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Facts
The appeals concern the validity of assessment orders passed under Section 153A/143(3) of the Income Tax Act, where the assessee argued that the prior approval obtained under Section 153D was mechanical and without application of mind. The Revenue contended that the approval is administrative and its process is irrelevant to the assessee.
Held
The Tribunal held that the approval granted under Section 153D was mechanical and lacked application of mind, thus vitiating the assessment proceedings. Consequently, the assessment orders were quashed as non-est and a nullity.
Key Issues
Whether the approval granted under Section 153D of the Income Tax Act was validly obtained, or if it was a mechanical exercise without application of mind, rendering the subsequent assessment orders void.
Sections Cited
153A, 143(3), 69C, 153D, 153C
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Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
(Assessment Year: 2018-19) Minda Capital Pvt. Ltd., vs. ACIT, Central Circle 13, A – 15, Phase 1, Ashok Vihar, New Delhi. New Delhi – 110 052. (PAN :AABCS7843P) (Assessment Year: 2016-17) ITA No.1856/DEL/2021 (Assessment Year: 2017-18) ACIT, Central Circle 13, vs. Minda Capital Pvt. Ltd., New Delhi. A – 15, Phase 1, Ashok Vihar, New Delhi – 110 052. (PAN :AABCS7843P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Salil Aggarwal, Sr. Advocate Shri Sahilesh Gupta, Advocate Shri Madhur Aggarwal, Advocate REVENUE BY : Shri Sunil Kumar Yadav, CIT DR Date of Hearing : 24.04.2025 Date of Order : 13.06.2025 O R D E R to 1392/DEL/2020 ITA Nos.1855 & 1856/DEL/2021 PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER :
1. 1. These cross appeals are filed by the assessee and Revenue against the orders of ld. Commissioner of Income-tax Appeals-26, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 30.04.2020 for Assessment Years 2016-17 & 2017-18. The assessee has also filed appeal against the order of ld. CIT (A)-26, New Delhi dated 29.04.2020 for Assessment Year 2018-19.
2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take for AY 2016-17 as lead case.
The assessee has taken the following grounds of appeal in AY 2016-17 :-
1. That having regard to the facts and circumstances of the case and in law, though the addition by the ld AO of Rs.8,02,35,847/- in the order passed u/s 153A/ 143(3) have been deleted, however the ld CIT (A) erred in confirming the business income from trading in fabric as unexplained expenditure u/s 69C of the Income Tax Act. Such act of the ld. Commissioner of Income Tax Act is arbitrary, against law and facts on record and is not sustainable on various legal and factual grounds.
2. That having regard to the facts and circumstances of the case and in law the adhoc addition confirmed by Ld. Commissioner of Income Tax( A) of Rs.36,94,847/- towards assumed commission being 1.5% of total sale and purchase of fabric is arbitrary, against law and facts on record and is not sustainable on various legal and factual grounds.
3. That having regard to the facts and circumstances of the case and in law the adhoc addition confirmed by Ld. Commissioner of Income Tax (A) of Rs.19,46,450/- towards assumed expenses being 159% of profit from trading of fabric is arbitrary, against law and facts on record and is not sustainable on various legal and factual grounds 4. That on the facts and circumstances of the case and in law the learned Commissioner of Income Tax (A) while confirming the above additions failed to consider the fact that no incriminating documents have been found and as such additions confirmed by ld CIT(A) is bad in law and hence liable to be quashed to 1392/DEL/2020 & 1856/DEL/2021 5. That having regard to the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (A) arbitrarily and, mechanically rejected the explanation and evidence tendered by the appellant and confirmed the above additions on the basis of suspicion, assumption, surmises, & conjectures by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.”
4. At the outset of the hearing, ld. AR for the assessee submitted that the assessee has filed applications under Rule 27 of Income Tax (Appellate Tribunal) Rules for AYs 2016-17 and 2017-18 and additional legal ground for AY 2018-19. In this regard, he submitted that the Rule 27 applications may be considered as Additional Legal Grounds raised in assessee's appeal, as the same is also arising from the order of learned CIT (A) in all the aforesaid five appeals. He submitted that the additional grounds of appeal are purely legal issue and the same are reproduced below :- “Additional Ground No.1 : That on the facts and circumstances of the case the approval accorded under section 153D of the Act (if any) is a mechanical and arbitrary approval without there being any application of mind and also without satisfying the statutory preconditions of the Act and as such, the assessment so framed is null and void and deserves to be quashed. Additional Ground No.2 : That on the facts and circumstances of the case the impugned assessment order so passed is null and void, and is also in complete violation of CBDT Circular No.19/2019, since no DIN is mentioned in the entire body of assessment order.”
5. Since the above grounds of appeal
are purely legal, do not require fresh facts to be investigated and go to the root of the matter, ld. AR of the assessee prayed that the same may be admitted in view of the judgment of Hon’ble Supreme Court in the case of NTPC Ltd. vs. CIT, (1998) 229 ITR 0383 (SC).
6. On the other hand, ld. DR for the Revenue has no objection of admitting the to 1392/DEL/2020 & 1856/DEL/2021 additional ground of appeal being purely legal issue.
7. Considered the rival submissions and material placed on record. We observed that the issues raised by the assessee in additional grounds go to the root of the matter challenging the jurisdictional issue. In the light of Hon’ble Supreme Court in the case of NTPC, Limited vs. CIT (1998) 229 ITR 383 (SC), we are inclined to admit the additional grounds and take up the same for adjudication herein below.
8. Before deciding the legal issue in dispute, we may gainfully reproduce the approval obtained/granted u/s. 153D of the Income Tax Act (for short ‘the Act’), which read as under:-
9. At the time of hearing, Ld. AR of the assessee submitted that in all the aforesaid five appeals, common issue involved i.e. consideration of a legal issue with regard to mechanical approval taken under section 153D of the Act before passing the impugned assessment orders under section 153A/143(3) of the Act. He submitted that before adverting to the arguments in the instant matters, the assessee would seek to draw up a chronological sequence of events, leading up to the instant appeals before ITAT and details of additions submitted by the ld. AR are tabulated as under: - Sr.No. Particulars Date i) Date of search u/s 132 of the Act 08.06.2017 ii) Date of notice u/s 153A 27.06.2019 iii) Approval u/s 153D of the Act obtained 30.12.2019 vide letter no. Addl CIT/CR-4/2019- 20/1238 (Pg A of paper book). iv) Assessment u/s 153A Date of assessment order 30.12.2019 v) Order of CIT (A) 30.04.2020 for AY 2016-17 (lead matter) Partly allowed on merits Dismissed the appeal on issue of Pg 19 of CIT section 153D Approval (Grounds and (A) Submissions at pages 2 and 5 to 9 of CIT (A) order). to 1392/DEL/2020 & 1856/DEL/2021 10. Ld. AR of the assessee submitted written submissions which read as under :- “Submissions with regards to the aforesaid legal ground was made before learned CIT (A) at pages 5 to 9 of CIT (A) order and the same has been dismissed by learned CIT (A) at page 19 of the order. Learned CIT (A) has failed to appreciate the fact that a common approval in 9 cases were accorded mechanically by Addl CIT, Range- 4, New Delhi on the very same day i.e. on 30.12.2019. Even the final order was also passed on the same date i.e. 30.12.2019 which shows complete non - application of mind and mechanical nature of approval so granted by higher authority (Copy of Approval in Page A of paper book). Further, it is submitted that approval was accorded in more than 50 cases on the very same day i.e. 30.12.2019, which shows complete non – application of mind on the part of Addl CIT and further, even the approval is a common approval for 9 assessment years, which is against the mandate of section 153A of the Act (kindly see pages 5 to 9 of CIT (A) order). A bare perusal of the approval makes it amply clear that the aforesaid approval is bereft of any reasoning, as no seized document has been discussed neither any issue on which additions have been made are being mentioned or discussed, whereas, additions were made on multiple issues from AY 2011-12 to 2018-19, this shows casual approach of Addl CIT while recording approval under section 153D of the Act. It would also be important to note that learned CIT (A) at page 19 of the order has recorded a factually incorrect finding that "issue in all seven assessment years are same", whereas, there were several issues in other assessment years, kindly see order of Hon'ble ITAT with regards to AY 2011-12 to 2015-16, more specifically in AY 2014-15 involving consideration of many other issues. Thus, the aforesaid finding of learned CIT (A) is factually incorrect and contrary to material available on record. It is further, submitted that "common approval" has been granted by learned Addl CIT instead of separate approval for each assessment year and that to without any application of mind and without perusing or discussing assessment records, which has been deprecated by various high courts and Tribunal's across the country. Reliance is placed on following case laws: Case Laws Pg No. of PB Copy of judgment of Hon'ble High Court of Delhi in the case of 9-13 PCIT vs Shiv Kumar Nayyar reported in 163 taxmann.com 9 Copy o1 judgment of Hon'ble High Court of Delhi in the case of 14-16 PCIT vs Anuj Bansal reported in 165 taxmann.com 2. Copy of Judgment of Hon'ble High Court of Allahabad in the 17-21 case of PCIT vs Sapna Gupta reported in 147 taxmann.com 288. Copy of judgment of Hon'ble High Court of Orissa in the case of 22-31 ACIT vs Serajuddin & Co. reported in 454 ITR 312. Copy of judgment of Hon'ble Supreme Court in the case of PCIT 32-33 vs Anuj Bansal reported in l65 Taxmann.com 3. to 1392/DEL/2020 ITA Nos.1855 & 1856/DEL/2021 Copy of judgment of Hon'ble Supreme Court in the case of ACIT 34-35 vs Serajuddin & Co. reported in 163 taxmann.com 118. Copy of order of Hon'ble ITAT Delhi in the case of Millenium 36-53 Vinimay Pvt. Ltd. vs ACIT in ITA No. 458/Del/2022. Copy of judgment of Hon'ble High Court of Delhi in the case of 54-59 CIT vs Brandix Maurities Holdings Ltd. reported in 456 ITR 34. Copy of order of Hon'ble ITAT Delhi in the case of Smt. Usha 60-72 Sharma vs DCIT in ITA No. 480/Del/2025. Copy of order of Hon'ble ITAT Delhi in the case of Parasram 73-80 Holdings Pvt. Ltd. vs DCIT in ITA No. 2824 to 2827/Del/2023. Copy of order of Hon'ble ITAT Delhi in the case of Veena Singh 81-97 vs ACIT in ITA No. 294/Del/2022. Copy of order of Hon'ble ITAT Delhi in the case of Shiv Kumar 98-116 Nayyar vs ACIT in ITA No. 1282 to 1285/Del/2020. Copy of order of Hon'ble ITAT Delhi in the case of Parnika 117-129 Commercial and Estate Pvt. Ltd. vs DCIT in ITA No. 4494/Del/2024.
Ld. AR submitted that in view of the aforesaid, the order so passed by learned AO be quashed as the approval accorded under section 153D of the Act is a mechanical and arbitrary approval without there being any application of mind and also without satisfying the statutory preconditions of the Act..
Per contra, ld. DR of the Revenue relied upon the orders of the authorities below and objected to the submissions of the ld. AR. He submitted that the approval u/s 153D of the Act is administrative approval. The procedure of approval process has no relevance to the assessee and his proceedings.
Considered the rival submissions and material placed on record. We have especially perused the approval granted u/s. 153D of the Act and the case laws cited by the ld. AR in the paper book.
We find that ITAT Delhi Bench in the case of M/s MilleniumVinimay (P) to 1392/DEL/2020 & 1856/DEL/2021 Ltd. vs. ACIT, (supra) has dealt the similar legal issue and decided the same in favour of the assessee. The relevant findings of the Coordinate Bench are reproduced as under:-
15. There are several decisions, which supports the view that approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D of the Act. Such perfunctory approval has no legal sanctity in the eyes of the law. The decision of the co-ordinate bench in Shreelekha Damani vs. DCIT 173 TTJ 332(Mum.) which has been approved by jurisdictional High Court subsequently, reported in 307 CTR 218 affirms the plea of the Assessee, wherein the Hon'ble Bombay High Court held as under:-
1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015.
Following question was argued before us for our consideration: "Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 2007- 08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with.
This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its conclusion that the approval whenever required under the law, must be preceded by application of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record.
The learned Counsel for the Revenue submitted that the question of legality of the approval was raised by the assessee for the first time before the Tribunal. He further submitted that the Additional CIT had granted the approval. The Tribunal committed an error in holding that the same is invalid. to 1392/DEL/2020 & 1856/DEL/2021 6. Having heard the learned Counsel for the both sides and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. The Additional CIT while granting an approval for passing the order of assessment, had made following remarks : "To, The DCIT(OSD)1, Mumbai Subject: Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref: No. DCIT (OSD)1/ CR7/Appr/2010-11 dt. 31.12.2010 As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analyze the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted. Approval to the above said draft order is granted u/s 153D of the I. T. Act, 1961."
In plain terms, the Additional CIT recorded that the draft order for approval under Section 153D of the Act was submitted only on 31st December, 2010. Hence, there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises.
Accordingly, the Tax Appeal is dismissed."
16. In the case of ACIT, Circle-1 (2) Vs. Serajuddin and Co. the Hon'ble Supreme Court in SLP (Civil) Dairy No. 44989/2023 vide order dated 28/11/2023, dismissed the Appeal filed by the Department of Revenue against the order dated 15/03/2023 in passed by the Hon'ble High Court of Orissa at Cuttack, wherein the Hon'ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act.
17. Hence, vindicated by the factual position as noted in preceding paras, we find considerable force in the arguments advanced by the Ld. the Assessee's Representative on the Additional Ground of Appeal. In our considered opinion the approvals so granted under the shelter of section 153D of the Act does not pass the to 1392/DEL/2020 & 1856/DEL/2021 test of legitimacy. The Assessment orders of various assessment years as a consequence of such inexplicable approval lacks legitimacy. Consequently, the impugned assessments orders in the captioned appeals are non-est and a nullity and hence the same are quashed.
18. In view of prima facie merits found in the legal objections raised in the Addl. Grounds of the Assessees, we do not consider it expedient to look into the aspects on merits of additions/disallowance as the legal objections on sanction granted under Section 153D of the Act has been answered in favour of the Assessee. Thus the other Grounds raised in the Appeals of the Assessee in both the Appeals have rendered in- fructuous, which do not need any separate adjudication.
19. In the result, the Appeals filed by the Assessee in and ITA No. 295/Del/2022 are allowed.
11. Upon considering the entire aspect of the matter, we find that the approval has been granted not separately for each assessment year for the assessee whereas the provision of Section 153D of the Act stipulates conditions that no order of assessment or reassessment shall be made by an Assessment Officer below the rank of Joint Commissioner in respect of each assessment year referred to in Clause (b) of Sub Section (1) of Section 153A of the Act or the assessment year referred to in Clause (b) of Sub Section 153B of the Act except the prior approval of the Joint Commissioner. It further appears from the approval dated 08.06.2018 that the same was a common and composite order whereas the Addl. Commissioner is required to verify and approve that each of assessment year is complied with as well as procedural laid down under the Act. Such fact clearly reveals non-application of mind on the part of the Learned Addl. Commissioner of Income Tax, Central Range-7, New Delhi. Thus granting approval for all the common years instead of approval under Section 153B for each assessment year separately de horse the rules. The said approval is found to have been given in a mechanical and routine manner. We find that the order issuing authority has not discharged its statutory duties cast upon him even by assigning cogent reasons in respect of the issues involved in the matter. Thus granting approval in the absence of due application of independent mind to the material on record for each assessment year in respect of the assessee's case separately vitiates the entire proceedings; the same is found to be arbitrary and erroneous and therefore, liable to be quashed. We are also inspired by the ratio laid down in the Judgment narrated hereinabove passed by the Hon'ble Jurisdictional High Court and respectfully relying upon the same with the above observation, we quash the entire proceeding initiated under Section 153C r.w.s 153A of the Act in the absence of a valid approval granted by the Learned Additional Commissioner of Income Tax, Central Range-7, New Delhi.
12. In the result, appeal of the assessee is allowed.” to 1392/DEL/2020 & 1856/DEL/2021 13. We further find that Hon’ble jurisdictional High Court in the case of PCIT vs. Shiv Kumar Nayyar (supra) has decided the similar legal issue in favour of the assessee and against the Revenue. The relevant findings of the Hon’ble Delhi High Court are reproduced as under:-
“15. 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 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 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 to 1392/DEL/2020 & 1856/DEL/2021 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.
18. Therefore, under the facts of the present case, considering the foregoing discussion and the enunciation of law settled through This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 judicial pronouncements discussed hereinabove, we are unable to find any substantial question of law which would merit our consideration.”
Respectfully following the above precedents, we quash the entire proceedings initiated under section 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the Ld. Addl.CIT, Central Range-4, Delhi.
We are refrained from adjudicating the other grounds of appeal
and at this stage, we keep the other grounds of appeal open.
16. In the result, the appeal being filed by the assessee for assessment year 2016-17 stands partly allowed. 17. With regard to appeal for AYs 2017-18 & 2018-19 filed by the assessee are concerned, since the facts are exactly similar to AY 2016-17 our above findings in AY 2016-17 are applicable mutatis mutandis in AYs 2017-18 to 1392/DEL/2020 & 1856/DEL/2021 &2018-19. Accordingly, the appeals being ITA Nos.1391 & 1392/Del/2020 filed by the assessee are also partly allowed.
With regard to Revenue’s appeals for AYs 2017-18 & 2018-19 are concerned, since the facts are exactly similar to assessee’s appeal in AY 2016-17 our above findings in AY 2016-17 are applicable mutatis mutandis in AYs 2017-18 & 2018-19 and accordingly, the appeals filed by the Revenue for AYs 2017-18 & 2018-19 are dismissed.
To sum up : all the three appeals filed by the assessee are partly allowed and both the appeals filed by the Revenue are dismissed. Order pronounced in the open court on this 13th day of June, 2025.