2025 (9) TMI 634 - AT - Income Tax

Combined approval under s.153D invalidates assessments under s.143(3) read with s.153A, forcing annulment for lack of valid approval

Aditya Sharma Versus ACIT, Central Circle-19, New Delhi And DCIT, Central Circle-7, New Delhi Versus Aditya Sharma

ITAT DELHI - AT quashed the assessments framed under s.143(3) read with s.153A, holding that a combined approval purportedly under s.153D vitiates the ... Validity of assessments framed u/s 143(3) r.w.s.153A - prescribed authority had accorded a valid approval u/s 153D or not? - HELD THAT:- We quote Shiv Kumar Nayyar [2024 (6) TMI 29 - DELHI HIGH COURT], MDLR Hotels (P) Ltd. [2024 (8) TMI 1138 - DELHI HIGH COURT] and Serajuddin and Co. [2023 (11) TMI 1254 - SC ORDER] to conclude that such a combined section 153D approval indeed vitiates the entire assessment itself. We draw strong therefrom to quash all the impugned assessments framed herein in assessee's case ISSUES PRESENTED AND CONSIDERED 1. Whether assessments framed under section 143(3) read with section 153A are valid where approval under section 153D was not validly obtained prior to assessment. 2. Whether the legal ground challenging validity of assessments for lack of valid section 153D approval can be admitted at the appellate stage under section 254(1). 3. Whether a single combined approval under section 153D purportedly covering multiple assessment years vitiates assessments for all those years. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of assessments under section 143(3) r.w.s. 153A where section 153D approval was not valid Legal framework: Assessments framed under section 143(3) read with section 153A require prior approval of the prescribed authority as mandated by section 153D; absence of such valid approval affects the jurisdictional competency to complete assessments consequent to search and seizure. Precedent treatment: The Court relied on established authority recognizing that compliance with statutory preconditions for framing assessment is fundamental; failure to obtain valid approval vitiates the resulting assessment. The Tribunal's approach aligns with higher authority treating lack of valid approval as going to the root of the matter. Interpretation and reasoning: The Tribunal examined the chronology of approval sought and granted and concluded that the approval process was defective because the approval granted did not satisfy the statutory requirement for separate valid approvals relative to each assessment year. The Tribunal considered the factual record demonstrating that a common approval was sought for multiple years and held that such combined approval does not meet the statutory mandate where treated as invalid. Ratio vs. Obiter: Ratio - Where mandatory approval under section 153D is absent or invalid, assessments framed under section 143(3) r.w.s. 153A are vitiated and liable to be quashed. The finding that a combined approval for multiple years vitiates the assessments is applied as the operative ratio. Observations about procedural steps and parties' submissions are obiter to the extent they are ancillary. Conclusions: The assessments framed under section 143(3) r.w.s. 153A were quashed for lack of valid section 153D approval; the defect is jurisdictional and requires setting aside the impugned assessments for the years considered. Issue 2 - Admissibility of raising the ground of invalid approval at appellate proceedings under section 254(1) Legal framework: Section 254(1) permits admission of additional grounds in appeals where relevant facts are on record and the ground relates to the determination of correct tax liability; appellate authorities may allow additional legal grounds that go to the root of assessment provided the factual matrix exists on the record. Precedent treatment: The Tribunal followed the established principle that additional legal grounds which are fundamental to jurisdiction and based on facts already on record can be entertained at the appellate stage to ensure correct determination of tax liability. Interpretation and reasoning: The Tribunal accepted that the ground challenging validity of section 153D approval was a jurisdictional/legal point going to the root of the matter and that all relevant facts were available in the record. Accordingly, it admitted the ground at the section 254(1) stage to resolve the correct tax liability rather than limiting the appeal to previously pleaded grounds. Ratio vs. Obiter: Ratio - Appellate admission of a legal ground under section 254(1) is permissible when it concerns jurisdictional defect and requisite facts are in the record; such admission is appropriate to determine correct tax liability. Ancillary comments on litigating positions are obiter. Conclusions: The additional legal ground challenging validity of approval under section 153D was properly admitted at the appellate stage under section 254(1) and considered on merits. Issue 3 - Effect of combined section 153D approval covering multiple assessment years Legal framework: Section 153D contemplates prescribed authority's approval for assessments arising out of search and seizure; the statutory requirement contemplates validity of approval in respect of assessment proceedings, and the nature of approval (whether year-wise or combined) affects compliance with the statutory scheme. Precedent treatment: The Tribunal treated recently decided authorities as instructive in holding that a combined approval purportedly covering multiple assessment years is legally infirm where statutory compliance requires appropriate approvals, and such infirmity vitiates assessments based thereon. Interpretation and reasoning: On examining the approval communication, the Tribunal found that the Assessing Officer sought and obtained a common approval for several assessment years. Reasoning proceeded that such a combined approval is not consistent with the statutory requirement and therefore renders the resulting assessments void. The Tribunal drew a direct causal link between the invalid combined approval and the invalidity of each impugned assessment year. Ratio vs. Obiter: Ratio - A combined approval under section 153D purporting to validate assessments for multiple assessment years is invalid and vitiates the assessments for those years. Observations on administrative practice are obiter. Conclusions: The common/combined section 153D approval for multiple years was held invalid; consequence is quashing of all impugned assessments for the assessment years covered by that approval. Interrelationship and Consequential Findings Cross-reference: Issues 1-3 are interconnected - admissibility under section 254(1) (Issue 2) permitted adjudication of the substantive jurisdictional defect (Issue 1), which was concretely manifested by the invalid combined approval (Issue 3). Consequential reasoning: Because the assessments were quashed on jurisdictional grounds arising from invalid approval, all consequential proceedings dependent on those assessments (including penalty proceedings under section 271(1)(c)) were rendered academic and set aside. Final disposition: The Tribunal allowed the appeals impugning assessments and consequential penalties for the relevant assessment years and dismissed the Revenue's cross-appeal insofar as it sought to sustain the impugned assessments; all other contentions on merits were held to be rendered academic by the jurisdictional finding.