PCIT Vs Subodh Agarwal (Allahabad High Court)
The Allahabad High Court dismissed the Income Tax Department’s appeal against the decision of the Income Tax Appellate Tribunal (ITAT) in the case of PCIT Vs Subodh Agarwal. The dispute pertained to the 2015-16 assessment year, following a search and seizure operation under Section 132 of the Income Tax Act, 1961. The Assessing Officer (AO) had passed an assessment order under Sections 153A/143(3), making several additions. However, the ITAT quashed the assessment order, citing procedural lapses, particularly in the prior approval process under Section 153D, which requires a Joint Commissioner’s approval before finalizing such assessments. The Tribunal found that the approval was granted on the same day as the draft assessment order, covering 38 cases, making it impossible for the Approving Authority to conduct a proper review. This led to the conclusion that the approval process was merely mechanical, rendering the entire assessment invalid.
The Revenue argued that the approval under Section 153D was in place at the time of assessment and met legal requirements. Citing precedents, it contended that “approval” simply means confirmation or ratification by a higher authority. However, the Tribunal, relying on past rulings, emphasized that approval must involve due application of mind. The High Court upheld this view, stating that a mechanical exercise of power undermines procedural safeguards intended to protect both revenue interests and taxpayer rights. Given that no substantial question of law arose, the appeal was dismissed. The judgment reinforces the principle that prior approval under Section 153D is not a mere formality but a critical legal requirement ensuring fairness in search-based assessments.
