Mechanical and Generic Approval Under Section 153D Renders Entire Assessment Void: ITAT Cancels Penalties [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed penalty orders imposed under Sections 271(1)(c), 270A, and 271AAB of the Income Tax Act, 1961 for three consecutive assessment years. The ruling came after the Tribunal found that the very assessments on which the penalties were based were invalid, owing to non-application of mind during the mandatory approval process under Section 153D.

The case is based on Assessment Years 2016–17, 2017–18, and 2018–19. The assessee, G.D. Goenka Pvt. Ltd. is a company engaged in the education sector, was subjected to a search under Section 132 of the Act. As a result of the search, assessments were completed under Section 153A read with Section 143(3), resulting in additions and subsequent penalty proceedings by the tax department. Penalties of ₹7.5 lakh and others were levied by the CIT(A), leading the assessee to appeal before the ITAT.

In the Appeal the assessee contended that the penalty orders were unsustainable, as the underlying assessments themselves had been quashed in earlier appeals by the same Tribunal. In the earlier common order, the Tribunal had struck down the assessments on the ground that the mandatory approval under Section 153D was granted in a routine, mechanical manner, without due application of mind.

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The Tribunal noted that the Additional Commissioner had approved assessments for as many as 58 different assessees covering multiple assessment years in a consolidated memo on the very next day after receiving the proposals from the Assessing Officers. No specific reference to the issues in the assessee’s case was made, and in some instances, even the assessed income had not been quantified before approval was granted.

The Tribunal observed, that the whole sequence of action towards approval under Section 153D appears to be illusory to merely meet the requirement of law as an empty formality. It further asserted that Section 153D is not a procedural nicety but a statutory safeguard meant to ensure objectivity and accountability in search-related assessments. Any approval granted without real scrutiny undermines the legality of the entire assessment process.

Citing the case of Mysore Bhaskara Pankaja, where similar facts led the Tribunal to strike down assessments based on blanket approvals, the Bench concluded that the assessments in the assessee’s case is also "non-est in law." Accordingly, it held that the penalties levied on such invalid assessments could not survive.

The bench also noted that once the assessments have been quashed, the penalty levied thereon is not sustainable in the eyes of the law and thus deserves to be deleted. The ruling extended the same relief to all three assessment years, as the facts were identical across the years. As a result, all three appeals by the assessee were allowed.

To Read the full text of the Order CLICK HERE

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