2025 (12) TMI 1689 - AT - Income Tax

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. ... Validity of approval accorded u/s 153D - single approval has been granted for 14 Assessment Years pertaining to two Assessee’s - HELD THAT:- As decided in M/S. SERAJUDDIN & CO. KOLKATA [2023 (3) TMI 785 - ORISSA HIGH COURT] Wide ranging observations towards the manner and legality of approval u/s 153D of the Act. The Hon’ble High Court inter-alia observed that the approval under s. 153D of the Act being mandatory, while elaborate reasons need not be given, there has to be some indication that approving authority has examined draft orders and finds that it meets the requirement of law. The approving authority is expected to indicate his thought process while granting approval, held that it is not correct on the part of the Revenue to contend that the approval itself is not justiciable. Where the Court finds that the approval is granted mechanically, it would vitiate the assessment order itself. The approval letter simply grants approval. As noted above, in the instant case, a single approval u/s 153D has been accorded in respect of 14 Assessment Years pertaining to two Assessee’s, there is no mentioning of seized material in the other material to show involvement of the superior authority in the approval granted by the ACIT. Applying the ratio of judgments delivered as noted above, the assessment orders based on ritualistic approval stands vitiated and thus quashed. Assessee appeal allowed. 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.