Facts of the Case

The Revenue filed appeals under Section 260A of the Income-tax Act, 1961 challenging a common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal in several connected appeals relating to Assessment Years 2006–07, 2007–08 and 2008–09. One of the respondents in the batch of appeals was M/s Shine Star Buildcon Pvt. Ltd.

The assessments arose out of a search conducted under Section 132. The Assessing Officer framed assessments after obtaining approval under Section 153D from the Additional Commissioner of Income Tax. The approval, however, was granted through common letters covering a very large number of proposed assessment orders across multiple assessees, without reference to seized material or individual facts of each case.

The ITAT allowed the assessee’s appeal and held that the mandatory approval under Section 153D was granted mechanically, without due application of mind, rendering the assessments invalid. Aggrieved, the Revenue preferred the present appeals before the High Court.

Issues Involved

Whether approval granted under Section 153D of the Income-tax Act by a common and omnibus letter, without consideration of seized material and without application of mind to individual cases, satisfies the statutory requirement, and whether such approval vitiates the resultant search assessments.

Appellant’s Arguments

The Revenue submitted that the Tribunal erred in invalidating the assessments on the ground of defective approval under Section 153D. It was argued that approval by the competent authority should be presumed to be valid and that the Tribunal had taken an unduly technical view. The Revenue fairly conceded, however, that the issues raised were identical to those already decided by the Delhi High Court in earlier cases arising from the same common ITAT order.

Respondent’s Arguments

The assessee contended that Section 153D is a mandatory safeguard introduced to ensure effective supervisory control in search assessments. It was argued that approval granted in a mechanical manner for hundreds of assessments through a single letter defeats the legislative intent and cannot be regarded as valid approval in the eyes of law. Reliance was placed on binding precedents of the Delhi High Court in PCIT, Central Circle-02 vs. MDLR Hotels Pvt. Ltd. and PCIT, Central-2 vs. King Buildcon Pvt. Ltd.

Court Order / Findings

The Delhi High Court noted that the questions raised in the present appeals were squarely covered by its earlier judgments in MDLR Hotels Pvt. Ltd. and King Buildcon Pvt. Ltd., which also arose from the same common order of the ITAT dated 08.02.2023.

The Court reiterated that Section 153D requires prior approval of a superior authority after due application of mind to the material on record. Approval accorded by a common letter for a large number of proposed assessments, without any discussion of seized material or individual facts, is purely mechanical and contrary to the mandate of the provision.

Following the binding precedents, the Court held that the Tribunal was correct in holding the approvals to be invalid and that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that approval under Section 153D is not a ritualistic or empty formality. It is a substantive statutory safeguard requiring meaningful application of mind by the approving authority, and mechanical or omnibus approvals vitiate the entire assessment proceedings.

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 ITAT and held that the search assessments framed pursuant to mechanically granted approvals under Section 153D were invalid. The appeals were dismissed in favour of M/s Shine Star Buildcon Pvt. Ltd. and other assessees and against the Revenue.

Link to download order- https://www.mytaxexpert.co.in/uploads/1769506201_PRINCIPALCOMMISSIONEROFINCOMETAX7VsSHINESTARBUILDCONPVT.LTD.pdf

 

 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.