Delhi HC confirms Section 153A assessments invalid without proper Section 153D approval for each year

Delhi HC upheld ITAT's decision invalidating assessment under Section 153A due to improper approval under Section 153D. The court held that approval must be granted separately for each assessment year with independent application of mind, not as mere formality. The approving authority mechanically granted single approval for multiple years (2011-12 to 2017-18) and processed 43 cases in one day without proper scrutiny of draft assessment orders, violating statutory requirements for meaningful review.

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Issues:
Whether the approval granted under Section 153D of the Income Tax Act, 1961 was in accordance with the law.

Analysis:
The case involved an appeal by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT) declaring the assessment order as illegal due to lack of appropriate approval under Section 153D of the Act. The dispute arose from a search and seizure operation conducted in the Nayyar Group of cases, leading to centralization of the assessee's case and subsequent scrutiny assessment. The assessing officer passed an assessment order under Section 153A read with Section 143(3) of the Act, which was challenged by the assessee before the Commissioner of Income Tax (Appeals) (CIT(A)). The CIT(A) partially allowed the appeal, prompting the Revenue to appeal to the ITAT, where the approval under Section 153D was found to be flawed and mechanical, rendering the search assessment illegal.

The main contention before the High Court was whether the approval granted by the competent authority under Section 153D was valid. The Revenue argued that the approval was not granted in a mechanical manner and that the authority had the right to approve on the same day as the draft assessment orders were sent. On the other hand, the assessee contended that the approval was mechanical, citing precedents and highlighting the requirement for independent application of mind by the approving authority for each assessment year.

The High Court analyzed the provision of Section 153D, emphasizing that approval must be granted for each assessment year separately with an independent application of mind. Referring to relevant case laws, including PCIT v. Sapna Gupta and Asst. CIT v. Serajuddin and Co., the Court reiterated that the approval under Section 153D cannot be a mere formality or rubber stamping exercise but must reflect a genuine application of mind by the approving authority.

The Court noted that the ITAT found the approval in the present case to be granted for multiple assessment years on the same day without individual consideration, which was not in compliance with the requirements of Section 153D. The approval lacked any indication of independent assessment of the draft orders, and the approving authority had granted approvals for numerous cases on a single day, raising doubts about the thoroughness of the process. Consequently, the High Court upheld the ITAT's decision, dismissing the appeal and emphasizing the necessity of a valid and well-considered approval process under Section 153D for each assessment year.

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