Facts of the Case

The Revenue filed appeals under Section 260A of the Income-tax Act, 1961 against a common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal in several connected matters, including the case of MDLR Resorts Pvt. Ltd. The appeals pertained to search assessments framed pursuant to a search conducted under Section 132.

The Assessing Officer framed multiple assessment orders after obtaining approval under Section 153D from the Additional Commissioner of Income Tax. The approval was granted by way of a single, common letter covering as many as 246 proposed assessment orders, merely directing that the assessments be passed within the limitation period, without any reference to seized material or individual facts.

The ITAT held that such approval was mechanical and invalid, and consequently set aside the assessments. Aggrieved, the Revenue preferred the present appeals.

Issues Involved

Whether approval granted under Section 153D of the Income-tax Act through a single, omnibus letter for a large number of search assessments satisfies the statutory requirement of prior approval, and whether lack of application of mind vitiates the resultant assessments.

Appellant’s Arguments

The Revenue contended that the Tribunal erred in invalidating the assessments on the ground of defective approval and argued that the approving authority is presumed to have applied its mind. It was submitted, however, that the questions raised in the present appeals were identical to those already considered by the Delhi High Court in earlier matters arising from the same common ITAT order.

Respondent’s Arguments

The assessee submitted that Section 153D is a mandatory safeguard requiring meaningful supervision by a superior authority in search assessments. It was argued that granting approval for hundreds of assessments through a single-line endorsement, without any discussion of seized material or assessment records, is purely mechanical and defeats the legislative intent. Reliance was placed on binding Delhi High Court precedents including PCIT, Central Circle-02 vs. MDLR Hotels Pvt. Ltd. and related cases.

Court Order / Findings

The Delhi High Court noted the Revenue’s candid submission that the issues involved were covered by earlier decisions of the Court, particularly PCIT, Central Circle-02 vs. MDLR Hotels Pvt. Ltd. (ITA 593/2023 and connected matters), which arose from the same common ITAT order dated 08.02.2023.

The Court reiterated that Section 153D mandates prior approval by a superior authority after due application of mind to the seized material and proposed assessment. Approval accorded mechanically by a single letter for as many as 246 assessment orders, without any indication of consideration of individual cases, is contrary to the statutory mandate.

Following settled precedent, the Court held that the Tribunal was justified in holding the approval to be invalid and concluded that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that approval under Section 153D is not a procedural formality but a substantive safeguard. Mechanical or omnibus approvals, unaccompanied by application of mind to seized material, render search assessments unsustainable in law.

Final Outcome

The appeals filed by the Revenue were dismissed. The Delhi High Court upheld the common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal and held that the search assessments framed pursuant to mechanically granted approvals under Section 153D were invalid. The matter was decided in favour of MDLR Resorts Pvt. Ltd. and against the Revenue.

 Link to download order- https://www.mytaxexpert.co.in/uploads/1769506078_PRINCIPALCOMMISSIONEROFINCOMETAX1VsMDLRRESORTSPVT.LTD.pdf

 

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