2025 (7) TMI 114 - AT - Income Tax

Validity of assessment order passed u/s 153A without obtaining approval u/s 153D - HELD THAT - As decided in Prateek Nagpal 2025 (1) TMI 651 - ITAT DELHI and Anu Nagpal 2025 (5) TMI 1782 - ITAT DELHI on similar facts and circumstances of the case as well common approval u/s 153D of the Income Tax Act dated 30.12.2019 the coordinate bench has quashed the entire proceedings initiated u/s 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the ACIT Central Range-4 New Delhi. The copy of approval u/s. 153D dated 30.12.2019 granted in total 28 assessees cases wherein the present assessee s name is mentioned at serial no. 10 - legal issue was decided in favour of the assessee by quashing the entire proceedings initiated under section 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the ACIT Central Range-4 New Delhi. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Tribunal was whether the assessment order passed under section 153A read with section 143(3) of the Income Tax Act, 1961, was valid in the absence of a proper approval under section 153D of the Act. Specifically, the issue was whether the Commissioner of Income-tax (Appeals) was correct in not quashing the impugned assessment order on the ground that the mandatory conditions for approval under section 153D had not been complied with before initiating proceedings under section 153C read with section 153A.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Validity of assessment order passed under section 153A without proper approval under section 153D

Relevant legal framework and precedents: Section 153A of the Income Tax Act empowers the Assessing Officer to assess or reassess income in cases where a search or seizure operation has been conducted. Section 153D mandates that before initiating or continuing any proceedings against a person other than the one searched, approval must be obtained from the specified authority. The approval must be granted after perusal of the draft assessment order and an independent application of mind.

The Tribunal referred to earlier decisions, notably the coordinate bench's common order dated 10.01.2025 in the case of Prateek Nagpal and Anu Nagpal, where similar facts and circumstances were involved. In those cases, the Tribunal quashed the proceedings initiated under section 153C read with section 153A for lack of valid approval under section 153D. The approval in question was a single, consolidated approval dated 30.12.2019, covering multiple assessees and assessment years.

Court's interpretation and reasoning: The Tribunal examined the approval order dated 30.12.2019 and found that it was a blanket approval covering 28 assessees, including the present assessee. The approval failed to demonstrate that the draft assessment orders were perused or that an independent application of mind was exercised by the approving authority, as mandated by section 153D. The Tribunal emphasized that such approval must be specific and must satisfy the mandatory conditions laid down by the statute.

Key evidence and findings: The approval order itself was the primary document scrutinized. It was found to be a generalized approval without any indication of detailed consideration of the draft assessment orders. The Tribunal also relied on the coordinate bench's prior ruling, which had quashed similar proceedings on identical grounds.

Application of law to facts: Applying the principles established in the coordinate bench's decision, the Tribunal held that the absence of a valid approval under section 153D rendered the assessment proceedings under section 153A invalid. The mandatory procedural safeguard intended by section 153D was not complied with, thereby vitiating the impugned assessment order.

Treatment of competing arguments: The Revenue contended that the approval granted was valid and defended it on similar grounds as in the coordinate bench's case. However, the Tribunal found these arguments unpersuasive in light of the statutory requirements and the prior authoritative ruling. The assessee's contention that the impugned assessment should be quashed for lack of valid approval was accepted.

Conclusions: The Tribunal concluded that the impugned assessment order passed under section 153A read with section 143(3) without proper approval under section 153D was invalid. Consequently, the assessment was quashed.

3. SIGNIFICANT HOLDINGS

The Tribunal held: "The order of approval dated 30.12.2020 reproduced establishes that a single approval has been granted for various assessment years and various assessee. The said order also fails to make any mention of the fact that the draft assessment orders were perused at all, much less perusal of the same with an independent application of mind."

Further, relying on the coordinate bench's ruling, the Tribunal stated: "Exactly on similar facts and circumstances of the case, the Coordinate Bench vide its common order dated 10.01.2025 passed in another case viz. Prateek Nagpal (supra) similar legal issue was decided in favour of the assessee by quashing the entire proceedings initiated under section 153C r.w.s. 153A of the Act in the absence of a valid approval granted by the ACIT, Central Range-4, New Delhi."

The core principle established is that approval under section 153D must be specific, demonstrate perusal of draft assessment orders, and involve an independent application of mind. Blanket or generalized approvals lacking these elements are invalid and render subsequent assessments under section 153A void.

Final determinations:

• The additional ground raised by the assessee challenging the validity of the assessment order for lack of proper approval under section 153D was admitted and allowed.
• The impugned assessment order passed under section 153A read with section 143(3) was quashed.
• The Revenue's appeal was dismissed.