Facts of the Case

The Revenue filed appeals under Section 260A of the Income-tax Act, 1961, including ITA No. 522/2025 against Ashutosh Developers Pvt. Ltd., challenging a common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal. The ITAT had allowed the assessees’ appeals arising out of search and seizure proceedings and quashed the assessments for the relevant assessment years.

The Tribunal found that approvals granted under Section 153D by the Additional Commissioner were mechanical and omnibus in nature. A single stereotyped approval letter was issued covering a very large number of draft assessment orders, without any reference to seized material or assessment records, thereby vitiating the assessments.

Issues Involved

Whether approvals granted under Section 153D of the Income-tax Act in a mechanical manner without application of mind are valid, whether such defective approvals invalidate the consequent search assessments, and whether any substantial question of law arose for consideration under Section 260A.

Appellant’s Arguments (Revenue)

The Revenue submitted that the questions involved in the appeal were covered by earlier decisions of the Delhi High Court, including ITA No. 593/2023 and connected matters as well as ITA No. 574/2024, which arose from the same ITAT order dated 08.02.2023. It was argued that the ITAT erred in quashing the assessments solely on the ground of defective approval under Section 153D.

Respondent’s Arguments (Assessee)

The assessee relied upon binding precedents of the Delhi High Court, including PCIT, Central Circle-02 vs. MDLR Hotels Pvt. Ltd. and related judgments, wherein mechanical approvals under Section 153D were held to be invalid. It was contended that Section 153D is a substantive safeguard intended to ensure meaningful supervisory scrutiny and not a mere formality.

Court Order / Findings

The Delhi High Court noted that the Revenue itself conceded that the issues raised in the present appeals were squarely covered by earlier judgments of the Court. The Court reproduced and relied upon its decision in PCIT, Central Circle-02 vs. MDLR Hotels Pvt. Ltd., wherein approvals granted to hundreds of draft assessment orders through a single, stereotyped approval letter were held to be mechanical and without due application of mind.

The Court reiterated that Section 153D was introduced to ensure that search assessments are made only after conscious scrutiny by senior अधिकारियों. Grant of approval without reference to seized material or assessment records defeats the legislative intent and renders the approval invalid.

The Court further observed that similar principles governing application of mind apply to approvals under Sections 151 and 153D, and mere rubber-stamping or ritualistic approval cannot sustain an assessment.

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 Income-tax Act and the provisions of the Search and Seizure Manual, 2007, was expressly left open to be examined in appropriate proceedings, consistent with earlier judgments.

Final Outcome

The appeal filed by Pr. Commissioner of Income Tax-1 against Ashutosh Developers Pvt. Ltd. was dismissed. The Delhi High Court upheld the ITAT’s order quashing the search assessments on the ground that the approval under Section 153D was mechanical and invalid, and held that no substantial question of law arose for consideration. All connected Revenue appeals were dismissed accordingly.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505887_PR.COMMISSIONEROFINCOMETAX1VsASHUTOSHDEVELOPERSP.LTD.pdf

 

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