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Facts
A search and seizure operation was conducted at the assessee's premises, leading to assessment proceedings under Section 153A of the Income Tax Act. The appeals were filed against the orders of the CIT(A) which partly sustained additions. The core of the appeals concerned the legality of the approval granted under Section 153D of the Act.
Held
The Tribunal held that the approval granted under Section 153D of the Act was mechanical and lacked independent application of mind, as evidenced by a single approval for multiple assessment years and cases on the same day. This non-compliance with statutory pre-conditions vitiated the assessment order.
Key Issues
Whether the approval accorded under Section 153D of the Income Tax Act for assessment proceedings was valid, considering it was granted mechanically without proper application of mind and for multiple assessment years in a single approval.
Sections Cited
132, 153A, 153D, 153A(1)
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Income Tax Appellate Tribunal, DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
Noida (‘Ld. CIT(A)’ for short) dated 21/10/2024 pertaining to Assessment Years 2016-17 to 2019-20 respectively.
Brief facts of the case are that, a search and seizure operation
u/s 132 of the Income Tax Act, 1961 ('Act' for short) has been carried out in the residential premises of the Assessee. The respective assessment proceedings u/s 153A of the Act were initiated against the Assessee and the assessment orders came to be passed for the Assessment Years 2016-17 to 2019-20 under Section 153A of the Act by making certain additions. Aggrieved by the Assessment Orders for the years under consideration, the Assessee preferred Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders dated 21/10/2024, sustained the partial addition and partly allowed the Appeals of the Assessee. As against the orders of the Ld. CIT(A), the Assessee preferred the captioned Appeals.
The Ground No. 3 & its sub Ground in ITA No.
5203/Del/2024,Ground No. 4 & sub Grounds in ITA No.
5200/Del/2024, 5201/Del/2024 and 5204/Del/2024 are regarding the legality or otherwise of framing the Assessment Orders consequent to the erroneous approval accorded u/s 153D of the Act.
Ld. Counsel for the Assessee addressing on the above grounds,
submitted that the approval accorded u/s 153D of the Act is a mechanical and arbitrary approval without their being any application of mind. Further, the approval has been granted for 21 cases in a single day, thus, the approval granted without satisfying the statutory pre-conditions of the Act as such the assessment so framed is null and void. The Ld. Counsel further submitted that approval issued u/s 153D of the Act does not mention any seized document having been perused and a single approval has been granted for several Assessment Years pertaining to the Assessee along with other Assessees. The Ld. Counsel relying on the plethora of Judgments, sought for quashing the assessment order.
The Ld. Departmental Representative has called for the comments from the A.O. and placed the same on record. The Ld.
Department's Representative contended that initially approval has been sought on 08/04/2021 by the ACIT, Central Circle. In response, a letter dated 15/06/2021 was sent from Office of the Range Head for re-examination in the light of seized material. After the due deliberation, once again a letter was sent by the ACIT on 23/06/2021 seeking approval u/s 153D of the Act. Thereafter, on 25/06/2021, the approval u/s 153D has been granted from the Office of the ACIT, Central Range. Therefore, submitted that the approval u/s 153D of the Act has been granted after applying mind.
Thus, sought for dismissal of the above grounds of the Assessee.
We have carefully considered the submissions of the parties and also verified material available on record and the case laws cited. The legal objection of transgression of requirement of approval under S.
153D of the Act is in question which has the effect on the very substratum of the assessment and consequential appellate proceedings.
For the purpose of deciding the issue of legality of approval
accorded u/s 153D of the Act and the consequential assessment proceedings, we shall straightway advert to the approval accorded u/s 153D of the Act. The approval under s. 153D of the Act dated
25/06/2021 granted by the Addl. CIT, Central Range, Meerut addressed to ACIT, Central Circle, Meerut is reproduced hereunder:-
On a perusal of the approval dated 25/06/2021 addressed by ACIT Central Range, Meerut, it emerges that the Addl. CIT, has not uttered a word on the subject matter of additions. The approval is in the nature of Performa approval; the approval granted smacks of mechanical or perfunctory approval in a symbolic exercise of powers
vested under s. 153D of the Act. Apart from the same, a single approval has been granted for seven Assessment Years pertaining to the Assessee along with other two Assessees for seven Assessment
Years each.
The Hon’ble Jurisdictional High Court in the case of Pr.
Commissioner of Income Tax Vs. Shiv Kumar Nayyar (supra) held 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, 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 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 OnLineOri 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 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 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]
14. 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 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. 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."
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.”
Significantly, the Hon’ble Orissa High Court in the case of ACIT vsSerajuddin& Co. 454 ITR 312 (Orissa) had an occasion to examine substantial question of law on the propriety of approval granted under Section 153D of the Act. The 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 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 ratio of judgment delivered in the case of ACIT vs Serajuddin& Co. Kolkata; PCIT vs Anuj Bansal; PCIT vs Shiv Kumar Nayyar; and PCIT vs SubhashDabas (supra) has held in chorus that the approval granted under s. 153D of the Act, if granted mechanically, will vitiate the assessment order itself. The SLP filed against the aforesaid judgment in the case of ACIT vs Serajuddin& Co. Kolkata was dismissed as reported in (2024) 163 taxmann.com 118 (SC).
As noted above, in the instant case, a single approval u/s 153D has been accorded in respect of seven Assessment Years pertaining to the Assessee along with other two Assessees for seven Assessment Years each. There is no mentioning of seized material in the other material to show involvement of the superior authority in the approval granted by the ACIT. Applying the ratio of judgments delivered as noted above, the assessment order based on ritualistic approval stands vitiated and thus quashed by allowing the Ground No. 3 and sub , 5201/Del/2024 and 5204/Del/2024.
In the result, the appeal of the Assessee in ITA Nos.
5200/Del/2024, 5201/Del/2024, 5202 /Del/2024 and 5203/Del/2024 are allowed.
Since, we have quashed the Assessment Order on the ground of erroneous approval accorded u/s 153D of the Act, we do not consider it necessary to address on other legal and factual contentions raised in the other grounds of Appeals of the Assessee.
Order pronounced in the open court on 28th May, 2025