Invalid Tax Assessments Overturned: Procedural Defects Invalidate Section 153C and 153D Approvals Across Multiple Assessment Years

Tribunal ruled invalid tax assessments for multiple assessment years due to procedural defects. Consolidated approval under Section 153D was deemed non-compliant with statutory requirements. Assessments under Section 153C for AYs 2015-16, 2016-17, and 2017-18 were quashed, citing lack of year-specific approvals and simultaneous assessment violations. The decision reinforced strict procedural mandates in tax jurisdiction assumptions.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals include:

• Whether the assumption of jurisdiction under section 153C of the Income Tax Act, 1961 (the Act) was validly made, particularly in relation to the satisfaction note and relevant material evidencing undisclosed income for the relevant assessment years.
• Whether the approval granted under section 153D of the Act, which is a prerequisite for initiating assessments under section 153C, was valid, specifically addressing the legality of a consolidated approval covering multiple assessment years instead of separate approvals for each year.
• Whether the assessments for the assessment years (AYs) 2015-16, 2016-17, and 2017-18 were correctly initiated under section 153C or whether such jurisdiction was wrongly assumed, especially considering the procedural requirements and the timing of satisfaction notes.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Assumption of Jurisdiction under Section 153C of the Act

Relevant Legal Framework and Precedents: Section 153C allows the Assessing Officer (AO) to assess an assessee when documents or assets belonging to the assessee are found during a search or seizure operation conducted in relation to another person. The jurisdiction under this section is contingent upon the prior approval under section 153D and a satisfaction note indicating the existence of undisclosed income. The Supreme Court's decision in CIT v Jasjit Singh (155 taxmann.com 155) clarifies that assessments under section 153C cannot be initiated simultaneously with regular assessments under section 143(3) for the same AY.

Court's Interpretation and Reasoning: The Tribunal observed that for AY 2017-18, the satisfaction note for assumption of jurisdiction under section 153C was prepared on 22.3.2018. Consequently, the assessment could not validly be initiated under section 143(3) and section 153C simultaneously. This was held to be a settled issue in light of the Supreme Court's ruling, which the Tribunal relied upon to sustain the additional ground raised by the assessee.

Application of Law to Facts: The Tribunal found that the assessments for AY 2017-18 were wrongly initiated under section 153C, violating the procedural requirements, and thus the assumption of jurisdiction was invalid.

Conclusions: The Tribunal sustained the additional ground challenging the assumption of jurisdiction under section 153C for AY 2017-18 and consequently quashed the assessment.

Issue 2: Validity of Approval under Section 153D of the Act

Relevant Legal Framework and Precedents: Section 153D mandates that the AO conducting search or seizure must obtain prior approval from the competent authority before initiating assessments under section 153C. This approval must be year-specific and cannot be granted in a consolidated manner for multiple assessment years. The Tribunal relied on the decision in ACIT v Serajuddin & Co. (2023) 150 taxmann.com 146 (Orissa), where the Supreme Court dismissed the Revenue's Special Leave Petition (SLP), thereby upholding the principle that consolidated approvals are invalid. Additionally, the Tribunal referred to coordinate Bench decisions, including Shri Gurvinder Singh Duggal v ACIT and the Hon'ble jurisdictional High Court's ruling in PCIT v Anuj Bansal, which reinforced the requirement for year-wise approval.

Court's Interpretation and Reasoning: The Tribunal noted that in the present case, the approval under section 153D was granted by the Joint CIT in a consolidated letter dated 30.12.2018, covering multiple assessment years. This did not comply with the statutory mandate requiring separate approvals for each year. The Revenue's argument that ongoing interaction between the approving authority and AO justified the consolidated approval was rejected as unsustainable in light of binding precedents.

Key Evidence and Findings: The consolidated approval letter itself was the primary document examined. The Tribunal found no valid material or legal basis for such consolidated approval.

Application of Law to Facts: Since the approval under section 153D was invalid, the assumption of jurisdiction under section 153C for AYs 2015-16 and 2016-17 was vitiated.

Treatment of Competing Arguments: The Revenue's defense based on procedural interactions was considered but found insufficient to override the clear statutory requirement and judicial pronouncements.

Conclusions: The Tribunal held that the approval under section 153D was invalid, thereby invalidating the assessments under section 153C for AYs 2015-16 and 2016-17.

3. SIGNIFICANT HOLDINGS

The Tribunal established the following core principles and final determinations:

• "The approval granted in a consolidated manner for various assessment years does not go along with the mandate of law."
• The assumption of jurisdiction under section 153C of the Income Tax Act is contingent upon valid, year-wise approval under section 153D; failure to obtain such approval renders the jurisdiction assumption invalid.
• Assessments under section 153C cannot be initiated simultaneously with assessments under section 143(3) for the same assessment year, as clarified by the Supreme Court in CIT v Jasjit Singh.
• Consequently, assessments initiated under section 153C without valid approval or in breach of procedural requirements must be quashed.

Accordingly, the Tribunal allowed the appeals, quashing the assessments for AYs 2015-16, 2016-17, and 2017-18 on the grounds of invalid approval and wrongful assumption of jurisdiction under section 153C of the Act.

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