SWIFT IMPEX PRIVATE LIMITED, NEW DELHI,NEW DELHI vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-27, NEW DELHI, NEW DELHI

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 7 '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.

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 8 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."

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 9 our considered opinion the approvals so granted under the shelter of section 153D of the Act does not pass the 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.

In the result, the Appeals filed by the Assessee in and are allowed.

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; 10 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.

In the result, appeal of the assessee is allowed.”

We noted from the contents of para 2 of the approval u/s. 153D in each case similarly worded shows that the approval is accorded on the basis of detail discussion held with the AO from time to time and also on the facts mentioned in the appraisal report and relevant seized documents perused by the AO had not by the approving authority. The word used are ”relevant seized document perused by you and brought to the notice of undersigned”. Now the question before us is whether the wording of the approval as noted above would satisfy the requirement of Section 153D of the Act? 11. The Joint Commissioner of Income Tax, Central Circle, Central Range-7, Delhi while granting approval, needed to examine all the material including the assessment records, 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 and the draft assessment order and after considering all the material should accord the approval. From the perusal of the approval letter as reproduced above, it is seen that similarly worded and same dated approval was given without perusal of the seized material.

We also noticed that the Hon’ble Allahabad High Court in case of PCIT v. Sapna Gupta [2023] 147 taxmann.com 288 (Allahabad) was pleased to hold that 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. We further noticed that Hon’ble Orissa High Court in the case of ACIT vs. Serajuddin & Company (2023) 150 taxmann.com 146 (Orissa), it was held that 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 needs the requirement of the law. It was further held that 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”. (ii) the final approval must be in writing; (iii) in fact that approval has been obtained, should be mentioned in the body of the assessment order.” Regarding the above, the observations of the Hon’ble Orissa High Court in para 22 of the judgment can be quoted with profit and extracted below: ”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 12 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 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, (7) the AO 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: (i) 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.” The SLP filed against the aforesaid judgment in the case of ACIT vs. Sirajjudin & Co. (supra) was dismissed by the Hon’ble Supreme Court as reported in (2024) 163 taxmann.com 118 (SC).

In the case of PCIT vs. Anuj Bansal, dated 13.07.2023, it was reiterated that the exercise of powers u/s 153D of the Act cannot be done mechanically. The grant of approval u/s 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. Further, we noticed that the Ld. Co-ordinate Bench in the case of DCIT vs. Ramesh Sharma, order dated 23.01.2026 regarding mechanical granting of the approval u/s 153D of the Act which relevant part is reproduced as under: “8. Significantly, the Hon’ble Orissa High Court in the case of ACIT vs Serajuddin & Co. 454 ITR 312 (Orissa) had an occasion to examine

On perusal of the aproval u/s 153D of the Act and the assessment order, we have noticed that there is no mention of taking of the approval u/s 153D of the Act in the assessment order which has violated the para 9 of chapter 3 of valume II (Technical) manual of office procedure issued by CBDT in February 2003, in exercise of its powers u/s 109 of the Act, which were discussed and approved by Hon’ble Orissa High Court in Sirajuddin & Co. Case (supra) extracted below as under: "9. Approval for assessment-An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT (For the period from 30-6-1995 to 31-12-1996 the approving authority was the CIT.). The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval t the proposed block assessment, at least one month before the time barring date. Finally once suc. approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself."

Further, the approval granted by the concerned authority in these cases as noted by us was not on the basis of perusal of the material by the approving authority as the approving authority has not perused the seized material personally and merely relied upon the perusal of the seized documents by the AO/ applicant and there is no personal satisfaction of the officer granting approval which makes the said approval u/s 153D of the Act as mechanical having been granted without independent satisfaction and non-application of mind.