15 May 2024 RTI – Right to Information >> Miscellaneous   |   Income Tax >> Tax Laws  

In a significant legal development, the Bombay High Court recently ruled on a crucial tax assessment case, affirming the decision of the Income Tax Appellate Tribunal (ITAT) regarding the validity of an assessment order under the Income Tax Act, 1961. The case pertained to the approval process mandated under Section 153D of the Act, which requires prior approval for assessment orders issued under Section 153A.

Facts:

The case originated from a search and seizure operation conducted by the Income Tax Investigation Wing on 18th November 2016 at various premises associated with the Nayyar Group, including the residential premises of the assessee. Subsequently, an order under Section 127 was issued, centralizing the assessee's case. Following this, a notice under Section 153A was served on the assessee on 22nd September 2017.

The assessee filed their Income Tax Return on 14th August 2018, declaring an income of ?18,48,450/-. This led to a scrutiny assessment, and eventually, an assessment order was passed on 30th December 2018 under Section 153A read with Section 143(3), determining the total taxable income at ?5,19,85,970/-. The assessee appealed against certain additions made by the Assessing Officer (AO), and the Commissioner of Income Tax (Appeals) partly allowed the appeal.

Proceedings before ITAT:

The Revenue, dissatisfied with the CIT(A)'s decision, appealed to the ITAT, challenging the legality of the assessment order primarily on the grounds of improper approval under Section 153D of the Act. The ITAT scrutinized the approval process and concluded that the approval granted by the relevant authority lacked independent application of mind, rendering the entire assessment invalid.

Conclusion:

The appeal reached the Bombay High Court, where the core issue revolved around the interpretation and application of Section 153D of the Income Tax Act, 1961. The High Court carefully analysed the provisions and judicial precedents related to the requirement of prior approval for assessment orders under Section 153A. In its ruling, the High Court upheld the ITAT's decision, dismissing the Revenue's appeal. The Court concurred with the ITAT's finding that the approval under Section 153D was indeed granted in a mechanical manner, without the necessary independent application of mind by the approving authority. This lack of substantive review and approval process undermined the procedural integrity mandated by the Act.

  Income Tax Act, 1961    Right to Information Act, 2005