Single s.153D approval for 14 assessment years across two taxpayers challenged; mechanical, mindless sanction led to assessments quashed

The dominant issue was the validity of approval under s. 153D, where a single approval was accorded for 14 assessment years covering two assessees. Applying HC authority that s. 153D approval is mandatory and justiciable, the Tribunal held that although elaborate reasons are not required, the approval must reflect application of mind, including indication of examination of draft orders and relevant seized material. As the approval letter was merely ritualistic, with no reference to seized material or demonstrable involvement of the approving authority, the approval was held mechanical, vitiating the assessments. Consequently, the assessment orders were quashed and the appeals were allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the approval granted under section 153D was a mechanical/perfunctory approval lacking application of mind, including whether granting a single consolidated approval covering multiple assessment years and more than one assessee satisfied the statutory requirement.

(ii) If the approval under section 153D was invalid, whether the resultant assessments framed under section 153C/143(3) stood vitiated and liable to be quashed, making it unnecessary to decide other grounds.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of approval under section 153D (mechanical approval; single approval for multiple years/assessees)

Legal framework (as discussed by the Court): The Court treated approval under section 153D as a mandatory pre-condition affecting the substratum of the assessment. It proceeded on the principle that approval must not be a "ritualistic formality" and must reflect application of mind, including with reference to "each assessment year" and "each assessee" separately, and that purely rubber-stamp approvals do not satisfy the requirement.

Interpretation and reasoning: On examining the text of the approval dated 29/12/2018, the Court found it to be in the nature of a "Performa approval" and observed that the approving authority "has not uttered a word on the subject matter of additions." The approval did not show that any seized material or related record was perused or evaluated. The Court also treated as significant that a single approval was issued covering 14 assessment years pertaining to two assessees, which, in the Court's view, reinforced the conclusion that the approval was perfunctory and symbolic rather than a genuine supervisory check contemplated by section 153D.

Conclusion: The Court held that the approval under section 153D in the present case was mechanical/ritualistic and did not satisfy the statutory pre-condition; hence it was legally defective.

Issue (ii): Consequence of invalid section 153D approval on the assessments

Legal framework (as applied by the Court): The Court applied the rule that where approval under section 153D is mandatory and is granted mechanically, it vitiates the assessment orders founded on such approval.

Interpretation and reasoning: Having concluded that the approval was ritualistic and unsupported by any indication of consideration of seized material or issues leading to additions, and noting the consolidated nature of approval for multiple years and assessees, the Court held that the assessments were based on an erroneous approval and therefore could not stand.

Conclusion: The Court quashed the assessment orders as vitiated due to defective approval under section 153D. As the assessments were quashed on this jurisdictional ground, the Court declined to adjudicate other legal and factual grounds raised in the appeals.

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