Prior approval under tax law must show application of mind; mechanical approvals vitiate assessments, resulting in quashment.

The dispute concerns the mandatory prior approval requirement for draft assessments under the tax statute and whether a single common approval covering multiple assessment years amounted to a mechanical, non reasoned grant. The Tribunal applied the principle that prior approval must record an independent application of mind for each assessment year and found the approval was ritualistic and identical across numerous cases, thereby vitiating the consequential assessment framed under the search proceedings procedure. The mechanical nature of the approval led to quashment of the assessment and dismissal of the Revenue appeal in favour of the assessee.

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Issues: Whether the approval accorded under Section 153D of the Income-tax Act, 1961 was a mechanical/common approval without application of mind for each assessment year and, if so, whether the assessment framed under Section 153A read with Section 143(3) is vitiated and liable to be quashed.

Analysis: The issue involves interpretation and application of Section 153D of the Income-tax Act, 1961 requiring prior approval for draft assessment orders for each assessment year. The Tribunal examined the record showing a single common approval number covering multiple assessment years and considered judicial authorities holding that approval under Section 153D must reflect an independent application of mind for each assessee for each assessment year. The Tribunal found that the approval in the present matter was accorded mechanically (single common approval covering multiple years and numerous cases on the same date) without indication of separate consideration for each assessment year, and that such mechanical grant of approval is contrary to the statutory requirement and precedent establishing that ritualistic or rubber-stamp approvals vitiate the assessment.

Conclusion: The approval under Section 153D of the Income-tax Act, 1961 is found to be mechanical and without application of mind; the assessment framed under Section 153A read with Section 143(3) is vitiated and is quashed. The appeal filed by the Revenue is dismissed (in favour of the assessee).

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