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Facts
A search and survey operation was conducted on the assessee, leading to assessment orders for AY 2010-11 to 2016-17, which were challenged by the assessee and dismissed by the Ld. CIT(A). The assessee further appealed to the ITAT, challenging the legality of the assessment orders, specifically arguing that the approval under Section 153D of the Income Tax Act was mechanical and without due application of mind.
Held
The ITAT held that the approval granted under Section 153D of the Act for multiple assessment years on the same day, without explicit mention of perusal of seized material or independent application of mind, amounted to a mechanical and ritualistic approval. Citing various High Court judgments, the Tribunal concluded that such mechanical approval vitiates the assessment orders, and therefore, quashed the assessment orders for the years in question.
Key Issues
The key legal issue was the validity of assessment orders framed under Section 153A read with Section 143(3), when the prior approval mandated by Section 153D of the Income Tax Act was granted mechanically without proper application of mind for multiple assessment years simultaneously.
Sections Cited
132, 133A, 153A, 143(3), 153D, 119, 226, 158BG
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Income Tax Appellate Tribunal, DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
ORDER
PER YOGESH KUMAR, U.S. JM:
1. The captioned Appeals are filed by the Assessee against the orders of Commissioner of Income Tax (Appeals)-31, New Delhi (‘Ld.
CIT(A)’ for short), New Delhi, dated 25/02/2022 for the Assessment
Years2010-11 to 2016-17 respectively.
Brief facts of the case are that, a search and survey operations
u/s 132/133A of the Income Tax Act, 1961 ('Act' for short) conducted on 09/09/2015 in the case of the Assessee along with other cases of the group at various residential and business premises. Assessment orders have been passed u/s 153A r.w. Section 143(3) on 29/12/2017 by making various additions in respect of the subject Assessment Years i.e. Assessment Year 2010-11 to 2016- 17.Aggrieved by the above assessment orders, Assessee preferred Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders dated
25/02/2022 dismissed the Appeal of the Assessee. As against the orders of the Ld. CIT(A), the Assessee preferred the captioned
Appeals.
3. The Assessee has challenged the legality or otherwise of the assessment orders on account of mechanical approval accorded u/s 153D of the Act in Ground No. 13 in Ground & 621/Del/2022, Ground No. 12
& 625/Del/2022 and Ground No. 8. in ITA No. 624/Del/2022.
4. The Ld. Counsel for the Assessee addressing on the above
mentioned Grounds of Appeal of the Assessee, submitted that the approval dated 29/12/2017 accorded u/s 153D of the Act is a mechanical and arbitrary approval without their being any application of mind and also without satisfying the statutory pre- conditions of the Act as such the assessment so framed is null and void. The Ld. Counsel further submitted that approval issued u/s 153D of the Act does not mention any seized document having been perused and a single approval has been granted for two Assessment
Years pertaining to the Assessee. The Ld. Counsel relying on the Judgment of the Jurisdictional High court in the case of Pr.
Commissioner of Income Tax Vs. Shiv Kumar Nayyar reported in 163 taxmann.com9 dated 15/05/2024 in (CMP No.
28994/2024) and other Judicial pronouncements, sought for allowing the Appeal and prayed for quashing the assessment order.
Per contra, the Ld. Departmental Representative submitted that the entire records and draft assessment orders have been perused by the Joint Commissioner of Income Tax while according the approvals
u/s 153D of the Act. The approval has been granted strictly in accordance with provisions of law and there is no absence of application of mind, thus sought for dismissal of the Grounds challenging the subject Assessment Orders on account of granting mechanical approval u/s 153D of the Act. The Department's
Representative has also filed detailed written submission which is reproduced as under:-
“Subject: Written Submission in the above case on the legal ground of validity of Section 153D approval granted by the JCIT/Addl. CIT-reg.
In the above case, it is humbly submitted that in addition to the oral arguments submitted by the undersigned, the following legal issues/legal submissions, relevant to section 153D approval and two vital Judgments of the Hon'ble
Supreme Court, on the legality and legal requirements of the Administrative Orders of government or executive authorities, may kindly be considered: -
The word/phrase "written approval" is not mentioned in the section 153D of the Income tax Act, 1961. The only phrase used is "the prior approval". Therefore, the contents of the written order of the JCIT/Addl. CIT are legally not required to be examined or considered, for meeting the legal or factual requirements of the approval under section 153D.
2. The order by the Addl. CIT/JCIT under section 153D is an Administrative Order, by the higher authority i .e. JCIT/Addl. CIT to the lower authority, i.e. AO. Such an order is not a quasi-judicial or judicial order. Therefore, the legal requirements and benchmarks regarding the principles of "the application of mind" and "the speaking order" are not as strict or high, as they are in the case of quasi-judicial or judicial order.
In respect of the legal requirements and the benchmarks regarding the administrative orders, the Hon. Supreme Court has given many comprehensive judgements, which are enclosed and the relevant portions/parts are quoted as under: - (i) Decision of Hon'ble Supreme Court in the case of Municipal Council Neemuch us Mahadeo Real Estate, dated 17 September, 2019, AIR 2019 SC 4517, 2019 (10) SCC 738.
“14. In the present case, the learned Judges of the Division Bench have arrived at a finding that such a sanction was, in fact, granted. We will examine the correctness of the said finding of fact at a subsequent stage. However, before doing that, we propose to examine the scope of the powers of the High Court of judicial review of an administrative action. Though, there are a catena of judgments of this Court on the said issue, the law laid down by this Court in the case of Tata Cellular Vs. Union of India reported in (1994) 6 SCC 651 lays down the basic principles which still hold the field. Paragraph 77 of the said judgment reads thus:
“77. The duty of the court is to confine itself to the question of legality. Its concern should be:-
1. Whether a decision-making authority exceeded its powers? 2. Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached оr, 5. abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:
(i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, unreasonableness.
(iii) Procedural impropriety
The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R.V. Secretary ofState for the Home Department, ex Brind, (1991) 1 AC 696, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, 'consider whether something has gone wrong of a nature and degree which requires its intervention".
15. It could thus be seen that the scope of judicial review of an administrative action is very limited. Unless the Court comes to a conclusion, that the decision maker has not understood the law correctly that regulates his decision- making power or when it is found that the decision of the decision maker is vitiated by irrationality and that too on the principle of "Wednesbury Unreasonableness" or unless it is found that there has been a procedural impropriety in the decision-making process, it would not be permissible for the High Court to interfere in the decision making process. It is also equally well settled, that it is not permissible for the Court to examine the validity of the decision but this Court
can examine only the correctness of the decision-making process.
16. This Court recently in the case of West Bengal Central School Service Commission Vs. Abdul Halim reported in 2019 SCC Online SC 902 had again an occasion to consider the scope of interference under Article 226 in an administrative action.
31. In exercise of its power of judicial review, the Court is to see whether the decision impugned is vitiated by an apparent error of law. The test to determine whether a decision is vitiated by error apparent on the face of the record is whether the error is self-evident on the face of the record or whether the error requires examination or argument to establish it. I f an error has to be established by a process of reasoning, on points where there may reasonably be two opinions, it cannot be said to be an error on the face of the record, as held by this Court in Satyanarayan v. Mallikarjuna reported in AIR 1960 SC 137. I f the provision of a statutory rule is reasonably capable of two or more constructions and one construction has been adopted; the decision would not be open to interference by the writ Court. It is onlyan obvious misinterpretation of a relevant statutory provision, or ignorance or disregard thereof, or a decision founded on reasons which are clearly wrong in law, which can be corrected by the writ Court by issuance of writ of Certiorari.
32. The sweep of power under Article 226 may be wide enough to quash unreasonable orders. If a decision is so arbitrary and capricious that no reasonable person could have ever arrived at it, the same is liable to be struck down by a writ Court. If the decision cannot rationally be supported by the materials on record, the same may be regarded as perverse. Municipal Council Nee much us Mahadeo Real Estate on 17 September, 2019 http://indiankanoon.org/doc/83894917/6. Indian Kanoon
However, the power of the Court to examine the reasonableness of an order of the authorities does not enable the Court to look into the sufficiency of the grounds in support of a decision to examine the merits of the decision, sitting as if in appeal over the decision. The test is not what the Court considers reasonable or unreasonable but a decision which the Court thinks that no reasonable person could have taken, which has led to mani fest in justice. The writ Court does not Interfere, because a decision is not perfect.
17. It could thus be seen that an interference by the High Court would be warranted only when the decision impugned is vitiated by an apparent error of law, i.e., when the error is apparent on the face of the record and is self-evident. The High Court would be empowered to exercise the powers when it finds that the decision impugned is so arbitrary and capricious that no reasonable person would have ever arrived a t. It has been reiterated that the test is not what the court considers reasonable or unreasonable but a decision which the court thinks that no reasonable person could have taken. Not only this but such a decision must have led to mani fest injustice.
In the present case, we find that the Commissioner had acted rightly as a custodian of the public property by pointing out the anomalies in the proposalof the Municipal Council to the State Government and the State Government has also responded in the right perspective by authorizing the Commissioner to take an appropriate decision. We are of the considered view that, both, the Commissioner as well as the State Government, have acted in the larger public interest, We are unable to appreciate as to how the High Court, in the present matter, could have come to a conclusion that it was empowered to exercise the power of judicial review to prevent arbitrariness or favoritism on the part of the State authorities, as has been observed by it in paragraph13. We are also unable to appreciate the finding of the High Court in para 17 wherein it has observed that the impugned decision of the authorities are found not to be in the public interest. We ask the question to us, as to whether directing re-tendering by inviting fresh tenders after giving wide publicity at the National level so as to obtain the best price for the public property, would be in the public interest or as to whether awarding contract to a bidder in the tender process where it is found that there was no adequate interest or as to whether publicity and al so a possibility of there being a cartel of bidders, would be In the public interest. We are of the considered view that the decision of the Commissioner which is set aside by the High Court is undoubtedly in larger public Interest, which would
ensure that the Municipal Council earns a higher revenue by enlarging the scope of the competition. By no stretch of imagination, the decision of the State Government or the Commissioner could be termed as illegal, improper, unreasonable or irrational, which parameters only could have permitted the High Court to inter fere. Interference by the High Court when none of such parameters exist, in our view, was totally improper. On the contrary, we find that it is the High Court, which has failed to take into consideration relevant material.
In the result, the impugned Orders are not sustainable in law. The appeals are, accordingly, allowed and the Impugned orders dated 31.08.2017 and 05.07.2018 are quashed and set aside. The petition of respondent No. 1 stands dismissed. " (ii) Decision of Hon'ble Supreme Court in the case of Wes t Bengal Central School Service vs Abdul Halim dated 24 July, 2019, AIR 2019 SC4504, AIRONLINE 2019 SC 2188 AIR 2020 SC (CIV) 82. "..
The sweep of power under Article 226 may be wide enough to quash unreasonable orders. If a decision is so arbitrary and capricious that no reasonable person could have ever arrived at it, the same is liable to be struck down by a writ Court. If the decision cannot rationally be supported by the materials on record, the same may be regarded as perverse.
However, the power of the Court to examine the reasonableness of an order of the authorities does not enable the Court to look into the sufficiency of the grounds in support of a decision to examine the merits of the decision, sitting as if in appeal over the decision. The test is not what the Court considers reasonable or unreasonable but a decision which the Court thinks that no reasonable person could have taken, which has led to mani fest in justice. The writ Court does not inter fere, because a decision is not per fact.
33. In entertaining and allowing the writ petition, the High Court has lost sight of the limits of its extraordinary power of judicial review and has in fact sat in appeal over the decision of the respondent No. 2...
Furthermore, reliance is being placed upon the decision of Hon'ble ITAT in the case of Smt. UshaSatishSalvi, AY 2012-13 to AY 2014-15, dated
23.01.2025, wherein on the issue of approval u/s 153D of the Act has been considered at para 8 to 8.2, page 12 to 17 therein. In this decision, Hon'ble ITAT has considered various decisions of Hon'ble Courts as well as the affidavits of the AO and Range Head regarding regular discussions between them prior to approval u/s 153D of the Act and the Hon'ble Tribunal had decided the issue in favour of the Department even in the case wherein common approval had been granted for all search cases of the assessee.
PRAYER: The assessment order deserves to be upheld, and the assessee's objection on the ground of improper approval u/s 153D ought to be dismissed, in view of the reasons above which establish that the allegation that approval u/s 153D was mechanical is factually and legally unsustainable and must be rejected.”
We have carefully considered the submissions of the parties and also verified, material available on record and the case laws cited. The legal objection of transgression of requirement of approval under S.
153D of the Act is in question which has the effect on the very substratum of the assessment and consequential appellate proceedings.
For the purpose of deciding the issue of legality of approval
accorded u/s 153D of the Act and the consequential assessment proceedings, we shall straightway advert to the approval accorded u/s 153D of the Act. The approval under s. 153D of the Act dated 29/12/2017 granted by the Joint Commissioner of Income Tax, Central Range-5, New Delhi addressed to ACIT, Central Circle-17, New Delhi is reproduced hereunder:-
On a perusal of the approval dated 29/12/2017 addressed by JCIT Central Range-5, New Delhi to the ACIT, Central Circle-17, New
Delhi, it emerges that the Ld. JCIT, has not uttered a word on the subject matter of additions. The approval is in the nature of Performa approval; the approval granted smacks of mechanical or perfunctory approval in a symbolic exercise of powers vested under s. 153D of the Act. Apart from the same, a single approval has been granted for seven
Assessment Years pertaining to the Assessee on the very same day when the ACIT submitted the draft assessment order for approval.
The Hon’ble Jurisdictional High Court in the case of Pr.
Commissioner of Income Tax Vs. Shiv Kumar Nayyar (supra) held 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 v. 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 to 625/Del/2022 Vishwanath Aggarwal Vs. ACIT 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, This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 requires the approving authority, i.e. 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. *** 19. 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] to 625/Del/2022 Vishwanath Aggarwal Vs. ACIT 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 OnLineOri 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 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 need not be given, there has to be some indication that the approving authority has examined the draft orders to 625/Del/2022 Vishwanath Aggarwal Vs. ACIT 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 ; (iii) 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.
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 to 625/Del/2022 Vishwanath Aggarwal Vs. ACIT formality or rubber stamping by the authority, rather it must reflect an appropriate application of mind.
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 ld. 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 This is a digitally signed order
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:34:51 that a letter dated 30.12.2018 was filed by the ld. AO before the ld. Addl. CIT seeking approval of draft assessment order u/s 153D of the Act. The ld. 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. NeetuNayyar. It is also pertinent in this regard to refer to pages 68 and 69 of the paper book which contains information obtained by Smt. NeetuNayyar 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 ld. 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 625/Del/2022 Vishwanath Aggarwal Vs. ACIT to the assessee herein and Smt. NeetuNayyar. 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 ld. 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 ld. Addl. CIT has granted a single approval for all assessment years put together."
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.”
Significantly, the Hon’ble Orissa High Court in the case of ACIT vsSerajuddin& Co. 454 ITR 312 (Orissa) had an occasion to examine substantial question of law on the propriety of approval granted under Section 153D of the Act. The Orissa High Court made wide ranging observations towards the manner and legality of approval under s.
153D of the Act. The Hon’ble High Court inter-alia observed that the approval under 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 justiciable. Where the Court finds that the approval is granted mechanically, it would vitiate the assessment order itself. 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 ratio of judgment delivered in the case of ACIT vs Serajuddin& Co. Kolkata; PCIT vs Anuj Bansal; PCIT vs Shiv Kumar Nayyar; and PCIT vs Subhash Dabas (supra) has held in chorus that the approval granted under s. 153D of the Act, if granted mechanically, will vitiate the assessment order itself. The SLP filed against the aforesaid judgment in the case of ACIT vs Serajuddin& Co. Kolkata was dismissed as reported in (2024) 163 taxmann.com 118 (SC).
As noted above, in the instant case, a single approval u/s 153D has been accorded in respect of seven Assessment Years pertaining to the Assessee, there is no mentioning of seized material in the approval and no material to show involvement of the superior authority in the approval granted by the JCIT. Applying the ratio of judgments delivered as noted above, the assessment orderspassed in the Assessment Year 2010-11 to 2016-17 based on ritualistic approval stands vitiated and thus quashed. Accordingly, Assessee’s Ground No. Ground No. 11 in & 621/Del/2022, Ground No. 12 in Ground No. ITA No. 624/Del/2022are allowed.
In the result, the appeals of the Assessee in 620, 621, 622, 623, 624 & 625/Del/2022 are allowed.
Since, we have quashed the Assessment Orders on the ground of erroneous approval accorded u/s 153D of the Act, we do not consider it necessary to address on other legal and factual contentions/grounds raised in the other grounds of Appeal of the Assessee.
Order pronounced in the open court on 27th August, 2025