Assessments under s.153A quashed as JCIT's omnibus s.153D approval held invalid and non est in law

ITAT Delhi allowed the assessees' additional legal ground and held the impugned assessments under s.153A to be non est in law due to invalid approval under s.153D. The JCIT had issued common, omnibus approvals covering multiple assessees and assessment years, without distinct taxpayer-wise and year-wise satisfaction, which was found to be contrary to the statutory mandate of s.153D. As this jurisdictional defect vitiated the very foundation of the assessments, all consequential assessment orders were quashed, and the remaining grounds on merits were treated as academic.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether additional legal grounds challenging the validity of assessments on account of alleged defects in approval under section 153D can be raised for the first time before the Tribunal in second appellate proceedings.

1.2 Whether assessments framed under section 153A are invalid and non-est in law where only a common or consolidated approval under section 153D is granted for multiple assessees and/or multiple assessment years, and not assessee-wise and year-wise as contemplated.

1.3 Whether the Revenue can cure or supplement defects in the approval under section 153D by filing subsequent affidavits of the Assessing Officer and the approving authority explaining application of mind and the process followed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admissibility of additional legal grounds on section 153D approval before the Tribunal

Interpretation and reasoning

2.1 The assessees sought to raise an identical additional ground in all appeals, challenging the validity of the assessments on the basis that separate approvals under section 153D, assessee-wise and assessment year-wise, were neither obtained nor granted.

2.2 The Department objected on the ground that the issue was being raised belatedly at the second appellate stage.

2.3 The Court noted that all relevant facts relating to the impugned section 153D approvals formed part of the assessment records and that adjudication of such a legal ground was necessary to determine the correct tax liability.

2.4 Relying on the principles laid down in NTPC Ltd. v. CIT and Al Cargo Logistics Ltd. v. DCIT, the Court held that a pure legal ground, not requiring fresh investigation of facts and arising from material already on record, can be raised for the first time before the Tribunal.

Conclusion

2.5 The technical objection of the Revenue was rejected and the additional ground relating to the validity of the section 153D approval was admitted in all appeals.

Issue 2: Validity of common / consolidated approval under section 153D for multiple assessees/years

Legal framework (as discussed)

2.6 The assessments in question were framed under section 153A read with section 143(3), pursuant to a search initiated on 27.11.2014. Under section 153D, prior approval of the prescribed authority is mandatory before passing an order of assessment under section 153A.

2.7 The Court referred to a recent coordinate bench order in Himanshu Verma v. ACIT, which held that an assessment based on a common section 153D approval in section 153A proceedings is non-est in law.

2.8 The Court also relied on PCIT v. Sapna Gupta and other cited precedents holding that approval under section 153D must be accorded with due application of mind and not in a consolidated or mechanical manner.

Interpretation and reasoning

2.9 The case records showed that the Joint Commissioner of Income Tax, Central Range, Meerut, had issued one common approval dated 31.12.2016 covering fifteen assessees, including two of the present assessees, across multiple assessment years (2009-10 to 2015-16).

2.10 In the case of the third assessee, the approval was likewise in a combined form, communicated under a single file number and letter dated 28.12.2016, for multiple years.

2.11 The Revenue did not dispute these factual aspects of the approvals. The approvals were thus demonstrably not assessee-wise and year-wise, but common and consolidated.

2.12 Following the coordinate bench decision in Himanshu Verma and the ratio of PCIT v. Sapna Gupta, the Court held that such common approvals do not meet the statutory requirement of a valid approval under section 153D and render the resultant assessments invalid.

Conclusion

2.13 The consolidated and common approvals granted under section 153D were held to be legally defective, and the consequent assessments under section 153A were declared non-est in the eyes of law.

Issue 3: Permissibility of curing or supplementing defects in section 153D approval through subsequent affidavits

Interpretation and reasoning

2.14 In resisting the additional ground, the Department relied on another coordinate bench decision in Usha Satish Salvi v. ACIT, where, based on affidavits of the Assessing Officer and the approving authority and other surrounding material, the approval under section 153D was upheld as valid.

2.15 The learned Departmental Representative also sought to justify the impugned approvals in the present cases by offering to file affidavits from the field authorities to demonstrate that the approving authority had in fact applied its mind and that discussions and examination of records had taken place.

2.16 The Court rejected this approach, holding that there is no statutory procedure permitting the Revenue to validate or supplement an approval under section 153D by affidavits of field officers at the appellate stage, beyond what is contained in the contemporaneous record.

2.17 Relying on Hindustan Lever Ltd. v. R.B. Wadkar in the context of sections 147/148 and on the general principles of administrative law as crystallised by the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner, the Court reiterated that:

* The validity of an order made by a statutory functionary must be judged only on the reasons and material contemporaneously recorded.

* Such orders cannot be improved or validated later by way of affidavits or fresh explanations.

* Public orders must be construed objectively with reference to their own language and cannot be reconstructed by post facto justifications.

2.18 Applying these principles, the Court held that the Revenue could not rely on later affidavits of the Assessing Officer or the approving authority to cure the legal defect inherent in the common and consolidated approvals under section 153D.

Conclusion

2.19 Subsequent affidavits or explanations by field authorities cannot be used to supplement, explain, or validate defective approvals under section 153D; the legality of such approvals must be determined solely on the basis of the contemporaneous approval order and the record.

Overall disposition

2.20 In view of the defective, common section 153D approvals, all corresponding assessments under section 153A were held to be non-est and invalid.

2.21 All other grounds and pleadings on the merits of the additions were rendered academic and not adjudicated.

2.22 All ten appeals were allowed on the above legal ground.

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