ITAT Rules: Mechanical Approval Under Section 153D Invalidates Income Tax Assessment
The Income Tax Appellate Tribunal (ITAT) in Delhi has ruled that an assessment under Section 144 of the Income Tax Act, 1961, is invalid if the mandatory approval under Section 153D is granted without proper application of mind. This decision, favorable to the assessee, highlights the importance of substantive approval in tax assessments.
Income TaxItatSection 153dTax AssessmentMechanical ApprovalReal EstateSep 12, 2025
The appeal was filed by Shri Vipin Kapur, challenging the order dated 14 March 2014 passed by the Commissioner of Income-tax (Appeals)-XXXII, New Delhi. The assessment in question was framed under Section 144 of the Act by the DCIT, Central Circle-8, New Delhi, following a search.
The assessee, represented by Ved Jain and Aayush Garg, argued that the approval under Section 153D was mechanical and devoid of any application of mind. Based on information obtained under the Right to Information Act (RTI), it was pointed out that the draft assessment was sent on 28 November 2011 and received by the office of the Additional Commissioner on 29 November 2011. Approval was granted the very next day, on 30 November 2011. The appellant contended that such a perfunctory exercise rendered the assessment void in law.
The Revenue, represented by Monika Singh, defended the assessment order. It was submitted that approval under Section 153D is essentially administrative in nature and does not require detailed reasoning in writing. The Department contended that the Additional Commissioner was involved throughout the search assessment process and that the approval granted was valid and in line with statutory requirements. It was further argued that procedural irregularities, if any, should not nullify the assessment.
The Bench, composed of Judicial Member Anubhav Sharma and Accountant Member Krinwant Sahay, examined the approval letter and noted that it lacked any indication of independent application of mind. Citing binding precedents, including the decision of the Delhi High Court in PCIT v. Shiv Kumar Nayyar (2024) and of the Orissa High Court in Asst. CIT v. Serajjudin & Co. (2023), the Bench held that approvals under Section 153D cannot be a mere ritualistic formality or rubber-stamping exercise.
The Tribunal acceded to the decision of a co-ordinate Bench in the case of ACIT vs. Sant Lal Aggarwal (2017) and found the approval letter, obtained by the assessee under the Right to Information Act, 2005, clearly reflected that the sanction had been accorded without substantive consideration. This record became central in demonstrating the absence of application of mind by the approving authority.
Since the approval in this case was found to be mechanical, the Tribunal annulled the assessment order. Therefore, ITAT dismissed the Revenue’s appeal.
Frequently Asked Questions
What is the significance of Section 153D in the Income Tax Act?
Section 153D of the Income Tax Act, 1961, requires mandatory approval for certain assessments, particularly those arising from search and seizure operations. This approval ensures that the assessment is fair and substantiated, preventing mechanical or perfunctory decisions.
What happens if the approval under Section 153D is mechanical?
If the approval under Section 153D is found to be mechanical, without any application of mind, the assessment is deemed invalid. The ITAT has ruled that such approvals are not in compliance with the statutory requirements and can be annulled.
Who can file an appeal against an income tax assessment?
An assessee who disagrees with an income tax assessment can file an appeal before the Commissioner of Income-tax (Appeals) or the Income Tax Appellate Tribunal (ITAT). The appeal should be filed within the prescribed time limit and supported by relevant evidence and arguments.
What is the role of the Right to Information Act in tax assessments?
The Right to Information Act (RTI) allows taxpayers to obtain information about their assessments and the processes involved. This transparency helps in ensuring that the assessments are fair and legally compliant, as seen in the case where the assessee used RTI to obtain the approval letter.
How does the ITAT make its decisions?
The ITAT makes its decisions based on a thorough examination of the case, including the relevant laws, precedents, and the evidence presented by both the assessee and the Revenue. The Tribunal ensures that the assessment is fair and in compliance with the Income Tax Act and other relevant statutes.
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