S. 153D Approvals Granted to 30+ Cases within Hours by Income Tax Dept: Bombay Slams ‘Casual’ Revenue Approach [Read Order]

In a recent ruling, the Bombay High Court has criticised the Income Tax Department’s mechanical and casual approach in granting prior approvals under Section 153Dof the Income Tax Act, 1961 after finding that approvals in over 30 search assessment cases were granted within minutes or a few hours on the same day, without any application of mind.

The observations were made while dismissing more than 25+ appeals that the Revenue had filed against a common decision of the Income Tax Appellate Tribunal (ITAT), which had invalidated search assessments structured under Section 153A based only on the invalidity of the required Section 153D permissions.

The ITAT had earlier noted irregularities in the approval process, including the fact that proposals seeking approval were sent to the Additional Commissioner at around 5:02 PM, and yet more than 30 approvals were issued the very same day, despite the draft assessment orders dealing with diverse facts, different assessees, and complex issues.

In some cases, the draft assessment orders already mentioned the date and number of the approval order even before the approval was formally granted, indicating that the approval was a foregone conclusion.

The court, upholding the ITAT’s findings, held that the statutory requirement of prior approval under Section 153D had been reduced to a “mere ritual, meaningless formality, and even a mockery”.

The Court found it impossible to accept the Revenue’s argument that meaningful scrutiny could have taken place within such a short span of time, particularly when the draft orders themselves contained glaring factual and legal discrepancies, including invocation of inapplicable provisions like Section 115BBE for assessment years where it did not apply, and approvals granted in cases where the assessee entities were not even in existence during the relevant assessment years.

The bench held that Section 153D protects both the Revenue's interests and the taxpayer's rights by acting as an inherent safeguard against the Assessing Officer's arbitrary use of power in search situations.

The basic premise of the provision is defeated when mass approvals are granted without even the slightest inspection. It disregarded the Revenue's argument that unofficial "discussions" among officers might take the place of a deliberate and thoughtful approval procedure.

Justices M.S. Sonak and Advait M. Sethna confirmed that even if detailed justifications are not necessary, the approval must at least show some application of mind, referring to precedents from the Supreme Court and several High Courts, including decisions holding that statutory sanctions and approvals cannot be granted mechanically.

It was decided that identical, template-based approvals that were given out in large quantities without taking into account specific factors were not legally sustainable.

The Bombay High Court decided that no important legal issue came up for review under Section 260A because the ITAT's conclusions were entirely factual, well-reasoned, and free of perversity.

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As a result, all Revenue appeals were rejected, showing clearly that rushed, careless approvals under Section 153D can render whole search assessments illegitimate, regardless of the value of the additions.

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