Facts of the Case

The Revenue filed multiple 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 for Assessment Years 2006-07, 2007-08 and 2008-09. The Tribunal had allowed the assessees’ appeals and cross-objections and set aside the assessments on the ground that mandatory approval under Section 153D had been granted mechanically.

In the case of Shivganesh Builders Pvt. Ltd. and connected assessees, the Additional Commissioner of Income Tax had accorded approval under Section 153D by issuing common approval letters covering an exceptionally large number of proposed assessment orders, without reference to seized material or application of mind to individual cases.

Issues Involved

Whether approval granted under Section 153D of the Income-tax Act in a mechanical manner, by a common approval letter covering numerous assessment orders, satisfies the statutory requirement of prior approval, and whether such approval vitiates the consequent search assessments.

Appellant’s Arguments

The Revenue submitted that the questions raised in the present appeals were identical to those raised in earlier matters where the Tribunal had invalidated search assessments on the ground of defective approval under Section 153D. It was argued that approval by the competent authority should be presumed valid and that the Tribunal erred in interfering with assessments on technical grounds.

Respondent’s Arguments

The assessees contended that Section 153D is a mandatory safeguard introduced by the legislature to ensure meaningful supervision in search assessments. It was argued that approval granted by a single-line endorsement for hundreds of assessments, without reference to seized material or discussion of facts, is no approval in the eyes of law. Reliance was placed on earlier Delhi High Court judgments including 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 Revenue fairly conceded that the questions involved in the present appeals were squarely covered by earlier decisions of the Court in MDLR Hotels Pvt. Ltd. and King Buildcon Pvt. Ltd., which arose from the same common ITAT order dated 08.02.2023.

The Court reiterated that Section 153D mandates prior approval of a superior authority, which necessarily implies due application of mind to the seized material and the proposed assessment. Grant of approval by a common letter for a large number of assessments, without any indication of consideration of individual cases, defeats the legislative intent behind the provision.

Following the binding precedents, the Court held that the Tribunal was justified in holding that such mechanical approvals were invalid and that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that approval under Section 153D is not an empty formality. It is a substantive safeguard requiring conscious and meaningful application of mind by the approving authority. Mechanical or omnibus approvals render the resultant search assessments unsustainable in law.

Final Outcome

The appeals filed by the Revenue were dismissed. The Delhi High Court upheld the ITAT’s common order dated 08.02.2023 and held that the assessments framed pursuant to mechanically granted approvals under Section 153D were invalid. The appeals were dismissed in favour of the assessees and against the Revenue.

Link to download order- https://www.mytaxexpert.co.in/uploads/1769506254_PRINCIPALCOMMISSIONEROFINCOMETAX7VsSHIVGANESHBUILDERSPVT.LTD.pdf

 

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