ITAT Delhi Annuls Section 153A Assessment Due to Defective Consolidated Approval Under Section 153D

Case Overview

In a significant ruling concerning procedural compliance in search assessments, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has set aside an assessment order framed under Section 153A of the Income Tax Act, 1961 for Assessment Year 2017-18. The primary ground for quashing the assessment was the mechanical and consolidated nature of approval granted under Section 153D, which lacked independent application of mind for each assessment year.

The case of Smt. Komal Tyagi Vs ACIT (ITAT Delhi) establishes an important precedent that approval under Section 153D cannot be treated as a mere formality or rubber-stamping exercise. Instead, it must reflect conscious, independent scrutiny of draft assessment orders for every individual year.

Factual Background

The matter originated from proceedings initiated under Section 153A of the Income Tax Act, 1961. The assessment order dated 28.09.2021 for AY 2017-18 was challenged by the assessee before the Commissioner of Income Tax (Appeals)-23, who passed an order dated 18.03.2025 denying relief to the assessee.

Dissatisfied with the appellate order, Smt. Komal Tyagi approached the ITAT Delhi with specific grounds challenging the validity of the assessment proceedings, particularly focusing on the defective nature of approval granted under Section 153D.

Assessee's Contentions

The representative appearing for the assessee raised a crucial jurisdictional challenge regarding Ground No. 3, which questioned the legality of the assessment order under Section 153A. The specific grievance related to the manner in which approval under Section 153D was accorded.

Key Submissions Made

The counsel for the assessee submitted documentary evidence in the form of the approval letter dated 26.09.2021, which revealed that:

  • A single, omnibus approval was granted covering multiple assessment years simultaneously
  • The approval letter contained only generalized and stereotyped observations
  • No specific examination of issues pertaining to individual assessment years was reflected
  • The approval merely reproduced statutory language without demonstrating independent scrutiny

Furthermore, the assessee's representative presented a detailed chart demonstrating the diverse nature of issues involved across different assessment years, which included:

Assessment Year 2014-15:

  • Protective additions in the hands of the assessee
  • Substantive additions made in the hands of Shri Dinesh Tyagi

Assessment Year 2015-16:

  • Disallowance of expenses under Section 44AD

Assessment Year 2016-17:

  • Protective additions
  • Disallowance of expenses under Section 44AD
  • Addition of agricultural income

Assessment Year 2017-18:

  • Issues relating to cash deposits during the demonetization period
  • Disallowance of expenses
  • Questions regarding agricultural income

Assessment Year 2018-19:

  • Disallowance under Section 56(1)

Assessment Year 2019-20:

  • Similar disallowances as in the preceding year

The multiplicity and diversity of issues across various years strengthened the contention that a consolidated approval could not satisfy the statutory requirement of independent examination.

Revenue's Response

The Departmental Representative defended the approval process by characterizing it as an administrative function performed by the competent authority under Section 153D. The Revenue's position rested on the following arguments:

  • Continuous supervision is maintained throughout the assessment process
  • The Assessing Officer receives ongoing instructions during the course of assessment proceedings
  • When issues across years are similar in nature, elaborate approval may not be necessary
  • Assessment records were made available along with the letter dated 26.09.2021 seeking approval

The Revenue attempted to justify the consolidated approach on grounds of administrative efficiency and similarity of issues.

Tribunal's Analysis and Findings

The Tribunal conducted a thorough examination of the approval letter dated 26.09.2021 and observed critical deficiencies in the approval process.

Examination of the Approval Letter

The approving authority had recorded the following observations in paragraph 2 of the approval:

"I have gone through the seized materials, appraisal report and other relevant materials pertaining to the case. I am satisfied that proper opportunity of being heard was given to the assessee on all the issues. All the issues emanating from the material available on record have been examined properly and are incorporated in accordance with law in the draft order. Relevant documents were verified before submitting the revised draft orders."

Critical Defects Identified

The Tribunal identified several fundamental flaws in the approval mechanism:

1. Lack of Evidence of Prior Examination

The approval letter referred to communication dated 26.09.2021 from the Assessing Officer but failed to reference any previous correspondence. There was no indication that:

  • Draft orders were forwarded earlier for preliminary examination
  • The approving authority suggested corrections or modifications
  • Revised draft orders were prepared incorporating suggested changes
  • Any iterative review process was undertaken

2. Generic and Mechanical Language

The observations recorded by the approving authority were found to be:

  • Extremely general in nature
  • Applicable to any assessment proceeding
  • Devoid of specific reference to individual year's issues
  • Mechanical reproduction of statutory requirements

3. Absence of Year-wise Analysis