Grant Of Section 153D Approval Can't Be Merely Ritualistic Formality, Rather It Must Reflect Appropriate Application Of Mind: Delhi High Court

The Delhi High Court has held that a grant of approval under Section 153D of the Income Tax Act, 1961, cannot be merely a ritualistic formality or rubber stamping by the authority; rather, it must reflect an appropriate application of mind.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that a single approval has been granted for AYs 2011–12 to 2017–18 in the case of the assessee. The order failed to make any mention of the fact that the draft assessment orders were pursued at all, much less perusal of the same with an independent application of mind. The bench noted that it cannot lose sight of the fact that the concerned authority has granted approval for 43 cases in a single day, which is evident from the findings of the ITAT.

As per Section Section 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 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.

Pursuant to the search, an order under Section 127 was passed, which led to the centralization of the case of the assessee. A notice under Section 153A was issued to the assessee. In response to the notice, the assessee filed its income tax return, declaring an income, and the same was processed as per the provisions of Section 143(1). Subsequently, the case of the assessee was picked up for scrutiny assessment, and a notice under Section 143(2) was duly issued.

An assessment order was passed by the assessing officer under Section 153A, read with Section 143(3), by which the total taxable income of the assessee was pegged. Being aggrieved by the additions made by the AO, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The CIT (A), while partly allowing the appeal of the assessee, deleted certain additions made by the AO.

The department preferred an appeal against the order of the CIT(A) before the ITAT, in which the approval under Section 153D 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.

The department 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 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. Since the authority granting approval has been involved in the assessment proceedings since the initial days, it cannot be divested of its right to accord approval on the same day.

The assessee contended that competent authority has granted approval in a mechanical manner as the draft assessment orders for multiple AYs were accorded approval on the same date on which they were sent, which reflects a complete lack of application of mind.

The court, while dismissing the appeal of the department, held that the order of approval dated December 30, 2020, which was produced by the assessee, clearly signifies that a single approval has been granted for AYs 2011–12 to 2017–18 in the case of the assessee.

Counsel For Appellant: Ruchir Bhatia

Counsel For Respondent: Salil Kapoor

Case Title: Pr. Commissioner Of Income Tax -15 Versus Shiv Kumar Nayyar

Citation: 2024 LiveLaw (Del) 630

Case No.: ITA 285/2024 & CM APPL 28994/2024

Click Here To Read The Order