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Facts
During a search and seizure operation, the assessee's income was assessed at Rs. 11,50,87,204/- as against declared income of Rs. 2,25,46,380/-. The assessee filed an appeal challenging the validity of the assessment order, claiming it was passed without proper approval under Section 153D of the Income Tax Act, 1961.
Held
The Tribunal held that the approval granted by the Joint Commissioner of Income Tax under Section 153D of the Act was mechanical and without proper application of mind, making the assessment order void-ab-inito. Consequently, the penalty proceedings were also set aside.
Key Issues
Whether the approval granted under Section 153D of the Income Tax Act, 1961, for the assessment order was valid and whether the assessment order itself is vitiated due to procedural irregularities.
Sections Cited
132, 143(3), 147, 148, 153D, 271(1)(c)
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Income Tax Appellate Tribunal, DELHI BENCH “F”, DELHI
Before: SHRI VIKAS AWASTHY & SHRI MANISH AGARWAL
आदेश/ORDER PER VIKAS AWASTHY, JM: These cross appeals by the assessee and Revenue are directed against the order of Commissioner of Income Tax (Appeals)-27 (hereinafter referred to as ‘the CIT(A)’) for AY 2014-15 decided on 26.03.2025.
5199/Del/2019 for AY 2014-15 2. A search and seizure action u/s. 132 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) was conducted in the group of Moin Akhtar Qureshi. The assessee was also covered in the search. The AO vide assessment order dated 23.01.2017 passed u/s. 143(3) r.w.s. 147 of the Act assessee total taxable income of the assessee at Rs.11,50,87,204/- as against declared income of Rs.2,25,46,380/-. At First Appellate stage, the assessee got part relief. Against the additions confirmed by the CIT(A), the assessee filed appeal before the Tribunal. The Revenue is also in appeal before the Tribunal assailing findings of the CIT(A) where additions have been deleted 3. The assessee has raised an additional ground of appeal
challenging validity of assessment order dated 23.12.2017 as the same has been passed without proper approval u/s. 153D of the Income Tax Act,1961(hereinafter referred to as ‘the Act’). The relevant additional ground of appeal raised by assessee vide application dated 25.02.2025 is reproduced here in below:- “iii. That in view of the facts and circumstances of the case and in law, the approval under section 153D of the Act is mechanical, without any application of mind, without perusing the records of the case and has been passed in a haste therefore the assessment order dated 23.12.2017 passed by the Ld. AO under section 153A is void-ab-inito, jurisdictionally flawed, and deserved to be quashed.”
4. Ms. Monika Singh, representing the department strongly opposed the additional grounds raised by the assessee at this belated stage. She submitted that the assessee never raised any objection before the Assessing Officer (AO) or the CIT(A) alleging mechanical approval u/s. 153D of the Act.
5. Submissions made by rival sides on the admission of additional ground of appeal heard. The additional ground raised by the assessee is a jurisdictional issue which goes to the root of validity of assessment order. It is no more res integra that the legal ground can be raised at any stage of the proceedings/appellant proceedings. The Hon’ble Apex Court in the case of NTPC Ltd. vs. CIT, 229 ITR 383 has held that the Tribunal is required to consider question of law arising from the facts which are on record in the assessment proceedings. In the present case no fresh evidences are required to be adduced for deciding the legal ground raised by the assessee. The relevant material is already available on record to adjudicate the legal issue raised by the assessee by way of additional ground of appeal. Hence, we see no impediment in admission of additional ground raised by the assessee by way of application dated 25.02.2025 (supra).
6. Shri Ajay Wadwa, appearing on behalf of the assessee referring to letter from the AO seeking approval u/s. 153D of the Act dated 20.12.2017 (at page 68 of the paper book) submitted that a perusal of said letter would show that the AO had only sent draft assessment order u/s. 148 of the Act to seek approval u/s. 153D of the Act from the Joint Commissioner of Income Tax (JCIT). The said communication clearly shows that no relevant documents or assessment folder were sent alognwith the draft assessment order. The JCIT vide letter dated 21.12.2017 (at page 69 of the paper book) accorded approval u/s. 153D of the Act only after perusal of the draft assessment order. Without examining any material whatsoever on which the assessment order is based approval has been given. The manner of granting approval on the face of it is mechanical and merely a formality. It is a settled legal position that approval allowed in mechanical manner u/s. 153D of the Act is unsustainable and is contrary to the spirit of section 153D of the Act. The ld. Counsel for the assessee placed reliance on the following decisions to contend that mechanical approval granted u/s. 153D of the Act is unsustainable, hence, vitiates the assessment proceedings: ACIT vs. Serajuddin & Co.; [2023] 454 ITR 312 (Orissa); ACIT vs. Serajuddin & Co.; [2024] 163 taxmann.com 118 (SC)- SLP Dismissed; PCIT vs. Anuj Bansal; 165 taxmann.com 2(Delhi) ; PCIT vs. Anuj Bansal; [2024] 466 ITR 254 (SC)- SLP Dismissed ; PCIT vs. Shiv Kumar Nayyar; ITA 285/2024 (DHC); & Kavita Jain v. DCIT Central Karna, ITA 3301/DEL/2024, Order dated 31.12.2024”
Per contra, Ms. Monika Singh representing the department vehemently defended the approval granted by the JCIT u/s. 153D of the Act. The relevant excerpts from the written submissions filed by the ld. DR on this issue are reproduced herein under:- “Section 153D of the Act was inserted vide amendment in Finance Act 2007 provides for the prior approval for the assessment in cases of search or requisition. Prior to the amendment vide Finance Act 2007 the existing provisions of making assessment and reassessment in cases where search has been conducted under section 132 or requisition is made under section 132A, does not provide for any approval for such assessment. Accordingly new section 153D has been inserted to provide that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner except with the previous approval of the Joint Commissioner. Such provision has been made applicable to orders of assessment or reassessment passed under clause (b) of section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. The provision has also been made applicable to orders of assessment passed under clause (b) of section 153B in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisitioned is made under section 132A. Section 153D of the Act is for administrative purposes and does not require that an opportunity of hearing is required to be given to the assessee. The Hon'ble Supreme Court in S. Narayanappa vs. CIT 63 IT 219 (SC) as to whether such approval is merely an administrative act or whether such approval can be brought under judicial scrutiny. The apex court held that the stage of obtaining approval from higher authority was administrative in character and not a quasi judicial act. What is to be seen is whether the Approving Authority is competent to grant approval is important and under scheme of things the JCIT is the competent authority to grant approval u/s 153D of the Act. In view of the above, it is submitted that aforementioned ground of appeal
on the issue of invalid approval under section 153D of the IT Act may kindly be dismissed for the reason mentioned above. The Hon'ble High Court of Karnatka in Rishabhchand Bhansali vs. DCIT in 136 taxman 579 held the approval granted by the JCIT is an administrative act and does not create any right to the appellant. xxxxxxx
2. Without prejudice to above objection, It is submitted that reading of letter Joint CIT/CR-5/153D/2017-18/1322 dated 21.12.2017 giving approval under section 153 D of the I.T. Act, make it amply evident that in the instant case, approving authority i.e. Joint Commissioner of Income Tax, Central Range-05, Delhi had applied his mind independently in judicious manner while granting approval.
In the given facts, the Joint CIT had applied his mind on the issues involved and accorded his approval in accordance with the provisions of the Act. It is not a gainsaying that the Joint CIT hold the concurrent jurisdiction and that the assessment is a continuous process involving administrative as well statutory roles being donned by the Joint CIT. And it is incumbent on the approving authority to examine and monitor the assessments which can't be denied if the same is not reduced in writing at every point of time till the finalization of the assessment. The approval of the approving authority underlines that he has examined the assessment records, relevant copies of seized documents and the relevant issues arising from the material on record judiciously in independent manner by way of due application of mind. It would not be out of place to mention here that the appellant has not come out with any case that there is case of non-application of mind. The appellant has to positively prove that there is a case of non-application of mind in light of the submission that the approval u/s 153D is an administrative approval. Here, it would not be out of place to highlight that the relevant seized documents in a case are always part of the assessment records as per practice, and requirement of the work. They are not kept separately as relevant seized material is frequently referred to by the assessing officer during the course of assessment proceedings and also made part of assessment order most of the time. In fact, as per the law, seized material is considered as part of records before Assessing Officer and all such seized records, return of income, notices etc. used during an assessment proceeding when considered collectively is known as 'Assessment record'. Therefore, from the letter seeking approval, it is evident that the entire assessment records which included seized material was placed before the approving authority for the purpose of taking decision with regard to approval under section 153D of the Act. In view of the same, it cannot be inferred in any manner from the letter seeking approval by the AO and the letter granting approval by the Joint CIT that approval under section 153D of the Act was granted in mechanical manner without independent application of mind by the Joint CIT.
It would also be pertinent to submit that in this case, letter granting approval in the instant case mentioned name of assessee only for this AY only. This case was approved by the approving authority vide aforesaid letter dated 21.12.2017. As can be seen from the approvals received in the case Sl No. Name of the case AY Reference of 153D approval 1 Sh. Aditya Sharma 2014-15 Joint CIT/CR-5/153D/2017-18/1322 dated 21.12.2017 Thus, it cannot be considered by any stretch of imagination that the approving authority was not in a position to apply his mind to the facts of the case and issues involved while granting approval under section 153D of the Act. The approving authority had sufficient time to go through all the records and relevant material to arrive at decision granting approval Under Section 153D of the I.T Act in judicious manner in the instant case. Further, in searchcases, a Joint CIT is well aware about progress of the assessment proceedings, relevant issues of different assessee, nature and content of the seized material in light of the fact that the as per the CBDT guideline F. No. 286/161/2006-IT (Inv. II) dt. 22.12.2006, copy of appraisal report is shared by Investigation Wing with both that the assessing officer and Addl. CIT. In fact, CBDT guideline dt. 22.12.2006 (Copy enclosed) on the subject of the search and Seizure Assessments clearly outlines such close coordination. Thus, as per the prevailing Practice and Guidelines, the approving authority has good idea of issues involved in particular case before hand i.e. much before the cases are sent to him for approval Under Section 153D of the Act. This guideline of CBDT is relevant piece of information, which throws light on the way search assessments are taken up by the filed officers. Therefore in light of such peculiar fact of instant case, it cannot be inferred that the Joint CIT was not in a position to independently apply his mind in judicial manner to the case of assessee on the same day.
In this regard, it is further submitted that on perusal of case laws on the issue of requirements for proper approval under section 153D, it is found that Hon'ble jurisdictional high court has emphatically held that such an issue is essentially a question of fact and has to be decided based of factual matrix of a particular case. Further, it has been held that approval cannot be reduced to a mechanical exercise and approving authority is required to apply his/her independent mind while granting such an approval. Thus, all the cases have been decided on this point by Hon'ble Tribunal and Hon'ble High court in light of peculiar facts of those cases only.”
The ld. DR further referring to the decision in the case of Usha Satish Salvi vs. ACIT in 4237 & 4238/Mum/2023 decided on 23.01.2025 submitted that the Tribunal after considering various decisions has held that the approval granted u/s. 153D of the Act was indeed in accordance with the provisions of the section and held the approval as valid. The ld. DR further referred to the decision rendered in the case of Home Finders Housing Ltd. vs. ITO, 93 taxmann.com 371 (Mad.) to contend that where it is held that order is passed without following prescribed procedure, the entire proceedings would not vitiate. She further referred to the decision rendered in the case of Improvement Trust, Ludhiana vs Ujagar Singh & Ors in Civil Appeal No. 2395/2008 decided on 09.06.2010 to contend that an attempt should always be made to allow the matter to be contested on merit rather than to dispose it on mere technicalities.
We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the case laws referred to by the rival sides to buttress their submissions. The assessee by way of additional ground of appeal has challenged the validity of approval granted by the JCIT u/s. 153D of the Act. Here it would imperative to refer to the letter seeking approval from the AO and the approval granted thereon by the JCIT:
Letter from the AO seeking approval u/s. 153D of the Act Approval granted by the JCIT u/s. 153D of the Act For granting approval u/s. 153D of the Act, the Competent Authority is not only required look at the draft assessment order but it is also required to see the assessment records, seized material and other relevant documents, if any. In the instant case, the letter from the AO seeking approval as well as the approval granted by the JCIT reveal that it is only the draft assessment order u/s. 148 of the Act that was sent by the AO to the JCIT and the JCIT granted approval u/s. 153D of the Act only on the basis of draft assessment order. The approval granting authority has not examined the document whatsoever on the basis of which draft assessment order has been passed. The ld. DR in her submissions has stated that appraisal report was shared with the JCIT as well and the assessment order is passed in close coordination with the JCIT. The fact of examination of appraisal report or seized documents does not emerge from the approval. Non application of mind by the JCIT in granting approval is apparent writ large in the present case. The JCIT in a mechanical manner without referring to appraisal report even if it was already available with him has granted approval u/s. 153D of the Act. Such approval is against the intent and sprit of section 153D of the Act. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Anuj Bansal (supra) has held that where the approval has been granted in a mechanical manner without application of mind invalid in eye of law. Ergo, the subsequent assessment proceedings arises from invalid approval are vitiated.
Next contention of the ld. DR is that assessment order is passed by AO in close co-ordination with the JCIT. If that be so, such assessment proceedings are contrary to the intent of Legislation. The provisions of section 143(3) of the Act contemplates that the AO has to make the assessment independently, uninfluenced by any other officer. If the assessment order is passed by the AO in co-ordination with the JCIT, this itself would make the assessment order defective. The Hon’ble Punjab & Haryana High Court in the case of Fin Doc Finvest Pvt. Ltd., vs. DCIT in CWP-9658 of 2024 decided on 07.03.2025 held:
“22. In SPL Siddhartha Ltd. case (supra), it was held that the procedure laid down under the Income Tax Act, has to be strictly followed. Thus, principally the law is settled as held in Nazir Ahmed v. King Emproer1936 (BC) 253 (2), applying the principle of ‘taylor v. taylor’ Ch.D (431), that ‘where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden, applied to Judicial Officers making a record under Section 164.’. Thus, as held in CIT vs. Anjum M.H.Ghaswala & Ors.2002 (1) SCC 633, by the Constitutional Bench that ‘it is a normal rule of construction that when a statue vests certain powers in a authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statue itself. If that be so, since the Commission cannot exercise the power of relaxation found in Section 119(2) (ain the manner provided therein it cannot invoke that power under Section 119(2)(a) to exercise the same in its judicial proceedings by following a procedure contrary to that provided in sub- section (2) of Section 119.’ 23. Section 116 of the Act, defines the Income Tax Authorities as different and distinct authorities. Such different and distinct authorities have to exercise its powers in accordance with law in specified circumstances. Thus, the Assessing Officer would have to exercise its own discretion to reach a conclusion and would not be influenced by any other officer. In view thereto, we find force in the contention raised by the learned senior counsel for the petitioner that the concerned Assessing Officer was influenced by the consultation and discussion with his superior officers. In fact the order passed by the Assessing Officer appears to have been already prepared even before the reply was received as the consultations have been conducted on 26.10.2023, 11.01.2024 and 14.03.2024 by the Assessing Officer as mentioned by him in the order itself. Again after the reply was received and the order was passed by the Assessing Officer, the same has been approved by the Joint Commissioner. As such, we find that the Joint Commissioner has in fact comprehensively and actively participated in the making of the assessment order while his role was only limited to the approval of the assessment order in terms of the CBDT Circular. Thus, we find the order to be vitiated in law.
In view of the above, the assessment order cannot be result of an independent application of mind and exercise of discretionary power by the Assessing Officer in terms of Section 143(3) of the Act and but is an order passed under the influence and directions of the superior officers. It is to be noticed that the consultation with a superior officer would be akin to directions of the superior. There is no room available for discretion where consultation is sought from a superior officer while if a superior officer consults his subordinates, the discretion continues to stay with him. He may choose not to follow the advice of his subordinate but the opposite would be untrue. We are, thus, of firm view that the order has been passed whereby the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law.” [Emphasized by us] Thus, the assessment order passed in consultation/coordination with JCIT itself would make the assessment order invalid. 10. In the facts of the case, we find merit in the additional ground of appeal
raised by the assesee and hold the assessment order based on invalid approval u/s. 153D of the Act as void-ab-inito.
11. In the result, appeal of the assessee is allowed.
12. Since, we have held the assessment order to be invalid, appeal of the Revenue is dismissed. for AY 2014-15 13. This appeal by the assessee is directed against the order of CIT(A)-27 dated 26.03.2019 confirming penalty levied u/s. 271(1)(c) of the Act by the AO vide order dated 13.08.2019. Since, we have held the assessment order for AY 2014-15 to be invalid, the substratum for levy of penalty u/s. 271(1)(c) of the Act is eroded, hence, penalty proceedings would not survive.
In the result, appeal of the assessee is allowed.
To sum up, & 8405 /DEL/2019 of the assessee are allowed and by the Department is dismissed. Order pronounced in the open court on Friday the 26th day of September, 2025. Sd/- Sd/- (MANISH AGARWAL) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी/Delhi, �दनांक/Dated 26/09/2025 NV/- �ितिलिप अ�ेिषतCopy of the Order forwarded to : अपीलाथ�/The Appellant , 1. �ितवादी/ The Respondent. 2.