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Facts
The assessee challenged assessment orders passed under Section 153A of the Income Tax Act, raising an additional ground of appeal that the mandatory approval under Section 153D was not properly obtained. The assessee argued that the approval was mechanical and lacked application of mind.
Held
The Tribunal held that the approval granted under Section 153D of the Act was mechanical and not substantiated by proper application of mind, rendering the assessment orders vitiated. The Tribunal relied on various High Court and Supreme Court judgments emphasizing the need for independent application of mind for such approvals.
Key Issues
Whether the approval granted under Section 153D of the Income Tax Act was mechanical and thus vitiates the assessment order.
Sections Cited
153A, 153D, 250, 143(3)
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Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER to 3040/Del/2017 [Assessment Year : 2008-09, 2009-10, 2010-11, 2010-11, 2013-14] M/s. Wang Investments vs ACIT, & Finance Pvt.Ltd., 19, Central Circle-8, DDA Commercial New Delhi Complex, Kailash Colony Extension, Zamrudpur, New Delhi-110048. PAN-AAACW0298B APPELLANT RESPONDENT Appellant by Shri R.K.Kapoor, CA Respondent by Shri Mahesh Kumar, CIT DR Date of Hearing 02.07.2025 Date of Pronouncement 16.07.2025 ORDER PER MANISH AGARWAL, AM :
The captioned appeals are filed by the assessee against the separate orders, all dated 24.03.2017 passed by Ld. Commissioner of Income Tax(Appeals)-24, New Delhi [CIT(A) in short] passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the different assessment orders pertaining to Assessment Years 2008- 09, 2009-10, 2010-11, 2010-11 and 2013-14 respectively which is tabulated as under:-
CIT(A)’s AO’s order Assessment No. Years order dated dated Order passed u/s 1. 3036/Del/2017 2008-09 24.03.2017 30.03.2015 153A r.w.s1 43(3) 2. 3037/Del/2017 2009-10 24.03.2017 30.03.2015 153A r.w.s 143(3) 3. 3038/Del/2017 2010-11 24.03.2017 30.03.2015 153A r.w.s.143(3) 4. 3039/Del/2017 2010-11 24.03.2017 30.03.2015 153A r.w.s.143(3) 5. 3040/Del/2017 2013-14 24.03.2017 30.03.2015 143(3) 2. During the course of hearing, assessee has taken additional ground of appeal which reads as under:- “That on law, facts and circumstances of the appellant’s case, the impugned assessment order u/s 153A of the Income Tax Act deserves to be quashed since the statutory and mandatory approval as required u/s 153D of the Income Tax Act has not been obtained and approval sought and granted was totally mechanical and ritualistic only.”
Since the additional ground of appeal taken by the assessee is purely a legal ground and goes to the root of the matter, therefore, it is prayed that same may be admitted for adjudication. Reliance is placed on the judgment of Hon’ble Supreme Court in the case of NTPC Ltd. vs CIT (1998) 229 ITR 382 (SC).
Ld.CIT DR for the Revenue objected for the admission of the additional ground of appeal.
Heard both the parties and perused the material available on record. From the perusal of the additional ground of appeal, it is seen that it relates to the mandatory approval as required in Section 153D of the Act which is purely a legal issue and requires no verification from the AO. In view of these facts and by respectfully following the judgement of Hon’ble Supreme Court in Page | 2 the case of NTPC Ltd. (supra), we admit the additional ground of appeal taken by the assessee for adjudication.
Since the assessee has challenged the validity of the assessment order on the ground of approval through additional ground of appeal therefore, the same is taken first for consideration.
Before us, Ld.AR for the assessee submits that in the present case, the approval has been granted by Ld. JCIT, Central Range-2, New Delhi dated 30.03.2015 which is mechanical approval. Ld.AR submits that Ld. JCIT has granted approval for AY 2007-08 to 2013-14 in terms of letter No. Jt.CIT/CR/2014-15/1228 dated 30.03.2015 which is mechanical approval as no separate approval for each Assessment Year was given rather approval was given by a single order for various assessees involving many assessment years. The orders so passed in the case of various different assessees’ is tabulated by the assessee alongwith written submission as Annexure A filed before us which reads as under:-
Ld.AR further submits that inspection of the file was carried out and after inspection of the assessment record, it was noticed that neither the approval granted by Ld. JCIT was available on record nor any evidence of draft assessment order was available on record nor it’s forwarding to the JCIT for seeking approval was available in the assessment folders. It is further stated by Ld.AR that no communication was available with the respective order sheet entries. The letter written in this regard before the AO for supply of the approval granted is read as under:-
Ld.AR finally submits that he has filed a chart based on the various assessment order passed for different assessee in the group wherein the common approval is given for all the assessees for all the Assessment Years and the same is contrary to the provisions of section 153D of the Act and therefore, he prayed that no proper application of mind before granting the approval and thus assessment order so passed deserved to be hold as null and void. He placed reliance on the following judgements:- [i] Arch Pharmalabs Ltd. reported in 2021-TIOL-1264-ITAT- Mumbai;
[ii] Sheelekha Damani vs DCIT 173 TTJ 332 (Mum.) reported in 2015-TIOL-2170-ITAT-Mum; [ii] Sanjay Dugal & Otehrs reported in 2021-TIOL-148 ITAT, Delhi; [iii] Inder International vs ACIT in [iv] Naveen Jain & Others vs CIT reported in 91 ITR 682 (Lucknow Trib.) [v] Smt. Sapna Gupta, Kanpur vs DCIT, [2021] (Lucknow Trib.); [vi] Vijayadevi Naval Kishore Bharatia vs Land Acquisition Officer [2003] 5 SCC 83 (SC); [vii] Dharampal Satyapal Ltd. vs Union of India [2019] 366 ELT 253 (Gauhati High Court); [viii] M/s. Subash Dabas, New Delhi vs ACIT; [ix] Pr.CIT vs Shiv Kumar Nayyar in [x] Pr.CIT vs Anuj Bansal (ITA No.368/2023) (Delhi High Court); [xi] ACIT vs Sarjuddin & Co. [2023 SCC Online Orissa 992].
On the other hand, Ld.CIT DR for the Revenue supports the order of AO and submits a written submission alongwith CBDT Guidelines dated 22.12.2006 wherein assessment framed in the case of search is described. According to the said circular, the Range head i.e. the JCIT/ Addl. CIT is fully aware of the assessment proceedings and actively discusses with the AO from time to time with reference to the issues relating to different assessee 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 written submission filed by Ld.CIT DR is as under:- 1) “That, with regard to the above-captioned appeal, Assessee has moved an application via letter dated 08.11.2021, concerning the issue of approval u/s 153D of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). In response to the same, the undersigned most respectfully submits that the said contention was not raised before the Ld. CIT (A) & even before the Hon'ble ITAT the same was raised only on 08.11.2021. As such, this ground constitutes an additional ground of appeal, for which the assessee was required to file an application under Rule 11 of the ITAT Rules for its admission. Further, it is pertinent to mention here that the contention with respect to approval u/s 153D of the Act is raised after about 4 years after filling of the present appeal. Furthermore, reasons for such delay of about a year are not even stated nor substantiated by any documentary evidence. Hence, it is most respectfully submitted that the application of the Assessee, dated 08.11.2021, for filing of additional ground of appeal on the issue of approval u/s 153D of the Act may not be admitted. 2) Without prejudice to foregoing objections, it is respectfully submitted that the assessment orders clearly state that the assessment order have been passed with the statutory approval of the Joint Commissioner of Income Tax, Central Range-2, New Delhi, communicated vide his office letter No. Jt. CIT/CR/2014-15/1228 dated 30.03.2015 in accordance with S. 153D of the Income Tax Act, 1961. 3) Further, in view of the CBDT's Guidelines being F. No. 286/161/2006-IT (Inv. II) dated 22.12.2006, Para 1.7, mandates that assessment in all cases be it search of a group or an assessee, assessment are framed simultaneously to ensure coordinated decision- making and eliminate the possibility of assessments being made in the wrong hands or for the incorrect assessment year(s). It is respectfully submitted that, in search cases, the Range Head (Addl./Joint CIT) is fully aware of the progress of the assessment proceedings, the relevant issues concerning different assessee, and the nature and content of the seized material. The said 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. The CBDT guideline is a crucial document that provides insight into the manner in which search assessments are handled by field officers. Hence, by any stretch of imagination, it cannot be inferred that the Range Head was not in a position to independently apply his mind in a judicious manner while granting approval under section 1530 of the Act and that the approval granted by the Range Head u/s 1530 was in a routine and casual manner without considering the facts of the case. [Copy of CBDT Circular dated 22.12.2026 is enclosed herewith as ANNEXURE-A) 4) Further, it is respectfully submitted that each approval must be assessed in light of the specific facts of the case, including the number of issues involved, the nature of those issues, the modus operandi, the number of cases, and the interrelationship among the facts of such cases. In instances where identical issues are involved, with the same modus operandi and cases pertaining to the same assessee, it would not be unreasonable to presume that the approving authority can judiciously apply its independent mind to such cases in a single day. Thus, the Range head approving all or a number of cases of an assessee on a single day ought not to be seen as non-application of mind, particularly when the Range Head has perused the records and engaged in discussions with the Assessing Officer from time to time as per the CBDT guidelines referred above. 5) Furthermore, it is respectfully submitted that the assessee has merely contented that the approval u/s 153D of the Act was mechanical in nature, without furnishing any specific evidence to substantiate such a claim. It is pertinent to note that the assessment orders clearly state that the assessment has been passed with the prior approval of the Range Head accorded under section 153D of the Act and communicated vide letter dated 25/12/2019. Therefore, mere assertion of a mechanical approval, absent any concrete evidence, cannot be accepted as sufficient to question the validity of the approval process when the then Range head and the AO have specifically affirmed again the perusal of records and regular discussion of the cases. In view of the foregoing submissions, it is most respectfully submitted that the contentions of the assessee on the issue of approval of u/s 153D of the Act may please be rejected and the order of the AO may please be upheld.”
11. Heard the contentions of both the parties and perused the material available on record. In the instant case, from the chart submitted by Ld.AR in Annexure “A”, it is seen that the approval was granted in as many as 11 cases where total number of assessment years involved are 29 Assessment Years. The Additional CIT while granting the approval, needs to examine all the material including the assessment, full appraisal report and seized material pertaining to each Assessment Year with reference to the addition proposed by the AO for which approval is sought. 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] Page | 11
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.
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. Neetu Nayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. Neetu Nayyar 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. Neetu Nayyar. 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."
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." 12. 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 justiciable. 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 Page | 13 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. Kolkata was dismissed as reported in (2024) 163 taxmann.com 118 (SC).
The ratio of judgement delivered in the case of ACIT vs Serajuddin & Co., Orrisa; PCIT vs Anuj Bansal; PCIT vs Shiv Kumar Nayyar; and PCIT vs Subhash Dabas (supra) has held in chorus that the approval granted under s. 153D of the Act, if granted mechanically, will vitiate the assessment order itself.
14. 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 eleven different Assessees comprising out of 29 Assessment Years and there is no other material to show involvement of the superior authority in the course of assessment. Moreover, on inspection of the file, neither the draft assessment order nor the letter through which the approval was sought was available in the assessment records. Thus applying the ratio of judgements delivered as noted above, the assessment order based on ritualistic approval stands vitiated and thus quashed by allowing additional Ground of appeal of the Assessee.
15. Since we have already allowed the additional ground of appeal taken by the assessee, thus other grounds of appeal are not adjudicated