ACIT Vs Splendor Landbase Ltd. (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi, delivered a significant verdict, quashing the assessment orders issued against Splendor Landbase Ltd. and its director, Hridey Vikram Bhatia, by the Assistant Commissioner of Income Tax (ACIT), Central Circle-3, New Delhi. These appeals, filed by the Revenue against the orders of the Commissioner of Income-tax (Appeals) [CIT(A)], pertained to assessment years following a search and seizure operation conducted on the Splendor Group on March 22, 2013. The ITAT’s decision rested on the grounds that the mandatory statutory approval under Section 153D of the Income Tax Act, 1961, was granted in a mechanical manner without proper application of mind.
The primary contention raised by the respondents was that the Joint Commissioner of Income Tax (JCIT) had granted approval for the assessment orders for multiple assessment years and multiple assessees within the Splendor Group on the same day, through common letters. It was argued that only draft assessment orders were forwarded to the JCIT, without the complete assessment or search records, indicating a lack of thorough review. The approval letters themselves merely stated that the “following draft assessment orders are being approved,” lacking any indication of independent consideration of the facts and materials for each assessment year and each assessee separately, as mandated by Section 153D.
The ITAT, after considering the arguments and the evidence on record, including the approval letters, sided with the assessees. The Tribunal emphasized that the approval under Section 153D is not a mere formality but requires the approving authority to apply an independent and judicious mind after considering the relevant records for each specific case and assessment year. Reliance was placed on recent judgments of the Delhi High Court in PCIT vs. Sapna Gupta, PCIT vs. Shiv Kumar Nayyar, and PCIT vs. Anuj Bansal, which have consistently held that mechanical approvals without demonstrable application of mind render the subsequent assessments invalid. The ITAT also noted the dismissal of the Revenue’s appeal by the Supreme Court in ACIT, Circle-1 (2) Vs. Sera Judd in and Co., which upheld the quashing of an assessment order due to inadequate procedure in issuing Section 153D approval.
The Tribunal found that the common and simultaneous approvals for multiple assessment years and assessees, coupled with the lack of any indication of a detailed review in the approval letters, strongly suggested a mechanical exercise of power by the JCIT. Furthermore, the fact that draft assessment orders were approved on the same day they were sought, without evidence of the JCIT having access to the complete records, reinforced this conclusion. The ITAT dismissed the Revenue’s attempts to retrospectively justify the approval through letters from the then JCIT and AO, noting that the JCIT’s letter indicated a misunderstanding of the legal requirement for the approval to be a self-contained piece of evidence demonstrating due application of mind. Consequently, the ITAT quashed the assessment orders against both Splendor Landbase Ltd. and its director, and allowed the cross-objections filed by the assessees.
FULL TEXT OF THE ORDER OF ITAT DELHI
