Over 30 approvals u/s 153D granted within minutes amounted to total non-application of mind – Bombay High Court
In a recent judgment, Bombay High Court upheld that over 30 approvals u/s 153D granted within minutes amounted to total non-application of mind and the so-called discussions between the official not a substitute for proper approval.
ABCAUS Case Law Citation:
4897 (2025) (12) abcaus.in ITAT
In the instant case, the Revenue had challenged the order passed by the Income Tax Appellate Tribunal’s (ITAT) common order by which the ITAT had recorded a finding that the “prior approval” contemplated under Section 153D of the Income Tax Act, 1961 (the Act) was vitiated by total non-application of mind and on such basis, quashed such approval.
It was inter alia submitted that one of the circumstances held against the Revenue was that the approvals were granted in haste, i.e., within 24 hours of the date on which such approval was sought, along with draft orders. It was submitted that the Tribunal too had acknowledged that there were frequent discussions between the officials seeking approval and the official granting it during the pendency of proceedings. Therefore, there was nothing wrong in the expeditious grant of such approvals.
The Hon’ble High Court observed that as per chart given in ITAT order, the approvals were rushed through, and it was correctly held by the ITAT to constitute a complete lack of application of mind. The ITAT had observed that, in several cases, the proposal was submitted to the approving authority at 05.02 PM, yet the approvals were issued on the same day.
The Hon’ble High Court further observed that the tribunal had noted that the proposals were accompanied by draft orders that set out diverse facts and issues. Besides the glaring discrepancies in such draft orders, the ITAT, quite correctly, found it difficult to believe that the Additional Commissioner could have considered all such proposals and the accompanying draft assessment orders within a few minutes or even a couple of hours, as was claimed in these cases. The so-called “discussions” between the official seeking approval and the Additional Commissioner cannot replace proper approvals that demonstrate no application of mind or even a basic reasoning process that might indicate some level of consideration.
The Hon’ble High Court opined that in the instant case, the entire approval process and the requirement for approval under section 153D were reduced to mere ritual, meaningless formality, or even a mockery in these matters. Most surprisingly, the draft orders that were supposed to accompany the approval proposals already included the date and number of the approval orders that had yet to be issued. Such glaring inconsistency showed that the approval was a foregone conclusion even before the proposal and draft orders were received by the Additional Commissioner, or that the authorities considered the mandatory approval a trivial formality subject to casual compliance.
The Hon’ble High Court further noted that the ITAT had observed that procedures prescribed in Departmental Manual were only followed in breach. The manual of office procedures is equivalent to instructions under Section 119 of the IT Act and thus binding on IT officials. Considering that the prescribed procedures were followed only in breach, along with other circumstances mentioned in the impugned order, the Hon’ble High Court held that the ITAT’s finding that the approvals were granted without any application of mind was well founded. Such a finding is well supported in facts and by several precedents on the subject.
The Hon’ble High Court further observed that the Orissa High Court had held that the approval is mandatory and must not be given mechanically. The Court explained that, while elaborate reasons need not be given, there must be some indication that the approving authority examined the draft orders and found that they met the requirements of law. The Special Leave Petition against this decision was dismissed by the Hon’ble Supreme Court.
The Tribunal observed that the Hon’ble Supreme Court has noted that the requirement for the grant of approvals is one of the safeguards provided under the law to ensure that an assessee is not unfairly or arbitrarily treated by the Revenue. This safeguard is rendered futile in the present matter by regarding the same as some ritualistic formality. The safeguards provided by the legislature, which are in the joint interest of the Revenue as well as the assessee, cannot be frustrated by granting en masse approvals without any application of mind to the particular facts and circumstances of each case.
The Hon’ble High Court observed that in some cases, higher tax rate u/s 115BBE was applied even for the Assessment Years even before the said section was inserted by The Finance Act 2012. The draft assessment order invoked such provision to which approval had been granted. Further, in one case, an assessee which was not at all in existence, assessment proceedings were carried out, and the AO treated the return filed by the assessee as “non est”. The Additional Commissioner, even in this case, granted approval without, perhaps, perusing the record. Further for one company, the approval was granted for the AY when the company was not even incorporated.
The Hon’ble High Court further observed that the argument of the Revenue that the authority seeking approval and the authority granting approval “were discussing the matter on a routine basis,” though partially accepted by the ITAT, cannot be regarded as some substitute for serious application of mind. If indeed such discussions were held, how so many glaring discrepancies crept into the approval orders.
The Hon’ble High Court further observed that all the approvals are identically worded, and there is no reference to the draft orders having been pursued by the Additional Commissioner of Income Tax. The approval order merely stated the following:
“The draft assessment order, submitted by you in the following case of M/s xxxxx. for Assessment Year as mentioned below, is approved u/s 153D of the Income Tax Act, 1961 based on the perusal of records submitted along with the submissions of the assessee”
The Hon’ble High Court considered a catena of judgments of the Co-ordinate Bench and opined that applying the law in the precedents to the facts involved in the present matters, the only inference that could be drawn was that the AO regarded this requirement of obtaining prior approval as merely a formality, and the Additional Commissioner who granted the approvals, likewise, was entirely in agreement with such an approach.
Accordingly, the Hon’ble High Court held that in the absence of valid approvals, the action under Section 153A cannot be justified and was rightly not upheld by the ITAT.
As a result, all the appeals of the Revenue were dismissed being not involving any substantial questions of law.
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