The Income Tax Appellate Tribunal, Delhi, has held that approval under Section 153D of the Income Tax Act, 1961, must be granted separately for each assessment year with independent application of mind. A composite or mechanical approval, especially when issued for multiple years on the same day without reviewing case-specific materials, renders the assessment order void. The Tribunal quashed the assessment orders for five assessment years due to non-compliance with this mandatory statutory requirement.
The Verdict
The assessee won. The core legal holding is that approval under Section 153D of the Income Tax Act must be granted separately for each assessment year, with the approving authority demonstrating independent application of mind by reviewing case-specific materials. The Tribunal quashed the assessment orders for Assessment Years 2012-13 to 2016-17 due to invalid, composite approval granted for all years simultaneously without individual scrutiny.
Background & Facts
The appellant, Sanjay Singhal, was subjected to search and seizure proceedings under Section 132 of the Income Tax Act, triggering reassessment proceedings under Sections 153A and 153D for Assessment Years 2012-13 to 2016-17. The Assessing Officer issued separate notices under Section 142(1) and passed separate draft assessment orders for each year. However, the Joint Commissioner of Income Tax (JCIT) granted a single, composite approval for all five assessment years on the same date, without specifying any review of individual case records, seized materials, or appraisal reports.
The appellant challenged the validity of this approval before the Commissioner of Income Tax (Appeals), who upheld the assessment orders, holding that Section 153D approval was merely administrative. The appellant then filed five appeals before the Income Tax Appellate Tribunal, Delhi, contending that the approval was legally invalid due to its mechanical nature and failure to comply with the statutory mandate of individualized scrutiny.
The Tribunal consolidated the appeals, treating ITA No. 5418/DEL/2025 (AY 2012-13) as the lead case. The Revenue opposed the appeal, arguing that Section 153D approval was procedural and non-substantive, and that any irregularity could be cured under Section 292B of the Act.
The Legal Issue
The central legal question was whether approval under Section 153D of the Income Tax Act, 1961, can be granted in a composite manner for multiple assessment years without individualized review, and whether such approval, issued without evidence of independent application of mind, satisfies the statutory requirement for validity.
Arguments Presented
For the Petitioner
The appellant’s counsel argued that Section 153D mandates that approval be obtained for "each assessment year" referred to under Section 153A, implying a separate, year-specific requirement. They contended that the JCIT’s approval, granted for seven years on the same day without referencing any case-specific documents, was a mechanical formality. They relied on the Delhi High Court’s decisions in PCIT v. Anuj Bansal and PCIT v. Shiv Kumar Nayyar, as well as the ITAT’s ruling in Millennium Vinimay (P) Ltd., to establish that approval must reflect a judicial-like application of mind. They emphasized that the approval letter failed to mention perusal of draft orders, seized material, or appraisal reports, rendering it legally defective.
For the Respondent
The Revenue’s counsel argued that Section 153D approval is an administrative formality and not a quasi-judicial function. They contended that the statute does not prescribe a specific format for approval, and that the absence of detailed reasoning does not invalidate the order. They further submitted that any procedural irregularity could be cured under Section 292B of the Act, which allows for rectification of defects not affecting the substance of the assessment.
The Court's Analysis
The Tribunal rejected the Revenue’s argument that Section 153D approval is purely administrative. It held that the statutory language - "no order of assessment... shall be passed... except with the prior approval" - imposes a mandatory condition that goes to the root of jurisdiction. The Tribunal emphasized that the legislature intended the approval mechanism to act as a safeguard against arbitrary assessments, requiring the approving authority to exercise independent judgment.
"The approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval under Section 153D of the Act. Such perfunctory approval has no legal sanctity in the eyes of the law."
The Tribunal relied heavily on the Delhi High Court’s reasoning in PCIT v. Shiv Kumar Nayyar, which noted that granting approval for 43 cases in a single day, without any indication of review, rendered the process a "rubber stamp." The Tribunal found that the JCIT’s approval for five assessment years on a single date, without any reference to individual case files, seized material, or draft orders, was indistinguishable from the mechanical approvals invalidated in prior precedents.
The Tribunal also dismissed the argument that Section 292B could cure the defect. It held that the absence of valid approval under Section 153D is not a mere procedural irregularity but a jurisdictional flaw that renders the assessment order a nullity. The Tribunal observed that the statutory requirement of separate approval for each year was not satisfied, as the approval was granted in a composite form, contrary to the plain language of the provision.
The Tribunal further noted that the approval letter contained no indication that the JCIT had even perused the draft assessment orders, let alone applied independent thought to the facts of each year. This failure to document reasoning, even minimally, was deemed fatal to the validity of the approval.
What This Means For Similar Cases
This judgment establishes a binding precedent for all tax authorities and practitioners dealing with reassessments under Sections 153A and 153D. Practitioners must now ensure that approvals under Section 153D are not only obtained but are demonstrably separate, year-specific, and accompanied by clear evidence of independent review. A blanket approval for multiple years will be treated as invalid, regardless of whether the underlying assessment is substantively correct.
For the Revenue, this means that future approvals must be issued individually for each assessment year, with at least a minimal record indicating that draft orders, seized materials, and appraisal reports were reviewed. For taxpayers, this provides a powerful ground for challenging assessments where approval is generic or issued en masse. The judgment also clarifies that Section 292B cannot cure jurisdictional defects arising from non-compliance with mandatory procedural conditions.
The ruling reinforces the principle that statutory safeguards designed to prevent arbitrary action cannot be reduced to formalities. Practitioners should now routinely verify the nature and scope of Section 153D approvals in reassessment cases and challenge composite approvals as jurisdictionally void.
