Assessment Invalid On Account Of A Mechanical Non-Speaking Approval Under Section 153D: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that assessment invalid on account of a mechanical non-speaking approval under Section 153D of the Income Tax Act.

The bench of Kuldip Singh (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that the assessing officer has passed a draft assessment order making huge additions, and such huge additions were approved without there being any application of mind. The basis of the addition was also not shared with the assessee.

In the course of police action, it was found that Mukesh Surajprakash Gupta was in possession of huge amounts of cash. The information was given to the Income Tax Department. Consequent to this, a search action u/s 132 of the Income Tax Act, 1961, was conducted on August 22, 2007, at the residence of Mukesh Gupta.

During the course of the search, cash to the tune of Rs. 4,66,73,200 was found. When questioned about the source of the cash, Mukesh Gupta stated that the cash lying at his residence had been given to him by Premchand Ashok Kamble. Mukesh Gupta stated that Premchand Ashok Kamble is the proprietor of 'Unique Finance, and he was an employee of 'Unique Finance'. It was also stated by Shri Gupta that Shri Kamble was involved in various business activities, but the exact details of the business activities from which the cash had come were not known to him. The details of transactions and receipts for Unique Finance were being maintained on computers in the Tally Package.

It was also informed Mukesh Gupta that the office of Unique Finance is at 306, Anant Lakshmi Chambers, Opp. Waman Hari Pethe, Thane (W). It was stated by Mukesh Gupta that his nature of duties includes looking after the cash and bank transactions of Unique Finance under the instructions of Premchand Kamble.

A survey was immediately initiated at the office of Unique Finance and later converted into a search action. During the course of the search, Premchand Kamble was not present. None of the employees present at the premises could give any information, neither about his residential address nor about his whereabouts on the day of the search. Cash to the tune of Rs. 45,15,615 was found at the office of M/s Unique Finance. None of the employees could satisfactorily explain the cash, and hence an amount was seized.

The assessee was covered based on the search conducted in the case of Premchand Ashok Kamble. Since the assessee and her husband were dealing with M/s. Unique Finance Group's concerns, the case of the assessee was included under Section 153C. The assessment was completed based on the statement given by the assessee and the findings of the special audit conducted.

The return of income filed by the assessee declared a total income of Rs. 3,02,100. Subsequently, a notice was issued and served on the assessee. The case of the assessee was also covered under the special audit, and accordingly, the audit report was shared with the assessee. The notice was issued to the assessee and her authorised representative. Since there was no response from the assessee, the assessing officer proceeded to complete the assessment based on the material available on record and the special audit report.

The assessee contended that the Assessing Officer had passed a draft assessment order making huge additions, and such huge additions were approved without any application of mind.

The tribunal decided the issue in favour of the assessee, finding that approval granted under Section 153D was not as per law. The approval process should indicate that proper procedure has been followed and that the officer has applied his mind as per the procedures laid down by the legislature and as per the provisions. Therefore, the assessment made under Section 144, read with Sections 143(3) and 153C of the Income Tax Act, is also bad law.

Case Title: Vrushali Sanjay Shinde Versus DCIT

Case No.: ITA NO.198/MUM/2022(A.Y: 2008-09)

Date: 08.09.2023

Counsel For Appellant: Sankalp Malik

Counsel For Respondent: Shanti Subramanian

Click Here To Read The Order