Approval u/s 153D granted for six assessment years by a single approval letter was mechanical and bad in law – ITAT
In a recent judgment, ITAT Delhi by majority judgment held that approval u/s 153D granted for six assessment years by a single approval letter was mechanical and bad in law as separate approval for each year is to be obtained.
ABCAUS Case Law Citation:
4748 (2025) (09) abcaus.in ITAT
The appellant individual filed its return of income under section 139(1) of the Income Tax Act, 1961 (the Act) for the year under consideration. Subsequently, a search and seizure operation under Section 132 of the Act was conducted on a business group. During the search operation some incriminating documents/informations relating to the assessee were claimed to have been found and seized.
Thereafter a consequential search and seizure operation was conducted at the premises of the assessee. The case of the assessee thereafter, was centralized by the order passed by the PCIT under Section 127 of the Act.
Notice under Section 153A was served upon the assessee directing the assessee to furnish a true and correct income for the year under consideration. Since nothing was forthcoming notice under Section 274 r.w.s 271 of the Act was issued and the assessee ultimately filed a letter stating that the return filed under Section 139(1) of the Act be treated as return filed in response to the notice under Section 153A of the Act.
Such re-assessment proceeding was finally culminated in impugned addition which was confirmed by the First Appellate Authority.
Before the Tribunal, the assessee filed an application for additional ground of appeal challenging the maintainability of the proceeding on the count that the approval under Section 153D of the Act obtained by the Assessing Officer in the matters is mechanical in nature; the same was, therefore, invalid and assessment was liable to be quashed.
It was submitted by the assessee that as per information obtained under RTI Act, the proposal for approval under Section 153D of the Act in these matters were sought for by the AO Central Circle from the Additional Commissioner of Income Tax enclosing the draft assessment orders for seven assessment years in the case of the assessee.
The assessee submitted that the approval had been given by the Addl ICT on the same day i.e, the day the approval was sought for by the AO enclosing the draft assessment orders to be issued by AO. Further that approval had been given in all the matters of 6 years and not each assessment year separately.
It was contended that no movement of file was reflecting from the said approval, neither sanction for each year had been given separately, nor it established appraisal report was seen and, therefore, approval was granted mechanically, without application of mind by the Additional Commissioner which vitiated the assessment orders too.
In support of his contentions, the assessee relied upon the judgment of the Hon’ble Orissa High Court in favour of the assessee quashing the assessment order. The Revenue had challenged the said judgment before the Hon’ble Apex Court, however, order passed by the Orissa High Court was upheld.
The assessee also relied upon the judgment passed by Hon’ble Supreme Court whereby the SLP filed by the department against the order passed by the Hon’ble Delhi High Court quashing the assessment order was dismissed holding the approval granted under Section 153D was a mechanical approval, without application of mind, would be invalid in the eyes of law.
The Tribunal was divided on the issue as to whether the approval given was mechanical one or not. The Judicial Member of the ITAT held that the approval was mechanical and he quashed the impugned approval. However, the Accountant Member held that the approval granted under section 153D of the Act was not invalid.
The Judicial member followed the law laid by the Orrisa High Court and Delhi High Court. He held that the order of approval issued by the Additional Commissioner of Income Tax was invalid in view of the particular fact that the said approval does not speak of movement of any file. Neither given approval for each year separately nor assigned any reason for such approval; the same is nothing but a product of total non-application of mind by the order approving authority. Further that the impugned order of approval had been issued in hot haste on the same day when the draft assessment orders were placed before Addl CIT. The same did not established review of the assessment records and search materials by the Additional CIT, therefore the approval was mechanical and invalid.
On the other hand, what weighed with the Accountant Member was the submission of the Revenue that range head (Addl CIT) is fully involved in guiding and supervising the assessment proceedings. Discussions and consultation between the AO and the range heads are sometimes not formally put in the form of letters on record. It was not the Additional CIT was seeing issues for the first time which were in the draft order as alleged by the assessee. Also, no government officer or even a layman will sign a legal paper/sensitive order without seeing and applying his/her mind where he can be held responsible/accountable later.
The Accountant Member observed that as laid by Delhi High Court, there is presumption in the Income Tax matter that all official actions were performed regularly unless controverted by the corroboratory evidence. Therefore, the onus was on the assessee to rebut that the Addl. CIT while approving the case had not applied his mind.
The Accountant Member opined that information sought in the RTI Application should not be considered as exhaustive as far as the issue of approval sought under section 153D of the Act is concerned. The purpose, context and nature of information sought under the RTI Application have to be taken in totality to draw the inference.
The Accountant Member further observed that section 153D of the Act does not lay the procedure and manner of granting approval under section153D of the Act. While granting approval under section153D of the Act, the Addl. CIT does not act as a Reviewing/Appellate Authority to allow or disallow the additions proposed by the AO.
As a result of the fractured judgment, the President, ITAT nominated third member to adjudicate the difference of opinion between the Judicial Member and Accountant Member.
The third member observed that in a case where approval was issued for 85 cases vide one single letter, the Allahabad High Court had considered the important concept of each assessment year for the purpose of approval to be granted under Section 153D and held that 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. It is humanly impossible to go through the records of 85 cases in one day to apply independent mind to appraise the material before the Approving Authority.
The third member observed that for all the relevant six assessment years, only one approval was granted by the Additional CIT. Whereas the bare reading of Section 153D of the Act makes it clear that separate approval of draft assessment order in each year is to be obtained. Hence, on this count also, the approval granted by the Additional CIT was bad in law and consequent assessment order passed in all these six assessment years were bad in law.
Further the third member noted from the proposal letter sent by AO to Addl CIT that the same was not accompanied by any assessment folder, seized material or any other related documents for completion of assessment. It means that before the Additional CIT, only a proposal was sent. Therefore, it was questionable whether this approval granted by the Additional CIT was mechanical or there was due application of mind.
The third member further observed that the Accountant Member considered the aspect that approval under Section 153D of the Act by the Additional CIT is merely administrative in nature to safeguard internal checks and balances without affecting the quasi-judicial powers of the Assessing Officer and creating any prejudice to the assessee. It was further noted by the AM that while granting approval under Section 153D of the Act, the Additional CIT does not act as a reviewing/appellate authority to allow or disallow the additions proposed by the Assessing Officer.
The third member opined that It is well-settled that the Assessing Officer upon whom jurisdiction has been conferred to make all orders judicially, has to act independently. However, the third member noted that the Assessing Officer, while framing assessment, cannot act on the advice given by an outsider even though he may be an authority higher in rank to him in official hierarchy. Higher authorities that include Additional CIT/JCIT under whom the Assessing Officer is administratively under control, are not entitled to give opinion or advice in regard to assessment proceedings being quasi-judicial in nature.
The third member observed that the proceeding under Section 153D for granting approval is entirely different from the process of making assessment. Once draft assessment is prepared, the process of approval starts under Section 153D of the Act. Then the authority prescribed under Section 153D i.e., the Additional CIT/JCIT has to apply his mind for grant of approval after verifying the assessment records, seized records, etc.
As a result, the third member concurred with the decision of Judicial Member quashing the above assessments.
Accordingly, the appeals of the assessee were allowed.
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