2025 (4) TMI 1657 - AT - Income Tax

Section 153D requires separate approvals for each assessment year despite common assessee identity

The ITAT Delhi held that a common approval under section 153D granted for 28 cases was invalid, as separate approvals are required for each assessment ... Validity of the impugned assessment as lacking valid approval u/s 153D - common approval granted in 28 cases - HELD THAT:- Various landmark precedents i.e. PCIT Vs. Shiv Kumar Nayyar [2024 (6) TMI 29 - DELHI HIGH COURT], Anuj Bansal [2024 (7) TMI 852 - SC ORDER] and MDLR Hotels (P.) Ltd. [2024 (8) TMI 1138 - DELHI HIGH COURT], Shiv Kumar Nayyar [2024 (6) TMI 29 - DELHI HIGH COURT] have already settled the issues in assessee’s favour and against the department that such an approval under section 153D has to be accorded separately for each and every assessment year even if it involves a single assessee. We thus accept the assessee’s instant first and foremost legal grounds/arguments to quash the impugned assessment herein framed by the Assessing Officer in very terms. Assessee appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered in the appeal is the validity of the assessment framed under section 143(3) read with section 153A of the Income-tax Act, 1961, specifically whether the assessment order dated 31st December 2019 was validly passed in the absence of a proper approval under section 153D of the Act. The core questions include:Whether the administrative approval under section 153D must be granted separately for each assessment year and for each assessee, even if the approval is common or collective in nature.The legal nature and requirements of the approval under section 153D: whether it must be a 'written approval' or merely a 'prior approval,' and the extent of judicial scrutiny permissible over such administrative approvals.The scope and limits of judicial review over administrative orders/approvals under section 153D, including the applicability of principles derived from Supreme Court precedents on administrative law, such as the parameters of legality, rationality, and procedural propriety.Whether the impugned assessment order suffers from any procedural irregularity or illegality due to lack of valid approval under section 153D.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity and Legal Requirements of Approval under Section 153DRelevant Legal Framework and Precedents: Section 153D of the Income-tax Act requires prior approval from the prescribed higher authority (typically the Joint Commissioner of Income Tax or Additional Commissioner of Income Tax) before the Assessing Officer (AO) can proceed with assessments or reassessments under section 153A. The section mandates 'prior approval' but does not explicitly require the approval to be 'in writing.'Several recent authoritative decisions have clarified the legal requirements of such approval. Notably, the Tribunal relied on landmark judgments including PCIT Vs. Shiv Kumar Nayyar (2024), PCIT Vs. Anuj Bansal (2024), and PCIT Vs. MDLR Hotels (P.) Ltd. (2024), which established that approval under section 153D must be accorded separately for each assessment year and for each assessee. A common or collective approval covering multiple years or multiple assessees does not satisfy the statutory mandate, rendering the assessment invalid.Court's Interpretation and Reasoning: The Tribunal emphasized that the statutory language 'prior approval' implies a requirement of explicit sanction for each individual assessment proceeding. The absence of such specific approval is fatal to the validity of the assessment under section 153A read with section 153D.While the Department argued that the section does not expressly require 'written approval,' and that the approval is an administrative order not subject to strict judicial scrutiny, the Tribunal distinguished the nature of the approval from quasi-judicial or judicial orders. It noted that administrative approvals must still comply with statutory requirements, and failure to do so invalidates the assessment.Key Evidence and Findings: The assessee produced the prescribed authority's common approval document covering multiple cases and years, which was challenged as insufficient. The Tribunal found that such a common approval did not meet the statutory requirement of separate approval per assessment year and per assessee.Application of Law to Facts: Applying the settled legal principles, the Tribunal held that the impugned assessment order, framed without valid separate approval under section 153D for the relevant assessment year 2018-19, was invalid. This conclusion was supported by the cited precedents which had already settled the point in favor of the assessee.Treatment of Competing Arguments: The Department contended that the approval under section 153D is an administrative order which need not be a 'speaking order' or satisfy the stringent requirements of judicial or quasi-judicial orders. It relied heavily on Supreme Court decisions on the scope of judicial review over administrative actions, emphasizing the limited grounds for interference: illegality, irrationality (Wednesbury unreasonableness), procedural impropriety, and abuse of power.The Tribunal acknowledged these principles but clarified that the issue here was not about the reasonableness or procedural propriety of the approval but about the fundamental statutory requirement of separate approval per assessment year and assessee. The absence of such approval is a clear statutory violation, not a mere procedural irregularity.Issue 2: Scope of Judicial Review over Administrative Approval under Section 153DRelevant Legal Framework and Precedents: The Department cited Supreme Court decisions including Municipal Council Neemuch vs Mahadeo Real Estate (2019) and West Bengal Central School Service Commission vs Abdul Halim (2019), which delineate the scope of judicial review over administrative actions. These cases establish that courts should confine themselves to examining legality, irrationality, procedural impropriety, or abuse of power, and should not substitute their own views on the merits of administrative decisions.Court's Interpretation and Reasoning: The Tribunal accepted the general principles of limited judicial review over administrative approvals. It recognized that administrative orders are not subject to the same rigorous standards as quasi-judicial or judicial orders, and that courts should not interfere unless the decision is arbitrary, capricious, or suffers from a manifest error of law.However, the Tribunal distinguished the present case on the ground that the issue was not about the reasonableness or fairness of the approval but about compliance with the statutory mandate requiring separate approval under section 153D. The absence of such approval was not a question of reasonableness but of statutory validity.Key Evidence and Findings: The Department's written submissions elaborated on the nature of administrative approvals and the limited scope of judicial review. The Tribunal considered these submissions but found them inapplicable to the core statutory requirement at hand.Application of Law to Facts: The Tribunal applied the principles of judicial review to uphold the necessity of statutory compliance with section 153D, holding that the lack of separate approval for the assessment year rendered the assessment void, irrespective of the administrative nature of the approval.Treatment of Competing Arguments: The Tribunal rejected the Department's argument that the approval need not be examined for content or form, emphasizing that the statutory requirement for prior approval is mandatory and cannot be bypassed by administrative convenience or collective approvals.3. SIGNIFICANT HOLDINGS'We thus accept the assessee's instant first and foremost legal grounds/arguments to quash the impugned assessment herein framed by the Assessing Officer on 31st December, 2019 in very terms.''Such an approval under section 153D has to be accorded separately for each and every assessment year even if it involves a single assessee.''The order of the Addl./Joint CIT u/s 153D does not suffer from any illegality or irrationality or procedural impropriety. Therefore, the above order / sanction / approval u/s 153D may kindly be upheld.' (Department's submission, noted but distinguished)'The absence of valid approval under section 153D renders the assessment framed under section 143(3) r.w.s. 153A invalid.''The scope of judicial review over administrative approvals is limited to examining illegality, irrationality, procedural impropriety or abuse of power, but does not extend to overlooking mandatory statutory requirements.'Final determinations:The impugned assessment framed without valid prior approval under section 153D for the relevant assessment year is quashed.The assessee's appeal is allowed, and the Revenue's cross-appeal is dismissed.All other merits-related pleadings become academic due to the quashing of the assessment on the threshold issue.