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Facts
A search action under Section 132 of the Income Tax Act led to an assessment under Section 153A/153D/143(3), with an addition of ₹37 lacs for bogus long term capital gain. The assessee challenged the assessment order, contending that the mandatory prior approval under Section 153D was invalid as it was granted mechanically for multiple entities and assessment years in a consolidated manner without proper application of mind.
Held
The Tribunal, relying on precedents from the Supreme Court and various High Courts, held that the approval granted under Section 153D for multiple assessees/assessment years in a consolidated, mechanical manner, without individual application of mind to each case and year, was invalid. Consequently, the approval granted under Section 153D and the assessment orders framed under Section 153A based on such a flawed approval were quashed.
Key Issues
Whether the prior approval granted by the Additional Commissioner of Income Tax under Section 153D of the Income Tax Act, 1961, was valid when granted mechanically and consolidated for multiple assessees and assessment years, and if not, its impact on the legality of the subsequent assessment orders framed under Section 153A.
Sections Cited
153A, 153D, 143(3), 132, 143(2), 142(1), 127, 133A, 143(1), 144BA, 139, 153B, 158BG
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Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI
Before: SHRI RAJESH KUMAR, AM & SHRI MANOMOHAN DAS, JM
“FOR THAT the Ld. Commissioner of Income Tax (Appeals), Guwahati-1 acted unlawfully in upholding the assessment order framed u/s. 153A/143(3) of the Income Tax Act, 1961 as framed by the Ld. Deputy Commissioner of Income Tax, Circle 1, Guwahati without any valid approval required u/s 153D of the Income Tax Act, 1961 from the ld. Additional Commissioner of Income Tax, Range I. Guwahati as required under the statute and the purported action on that behalf is thoroughly opposed to law"” 3.1. The facts in brief are that a search action u/s 132 of the Act was conducted in the CMG group and SM group of cases during the period from 02.06.2016 to 01.08.2016. A search action u/s 132 of the Act was also conducted on 02.06.2016 on the residential premises of Smt. Reshmi Jain at 402, Raheja Haven Prananjali, 10th Road, JVPD, Mumbai. During the course of search certain incriminating documents, paper folders, mobile data were found and seized. Besides cash of ₹80,500/- was also found and inventoried as per annexure-2 of Panchanama. Notice u/s 153A of the Act was issued on 31.08.2017, calling upon the assessee to filing the return of income. The assessee filed the return of income online on 27.10.2018, declaring total income of ₹69,84,340/-. Thereafter, notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued which were duly complied with by the assessee. Finally, the assessment was framed u/s 153A/153D/143(3) of the Act vide 3.5. After hearing the rival contentions and perusing the materials available on record including the approval granted u/s 153D of the Act dated 28.12.2018, we find that in this case the draft assessment was sent to the Addl. CIT, Range-1, Guwahati and he granted an approval u/s 153D of the Act vide letter dated 28.12.2018 in the cases of Shri MG Group thereby granting approval to ten persons/entities including the assessee. For the sake of ready reference and convenience, the same is extracted below:-
3.6. Therefore, considering the approval granted u/s 153D of the Act for ten persons/entities together is not a valid approval and curtained the approval is granted in a machenical manner and without application of mind. In our cosndiered opinion the approval has to be granted afgter perusing the draft assessment order carefully in each case separately however the Add. CIT granted consolidated approval which is invalid and has to be quashed.
“1. The solitary question which stands posted before us for adjudication pertains to whether, under the facts of the present case, the specified authority has granted approval in accordance with the mandate of Section 153D of the Income Tax Act, 1961 ["Act"]? 2. The instant appeal, at the instance of the Revenue, impugns the order of the Income Tax Appellate Tribunal ["ITAT"] dated 26.07.2023, whereby, the assessment order has been held to be illegal for lack of appropriate approval under Section 153D of the Act.
As per record, the appeal pertains to Assessment Year ["AY"] 2015-16. The dispute essentially emanates from a search and seizure operation which was conducted on 18.11.2016 under Section 132 of the Act by the Investigation Wing in Nayyar Group of cases, including the residential premises of the assessee. The said operation was followed by a survey operation under Section 133A of the Act.
Pursuant to the aforenoted search, an order under Section 127 of the Act was passed which led to centralization of the case of the assessee. Consequently, a notice under Section 153A of the Act was issued to the assessee on 22.09.2017. In response to the said notice, the assessee filed its Income Tax Return ["ITR"] on 14.08.2018, declaring an income of ₹18,48,450/- and the same was processed as per the provisions of Section 143(1) of the Act. Subsequently, the case of the assessee was picked up for scrutiny assessment and a notice under Section 143(2) was duly issued.
5. Thereafter, on 30.12.2018, an assessment order was passed by the assessing officer ["AO"] under Section 153A read with Section 143(3) of the Act, whereby, the total taxable income of the assessee was pegged at ₹5,19,85,970/-. Being aggrieved by the additions made by the AO, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) ["CIT(A)"]. Vide order dated 09.07.2021, the CIT(A), while partly allowing the appeal of the assessee, deleted certain additions made by the AO.
However, the Revenue preferred an appeal against the order of the CIT(A) before the ITAT, wherein, the approval under Section 153D of the Act by the competent authority was found to be flawed and mechanical in nature and as a sequitur, the entire search assessment was declared to be illegal.
Learned counsel for the Revenue submitted that there is no infirmity in the approval granted by the concerned authority and therefore, the ITAT has erred in declaring the assessment order to be invalid. He contended that merely because the approval was granted on the same day when the draft assessment orders were sent by the AO, the same cannot be a ground to hold that the approval was accorded without any application of mind. According to him, since the authority granting approval has been involved in the assessment proceedings from the initial days, the same
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 “Considering the submissions of the learned counsel for the parties and having perused the order of the Tribunal, in view of the undisputed facts before us about the manner in which the approval to the draft assessment order was granted under Section 153D for the assessment proceedings, by a letter dated 30.12.2017 in 85 cases placed before the approving authority in a single day, we are required to examine as to whether a substantial question of law arises for consideration before us so as to admit the present appeal. To answer the same, we are required to go through the relevant provisions of the Income Tax Act. Section 132 provides the procedure for search and seizure operations in consequence of the information in possession of the Income Tax Authorities. Section 153A prescribes assessment in case of search or requisition. Section 153A provides that in the case of a person where a search is initiated under Section 132, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years) referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may apply accordingly as if such return were a return required to be furnished under Section 139. Section 153D of the Act relevant for our purposes is to be noted hereinunder: "Prior approval necessary for assessment in cases of search or requisition. 153D. No order of assessment or reassessment shall be passed by an Assessing 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 or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner." Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is required to be passed by the Assessing Officer with the prior approval of the [Principal Commissioner or] Commissioner under sub-section (12) of section 144BA. The Tribunal while quashing the assessment order had relied upon its earlier decision in Navin Jain and Others (Supra) wherein a detailed discussion has been made with regard to the requirement of prior approval of superior authority on the draft assessment order under Section 153D, before passing the assessment order by the Assessing Officer. It was noted that the word 'approval' though has not been defined in the Income Tax Act but the general meaning of the word 'approval' in Black's Law Dictionary, 6th Edition was to be seen. The decision of the Apex Court in Vijayadevi Naval Kishore Bharatia vs. Land Acquisition Officer (2003) 5 SCC 83 wherein the distinction between Approving Authority and Appellate Authority was drawn, had been noted. The decision of the High Court of Gauhati in Dharampal Satyapal Ltd. vs. Union “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, 19A, u/s.153A/143(3)/144/145(3) 2003-04 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 3.11. The appeal of the assessee is allowed.
to 310/GTY/2019 For A.Ys. 2015-16 &2016-17 4. The issue raised in these appeals are similar to one as decided by us in ITA No. 306/GTY/2019. Accordingly, our decision would, mutatis mutandis, apply to these appeals of assessee in to 310/GTY/2019 for A.Y. 2015-16 & 2016-17 as well. Hence, the appeals of assessee are allowed.
In the result, the all the appeals of the assessees are allowed.
Order pronounced in the open court on 18.12.2025.