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Facts
A search and seizure action under section 132 was conducted, followed by a notice under section 153A. The Assessing Officer (AO) passed an assessment order, which was upheld by the CIT(A) after the assessee's appeal was dismissed. The assessee then appealed to the ITAT.
Held
The Tribunal held that the approval granted under section 153D by the Addl. CIT was mechanical and lacked independent application of mind, as evidenced by a single common approval for multiple assessment years and no clear indication of material review. Consequently, the assessment order was vitiated.
Key Issues
Whether the approval granted under section 153D of the Income Tax Act, 1961, for the assessment order was mechanical and vitiated the assessment.
Sections Cited
153A, 153D, 132, 127
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IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'B', NEW DELHI
BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER
ITA No.5171/Del/2024 [ASSESSMENT YEAR 2018-19]
Gaurav Kathuria | ACIT H.No.1567/19 | Cent. | Gurugram Shri Nagar Colony | Vs Near Double Pathak Haryana-124001 PAN-CBYPK0864K (Appellant) | ( F | Respondent) Assessee by | Shri Deepak Upadhaya, CA Department by | M | Ms. Pooja Swaroop, CIT (DR) 12.01.2026 Date of Hearing | 12.01.2 | 2026
ORDER
PER MANISH AGARWAL, AM:
The present appeal is filed by assessee against the order dated 18.09.2024 by Ld. Commissioner of Income Tax (A)-3, Gurgaon ["Ld. CIT(A)"] in Appeal No.10543/2017-18 passed u/s 250 of the Income Tax Act, 1961 ["the Act"] arising out of assessment order dated 08.06.2021 passed u/s 153A of the Act pertaining to Assessment Year 2018-19.
Brief facts of the case are a search and seizure action u/s 132 of the Act was carried out in the case of Shri Krishan Group of cases, Rohtak on 11.01.2019 including the assessee. Subsequently, notice u/s 153A(1) of the Act dated 20.01.2020 was issued, in response to
which return of income was filed by the assessee on 05.05.2020, declaring total income of INR 19,97,280/-. Thereafter, various notices were issued from time to time and in response, the assessee furnished the requisite documents/reply to the lower authorities. After considering the submissions of the assessee, AO passed the assessment order u/s 153A on 08.06.2021, assessed the total income of assessee at INR 29,70,280/-.
- 3. Against the said order, assessee preferred an appeal before the ld. CIT(A) who vide impugned order dated 18.09.2024, dismissed the appeal of the assessee. - 4. Aggrieved by the order of Ld. CIT(A), the assessee preferred appeal before the Tribunal by taking following grounds of appeal:- - 1. "The Ld. AO has grossly erred in framing assessment with preconceived notion and without appreciating material on record. - 2. The Learned AO has erred in making addition amounting to Rs. 9,73,000/-. - 3. The appellant craves to add, alter, and amend any ground of appeal during the hearing of appeal. - 4. The Notice issued us. 153A by the Ld. AO is bad in law. - 5. The Assessment Order us. 153A passed by the Ld. AO is bad in law ." - 5. During the course of hearing, Ld.AR raised additional grounds of appeal under Rule 11 of the Income Tax Appellate Tribunal Rules, 1963. The additional grounds of appeal taken read as under:
"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 the order passed under section 127 of the income-tax Act, 1961 transferring the case of the appellant is bad in law, void ab initio and without jurisdiction, as the same has been passed without comply the mandatory condition ie. recording proper reasons and without affording adequate and meaningful opportunity of being heard, in violation of the mandatory provisions of the Act as well as principles of natural justice.
Additional Ground No.3: That the notice issued under section 153A of the Income-tax Act, 1961 is bad in law, void ab initio and without jurisdiction, as the said notice has been issued manually and without a Document Identification Number (DIN), in contravention of the mandatory requirements prescribed by CBDT Circular No. 19/2019 dated 14.08.2019, rendering the notice invalid and all consequential proceedings liable to be quashed."
- 6. Ld.AR submits that additional grounds of appeal now taken are purely legal in nature and goes to the root of the matter and requires no investigation or verification thus, the same be admitted for adjudication. He placed reliance on the judgement of the hon'ble supreme court in the case of NTPC Ltd. vs. CIT reported in (1998) 229 ITR 0383 (SC). - 7. On the other hand, Ld. CIT DR for the Revenue submits that additional grounds of appeal require verification on the part of the AO therefore, the same should not be admitted at this stage. - 8. After considering the submissions and perused the additional ground of appeal taken, we find that the assessee has challenged the
validity of the assessment order as the approval granted u/s 153D of the Act was not valid. Since its purely a legal issue and require no verification thus, by respectfully following the judgement of Hon'ble Supreme Court as relied upon by the assessee, the additional grounds of appeal taken by the assessee are admitted for adjudication.
- 9. First we take the additional Ground of appeal No.1 taken by the assessee wherein assessee has challenged the stated the validity of assessment order with regard to the approval granted u/s 153D in mechanical manner is challenged. - 10. Before us, Ld. AR for the assessee submitted that in the present case, approval was granted by ld. Addl. CIT, Central Range, Gurugram vide letter dated 20.04.2021 which is mechanical approval. Ld. AR further submits that ld. Addl. CIT granted common approval for various Assessment Years from 2017-18 to 2019-20 in terms of letter bearing No. Addl. CIT(CR)/GGN/2021-22/108 dated 20.04.2021. He submits that from the perusal of the same, it could be seen that approval granted by the Id. Addl. CIT was mechanical approval and separate approval for each Assessment Year was not given rather approval was given by a single order for various assessment years. The letter seeking approval by the AO and the approval so granted by ld. Addl. CIT are reproduced as under:
ADDL. COMMISSIONER OF INCOME TAX (CENTRAL RANGE), GURUGRAM 7th FLOOR, HSHIDC BUILDING, UDYOG VIHAR, PHASE-V, GURUGRAM Phone No - 0124-2450460, 2450051, Fax No - 2450097
E-mall - Gurgaon.addlelt.con@incometax.gov.in
F. No. Addl., CIT (CR)/GGN/2021-22/ 108
Dated: 20.04.2021
To.
The Asstt. Commissioner of Income Tax, Central Circle-1, Gurgaon
Sub: Approval u/s 153D of the Income Tax Act, 1961 in the case of Sh. Gaurav Kathuria, PAN- CBYPK0864K for A.Y. 2017-18 to 2019-20-Regarding-
- This is in reference to your letter No. 32 dated 20.04.2021 whereby you have submitted draft orders to be passed seeking approval u/s 153D of the I.T. Act, 1961 in the case of Sh. Gaurav Kathuria, PAN-CBYPK0864K for A.Y. 2017-18 to 2019-20. - The approval u/s 153D of the IT Act, 1961, is accorded for the A.Y. 2017-18 to 2. 2019-20 considering the facts as submitted that - 1. Proper opportunity of being heard was provided to assessee. - 2. All the issues appearing from the material on record were duly examined - 3. Relevant copies of seized documents were verified before passing the draft - 1. It is further directed that order should be passed well before the limitation and copies of the final orders so passed be sent to this office for records.
Encl: As above
Addl. Commissioner of Ind Central Range, Garugram
2 0 APR 2021
- 11. Ld. AR further submits that from the perusal of the approval, it could be seen that Addl. CIT while granting the approval has not stated whether he has gone through the seized material, assessment records including the replies filed by the assessee with reference to the additions/ disallowance proposed in the drafts assessment orders for various assessment years. As per ld. AR Addl. CIT in the approval letter has referred the action taken by AO of making enquiries and considering all the material and providing sufficient opportunity to the assessee. Nowhere in the approval letter ld. Adl. CIT has made reference of any discussions the AO and the Adl. CIT nor has referred the seized material before granting the approval. As per ld. AR, the Addl. CIT has not verified the material, nor any reference was made in the approval letter about the material supplied to him by the AO alongwith the draft assessment orders for his consideration and thus it is a mechanical approval given. Ld. AR also stated that the approval was sought on the same day when it was granted. - 12. Ld. AR finally submits that common approval is given for various Assessment Years which is contrary to the provisions of section 153D of the Act and therefore, he prayed that there was no proper application of mind before granting the approval by ld. Addl. CIT and thus assessment order so passed deserved to be held as null and void. He placed reliance on the following judgements:- - (i) M/s Tavleen Resorts & Spa Pvt. Ltd. Vs. DCIT in ITA No. 3361- 3366/Del/2024 - (ii) Smt Peu Veer Vs. DCIT in ITA No. 3367-3370/Del/2024 & 3380 to 3381/Del/2024
- (iii) Mainee Steel Works Pvt. Ltd. Vs. DCIT in ITA No. 3371 to 3377/Del/2024; - (iv) Divjot Singh Mainee Vs DCIT in ITA No. 3378-3379/Del/2024 - (v) Sohan Lal Single (AOP) Vs. DCIT in ITA No. 711-712/Del/2023 and 713-714/Del/2024 - 13. On the other hand, Ld. Sr. DR for the Revenue supports the order of AO and submits that approval was though was granted on the same day but is not a mechanical approval. As per CBDT Circular dated 22.12.2006, the Range head i.e. the JCIT/ Addl. CIT is fully aware of the assessment proceedings and actively discussed with the AO from time to time with reference to the issues relating to different assessment years and the nature of contents of the seized material. Ld. CIT DR 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 CBDT 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. It is thus prayed by Id. CIT DR that the contentions of the assessee on the issue of approval u/s 153D of the Act may please be rejected and the order of the AO may please be upheld. Reliance is placed on the judgement of Co-ordinate Mumbai Bench of Tribunal in the case of Usha Satish Salvi Vs. ACIT in ITA No. 4237 to 4239/Mum/2023
order dated 23.01.2025 wherein the issue of validity of assessment order passed u/s 143(3) r.w.s.153A of the Act in light of provisions of section 153D of the ACT was decided against the assessee.
- 14. Heard the contentions of both the parties and perused the material available on record. In the instant case, from the perusal of common approval letter as reproduced above, for three assessment years, it is incumbent upon the Additional CIT while granting the approval, 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 each individual assessment year for which approval is sought. Further, approval is to be granted for each assessment year separately. - 15. The Hon'ble Jurisdictional High Court in the case of Shiv Kumar Nayyar in ITA No.285/2024 [TS-343-HC-2024-Delhi] has held that 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 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, Le. 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.
\\\\
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, (ii) 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 - 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. - 16. 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 Id. 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 Id. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The Id. 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 Id. 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 Id 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 id Addl. CIT has granted a single approval for all assessment years put together"
- 17. 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." - 16. 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 u/s 153D of the Act. The Hon'ble Orissa High Court made wide ranging observations towards the manner and legality of approval u/s 153D of the Act. The Hon'ble High Court inter-alia observed that approval u/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 justifiable. 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 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. was dismissed as reported in (2024) 163 taxmann.com 118 (SC).
In so far as the order of the Co-ordinate Bench of the Tribunal (Mumbai Bench) relied by the Ld. Department's Representative in the case of Usha Satish Salvi (supra), in the said case, certain modifications were suggested to the A.O. in the draft assessment order, which have been carried out by the A.O. while passing the Assessment Order and the coordinate Bench observed that the said fact shows that approving authority approved the draft order not in mechanical manner but after due application of mind. However, in the present case, no such application of mind is forthcoming. Further in the case of Usha Satish Salvi (supra), the Ld. Department's Representative has filed affidavit of the then Assessing Officer and the approving authority who have denied the allegations raised by
the Assessee. After relying on the same so called unchallenged depositions made in the Affidavit of the then A.O. and the approving authority, (which has been filed much after the granting of the approval and at the stage of second Appeal before the Tribunal), upheld the order of the Id. CIT(A). Therefore, the present case in hand is factually distinguishable. In view of the judgement of the Hon'ble Delhi High Court in the case of Shiv Kumar Nayyar (supra), which is having binding precedent, and the order/ratio of the Tribunal in the case of Usha Satish Salvi (supra) has no effect of binding precedent.
- 18. 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 Three assessment years and there is no other material to show involvement of the superior authority in the course of assessment proceedings. 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 No. 1 of the Assessee. - 19. Since we have already allowed the additional Ground of appeal No. 1 taken by the assessee thus, other grounds of appeal are not adjudicated.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 06.02.2026.
Sd/- Sd/-
(ANUBHAV SHARMA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:06.02.2026 \Amit Kumar, Sr. PS\
Copy forwarded to:
- 1. Appellant - 2. Respondent - 3. CIT - 4. CIT(Appeals) - 5. DR: ITAT - 6. Guard File
ASSISTANT REGISTRAR ITAT, NEW DELHI