ITAT Delhi on Legality of Approval under Section 153D of the Income Tax Act, 1961.

Headnote:

The ITAT Delhi quashed the assessment orders passed under Sections 153C/143(3) of the Income Tax Act, 1961 for AYs 2013-14 to 2016-17, as the approval accorded under Section 153D was found to be mechanical and perfunctory, without independent application of mind by the approving authority. The Tribunal relied on multiple High Court precedents emphasizing that approval under Section 153D must be for each assessment year and each assessee separately, reflecting proper consideration of draft orders.

Background:

1. A search and seizure operation was conducted on 05/08/2015 in the case of Pankaj Kumar Group, uncovering incriminating material allegedly linking the assessee to bogus LTCG entries.
2. Assessment orders for AYs 2013-14 to 2016-17 were passed on 30/12/2018 under Sections 153C/143(3).
3. Assessee appealed before CIT(A), which dismissed all appeals on 28/02/2022.
4. Assessee challenged the CIT(A) orders before ITAT, arguing that approval under Section 153D was null and void as it was granted mechanically, without considering statutory preconditions.

Court’s Observations:

1. Approval under Section 153D must be granted separately for each assessment year and each assessee after applying independent mind.
2. In this case, a single approval was granted for 14 assessment years pertaining to two assessees, on the same day the draft orders were submitted, without reference to seized material.
3. Tribunal relied on Shiv Kumar Nayyar, Sapna Gupta, Serajuddin & Co., Anuj Bansal precedents, emphasizing that mechanical approval vitiates the assessment order.
4. The approval letter here did not indicate any perusal of draft assessment orders, failing the statutory requirement.

Decision:

1. ITAT allowed the appeals in ITA Nos. 571/Del/2022, 572/Del/2022, 573/Del/2022, 574/Del/2022.
2. Assessment orders for AYs 2013-14 to 2016-17 were quashed.
3. No need to address other factual or legal contentions due to quashing on grounds of erroneous approval.

Legal Provisions Discussed:

1. Section 153C, Income Tax Act, 1961 – Assessment of a person other than the one searched.
2. Section 153D, Income Tax Act, 1961 – Approval by higher authority for draft assessment orders.
3. Section 143(3), Income Tax Act, 1961 – Regular assessment procedure.
4. Relevant precedents: PCIT v. Shiv Kumar Nayyar, PCIT v. Sapna Gupta, ACIT v. Serajuddin & Co., PCIT v. Anuj Bansal

Citation: 2025:ITAT:DEL:571-574

Case: Brij Kishore Sabharwal v. ACIT

Court: Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi

Coram: S. Rifaur Rahman, Accountant Member & Yogesh Kumar U.S., Judicial Member

ITA Nos.: 571/Del/2022 (AY 2013-14), 572/Del/2022 (AY 2014-15), 573/Del/2022 (AY 2015-16), 574/Del/2022 (AY 2016-17)