Controversy on Section 153D Approvals Without Application of Mind

Several controversies surround Section 153D approvals, most notably regarding “mechanical” or bulk approvals granted without individual application of mind; courts have repeatedly invalidated tax assessments when approval is not year-specific, lacks comprehensive review of case records, or is issued for multiple cases with a single, non-deliberative order.

Common Controversies

• Bulk/Consolidated Approvals: Approvals granted for numerous cases or years in a single action, rather than individualized scrutiny, have been quashed. Judicial findings repeatedly emphasize that approving dozens of orders at once is “humanly impossible” for proper review and does not meet the statutory requirement.
• Absence of Case Record or Evidence Review: Approval must consider all seized materials and assessment records. Approvals given without detailed examination or supporting evidence are deemed invalid, especially if granted quickly after receiving draft orders.
• Ritualistic vs. Genuine Application: Courts and ITAT benches have held that Section 153D is a substantive safeguard, requiring clear signs of “application of mind,” not a mere signature or rubber-stamp administrative ritual.

Judicial Developments

• Recent Judgments: ITAT and various High Courts (Delhi, Allahabad, Orissa) have consistently quashed mechanical section 153D approvals, stating such actions violate legislative intent and fairness in tax administration. The Supreme Court recently dismissed SLPs against High Court rulings that found mechanical approval invalid.
• Legal Standards: The courts require the joint/additional commissioner’s approval to be documented year-wise, specific, and deliberative, showing review of materials and assessment rationale—not generic or bundled.

These themes highlight that controversies over Section 153D focus on the need for individualized, year-specific, reasoned, and honest approval—without which search-based tax assessments risk being declared void.

Hon’ble ITAT Delhi Bench “B” order in the case of Shri Dheeraj Chaudhary dated 12.09.2025 presents a detailed difference of opinion among the Judicial Member (JM), Accountant Member (AM), and the Third Member (TM) on the issue of validity of approval granted under Section 153D of the Income Tax Act, 1961. The key views of each member are summarized below:

Judicial Member (Ms. Madhumita Roy)

• Held that the approval granted by the Additional Commissioner of Income Tax (Addl. CIT) under Section 153D was mechanical and without application of mind.
• Noted the approval was given on the same day the draft assessment orders were submitted, covering multiple assessment years in one consolidated approval without separate approval for each year.
• Observed no movement of file or appraisal report was recorded, and no reasons were assigned by the approving authority.
• Relied heavily on Supreme Court and High Court rulings condemning mechanical approvals.
• Concluded that such mechanical approval vitiates the entire assessment, rendering it void ab initio.
• Allowed the assessee’s appeals on this ground, quashing the assessments across all appealed years.

Accountant Member (Shri Avdhesh Kumar Mishra)

• Disagreed with the judicial member’s view of invalidity of the approval.
• Emphasized the administrative nature of Section 153D approval, intended as a safeguard for internal checks and balances, not a quasi-judicial review.
• Submitted that the Assessing Officer (AO) and Additional CIT work as a team and approvals reflect this cumulative involvement and supervision.
• Relied on statutory presumptions under Evidence Act §114(e) that official acts are regularly performed unless disproved by evidence.
• Noted that the assessee failed to demonstrate any other evidence undermining application of mind by Additional CIT.
• Held that approval is not required to be detailed in reasons or show movement of files every time.
• Distinguished this case from others where approvals were proven mechanical and ruled the approval as valid.
• Concluded that the additional ground raised by the assessee on this issue stands dismissed and the appeals should be heard on merits regarding other issues.

Third Member (Shri Mahavir Singh, Vice President)

• Concurred with the Judicial Member’s findings.
• Held the approval dated 27.12.2016 under Section 153D by the Additional CIT as not sustainable in law because it:
  • Did not mention file movement,
  • Did not give separate approval for each assessment year,
  • Did not assign reasons reflecting application of mind,
  • Was given on the same day the drafts were submitted in a hurried manner,
  • Did not show examination of assessment records or seized materials.
• Following the precedents, quashed the approval and the impugned assessments.
• Ordered matter to be placed before the regular Bench for decision on other grounds in the interest of justice.

Outcome

• Due to dissent, the matter was referred under Section 255(4) of the Income Tax Act for reference.
• The Third Member’s opinion concurred with the Judicial Member, resulting in the quashing of the Section 153D approval and the assessments.
• The Accountant Member’s dissent emphasized procedural and supervisory cooperation but was overridden.
• The appeals by the assessee were allowed on the ground of invalid mechanical approval; other grounds became academic.

This case illustrates the critical importance of genuine, year-wise, reasoned and timely approval under Section 153D by the Additional CIT/Joint CIT—mere procedural formalism or rubber-stamping is legally untenable and renders search related assessment-void.