ITAT Delhi Strikes Down Assessment Orders: Section 153D Approval Deemed Mechanical and Without Application of Mind Across Multiple Assessment Years

Overview of the Case

The Income Tax Appellate Tribunal, Delhi Bench, delivered a significant ruling in Terveeni Singh Vs Central Circle-14, wherein it invalidated assessment orders under sections 153C read with 153A of the Income Tax Act, 1961 for Assessment Years 2012-13 to 2014-15 and 2017-18 to 2018-19. The core issue revolved around the validity of the mandatory approval obtained under Section 153D, which the Tribunal found to be mechanical, omnibus, and devoid of proper application of mind. This fundamental jurisdictional defect rendered the entire assessment proceedings void ab initio.

Factual Background

The assessments in question were framed following search proceedings, requiring mandatory approval under Section 153D of the Income Tax Act, 1961 before finalization. The assessee challenged these assessments before the Commissioner of Income Tax (Appeals), who confirmed the orders passed by the Assessing Officer. Aggrieved by these decisions, the assessee filed multiple appeals before the ITAT Delhi.

During the proceedings before the Tribunal, the assessee's counsel sought to introduce additional legal grounds challenging the very foundation of the assessment orders. The sixth additional ground specifically questioned the validity of the approval granted under Section 153D, asserting that the approval was obtained in violation of statutory requirements and established legal principles.

The additional ground stated that the assessment orders passed under sections 153A/143(3) were invalid as they were completed without obtaining proper approval from higher authorities as mandated under Section 153D of the Income Tax Act, 1961.

Admission of Additional Ground

The Tribunal addressed the preliminary question of whether the additional legal ground could be admitted at the appellate stage. The assessee's counsel relied on the landmark ruling of the Supreme Court in CIT Vs. Sinhgad Technical Educational Society (397 ITR 344), which permits admission of pure questions of law at any stage of proceedings.

Tribunal's Decision on Admission

After hearing both parties and examining the nature of the additional ground, the Tribunal concluded that since the sixth additional ground raised a pure question of law relating to jurisdictional validity, it warranted admission for adjudication. Following the Supreme Court's precedent in Sinhgad Technical Educational Society, the Tribunal admitted this additional ground for consideration on merits.

The crux of the matter before the Tribunal was whether the approval granted by the Additional Commissioner of Income Tax, Central Circle-14, under Section 153D on 30.12.2019 satisfied the statutory requirements and established judicial principles.

Nature of the Impugned Approval

Upon examination of the approval document, the Tribunal discovered critical deficiencies:

  • The Additional Commissioner had granted a single, consolidated approval dated 30.12.2019 covering as many as 28 different assessees
  • The approval encompassed multiple assessment years for each assessee
  • There was no year-wise or case-specific satisfaction recorded in the approval order
  • The approval lacked any indication of independent scrutiny of draft assessment orders
  • No specific reasoning or considerations were documented for any individual case or assessment year

Revenue's Contention

The Departmental Representative defended the approval, arguing that:

  • The approval had been granted after due consideration of records
  • The Additional Commissioner had applied his mind before granting approval
  • The approval could not be deemed mechanical or invalid merely based on its format
  • The approval process was an administrative requirement that had been fulfilled

Assessee's Arguments

The assessee's counsel contended that:

  • The approval was patently mechanical and lacking in application of mind
  • It was humanly impossible for the Additional Commissioner to have properly examined draft assessment orders for 28 assessees covering multiple years on a single day
  • The blanket approval violated the specific requirement under Section 153D that approval must be granted for each assessment year separately
  • Numerous judicial precedents have held such omnibus approvals to be invalid
  • The jurisdictional defect went to the root of the matter and vitiated the entire proceedings

Judicial Precedents Examined

The Tribunal conducted an exhaustive review of binding precedents dealing with the requirement of approval under Section 153D.

Anu Nagpal Case