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Facts
A search and seizure operation was conducted, leading to the discovery of diaries containing cash entries. The Assessing Officer added an amount based on these entries and framed assessment orders under Section 153C. The assessee appealed these orders.
Held
The Tribunal held that the approval obtained under Section 153D was invalid as it was a common approval for multiple assessment years, granted mechanically without due application of mind. This vitiates the entire assessment.
Key Issues
Whether the common approval under Section 153D for multiple assessment years is valid and whether the assumption of jurisdiction under Section 153C is fundamentally flawed due to the invalid approval.
Sections Cited
153C, 153D, 132, 132(4), 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Sh. S. Rifaur Rahman & Sh. Sudhir Kumar
Per Sudhir Kumar, Judicial Member:
The instant batch of 03 appeals pertains to the single assessee herein namely, Gaurav Verma, against the separate orders of the Ld. CIT(A)-24, New Delhi pertaining to assessment years 2017-18, 2018-19 & 2019-20 wherein, the assessee has raised various grounds of appeal. But, at the time of hearing, Ld. AR for the assessee has filed an Application for admission of common additional grounds of appeal in all the 03 appeals. Since common grounds/additional grounds have been raised in all these appeals, hence, we are dealing with the facts of (AY 2017-18) being the lead case.
2. The following are common additional grounds have been raised in AY 2017-18 :- 1. That the Ld CIT(A) erred in law in upholding the impugned assessment order passed under section 153C of the Act when the AO has sought common approval u/s. 153D for the AY 2013-14 to 2019- 20 and which also was granted by the Ld. Addl. CIT by a common letter for all the assessment years from 2013-14 to 2019-20 purely in mechanical manner, without application of mind and when such approval is a non-est in the eyes of law and vitiates the entire assessment itself.
2. That the ld. CIT(A) erred, both on facts and in law in upholding the impugned assessment order passed u/s. 153C of the Act which was without valid jurisdiction, bad in law and was liable to be quashed inasmuch as the AO assumed jurisdiction u/s. 153C on the basis of a single, consolidated and mechanical “satisfaction note” common for all the assessment years, without recording a proper, independent and case-specific satisfaction for each assessment year separately and without establishing any linkage of seized material to the specific year under assessment, as mandated under section 153C rendering the assumption of jurisdiction fundamentally flawed and the resultant assessment orders void ab initio.
3. The brief facts of the case are that the assessee filed his original return of income for the A.Y. 2017-18 on 05-08-2017 declaring the total income of Rs.4,86,840/-. Further search and seizure action u/s. 132 of the Act was conducted on 08.12.2018 in M/s H.S. Impex group of cases wherein the office premise of M/s Dengen Products India LLP, where Shri Prateek Chitkara is partner, was also covered. During the search proceedings u/s. 132 of the Act at 4/3, WEA Saraswati Marg, Near Hotel Apra Deluxe, Karol Bagh, New Delhi – 5, the office premises of M/s Dengen Products India LLP on 8.12.2018 were conducted, however, Mr. Prateek Chitkara was not present at the premises and the proceedings were conducted in the presence of Mr. Shiv employee of Prateek Chitkara. During search action, 10 spiral diaries were found, seized and marked as Annexure A-1 to A-10. There were various cash entries in the said diaries which appeared to be relating to the cash committees and various other entries of cash received from and paid to various persons. Statement of Sh. Shiv was recorded on oath u/s. 132(4) of the Act on 8.12.2018 and he admitted that the entries in the diaries, marked as Annexure A-1 to A-10 seized from the said premises are relating to the cash committees being controlled and run by Prateek Chitkara and he also elaborated the procedure how the cash committees works. AO observed that assessee has been indulged in various cash transactions which have not been recorded in his regular books of accounts and reported by the assessee in any manner. Since the assessee has failed to explain the nature and source of the cash amounts transacted by him even after affording due opportunity to do so that he failed to avail and therefore, the amount of Rs. 16,000/- appearing in the said diaries are added to the income of the assessee, on the basis of peak receipts appearing in diaries as unaccounted money u/s. 69A of the Act by assessing the total income at Rs. 5,02,840/- u/s. 153C of the Act. Aggrieved the order of the AO the assessee filed the appeal before the Ld. CIT(A) who dismissed the appeal of the assessee, against which the assessee filed this appeal before the Tribunal.
We have heard both the parties at length and perused their respective submissions along with all the case files.
The learned AR of the assessee submitted that Ld. CIT(A) erred in law in upholding the impugned assessment order passed under section 153C of the Act when the AO has sought common approval u/s. 153D for the AY 2013- 14 to 2019-20 and which also was granted by the Ld. Addl. CIT by a common letter for all the assessment years from 2013-14 to 2019-20 purely in mechanical manner, without application of mind and when such approval is a non-est in the eyes of law and vitiates the entire assessment itself. He further submitted that ld. CIT(A) further erred, both on facts and in law in upholding the impugned assessment order passed u/s. 153C of the Act which was without valid jurisdiction, bad in law and was liable to be quashed inasmuch as the AO assumed jurisdiction u/s. 153C on the basis of a single, consolidated and mechanical “satisfaction note” common for all the assessment years, without recording a proper, independent and case-specific satisfaction for each assessment year separately and without establishing any linkage of seized material to the specific year under assessment, as mandated under section 153C rendering the assumption of jurisdiction fundamentally flawed and the resultant assessment orders void ab initio.
The Ld. DR of the Revenue relied upon the orders of the authorities below and objected to the submissions of the ld. AR. She submitted that the approval u/s 153D of the Act is administrative approval. The procedure to approval process has no relevance to the assessee and the proceedings. She also submitted that approval was granted after perusal the draft order.
We note that there arises the first and foremost issue of validity of all the impugned assessments framed u/s 153C of the Act, in consequence to the search action herein dated 08.12.2018, on the ground that the learned prescribed authority had not accorded a valid approval thereto u/s 153D of the Act. We may reproduce the approval u/s 153D of the Income Tax Act, which read as under:
7.1 We find that in the case of ACIT, Circle1(2) vs. M/s Serajudeen and Co., the Hon’ble Supreme Court dismissed the appeal filed by the Department of Revenue against the order dated 15-03-2023 in wherein the Hon’ble Orissa High Court in to 45/2022 held that:
“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 CIT. 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 see or approved will not satisfied the requirement of law.”
7.2 We further find that in the case of Pr. Commissioner of Income Tax -15 v. Shiv Kumar Nayyar the Hon’ble Delhi High Court held that : “17” Notable, 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 fail 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. 7.3 We observe that learned Assessing Officer had sought the prescribed authority’s approval on 29.03.2023 which stood granted on 30.03.2023. The sole issue is that the learned Assessing Officer herein had infact sought a common approval for the assessment years from 2013-14 to 2019-20 which stood granted, and therefore, we quote PCIT Vs. Shiv Kumar Nayyar (2024) 163 taxmann.com 9 (Del.), PCIT Vs. MDLR Hotels (P) Ltd. (2024) 166 taxmann.com 327 (Del.) and ACIT vs. Serajuddin and Co. (2024) 163 taxmann.com 118 (SC), to conclude that such a combined section 153D approval indeed vitiates the entire assessment itself. We draw strong support therefrom to quash all the impugned assessments framed herein in assessee’s case in assessment years 2017-18, 2018-19 & 2019-20 in very terms.
As a result, the assessee’s quantum appeals being 4455 & 4456/Del/2025 involving the corresponding impugned assessment succeed.
8.1 All other pleadings on merits herein stand rendered academic.
To sum up, these assessee’s 03 appeals ITA Nos.
4454, 4455 & 4456/Del/2025 are allowed. A copy of this common order be placed in the respective case files.
Order Pronounced in the Open Court on 20/03/2026.