Section 153D Approval Quashed: ITAT Delhi Sets Aside Assessment Order in Nussli Switzerland Ltd. Case

Overview of the Case

The Delhi Bench of the Income Tax Appellate Tribunal, in Nussli Switzerland Ltd. Vs ACIT (ITAT Delhi), ITA No. 2155/DEL/2018, delivered a significant ruling on 29th July, 2026, concerning Assessment Year 2011-12. The Tribunal allowed the assessee's appeal by holding that the mandatory prior approval granted under Section 153D of the Income Tax Act, 1961 was rendered invalid on account of it being a purely mechanical exercise, entirely devoid of any genuine application of mind by the approving authority.

This decision reinforces the well-established legal principle that statutory approvals under the Income Tax Act, 1961 must not be reduced to mere formalities. Where an approving authority signs off on a draft assessment order without actually engaging with the underlying seized material, appraisal reports, or proposed additions, such approval cannot be treated as valid in the eyes of law.

Background Facts

Nussli Switzerland Ltd., the appellant assessee, had filed its return of income for Assessment Year 2011-12 on 30.09.2011, declaring a loss of Rs.12,68,46,434/-. The assessee was among the contracted parties engaged in work related to the development of sports venues for the Commonwealth Games held in Delhi in October 2010.

A search and seizure operation was conducted upon the assessee on 19.10.2010. Following the search, the Assessing Officer proceeded to frame the assessment based on enquiries conducted and documents found and seized during the course of the search proceedings. Upon completion of the assessment under Section 144C read with Section 153A/Section 143(3) of the Income Tax Act, 1961, the total income of the assessee was determined at Rs.432,19,54,890/-, which also included a transfer pricing adjustment made under Section 92CA.

Grounds of Appeal Before the Tribunal

The assessee had raised an extensive set of grounds before the Tribunal, challenging various substantive additions and disallowances made during the assessment. These included:

  • Additions of Rs.69,02,01,038/- treated as unexplained expenditure under Section 69C (partly sustained by CIT(A) at Rs.3,51,58,051/-)
  • Additions of Rs.32,05,60,423/- under Section 69C on account of alleged extra cumulative profit based on comparative quotations
  • Disallowance of Rs.5,25,00,000/- (partly sustained at Rs.1,47,62,000/-) on account of management consultancy fee under Section 37
  • Additions of Rs.46,59,22,136/- pertaining to purchases and services through M/s. Comfortnet Traders (I) Pvt. Limited under Section 69C
  • Addition of Rs.2,19,27,355/- on account of licence fee paid for using the brand name "Nussli" under Section 69C
  • Addition of Rs.2,89,45,143/- relating to salaries/remuneration paid to employees under Section 69C
  • Sustenance of addition of Rs.6,40,83,107/- out of expenses of Rs.22,06,26,095/- relating to head office payments
  • Aggregate addition of Rs.89,32,03,950/- under Section 69C
  • Disallowance of Rs.12,68,46,434/- representing the returned loss under Section 37
  • Transfer pricing adjustment of Rs.19,62,79,381/-
  • Charging of interest under Section 234B, Section 234C, and Section 234D

Additional Grounds on Validity of Section 153D Approval

By way of additional grounds, the assessee challenged the very foundation of the assessment order, contending that: