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Facts
A search and seizure operation was conducted on 11.11.2014 on the Apple Group of Companies, which included the assessee, Zync Global Pvt. Ltd. Information related to the assessee was retrieved from an employee's computer. The central dispute concerned the validity of the approval granted by the JCIT under section 153D of the Income Tax Act for passing assessment orders, which the assessee challenged as being mechanical and without proper application of mind.
Held
The Tribunal found that the approval granted by the JCIT under section 153D was given in a mechanical manner, without proper application of mind, as evidenced by a remark indicating insufficient time for examination. Following precedents in similar group cases, the Tribunal held that such a 'hollow and cosmetic' approval renders the assessment orders unenforceable in law and therefore quashed them. Consequently, the assessee's cross-objections were allowed, the revenue's appeals were dismissed, and the additional ground raised by the assessee was allowed.
Key Issues
1. Whether the approval granted by the JCIT under Section 153D for assessment orders was validly accorded with due application of mind. 2. Whether assessment orders passed pursuant to a mechanical or 'hollow and cosmetic' approval under Section 153D are enforceable in law.
Sections Cited
153D, 153A, 153C, 143(3), 271(1)(c), 271AAB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. N. K. BILLAIYA & SH. YOGESH KUMAR U.S.
PER N. K. BILLAIYA, AM: and 4457/Del/2019 and cross objection No.55/Del/2022 and 56/Del/2022 are appeals and cross objections by the revenue and the assessee preferred against the order of the CIT(A)-4, Kanpur dated 26.02.2019 pertaining A.Y. 2013-14 and 2014-15.
CIT(A)-4, Kanpur dated 10.10.2018 pertaining to A.Y.2015-16.
Since common issues are involved in the captioned appeals they were heard together and are disposed of by this common order for the sake of convenience and brevity.
The cross objection and the appeal by the assessee go to the root of the matter, therefore, we decided to adjudicate them first. The common challenge by the assessee is that the assessment order passed by the AO is contrary to the provisions of section 153D of the Act.
Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of rule 18 (6) of the ITAT Rules.
Briefly stated the facts of the case are that a search and seizure / survey action has been conducted at various residential and business premises of Apple Group of Companies on 11.11.2014. Assessee is one of the group company which deals in trading various electronic and other products and also trading of fabric and others including online platform.
During the course of search at the business premises of M/s. Apple Industries Limited, M/s. Nirman Private Limited, M/s. M.G. Mettaloy Private Limited and M/s. Promart Retail India Pvt. Ltd. certain information belonging to the assessee were retrieved from the HD’s / Pendrives/ DVD’s particularly from the hard disc of the computer of Amit Chaudhary an employee of the concerns.
The entire quarrel revolves around the approval granted by the JCIT, Central Range, Meerut u/s. 153D of the Act which is as under :-
It can be seen from the above 18 cases were approved u/s. 153D of the Act and what is glaring is the stamp put wherein it has been stated “ Draft assessment order received late on 30.12.2016 beyond the time and thus having very little time for proper examination of the facts of the case records etc”.
This approval clearly shows the haste and the mechanical manner there being no application of mind on the part of the approving authority.
On identical set of facts on the very same approval exhibited elsewhere this Tribunal in one of the group cases of M.G. Metalloy Private Limited in held the assessment order illegal in pursuance of hollow and cosmetic approved u/s. 153D. The relevant findings read as under :-
“10. In nutshell, the approval under S: 153D is repugnant for more than one reasons;
(i) the approval accorded under Section 1530 is admittedly without any occasion to refer to the assessment records and seized materials, if any, incriminating the assessee and hence such approval is in the realm of an abstract approval of draft assessment orders and consequently suffered from total non-application of mind.
(ii) approval granted hurriedly in a spur involving voluminous assessments spanning over 5 assessment years admittedly a symbolic exercise to meet the requirement of law. The JCIT himself has made such fact abundantly clear without any demur.
(iii) The red flag raised by JCIT and unambiguous assertions of the JCIT himself that the approval granted is in the nature of "technical approval and he is having very little time at his disposal for proper examination of facts of the case or for related enquiries says it all and has brought quietus to any different possibility or interpretation. The approving authority himself has thus discredited its own approval.
(iv) abject failure in drawing satisfaction on objective material while giving a combined approval for 5 assessments and also without evaluating the nuances of each assessment year involved. The combined approval of several assessee combinedly for multiple assessment years runs contrary to the Judgment of the Hon'ble Allahabad High Court in the case of PCIT vs. Sapna Gupta judgment dated 12 12-2022 Income Tax appeal no. 88 of 2022. The Hon'ble High Court inter alia observed that the compliance of S. 153D qua each assessee and for each assessment year is expected.
(v) The mundane approval under Section 153D in a cosmetic manner gives infallible impression of approval on dotted line and without discharging the onus placed on competent authority thus defeats the intrinsic purpose of supervision of search assessments. Such hawkish approval has thus tarred the assessment and rendered it bad in law. xxxx
12. The identical issue has been favourably adjudicated in assessee's own case in ITA 3306/Del./2018 order dated 23-08-
2021 concerning other AY 2015-16 where co-ordinate bench found total lack of propriety in such statutory approval. There are plethora of decisions of various co-ordinate benches including Sanjay Duggal & ors (ITA 1813/Del/2019 & ors; order dated 19.01.2021 which have also echoed the same view on similar fact situation.
13. The CIT(A) in para 7 of first appellate order has brushed aside the legal objection summarily merely on an inept & indifferent premise that the assessment order makes mention of the approval from JCIT under 153D of the Act. The cryptic conclusion drawn by the CIT(A) is bereft of any reasons whatsoever and thus cannot be reckoned to be a judicial finding on the point. The observations so made are not tenable in law.
In the light of foregoing discussions, We are unhesitatingly disposed to hold that the assessment order for AY 2014-15 in question, in pursuance of a hollow & cosmetic approval accorded under S. 153D and unndeniably without application of mind, is rendered unenforceable in law and hence quashed.”
Similar view was taken in another group case Ruchi Garg in to 1438/Del/2022 and 1440/Del/2022 and Cross Objection No.41 to 43 and 45/Del/2023 wherein the coordinate Bench followed the decision of this Tribunal in the case of M.G. Metalloys in ITA No.3693/Del/2018.
Since in the group cases which are part of the same approval mentioned here in above the coordinate Bench has categorically held that the approval accorded is without application of mind and further held it to be un-enforceable in law and quashed. Respectfully following the decision of the coordinate Bench (supra) we hold accordingly. The cross objections No. 55 and 56 /Del/2022 are allowed the corresponding appeals by the revenue in and 4457/Del/2019 are dismissed and the additional ground raised by the assessee in is allowed.