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Facts
A search and seizure operation under section 132 of the Income Tax Act was conducted on the assessee's premises. During the assessment, additions were made by the Assessing Officer, and the CIT(A) dismissed the assessee's appeal. The assessee appealed to the Tribunal, raising a legal ground concerning the approval under section 153D of the Act.
Held
The Tribunal held that the approval granted by the Additional CIT under section 153D was mechanical and granted for multiple assessment years in a single order, without proper application of mind. This was found to be contrary to the judicial precedents and the High Court rulings which emphasize independent application of mind for each assessment year.
Key Issues
Whether the approval granted by the Additional CIT under section 153D of the Income Tax Act, 1961, for assessment orders in search and seizure cases, was mechanical and therefore vitiated the assessment orders.
Sections Cited
132, 153D, 153A, 119
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘C’: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI SUDHIR KUMAR
ORDER PER BENCH
The assessee has filed the captioned quantum Appeals relating to assessment years 2015-16 to 2018-19 against the common order and quantum appeal relating to assessment year 2019-20 is against the separate order, all dated 21.1.2025 passed by the Ld. CIT(A)-3, Gurgaon respectively. The assessee has also filed the penalty appeal being (AY 2019-20) against the order dated 22.1.2025 passed by the Ld. CIT(A)-3, Gurgaon.
1.1 At the time of hearing, Ms. Sunita Yonzone, Income Tax Officer, C-Bench, ITAT, New Delhi has filed the applications for adjournment in all the appeals due to the reasons that Ld. CIT(DR) is on casual leave on 11.3.2026 and 12.3.2026. After hearing both the sides and perusing the records, the Bench found no plausible reasons in the adjournment applications moved by the Revenue, hence, the adjournment request of the Department was rejected.
All the quantum appeals of the assessee are revolving around common ground and hence for the purposes of adjudication these appeals were heard together and are being disposed by this common order. The facts in (AY 2016-17) are being considered being the lead case. Since common identical legal issue involved in all the quantum appeals, the decision taken herein in assessment year 2016-17 will apply mutatis mutandis in remaining other quantum appeals relating to assessment years 2015-16, 2017- 18, 2018-19 & 2019-20 also.
Brief facts of the case as per assessment order are as under:-
“A search & seizure operation u/s 132 of the I.T. Act, 1961 was conducted on 30.07.2018 at the residential as well as office premises of Piyush Group of Cases including the assessee by virtue of the authorization of the Pr. Director of Income Tax(Investigation), Chandigarh under section 132(1) of the I.T.
Act. The case was centralized in this circle by the worthy Pr. Commissioner of Income Tax, Faridabad vide his office order F. No. Pr. CIT/Fbd/127/2018-19/7199 dated 11.03.2019 in pursuance to the Search & Seizure action u/s 132 of the I.T. Act, 1961 on this group (D.O.S.: 30.07.2018).” 4. During the assessment, the Assessing Officer made several additions against which the assessee went in appeal before the ld.
CIT(A). The ld. CIT(A) vide his order dated 21.01.2025 has dismissed the appeal of the assessee. Against the order of the ld. CIT(A), the assessee is in appeal before the Tribunal.
During proceedings before us, the ld. Counsel has taken a legal ground i.e. related to the approval under section 153D of the Act. The ld. Counsel for the assessee has submitted that the ld. Addl. CIT, Central Range, Gurgaon has given approval under section 153D of draft assessment orders for Assessment Year 2013-14, 2014-15, 2016- 17 to 2019-20, in just one letter. He further submitted that approval for assessment year 2015-16 was accorded on 08.09.2021 exactly on the same working and similar lines. Before us, Ld. Counsel for the assessee submitted that in the present case, approval was granted by Ld. Addl. CIT, Central Range, Gurugram, vide letter dated 17.08.2021 which is mechanical approval. Ld. Counsel for the assessee further submits that Ld. Addl. CIT granted approval for AYs. 2013-14, 2014- 15 and 2016-17 to 2019-20 in terms of letter dated 17.08.2021. He submits that from the perusal of the same it could be seen that the approval granted by the ld. Addl. CIT was mechanical approval as no separate approval for each Assessment Year was given rather approval was given by a single order for various assessment years. The approvals so granted are as under:
The ld. Counsel for the assessee further submitted that Coordinate Bench of Delhi Tribunal in assessee’s own case in and 1315/Del/2025 (Ayrs. 2013-14 & 2014-15) vide order dated 16.2.2026 has decided the similar issue in favour of the assessee, exactly on identical ground wherein, common mechanical approval u/s. 153D dated 17.8.2021 had been extracted at page no. 5 under para no. 6 of the above order, where common approval u/s. 153D of the Act was accorded by the Addl. CIT, Central Range, Gurgaon for the assessment years 2013-14 to 2014-15 and 2016-17 to 2019-20.
Hence, he requested to follow the aforesaid ratio in these appeals and similarly quash the assessment orders in all the captioned assessment years.
8. The ld. Counsel for the assessee also brought on record the order passed by the Co-ordinate Bench of the Tribunal in the case of Shri Vinod Jindal, vs Dy. CIT in to 1985/Del/2025, in which in the similar circumstances, the Co-ordinate Bench has given the finding that the approval given by the Addl. CIT(A) is mechanical in nature and thus quashed the assessment order.
Per contra, the ld. DR relied upon the order of the authorities below.
10 We have heard the rival contentions and perused the records, especially the Coordinate Bench of Delhi Tribunal decision in assessee’s own case in and 1315/Del/2025 (Ayrs. 2013- 14 & 2014-15) vide order dated 16.2.2026 wherein, exactly on identical ground the assessment was quashed, solely for the reasons of mechanical approval granted by the Addl. CIT, Central Range, Gurgaon, as extracted above under para 6 of this order. In the above cited case, the Tribunal has held as under:-
“9. We have considered the findings given by the AO in the assessment order and the findings given by the ld. CIT(A) in the appellate order. We have also considered the technical/legal point raised by the ld. Counsel of the assessee regarding mechanical approval given by the Addl. CIT under section 153D. We have considered the arguments and case laws brought on record both by the Revenue as well as by the assessee, we are of this view that the case law brought on record by the assessee is in the case of Shri Vinod Jindal (Supra) is most appropriate and applicable in this case. Therefore, we are reproducing the same hereunder:-
“7. Before us, Ld.AR for the assessee submitted that in the present case, approval was granted by Ld. Addl. CIT, Central Range, Gurugram vide letter dated 20.04.2021 which is mechanical approval. Ld. AR further submits that Ld. Addl. CIT granted approval for AYrs. 2013-14 to 2019-20 in terms of letter bearing No. Addl. CIT(CR)/GGN/2021-22/112 dated 20.04.2021. He submits that from the perusal of the same it could be seen that the approval granted by the ld. Adl. CIT was mechanical approval as no separate approval for each Assessment Year was given rather approval was given by a single order for various assessment years. The approvals so granted are as under:
Ld.AR further submits that from the perusal of the approval, it could be seen that Addl. CIT while granting the approval has not stated whether he has gone through the seized material, assessment records including the replies filed by the assessee with reference to the additions/ disallowance proposed in the drafts assessment order. Rather the Addl. CIT referred the action of the AO in making enquiries and considering all the material and providing sufficient opportunity to the assessee. Nowhere in the approval letter it is stated whether any discussions were carried between the AO and the Adl. CIT or he has gone through the seized material. As per ld. AR, the Addl. CIT has not verified the material, nor any reference was made in the approval letter about the material supplied to him by the AO alongwith the draft assessment orders for his consideration and thus it is a mechanical approval given. He further states that the Addl. CIT was at Gurugram and the assessing officer was stationed at Faridabad and it is not possible that Addl. CIT had occasion to go through the assessment records and seized material pertaining to the issues on which additions were proposed in draft assessment order.
9. Ld. AR finally submits that common approval is given for various Assessment Years which is contrary to the provisions of section 153D of the Act and therefore, he prayed that there was no proper application of mind before granting the approval by ld. Addl. CIT and thus assessment order so passed deserved to be held as null and void. He placed reliance on the following judgements:-
[i] M/s Tavleen Resorts & Spa Pvt. Ltd. Vs. DCIT in 3366/Del/2024 [ii] Smt. Peu Veer Vs. DCIT in & 3380 t0 3381/Del/2024 [ii] Mainee Steel Works Pvt. Ltd. Vs. DCIT in to 3377/Del/2024; [iii] Divjot Singh Mainee Vs. DCIT in [iv] Sohan Lal Single (AOP) Vs. DCIT in and 713-714/Del/2024
On the other hand, Ld. CIT DR for the Revenue supports the order of AO and submits that approval was not granted on the same day and not a mechanical approval. As per CBDT Circular dated 22.12.2006,the Range head i.e. the JCIT/ Addl. CIT is fully aware of the assessment proceedings and actively discussed with the AO from time to time with reference to the issues relating to different assessment years and the nature of contents of the seized material. He thus submits that by any stretch of imagination, it cannot be inferred that Range Head was not in a position to apply his mind independently in a judicious manner while granting approval under section 153D of the Act. The CBDT guidelines explicitly emphasize the close coordination required in search and seizure assessments. Therefore, it is reasonable to conclude that, in accordance with prevailing administrative practices and guidelines, the approving authority has a comprehensive understanding of the issues involved in a particular case well in advance, prior to the case being submitted to him for approval under section 153D of the Act. It is thus prayed by ld. CIT DR that the contentions of the assessee on the issue of approval u/s 153D of the Act may please be rejected and the order of the AO may please be upheld. He also placed reliance on the judgement of Co-ordinate Mumbai Bench of Tribunal in the case of Usha Satish Salvi Vs. ACIT in to 4239/Mum/2023 order dated 23.01.2025 wherein the issue of validity of assessment order passed u/s 143(3) r.w.s.153A of the Act in light of provisions of section 153D of the ACT was decided against the assessee.
11. Heard the contentions of both the parties and perused the material available on record. In the instant case, from the perusal of approval letters as reproduced above, for all the Seven assessment years, it is incumbent upon the Additional CIT while granting the approval, to examine all the material including the assessment records, full appraisal report and seized material pertaining to each Assessment Year and with reference to the addition proposed by the AO for each individual assessment year for which approval is sought. Further approval is to be granted for each assessment year separately.
12. The Hon’ble Jurisdictional High Court in the case of Shiv Kumar Nayyar in [TS-343-HC- 2024-Delhi] has held that the approval u/s 153D of the Act has to be granted for each Assessment year independently. The relevant observations of the judgement of Hon’ble High Court are as under:- "11. A plain reading of the aforesaid provision evinces an uncontrived position of law that the approval under Section 153D of the Act has to be granted for "each assessment year" referred to in clause (b) of sub-section (1) of Section 153A of the Act. It is beneficial to refer to the decision of the High Court of Judicature at Allahabad in the case of PCIT v. Sapna Gupta [2022 SCC OnLine All 1294] which captures
with precision the scope of the concerned provision and more significantly, the import of the phrase- "each assessment year" used in the language of Section 153D of the Act. The relevant paragraphs of the said decision are reproduced as under:- "13. It was held therein that if an approval has been granted by the Approving Authority in a mechanical manner without application of mind then the very purpose of obtaining approval under Section 153D of the Act and mandate of the enactment by the legislature will be defeated. For granting approval under Section 153D of the Act, the Approving Authority shall have to apply independent mind to the material on record for "each assessment year" in respect of "each assessee" separately. The words 'each assessment year' used in Section 153D and 153A have been considered to hold that effective and proper meaning has to be given so that underlying legislative intent as per scheme of assessment of Section 153A to 153D is fulfilled. It was held that the "approval" as contemplated under 153D of the Act, requires the approving authority, i.e. Joint Commissioner to verify the issues raised by the Assessing Officer in the draft assessment order and apply his mind to ascertain as to whether the required procedure has been followed by the Assessing Officer or not in framing the assessment. The approval, thus, cannot be a mere formality and, in any case, cannot be a mechanical exercise of power. *** 19. The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to "each assessment year" is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A." [Emphasis supplied]
12. It is observed that the Court in the case of Sapna Gupta (supra) refused to interdict the order of the ITAT, which had held that the approval under Section 153D of the Act therein was granted without any independent application of mind. The Court took a view that the approving authority had wielded the power to accord approval mechanically, inasmuch as, it was humanly impossible for the said authority to have perused and appraised the records of 85 cases in a single day. It was explicitly held that the authority granting approval has to apply its mind for "each assessment year" for "each assessee" separately.
13. Reliance can also be placed upon the decision of the Orissa High Court in the case of Asst. CIT v. Serajuddin and Co. [2023 SCC OnLine Ori 992] to understand the exposition of law on the issue at hand. Paragraph no.22 of the said decision reads as under:-
"22. As rightly pointed out by learned counsel for the assessee there is not even a token mention of the draft orders having been perused by the Additional Commissioner of Income-tax. The letter simply grants an approval. In other words, even the bare minimum requirement of the approving authority having to indicate what the thought process involved was is missing in the aforementioned approval order. While elaborate reasons need not be given, there has to be some indication that the approving authority has examined the draft orders and finds that it meets the requirement of the law. As explained in the above cases, the mere repeating of the words of the statute, or mere "rubber stamping" of the letter seeking sanction by using similar words like "seen" or "approved" will not satisfy the requirement of the law. This is where the Technical Manual of Office Procedure becomes important. Although, it was in the context of section 158BG of the Act, it would equally apply to section 153D of the Act. There are three or four requirements that are mandated therein, (i) the Assessing Officer should submit the draft assessment order "well in time". Here it was submitted just two days prior to the deadline thereby putting the approving authority under great pressure and not giving him sufficient time to apply his mind ; (ii) the final approval must be in writing ; (iii) the fact that approval has been obtained, should be mentioned in the body of the assessment order." [Emphasis supplied]
During the course of arguments, learned counsel for the assessee apprised this Court that the Special Leave Petition preferred by the Revenue against the decision in the case of Serajuddin (supra), came to be dismissed by the Supreme Court vide order dated 28.11.2023 in SLP (C) Diary no. 44989/2023.
A similar view was taken by this Court in the case of Anuj Bansal (supra), whereby, it was reiterated that the exercise of powers under Section 153D cannot be done mechanically. Thus, the salient aspect which emerges from the abovementioned decisions is that grant of approval under Section 153D of the Act cannot be merely a ritualistic formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind.
16. In the present case, the ITAT, while specifically noting that the approval was granted on the same day when the draft assessment orders were sent, has observed as under:-
"10. We have gone through the approval granted by the ld. Addl. CIT on 30.12.2018 u/s 153D of the Act which is enclosed at page 36 of the paper book of the assessee. The said letter clearly states that a letter dated 30.12.2018 was filed by the ld. AO before the ld. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The ld. Addl. CIT has accorded approval for the said draft assessment orders on the very same day i.e., on 30.12.2018 for seven assessment years in the case of the assessee and for seven assessment years in the case of Smt. NeetuNayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. NeetuNayyar from Central Public Information Officer who is none other than the ld. Addl. Commissioner of Income-tax, Central Range-S, New Delhi, under Right to Information Act, wherein, it reveals that the ld. Addl. CIT had granted approval for 43 cases on 30.12.2018 itself. This fact is not in dispute before us. Of these 43 cases, as evident from page 36 of the paper book which contains the approval u/s 153D, 14 cases pertained to the assessee herein and Smt. NeetuNayyar. The remaining cases may belong to some other assessees, which information is not available before us. In any event, whether it is humanly possible for an approving authority like ld. Addl. CIT to grant judicious approval u/s 153D of the Act for 43 cases on a single day is the subject matter of dispute before us. Further, section 153D provides that approval has to be granted for each of the assessment year whereas, in the instant case, the ld. Addl. CIT has granted a single approval for all assessment years put together."
17. Notably, the order of approval dated 30.12.2020 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, we 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."
13. Similarly, the Hon'ble Orissa High Court in the case of ACIT vs Serajuddin& Co. 454 ITR 312 (Orissa) had an occasion to examine substantial question of law on the propriety of approval granted under s. 153D of the Act. The Hon’ble Orissa High Court made wide ranging observations towards the manner and legality of approval under s.153D of the Act. The Hon'ble High Court inter-alia observed that the approval under s. 153D of the Act being mandatory, while elaborate reasons need not be given, there has to be some indication that approving authority has examined draft orders and finds that it meets the requirement of law. The approving authority is expected to indicate his thought process while granting approval, held that it is not correct on the part of the Revenue to contend that the approval itself is not justifiable. Where the Court finds that the approval is granted mechanically, it would vitiate the assessment order itself. The Hon'ble High Court inter- alia observed that there is not even a token mention that draft order has been perused by the Ld. Addl. CIT. The approval letter simply grants approval. In other words, even the bare minimum requirement of approving authority having to indicate what thought process involved leading to the aforementioned approval has not been provided. As explained, the mere repeating of words of the Statue or mere rubber stamping of the communication seeking sanction by using similar words like 'approval' will not, by itself, meet the requirement of law. The Hon'ble Court made reference to manual issued by the CBDT in the context of erstwhile section 158BG of the Act and observed that such manual serves as a guideline to the AOs. Since it was issued by CBDT, the powers of issuing such guidelines can be traced to section 119 of the Act. The Hon'ble High Court also held that non-compliance of requirement of section 153D of the Act is not a mere procedural irregularity and lapse committed by Revenue may vitiate the assessment order. The SLP filed against the aforesaid judgement in the case of ACIT vs Serajuddin& Co. was dismissed as reported in (2024) 163 taxmann.com 118 (SC).
14. In so far as the order of the Co-ordinate Bench of the Tribunal (Mumbai Bench) relied by the Ld. Department's Representative in the case of Usha Satish Salvi (supra), in the said case, certain modifications were suggested to the A.O. in the draft assessment order, which have been carried out by the A.O. while passing the Assessment Order and the Bench therein observed that the said fact shows that approving authority approved the draft order not in mechanical manner but after due application of mind, however, in the present case, no such application of mind is forthcoming. Further in the case of Usha Satish Salvi (supra), the Ld. Department's Representative has filed affidavit of the then Assessing Officer and the approving authority who have denied the allegations raised by the Assessee. After relying on the said so called unchallenged depositions made in the Affidavit of the then A.O. and the approving authority, (which has been filed much after the granting of the approval and at the stage of second Appeal before the Tribunal), upheld the order of the Ld. CIT(A). Therefore, the present case in hand is factually distinguishable. In view of the judgement
of the Hon'ble Delhi High Court in the case of Shiv Kumar Nayyar (supra), which is having binding precedent, and the order/ratio of the Tribunal in the case of Usha Satish Salvi (supra) has no effect of binding precedent.
15. Such mechanical approval cannot be sustainable in law in the light of judicial dicta available. The approval memo is totally silent on the issues involved and has granted omnibus approval without any thoughtful process being discernible. A single approval u/s 153D has been accorded in respect of Seven assessment years and there is no other material to show involvement of the superior authority in the course of assessment proceedings. Thus, applying the ratio of judgements delivered as noted above, the assessment order based on ritualistic approval stands vitiated and thus, quashed by allowing Ground of appeal No. 13 of the Assessee.
Since we have already allowed the ground of appeal No. 13 taken by the assessee thus, other grounds of appeal are not adjudicated.
In the result, the appeal of the assessee is allowed.” 10. Therefore, respectfully following the ratio laid down by the Co-ordinate Bench of the Tribunal and different benches, decision of Hon’ble High Courts in the case mentioned above, the assessment passed for Assessment Years 2013-14 and 2014-15 are quashed.
11. Since, we have given our finding on the legal and technical issue on approval under section 153D of the Act and quashed the assessment order, therefore we are not inclined to give out finding on other issues raised in these appeals.
12. In the result, both the appeals of the assessee are allowed.”
In the background of the aforesaid discussions and respectfully following the precedents as aforesaid, the assessment passed for the assessment years 2015-16 to 2019-20 are hereby quashed. Since we have given our finding on the legal issue on approval u/s. 153D of the Act and quashed the assessment, hence, we are not inclined to adjudicated other issues raised in these appeals. Resultantly, all the quantum appeals filed by the assessee for the assessment years 2015- 16 to 2019-20 are allowed in the aforesaid manner.
As regards the penalty appeal No. 1397/Del/2025 (AY 2019-20) is concerned, since we have already quashed the assessment on the legal issue itself, as aforesaid, the penalty in dispute does not stand in the eyes of law, hence, the same is deleted and thus, the appeal of the assessee is allowed.
In the result, all the 06 appeals of the assessee are allowed.