Aashiyana Buildmart Pvt. Ltd. Vs DCIT (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal, in Aashiyana Buildmart Pvt. Ltd. Vs DCIT, allowed the assessee’s appeal for Assessment Year 2014-15 and quashed the assessment order on the ground that the mandatory approval under Section 153D of the Income Tax Act, 1961 had been granted mechanically without independent application of mind. The Tribunal held that approval granted for 110 assessment orders in a single day, without any indication that the draft assessment orders were individually examined, could not constitute valid statutory approval.
The assessee challenged the order dated 12.07.2018 passed by CIT(A)-IV, Kanpur, arising from the assessment order dated 30.12.2017 passed by DCIT, Central Circle, Noida. The proceedings originated from a search and seizure operation conducted under Section 132 on 30.09.2015 in the Airwil Group of cases, during which documents belonging to the assessee were found and seized. Following issuance of notice under Section 153A, the Assessing Officer completed the assessment by making an addition, which was subsequently confirmed by the First Appellate Authority.
The appeal before the Tribunal was filed beyond the prescribed limitation period. The assessee explained that the department had seized its bank accounts for recovery of outstanding demands, while substantial losses in its projects, financial difficulties and interruption of a project at Greater Noida by the mining department had prevented it from arranging the appeal filing fees. Considering these circumstances and the submissions of counsel, the Tribunal found sufficient cause and condoned the delay.
The assessee also raised an additional legal ground challenging the validity of approval under Section 153D. It contended that approval was required to be granted separately for each assessment year and that a common, mechanical approval was legally unsustainable. Relying upon the Supreme Court decision in National Thermal Power Company Ltd. Vs CIT, reported in 229 ITR 383 (SC), the Tribunal admitted the additional ground because it went to the root of the assessment proceedings and arose from facts already available on record.
Cases Discussed
- National Thermal Power Company Ltd. Vs CIT, 229 ITR 383 (SC) — Relied upon for admitting the additional legal ground challenging Section 153D approval, as the issue arose from facts already on record.
- PCIT Vs Shiv Kumar Nayyar (Delhi High Court) — Relied upon for the principle that mechanical approval covering numerous assessment orders, without demonstrated independent application of mind, cannot sustain the resulting assessments.
FULL TEXT OF THE ORDER OF ITAT DELHI
The instant appeal filed by the assessee is directed against the order dated 12.07.2018 passed by the CIT(A)-IV, Kanpur, underSection 153Ar.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 30.12.2017 passed by the Ld. DCIT, Central Circle, Noidafor Assessment Year 2014-15.
2. The appeal is barred by limitation and therefore, the assessee has filed an application for condonation of delay in preferring the appeal before us wherein it appears that consequential to the Assessment Order passed by the DCIT, all bank accounts were seized by the department for recovery of outstanding demands due. Apart from that the projects suffered huge losses. Due to shortage of funds in running the projects including one of the project site stopped by the mining department at Greater Noida for which substantial time was deputed in releasing the said site and due to that financial crunch and blockage of bank accounts of all major companies and key managerial personnel, the assessee was unable to arrange funds to deposit fees for filing the appeals before us and hence the delay. The above statement has also been reiterated before us by the Ld. Counsel appearing for the assessee which seems to be true and sufficient to grant relief in condoning the delay in preferring the appeal filed by the assessee before us. Hence, the delay is condoned.
3. The assessee before us has challenged the impugned order on few grounds including the additional grounds challenging the validity of the approval taken under Section 153D of the Act as the same has been obtained in a mechanical manner. According to the assessee the approval under Section 153D of the Act has to be separate in each Assessment Year and the same cannot be a common approval. Since, this additional ground goes to the root of the matter which clearly appears from the proceeding before the lower authorities with complete facts on records relying on the judgment passed by the Hon’ble Apex Court in the case of National Thermal Power Company Ltd. Vs. CIT, reported into 229 ITR 383 (SC) this additional ground is admitted.
4. The brief facts of the matter are that a search and seizure operation under Section 132 of the Act was conducted on 30.09.2015 in Airwil Group of Cases wherein certain documents were found and seized belonged to the assessee. Notice underSection 153Aof the Act was issued and the issue was finalized upon making addition which was further confirmed by the First Appellate Authority and thus impugned before us.
5. At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee submitted before us that the approval was done along with 110 in a single day on 29.12.2017 and it was communicated on the same date, details whereof has been submitted before us. Needless to mention that the Ld. D.R has failed to controvert the said document which clearly establishes the fact of granting approval of 110 cases at a time. Nowhere of the said documentsspeaks about draft assessment orders were perused/verified/examined or that there was any independent application of mind by the approving authority. If that view of the matter, the approval of the draft assessment order is invalid and non-nest in the eye of law. The final assessment on the basis of invalid approval is, therefore, liable to be quashed as the crux of the arguments advanced by the Ld. A.R. In this regard, he has further relied upon by the Hon’ble Delhi High Court in the case of PCIT vs. Shiv Kumar Nayyar. The relevant observation made by the Hon’ble Delhi High Court is as follows:
“17. Notably, the order of approval dated 20.12.2020 which was produced before us by the Learned Counsel for the assessee clearly signifies that a single approval has been granted for AYs. 2011-12 to 2017-18 in the case of the assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind. Also, w cannot lose sight of the fact that in the instant case, the concerned authority has granted approval for 43 cases in a single day which is evident from the findings of the ITAT, succinctly encapsulated in the order extracted above.
18. Therefore, under the facts of the present case, considering the foregoing discussion and the enunciation of law settled through judicial pronouncements discussed hereinabove, we are unable to find any substantial question of law which would merit our consideration.”
6. Keeping in view, the facts of the matter as narrated in the judgment passed by the Hon’ble Delhi High Court, we find no mentioning of perusal of the draft assessment order by the concerned authority and no separate application of mind in the instant case in hand while granting approval altogether 110 assessment orders in a single day the same is nothing but the product of total non-application of mind and therefore, relying on the ratio laid down by the Hon’ble Delhi High Court, we do not hesitate to find the same arbitrary, erroneous and thus, liable to be treated as non-est in the eye of law. The Assessment Order passed on the basis of such approval is therefore, found to be without any basis and thus, quashed.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06.09.2024
