Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal in ITA No. 3084/Del/2016 and CO No. 261/Del/2016 for Assessment Year 2007-08. The ITAT had set aside search assessments on the ground that the mandatory prior approval under Section 153D was accorded mechanically. The approval in question was granted by the Additional Commissioner of Income Tax through a single, common approval letter covering 246 assessment orders, merely directing that the orders be passed before limitation and copies be sent for record.

Issues Involved

Whether approval accorded under Section 153D of the Income-tax Act to a large number of search assessments through a single, omnibus approval letter satisfies the statutory mandate of prior approval, whether such approval reflects due application of mind, and whether any substantial question of law arises from the ITAT’s findings.

Petitioner’s Arguments

The Revenue submitted that the issues involved were already covered by earlier decisions of the Delhi High Court, including PCIT, Central Circle-02 vs. MDLR Hotels Pvt. Ltd. and PCIT Central-2 vs. King Buildcon Pvt. Ltd., which arose from the same common ITAT order dated 08.02.2023. It was argued that similar substantial questions of law were proposed in the present appeal and that the ITAT had erred in invalidating the assessments.

Respondent’s Arguments

The assessee supported the ITAT’s findings and contended that Section 153D was introduced to ensure meaningful supervisory scrutiny in search cases. It was argued that mass approvals granted without reference to seized material or assessment records, and without any indication of consideration of individual cases, are contrary to legislative intent and settled law.

Court Order / Findings

The Delhi High Court noted that the Tribunal had recorded detailed factual findings showing that approvals under Section 153D were granted to 246 assessment orders by a single letter, with no reference to seized material or assessment records, and without any indication of independent application of mind. The Court reiterated that the legislative intent behind Section 153D, as explained in CBDT Circular No. 3 of 2008, is to ensure that superior authorities meaningfully scrutinise search assessments before approval. Relying on its earlier decisions in MDLR Hotels Pvt. Ltd., King Buildcon Pvt. Ltd., and principles laid down in cases dealing with mechanical approvals, the Court held that such omnibus approvals defeat the statutory safeguard. The Court found no justification to interfere with the ITAT’s view and held that no substantial question of law arose.

Important Clarification

While dismissing the appeal, the Court noted that issues relating to the effect and impact of Section 144A of the Income-tax Act and provisions of the Search and Seizure Manual, 2007 were left open to be examined in appropriate proceedings, as observed in connected matters. However, on the facts recorded by the Tribunal in the present case, there was no occasion to examine those aspects.

Final Outcome

The appeal filed by the Revenue was dismissed. The order of the Income Tax Appellate Tribunal dated 08.02.2023 quashing the search assessments for want of valid approval under Section 153D was upheld. The decision was rendered in favour of the assessee and against the Revenue, with no substantial question of law arising for consideration.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505618_PRCOMMISSIONEROFINCOMETAXCENTRAL2VsBELIEVECONSTRUCTIONSP.LTD.pdf

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