ITAT Quashes Assessments Citing Mechanical Approval u/s 153D [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench has annulled the assessment orders passed against the appellant for Assessment Years 2013–14, 2014–15, and 2019–20, holding that the approval granted under Section 153D of the Income Tax Act was mechanical and invalid.

Kapil Garg, appellant-assessee who was subjected to a search u/s (Under Section) 132 on 30 July 2018, was issued notices for reassessment u/s 153A. Based on the seized material, the Assessing Officer (AO) framed assessment orders and made various additions. These assessments were approved under Section 153D by the Additional Commissioner of Income Tax (ACIT), Central Range, Meerut on 11 August 2021. The approvals were granted the same day the AO sent the draft orders for approval.

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Challenging the validity of the assessments, the assessee argued before the Tribunal that the ACIT failed to independently evaluate the draft assessments, supporting documents, and submissions before granting the required sanction. The approval was issued for multiple years in one go, in a consolidated format, without any case-specific examination. The assessee contended that this indicated non-application of mind, rendering the approvals and consequent assessments void.

In response, the Department contended that the ACIT in a central circle is closely involved with search-related cases from the beginning, often examining seized material alongside the AO. Therefore, granting approval on the same day did not invalidate the process. The Department further submitted that Section 153D only requires the existence of approval, and any requirement for “application of mind” is a judicial creation, not statutory.

After hearing both sides, the Tribunal noted that Section 153D approval is not a mere formality but a quasi-judicial function requiring due consideration of facts, evidence, and the AO’s findings. The Tribunal observed that in this case, the approval was granted in a "stereotyped manner" and simultaneously for multiple years without showing independent consideration.

Two Member bench comprising Shamim Yahya (Accountant Member) and Yogesh Kumar U.S. (Judicial Member) referred to several judicial precedents including PCIT v. Anju Bansal (2023), SEH Realtors Pvt. Ltd. V. ACIT (2024), and PCIT v. Shiv Kumar Nayyar (2024). These judgments emphasized that the failure of the ACIT to independently apply his mind before granting approval vitiates the entire assessment process.

The Tribunal concluded that the approvals under Section 153D were granted mechanically, without the necessary scrutiny, and hence, the resulting assessment orders were invalid in law. Consequently, the ITAT quashed the assessment orders for all three assessment years and allowed the appeals filed by the assessee.

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