. On appeal, the CIT(A) confirmed the addition of Rs. 15,19,998/- made on account of seized jewellery treating the same as unexplained investment and deleted the addition of Rs. 2,39,757/- made by the AO on account of cash seized during the search operation.

Observations of the Tribunal:

The Bench noted that the AO had sent the letter for approval to Additional CIT, who had granted the approval u/s 153D for 178 cases of 29 Assessees in a single approval letter.

From a bare glance at the approval accorded by the Additional CIT, the Bench found that such approval is generic and had been accorded in a blanket manner without any reference to any issue in respect of any of the 178 cases of 29 Assessees including the present Assessee.

Thus, the Bench stated that the approval granted on a dotted line without any availability of reasonable time shows non application of mind by the Additional CIT who has granted the approval in a consolidated manner for several assessment years for which voluminous assessment orders were prepared.

The whole sequence of action apparently appears to be illusory to merely meet the requirement of law as an empty formality, added the Bench.

From a plain reading of approval memo, the Bench found that various assessment orders and the issues incorporated in the assessment orders, were never subjected to any discussion with the authority granting approval

Referring to the CBDT Circular No. 3 of 2008, the Bench elaborated that the legislature in its highest wisdom had made it obligatory that the assessments of search cases should be made with the prior approval of superior authority, so that the superior authority apply their mind on the materials and other attending circumstances on the basis of which the Assessing officer is making the assessment and after due application of mind and on the basis of seized materials, the superior authority is required to accord approval of the respective Assessment order.

Solemn object of entrusting the duty of Approval of assessment in search case is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment, added the Bench.

The Bench further observed that the approvals so granted under the shelter of section 153D does not pass the test of legitimacy.

Thus, opining that the Assessment order in consequence to such inexplicable approval lacks legitimacy, the ITAT quashed the assessment and allowed Assessee's appeal.

Counsel for Appellant/ Assessee: Amit Goel

Counsel for Respondent/ Revenue: Subhra Jyoti Chakraborty

Case Title: Mysore Bhaskara Pankaja verses ACIT

Case Number: ITA No. 3823/DEL/2023

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