ITAT Quashes Assessment in Wave Industries Case, Cites 'Mechanical Approval' u/s 153D [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has quashed the assessment order against Wave Industries Pvt. Ltd., holding that the approval granted under Section 153D of the Income Tax Act, 1961, was "mechanical" and lacked proper application of mind. The bench allowed the company's appeal, setting aside the additions made by the tax department.

Wave Industries Pvt. Ltd., a Noida-based company, had challenged the assessment order dated March 27, 2014, passed under Section 153A of the Income Tax Act. The case stemmed from search proceedings, and the Assessing Officer had made additions to the company's income. However, the tribunal found that the mandatory approval under Section 153D, required for such assessments, was granted without due consideration of the facts.

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During the hearing, the tribunal noted that the Additional CIT, Central Range-6, New Delhi, had approved the assessment proposal on March 27, 2014, in a routine manner. The bench observed that the approval was given without examining the search records or applying independent judgment, rendering the assessment invalid.

The tribunal relied on several judicial precedents, including the Delhi High Court's decision in PCIT vs. Shiv Kumar Nayyar (2024) and the Supreme Court's ruling in PCIT vs. Anuj Bansal (2024), which emphasize that Section 153D approvals must be meaningful and not merely procedural.

The department's representative argued that the approval was valid and complied with legal requirements. However, the tribunal disagreed, stating that the approval lacked substantive scrutiny of the case details. The bench highlighted that Section 153D mandates a thorough review by the approving authority, which was missing in this instance.

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The Bench Comprising of Satbeer Singh Godara (Judicial Member) and S. Rifaur Rahman (Accountant Member) pronounced the order  allowing Wave Industries' appeal. The tribunal clarified that since the assessment itself was invalid due to the defective approval, other arguments on the merits of the case became irrelevant.

The decision brings relief to Wave Industries, as the quashed assessment would have otherwise resulted in significant tax liabilities. The order underscores the importance of proper scrutiny in the approval process under Section 153D, ensuring that taxpayers are protected against arbitrary assessments.

To Read the full text of the Order CLICK HERE

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