Facts of the Case

The Revenue filed multiple appeals under Section 260A of the Income-tax Act, 1961, including ITA No. 539/2025 against Bhudeva Estates Pvt. Ltd., challenging a common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal. The ITAT had allowed the assessees’ appeals for Assessment Years 2006-07, 2007-08 and 2008-09 arising out of search and seizure proceedings.

The Tribunal quashed the assessments on the ground that approvals granted under Section 153D of the Act by the Additional Commissioner were mechanical, omnibus in nature and without due application of mind. The approvals covered a very large number of draft assessment orders through stereotyped language, without reference to seized material or assessment records.

Issues Involved

Whether approvals granted under Section 153D of the Income-tax Act were valid when accorded mechanically without application of mind, whether such approvals vitiated the consequent search assessments, and whether any substantial question of law arose warranting interference under Section 260A.

Appellant’s Arguments (Revenue)

The Revenue contended that the ITAT erred in quashing the assessments merely on the ground of defective approval under Section 153D. It was argued that the requirement of approval was substantially complied with and that the assessments should not fail on technical grounds. The Revenue fairly conceded that the issues raised were covered by earlier judgments of the Delhi High Court.

Respondent’s Arguments (Assessee)

The assessee relied upon binding precedents of the Delhi High Court, including Pr. Commissioner of Income Tax, Central Circle-02 vs. MDLR Hotels Pvt. Ltd. and Pr. Commissioner of Income Tax, Central-2 vs. King Buildcon Pvt. Ltd., wherein mechanical and omnibus approvals under Section 153D were held to be invalid. It was submitted that Section 153D is a substantive safeguard requiring conscious application of mind by the approving authority.

Court Order / Findings

The Delhi High Court noted that the Revenue itself conceded that the issues involved were covered by earlier decisions of the Court. The Court reproduced and relied upon its judgment in MDLR Hotels Pvt. Ltd., wherein it was held that granting approval to hundreds of draft assessment orders through a single, stereotyped approval letter clearly demonstrates lack of application of mind.

The Court reiterated that Section 153D was introduced to ensure that search assessments are subjected to supervisory scrutiny by senior अधिकारियों, and such approval cannot be ritualistic or mechanical. The approving authority must examine the seized material and assessment records before according approval.

The Court further observed that similar principles governing application of mind apply to approvals under Sections 151 and 153D, and mere rubber-stamping of approval defeats the legislative intent.

Finding no substantial question of law arising from the ITAT’s order, the Court declined to interfere.

Important Clarification

The High Court clarified that the question relating to the effect and impact of Section 144A of the Act and provisions of the Search and Seizure Manual, 2007, was left open to be examined in appropriate proceedings, as recorded in earlier judgments.

Final Outcome

The appeal filed by the Pr. Commissioner of Income Tax-I against Bhudeva Estates Pvt. Ltd. was dismissed. The Delhi High Court upheld the ITAT’s order quashing the search assessments on the ground of mechanical and invalid approval under Section 153D, holding that no substantial question of law arose for consideration. All connected Revenue appeals were dismissed in favour of the assessees.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505831_PR.COMMISSIONEROFINCOMETAXIVsBHUDEVAESTATESP.LTD.pdf

 

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