2025 (11) TMI 1598 - AT - Income Tax

Mechanical omnibus approval under Section 153D for multiple years held invalid; assessments quashed for lack of scrutiny

ITAT Delhi-AT held that a single, common approval u/s 153D granted for four assessment years, through one omnibus order, was mechanical and invalid. ... Validity of approval granted u/s 153D - single approval u/s 153D has been accorded in respect of four Assessment Years - HELD THAT:- Recently the hon’ble Third member in the case of Dheeraj Chaudhary [2025 (9) TMI 1372 - ITAT DELHI (LB)] after considering all the judgements relied upon by the ld. CIT DR and further after detailed analyzing the provisions of section 153D, power and independence of assessing authority and the CBDT manual referred by the revenue has held that the common approval granted for various year and for various assessee without making any reference to the material seen is mechanical approval and cannot sustained in the eyes of law. Such mechanical approval cannot be sustainable in law in the light of judicial dicta available. The approval memo is totally silent on the issues involved and has granted omnibus approval without any thoughtful process being discernible. A single approval u/s 153D has been accorded in respect of four Assessment Years through single order on the request of the AO made on the very same day vide letter dt. 23.03.2022 which is filed before us during the course of hearing. There is no other material to show involvement of the superior authority in the course of assessment proceedings. ISSUES PRESENTED AND CONSIDERED 1. Whether approval under section 153D was valid where a single omnibus approval was granted contemporaneously for multiple assessment years and multiple assessees without any indication of perusal of draft assessment orders or application of independent mind by the approving authority. 2. Whether an approval under section 153D, if found to be mechanical (i.e., granted without independent application of mind or without year-wise/assessee-wise consideration), vitiates the consequent assessment orders passed under sections 153A/153C. 3. Whether non-compliance with the procedural requirement of disposal of objections (as envisaged by judicial precedent) to initiation/reopening of assessment proceedings renders an assessment void or is an irregularity curable by remand. 4. Consequential issue: if approval under section 153D is invalid, whether other additions and appeals become academic. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of approval under section 153D where a single omnibus approval was granted Legal framework: Section 153D requires prior approval of the Additional/Joint CIT for draft assessment orders passed under section 153A/153C; the approval must relate to 'each assessment year' and to 'each assessee' and contemplates application of independent mind by the approving authority. Precedent treatment: Decisions of various High Courts and Tribunals have held that approval under section 153D cannot be a mere formality or rubber-stamp; approving authority must indicate some thought process or perusal of records (decisions referenced and relied upon in the judgment include High Court and Tribunal authorities applying this principle). The Supreme Court's procedural jurisprudence (GKN Driveshafts) is relevant on disposal of objections (see Issue 3). Interpretation and reasoning: The Court examined the approval letter and surrounding facts and found that a single approval was granted for multiple assessment years by a single order and that the approving authority had granted approval on the same day that draft assessment orders were submitted. The approval memo was silent as to any perusal of draft orders or seized material and did not reflect discernible application of mind toward each assessment year or each assessee. The Court relied upon the statutory text ('each assessment year'), the jurisprudence emphasizing per-case/year consideration, and factual indicia (number of cases approved the same day, lack of year-wise consideration in the approval note) to conclude the approval was mechanical. Ratio vs. Obiter: Ratio - approval under section 153D must reflect independent consideration for each assessment year/assessee; a single omnibus, contemporaneous approval without any indication of perusal or thought process can be mechanical and therefore invalid. Observations distinguishing factual scenarios from cases where approval was held valid are explanatory (obiter) to the extent they identify factual differences (e.g., when approving authority had prior knowledge or had perused records). Conclusion: The approval in the instant matter was mechanical and invalid because it was an omnibus approval for multiple assessment years and multiple cases granted on the same day without any demonstrable application of mind for each assessment year/assessee. Issue 2 - Consequence of mechanical/invalid approval on assessments passed under sections 153A/153C Legal framework: The structure of sections 153A-153D places a statutory precondition on assessments arising out of search/requisition that prior supervisory approval be obtained; the approval is designed as a protective check. Precedent treatment: High Courts and Tribunals have held that where approval under the relevant supervisory provision is granted mechanically, it can vitiate the assessment order; some authorities have quashed assessments for lack of proper approval. The CBDT technical/manual guidance (Office Procedure Manual) prescribes the procedure to ensure meaningful approval. Interpretation and reasoning: Given the mandatory nature of approval for assessments in search cases and the protective purpose of the provision, an approval that is devoid of any indication of independent application of mind defeats the legislative intent. Where the approval memo does not show consideration of draft orders or materials and is an omnibus contemporaneous approval, the statutory safeguard is rendered illusory. Applying the cited precedents and the facts (omnibus approval for seven years and 43 cases on the same day; silence in the approval memo), the Court held the approvals invalid and, therefore, the assessment orders founded on those approvals stand vitiated. Ratio vs. Obiter: Ratio - mechanical approval vitiates the resultant assessment order; consequently those assessment orders are liable to be quashed. Observations about operational distinctions and exceptions (where approval may be valid if records show application of mind) are explanatory/obiter to the extent not necessary for the decision. Conclusion: The assessments founded on the mechanical omnibus approval are quashed; the approving authority's failure to give year-wise/assessee-wise applied mind rendered assessments invalid. Issue 3 - Procedural non-compliance in disposal of objections (GKN principle) and curability Legal framework: Judicial precedent requires the assessing officer to consider and dispose of objections filed in response to reasons for reopening (GKN principle); this is a procedural safeguard though not strictly mandated by statute. Precedent treatment: Higher courts have held that failure to dispose of objections is procedural breach; authorities diverge whether such non-compliance vitiates the assessment or is remediable by remand. The judgment examined authorities holding that non-compliance is an irregularity curable by remand rather than rendering the assessment void. Interpretation and reasoning: The Court noted that although not statutorily mandated, the GKN line of jurisprudence provides a procedural safeguard and requires a speaking disposal of objections before concluding reassessment. However, the Court accepted the view that non-compliance with GKN does not necessarily make an order void; it may be an irregularity curable by remand for disposal of objections unless malafide or the breach is so fundamental as to render the proceedings invalid. That principle was applied by reference to the facts, but because the primary defect found was invalid approval under section 153D, the Court treated other procedural contentions as academic in light of the quashing on approval grounds. Ratio vs. Obiter: Ratio - non-disposal of objections is a procedural irregularity that, ordinarily, can be cured by remand; it does not automatically render assessment void in every case. Observations distinguishing cases where non-compliance is fatal versus remediable are explanatory. Conclusion: Procedural non-compliance with disposal of objections, while a recognized infirmity, is not per se fatal in every case and is generally remediable; however, in the present matters the assessments were quashed on the separate and determinative ground of mechanical approval under section 153D. Issue 4 - Consequences for other grounds of appeal and cross-objections Legal framework and reasoning: If the foundational statutory approval is invalid and assessments are quashed, subsidiary challenges to assessment figures, additions, and extrapolations become academic because the assessments cannot stand without valid supervisory approval. Ratio vs. Obiter: Ratio - quashing of assessment on valid statutory ground renders other grounds academic and need not be adjudicated; observations considering those grounds are obiter in the sense that they were not decided on merits. Conclusion: In consequence of quashing assessments for invalid approval, the Court declined to adjudicate the other additions/issues; all cross-objections raised by the assessee on approval validity were allowed and all appeals by the revenue were dismissed as academic.