ITAT Delhi Quashes Section 153C Assessments: Mechanical Approval Under Section 153D Held Legally Invalid

Background and Overview

The Delhi Bench of the Income Tax Appellate Tribunal recently delivered a significant ruling in the matter of Soni Commercial Enterprises Private Limited Vs ACIT (ITAT Delhi), allowing appeals filed by the assessee against assessment orders framed under Section 153C read with Section 143(3) of the Income-tax Act, 1961. The assessments in question pertained to Assessment Years 2014-15, 2015-16, and 2016-17, all concluded by ACIT, Central Circle-14, New Delhi vide orders dated 31.12.2019.

The core question before the Tribunal was whether the approval granted under Section 153D of the Act by the Additional Commissioner of Income Tax, Central Range-4, New Delhi, vide letter dated 29.12.2019, was legally valid — or whether it amounted to a mere mechanical exercise devoid of any genuine application of mind.

The ruling carries substantial implications for search-related assessments across India, reinforcing that the approval mechanism under Section 153D is not a procedural rubber stamp but a substantive jurisdictional precondition.

Factual Matrix

The assessee, Soni Commercial Enterprises Private Limited, was subjected to assessments framed under Section 153C read with Section 143(3) of the Income-tax Act, 1961. These orders were challenged before the Commissioner of Income Tax (Appeals)-26, Delhi, whose appellate orders were subsequently appealed before the ITAT Delhi in the following matters:

Before the Tribunal, the assessee pressed for disposal of an additional ground challenging the very legality of the impugned assessments on the basis that the approval under Section 153D was granted mechanically and without independent application of mind.

The Additional Ground Raised by the Assessee

The assessee raised the following additional ground before the Tribunal:

"1.1 That on the facts and circumstances of the case and in law, the assessment order dated 31.12.2019 passed u/s 153C read with section 143(3) of the Income Tax Act, 1961 is bad in law, void ab initio and liable to be quashed, as the approval granted u/s 153D of the Act by the Additional Commissioner of Income Tax, Central Range-4, New Delhi vide letter dated 29.12.2019 is mechanical, ritualistic and without independent application of mind to the seized material, satisfaction note, assessment records, replies filed by the appellant and the draft assessment order for the relevant assessment year.

1.2 That the Ld. CIT(A) erred in sustaining the assessment order without appreciating that valid approval u/s 153D is a mandatory jurisdictional requirement and not an empty formality. In the absence of proper, independent and year-wise approval u/s 153D, the assessment order passed u/s 153C r.w.s. 143(3) deserves to be quashed."

The assessee's position was unequivocal: a valid approval under Section 153D is a mandatory jurisdictional requirement, and any approval that lacks genuine, independent, and year-wise deliberation renders the entire assessment legally void.

Revenue's Counterarguments

The Departmental Representative mounted a two-pronged defence:

First Line of Defence — Sufficiency of the Approval

The Revenue argued that the approval letter dated 29.12.2019 adequately demonstrated application of mind and that, being administrative in character, it should be construed liberally. The submission was that the approval was supervisory and that mere shortcomings in articulation of reasons would not vitiate the entire process.

Second Line of Defence — Retrospective Applicability of Section 292BC

The Revenue placed significant reliance on Section 292BC of the Income-tax Act, 1961, introduced through the Finance Act, 2026, with effect from 01.04.2021. According to the Department, this provision clarifies that the approval process under Section 153D is a supervisory and administrative function, and any deficiency in recorded reasons would not invalidate the approval.