Allahabad HC Quashes Assessment Due to Mechanical Section 153D Approval

PCIT Vs Subodh Agarwal (Allahabad High Court)

The Allahabad High Court dismissed the Revenue’s appeal filed under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT), Lucknow Bench, which had quashed the assessment order and the consequential order of the Commissioner of Income Tax (Appeals) for Assessment Year 2015-16.

The case arose from a search and seizure operation conducted under Section 132 of the Income-tax Act on 31.08.2015. Pursuant to the search, the assessee filed a return in response to a notice under Section 153A. The assessment was completed under Sections 153A/143(3) on 31.12.2017 with various additions.

The assessee contended that before passing an assessment under Sections 153A or 153C, an Assessing Officer below the rank of Joint Commissioner is required to obtain prior approval under Section 153D from the Joint Commissioner. According to the assessee, the approving authority must examine the seized material, appraisal reports, enquiries conducted during assessment proceedings, and the assessee’s replies before granting approval to the draft assessment order.

In the present case, the draft assessment order, the approval under Section 153D, and the final assessment order were all completed on 31.12.2017. The approval letter showed that the Additional Commissioner granted approval in 38 cases on the same day, including the assessee’s case. The ITAT concluded that it was humanly impossible for the approving authority to properly examine the records in all those cases within a single day and held that the approval had been granted mechanically, thereby vitiating the assessment proceedings. The Tribunal relied upon its earlier decision in Navin Jain & Others Vs. Deputy C.I.T., Central Circle-II, Kanpur.