Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961, being ITA No. 542/2025, challenging the common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal. The Tribunal had allowed the assessee’s appeal arising out of search and seizure proceedings and quashed the assessments for the relevant assessment years, namely AYs 2006-07, 2007-08 and 2008-09.

The ITAT held that the mandatory approval granted under Section 153D of the Act by the Additional Commissioner was mechanical, omnibus and without application of mind. The approval was issued through a stereotyped letter covering a very large number of draft assessment orders, without any reference to seized material or assessment records.

Issues Involved

Whether approvals granted under Section 153D of the Income-tax Act in a mechanical manner without due application of mind are valid, whether such defective approvals vitiate 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 raised in the appeal were similar to those raised in other connected appeals arising from the same ITAT order dated 08.02.2023. It was fairly conceded that the issues stood covered by earlier decisions of the Delhi High Court in 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., which had affirmed the Tribunal’s view on invalid mechanical approvals under Section 153D.

Respondent’s Arguments (Assessee)

The assessee relied upon the binding precedents of the Delhi High Court holding that Section 153D approval is a substantive statutory safeguard and cannot be reduced to a ritualistic or mechanical formality. It was contended that grant of approval without examination of seized material or assessment records defeats the legislative intent and renders the assessment void.

Court Order / Findings

The Delhi High Court noted that the Revenue itself admitted that the issues involved were covered by earlier judgments of the Court. The Court reiterated that approvals granted under Section 153D must reflect conscious application of mind by the approving authority and cannot be accorded in a blanket manner through a single stereotyped approval covering numerous draft assessment orders.

Relying on its earlier decisions in MDLR Hotels Pvt. Ltd. and King Buildcon Pvt. Ltd., the Court held that mechanical and omnibus approvals under Section 153D are invalid and vitiate the entire assessment proceedings. The Court further observed that similar principles governing application of mind apply to approvals under Sections 151 and 153D of the Act.

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 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 Believe Constructions 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. The appeal was dismissed in favour of the assessee and against the Revenue.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505922_PR.COMMISSIONEROFINCOMETAX1VsBELIEVECONSTRUCTIONSP.LTD.pdf

 

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