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Facts
Three appeals were filed by two assessees, Soumendra Kumar Mohanty and Smt. Avinandita Mohanty, against separate orders of the CIT(A). The appeals involve the issue of approval granted by the JCIT under Section 153D of the Income Tax Act, 1961, for passing assessment orders.
Held
The Tribunal held that the approval granted by the JCIT was mechanical and without application of mind. This was based on precedents from the Delhi High Court and the Jurisdictional High Court, which were also affirmed by the Supreme Court.
Key Issues
Whether the approval granted by the JCIT under Section 153D of the Income Tax Act, 1961, was valid or invalid due to lack of application of mind and being granted mechanically.
Sections Cited
153D, 153A, 143(3)
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
O R D E R PerBench: These are three appeals filed by two assessees being Soumendra Kumar Mohanty in for A.Y.2017-2018 and Smt. Avinandita Mohanty in for the A.Yrs.2012- 2013 & 2017-2018, against the separate orders of the ld. CIT(A), Bhubaneswar-2, all dated 28.04.2025. 2. At the time of hearing, it was fairly agreed by both the sides that in the three appeals the issues are covered by the decision of the coordinate 365&367/CTK/2025 bench of the Tribunal in the case of Soumendra Kumar Mohanty, passed in ITA Nos.284-289/CTK/2025 and in the case of Modern Engineering & Management Foundation in ITA No.290/CTK/2025, vide order dated 16.07.2025, wherein the coordinate bench of the Tribunal in paras 9 to 20 has held as follows :- 9. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the AO has sent the files for approval on 24.12.2018. Admittedly, 25.12.2018 was a holiday. A perusal of the facts in the present case further clearly shows that the ld. JCIT has given approval for multiple assessment years vide the same letter of approval dated 26.12.2018. A perusal of the various approvals granted by the ld. JCIT in the present case shows that he has used the common term “I have gone through the Assessment orders, appraisal report and other related materials of this case.” Then he proceeds to say, “Now, approval is hereby accorded as per the provisions of section 153D of the I.T.Act for passing assessment order in respect of the following cases…… The approval is accorded after due application of mind in these cases.” Here, it becomes evident that what he has found in each case have not discussed. In all the cases he has granted approval which is simply a mechanical approval. For this purpose it would be worthwhile to extract the approval given in other cases. In case of Sandhya Mohanty, the approval given by the ld. JCIT reads as follows :-
10. In case of Sri Debasis Mohanty, the approval given by the ld. JCIT reads as follows :-
11. In case of Smt. Avinandita Mohanty, the approval given by the ld. JCIT reads as follows :-
12. In case of Smt. Namita Mohanty, the approval given by the ld. JCIT reads as follows :-
13. This clearly shows that the ld. JCIT has found no suggestion to give the AO in regard to the assessment much less any discussion with the AO in regard to the draft assessment orders proposed. When this is considered in line with the decision of the Hon’ble Delhi High Court in the case of Shiv Kumar Nayyar (supra), which has been extracted above, it clearly shows that the ld. JCIT has given approval for multiple assessment years by a single approval letter. This is not permissible and consequently respectfully following the decision of the Hon’ble Delhi High Court in the case of Shiv Kumar Nayyar (supra), the approval granted by the ld. JCIT in the case of assessee u/s.153D is held to be invalid and the same stands quashed.
14. When the said approval is examined in the line of the decision of the Hon’ble Jurisdictional High Court in the case of Serajuddin & Co. (supra), it clearly shows that under similar circumstances, the Hon’ble Jurisdictional High Court has categorically held that the approval granted is invalid. In these circumstances, on the ground that there has been no application of mind by the ld. JCIT and the approval has been granted in a mechanical manner, respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of M/s Serajuddin & Co. which has been affirmed by the Hon’ble Supreme Court by dismissing the SLP filed by the revenue, the approval granted by the ld. JCIT for the impugned assessment years in the case of the assessee stands quashed.
It must also be mentioned here that the coordinate bench of the Tribunal in the case of Choudhury Swapan Kumar, passed in order dated 29.01.2025 along with other connected appeals, has under similar circumstances, quashed the approval granted u/s.153D of the Act by holding from para 7 to 15 as under :- 7. Ld. AR further proceeded to submit with regard to the second issue which is being raised against the approval granted u/s.153D of the Act by the ld. JCIT. The ld. AR drew our attention to page 3 of the paper book which is a copy of the approval granted by the ld. JCIT on 21.12.2018, which is as follows :-
He also drew our attention to a similar approval granted in the othercases, which is as follows :-
It was submitted that there were total 16 cases in the case of assessee’s group itself and these two approvals are only for theassessment year 2016-2017. The approval in all the cases were soughtvide letter dated 20.12.2020 and approval was granted on 21.12.2018.The assessment order clearly showed that the assessments have beendone for the assessment years 2011-2012 to 2016-2017, being six yearsand consequently the total number of approvals granted within 24 hoursby the JCIT in assessee’s own group itself comes to 84 approvals.
It was also submitted by the ld. AR that the ordersheet entry whichis placed in the paper book clearly showed that there was no mention ofthe files being sent for approval to JCIT. The said ordersheet placed in thepaper book at page 2 read as under :-
It was the submission that a perusal of the approval granted also clearly shows non-application of mind. He relied upon the decision of the Hon’ble Jurisdictional High Court in the case of Serajuddin and Co.
reported in [2023] 150 taxmann.com 146 (Orissa), wherein the Hon’ble jurisdictional High Court in para 21 to 25 has held as follows :- 21. It is seen that in the present case, the AO wrote the following letter seeking approval of the Additional CIT: GOVERNMENT OF INDIA OFFICE OF THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), BHUBANESWAR No. ACIT/C-1(2)//Approval/2010-11/5293 Dated, Bhubaneswar, the 27/29th December, 2010 To The Addl. Commissioner of Income-tax, Range-1, Bhubaneswar. Sub: Approval of draft orders u/s 153D of the I.T. Act 1961 in the case of M/s. Serajuddin & Co. 19A, British India Street, Kolkata (in Serajuddin Group of Cases)- matter regarding. Sir, Enclosed herewith kindly find the draft orders u/s 153A of the I.T.Act, 1961 along with assessment records in the case of M/s Serajuddin & Co., 19A, British India Street, Kolkata for kind perusal and necessary approval u/s.153D. No. Name of the assessee Section under which order passed Asst. Year 1 M/s Serajuddin & Co, u/s.153A/143(3)/144/145(3) 2003-04 19A, British India Street, Kolkata 2. -do- -do- 2004-05 3. -do- -do- 2005-06 4. -DO- -do- 2006-07 5. -DO- -DO- 2007-08 6. -DO- -DO- 2008-09 7. -DO- U/s.143(3)/144/153B(B)/145(3) 2009-10 3) The above cases will be barred by limitation on 31.12.2010. Encl: As above Yours faithfully, Sd/- Asst. Commissioner of Income-tax, Circle-1(2), Bhubaneswar of the Tribunal itself Government of India OFFICE OF THE ADDL. COMMISSIONER OF INCOME TAX, 3 Floor, Range-1, Bhubaneswar No. Addl. CIT/R-1/BBSR/SD/2010-11/5350 Dated, Bhubaneswar, the 30th December, 2010 To The Assistant Commissioner of Income Tax, Circle-1(2), Bhubaneswar. Sub: Approval u/s 153D-in the case of M/s Serajuddin & Co., 19A, British India Street, Kolkata-Matter regarding. Ref: Draft Orders u/s 153A/143(3)/144 for the A.Y. 2003- 04 to 2008- 09 u/s.143(3)/153B (b)/144 of the A.Y.2009-10 in the case of above mentioned assessee.
Please refer to the above The draft orders u/s 153A/143(3)/144 for the A.Y. 2003-04 to 2008-09 and u/s. 143(3)/153B(b)/144 for the A.Y. 2009-10 submitted by you in the above case for the following assessment years are hereby approved: Assessment Income Year Determined (Rs.) 2003-04 11,66,22,771 2004-05 36,46,80,016 2005-06 65,70,12,805 2006-07 60,02,65,791 2007-08 130,03,13,307 2008-09 274,68.87,069 2009-10 301,17,05,952 You are requested to serve these orders expeditiously on the assessee, submit a copy of final order to this office for record. Sd/- Addl. Commissioner of Income Tax, Range-1, Bhubaneswar 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 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 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; (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.
In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure.
The above manual is meant as a guideline to the AOs. Since it was issued by the CBDT, the powers for issuing such guidelines can be traced to Section 119 of the Act. It has been held in a series of judgments that the instructions under Section 119 of the Act are certainly binding on the Department. In Commissioner of Customs v. Indian Oil Corporation Ltd. 2004 (165) E.L.T. 257 (S.C.) the Supreme Court observed as under: "Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Central Board of Central Excise, Vadodara v. Dhiren Chemicals Industries: 2002 (143) ELT 19 where the view of the Constitution Bench regarding the binding nature of circulars issued under Section 37B of the Central Excise Act, 1944 was reiterated after it was drawn to the attention of the Court by the Revenue that there were in fact circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam 2003 (5) SCC 528. The principles laid down by all these decisions are: (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars."
For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves.
It was the submission that the decision of the Hon’ble Jurisdictional High Court has been approved by the Hon’ble Supreme Court as reported in [2024] 163 taxmann.com 118 (SC) by dismissing the SLP filed by the revenue. It was the submission that the approval granted in assessee’s case was similar to the approval granted in the case of Serajuddin & Co. and on this ground also the approval being vitiated consequently the assessment order is required to be annulled.
In reply, ld. CIT-DR drew our attention to the approval accorded bythe ld. JCIT. It was the submission that the approval letter refers to the several discussion that has been done between the AO and the JCIT. It was the submission that it also mentions that the JCIT has gone through the assessment orders and appraisal report and other relevant materialsin the case. It was the submission that the JCIT has applied his mindbefore making the approval and the same is liable to be upheld.
We have considered the rival submissions. As mentioned earlier bythe ld. AR that there are 84 cases in this group. It is surprising that JCIThas been able to go through the assessment orders, appraisal reports andother related materials for a minimum of 84 cases within one day. We usethe word “minimum of 84 cases” because this group alone contains 84cases and the JCIT could avail his other files also before him. Theassessment orders, in all the cases, are more than 9 pages, appraisalreports was also to be quite a few pages and the submissions of theassesee would be innumerable. These are physically impossible taskwhich has been admitted to by the ld. JCIT. Consequently, the approvalgranted in these cases are without application of mind. This being so,respectfully following the principle laid down by the Hon’ble JurisdictionalHigh Court in the case of Serajuddin & Co., reported supra, which hasalso been approved by the Hon’ble Supreme Court by dismissal of theSLP, the approval u/s.153D of the Act granted in the impugned appeal inthe case of Choudhury Swapan Kumar Mohapatra (ITANo.493/CTK/2024) for A.Y.2016-2017, by the JCIT, is held to be invalidand the consequential assessment order is hereby annulled. As theappeal of the assesee is allowed by allowing the legal grounds of appeal
,other grounds taken on merits become academic and not adjudicatedupon. Thus, the appeal of the assesee is allowed.
15. Since, we have already annulled the assessment framed by the AOin the case of Choudhury Swapan Kumar Mohapatra while dealing withthe appeal in for A.Y.2016-2017, by holding theapproval u/s.153D of the Act granted by the ld. JCIT as invalid, therefore,all the remaining eleven appeals filed by the eleven different assesseesas mentioned in the cause title above, which also come under the invalidapproval of the JCIT, are hereby allowed and the assessment framed inall the cases are hereby quashed.
16. This order of the Tribunal has not been challenged before the Hon’ble High Court also. In these circumstances, respectfully following the decision of the Hon’ble Delhi High Court, as referred to supra, the approval granted by the ld. JCIT in the case of the assessee for the impugned assessment years under consideration stands quashed on account of multiple approvals for multiple assessment years. Also respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of M/s Serajuddin & Co., referred to supra, on account of non- application of mind and granting the approval in a mechanical manner, the approval granted by the ld. JCITin the case of the assessee for the impugned assessment years under consideration stands quashed.
As we have quashed the approval granted by the ld. JCIT u/s.153D of the Act in the case of the assessee for the impugned assessment years under consideration, the consequential assessment years also stand quashed.
With regard to for A.Y.2016-2017 in the case of it was submitted that the approval given in this case also is a non- speaking approval and the same is without application of mind. Therefore, the approval given by the ld. JCIT is null and void and the same deserves to be quashed.
We have discussed the facts above in the case of assessee Soumendra Kumar Mohanty and search was also conducted in the case of assessee Modern Engineering & Management Foundation. The 365&367/CTK/2025 approval given by the ld. JCIT in this case also shows that non- application of mind. The said approval of the ld. JCIT in the case of Modern Engineering & Management Foundation reads as under :-
A perusal of the above approval clearly shows that similar approval has been given in the case of Soumendra Kumar Mohanty discussed above, wherein we have held that the such approval given by the ld.JCIT in mechanical manner is invalid and non- application of mind and multiple approvals for multiple assessment years. Therefore, the issue being similar to the issue decided in the case of Soumendra Kumar Mohanty, respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of M/s Serajuddin & Co.(supra) which has been affirmed by the Hon’ble Supreme Court by dismissing the SLP filed by the revenue, the approval granted by the ld. JCIT for the impugned assessment year in the case of the assessee stands quashed. 3. We carefully perused the order the coordinate bench of the Tribunal and gone through the observations made therein. A perusal of the order of the coordinate bench of the Tribunal clearly shows that in the said 365&367/CTK/2025 cases, the assesee had challenged the approval u/s.153D of the Act and the coordinate bench of the Tribunal found that the approval granted u/s.153D of the Act is invalid by following the decision of the Hon’ble Jurisdictional High Court in the case of M/s Serajuddin & Co., reported in [2023] 150 taxmann.com 146 (Orissa) as also the decision of the Hon’ble Delhi High Court in the case of Shiv Kumar Nayyar, reported in [2024] 487 ITR 186 (Delhi). As the issues involved in all the three appeals are similar to the issue decided by the coordinate bench of the Tribunal in the case of Shri Soumendra Kumar Mohanty and in the case of Modern Engineering and Management Foundation, referred to supra, therefore, respectfully following the decision of the coordinate bench of the Tribunal, as the appeals under consideration are one of the group cases, the approval granted u/s.153D of the Act is held to be bad in law and consequently the assessments made therein stand quashed.
In the result, appeals in (Soumendra Kumar Mohanty) and ITA No.365/CT/2025 & 367/CTK/2025 (Avinandita Mohanty) are allowed. Order dictated and pronounced in the open court on 24/09/2025.