Approval Memo u/s 153D Silent on Issues Involved not Sustainable in Law: ITAT quashes ₹32L Income Tax Addition [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has quashed an assessment order on the ground of an erroneous and non-speaking approval granted by the Additional Commissioner of Income Tax (Appeals) [CIT(A)] to the Deputy Commissioner of Income Tax under Section 153D of the Income Tax Act, 1961.

Assessment proceedings were initiated against the assessee pursuant to a search and seizure operation dated 20.04.2017. Consequently, an assessment order was passed on 18.12.2019 under Section 143(3) read with Section 153A of the Income Tax Act,1961 by making an addition of ₹32,41,00 under Section 68 of the Act,1961.

Aggrieved by the said order, an appeal was preferred by the assessee before the Commissioner of Income Tax (Appeals) [CIT (A)] who dismissed the appeal. Hence, the present appeal was filed by the assessee.

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Read more: Approval Granted u/s 153 D clearly indicates Approving Authority neither Examined Assessment Records nor Seized Materials: ITAT quashes Assessment Order 

The Authorized representative, Ved Jain and Aman Garg, appearing for the assessee contended that the Additional CIT (A) granted approval under Section 153D of the Act,1961 in respect of seven cases vide single letter which comprised seven assessment years. It was further submitted that while according approval, the CIT(A) has not examined the assessment records, seized materials and other assessment records. He also relied on a number of precedents and sought for quashing of the assessment order.

Dayainder Singh Sidhu, Departmental Representative, on the other hand contended that according to approval under Section 153D of the Income Tax Act, 1961 is the internal correspondence between the Assessing officer (AO) and Additional CIT. It was further contended that all assessment records and draft assessment order have been examined and the approval has been granted only after due application of mind. Thus, no interference of the tribunal is required.

Read more:Approval u/s 153 D of Income Tax Act made in Mechanical Manner: Delhi HC upholds Annulment of Assessment Order

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The bench comprising Shamim Yahya (Accountant member) and Yogesh Kumar (Judicial member), on a perusal of the approval order, observed that the CIT(A) has not uttered even a single word on the subject matter of additions. It was further observed that the approval is in the nature of performa approval which is nothing but a mechanical one and has been passed by the approving authority in exercise of symbolic powers vested under Section 153D of the Act,1961. Also, a single approval was granted for seven assessment years. 

The bench also placed reliance on the decision of the Hon’ble Orissa High Court in ACIT vs Serajuddin & Co (2023) where wide ranging observations were made towards the manner and legality of approval under Section 153D of the Act,1961. It was observed that while elaborate reasons need not be given in the approval order, there has to be some indication that the approving authority has examined the draft orders and found that it meets the requirements of law.

It was further observed that indication of the thought process of the approving authority is expected while granting the approval. The bench also highlighted that mere repetition of words of the Statute or mere rubber stamping of the communication seeking sanction by using similar words like ‘approval’ will not, by itself, meet the requirement of law.

Read more: Approval u/s 153D of Income Tax Act cannot be Grant Merely in Ritualistic formality or rubber stamping by authority: Delhi HC

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In the present case, it was observed that there is no mention of any draft assessment order or assessment records or seized materials in the approval letter. Thus, it was held that the approval memo granting omnibus approval without any thought process vitiates the assessment order.

Hence, the assessment order was quashed on the ground of the erroneous approval and the appeal of the assessee was allowed.

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To Read the full text of the Order CLICK HERE

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