Case Law Details
Max City Developers Private Limited Vs DCIT (ITAT Delhi)
The Delhi Income Tax Appellate Tribunal (ITAT) allowed the appeals filed by the assessee against the common order of the Commissioner of Income-tax (Appeals) relating to Assessment Years 2011-12 and 2014-15. The dispute arose from assessment orders passed under Section 153C read with Section 143(3) of the Income Tax Act, 1961. During the hearing, the assessee pressed Ground No. 1, contending that the approval granted under Section 153D was not in accordance with law.
The Department opposed the challenge by arguing that Section 292BC, introduced through a recent amendment, characterises approval as a supervisory and administrative function and provides that deficiencies in reasons would not invalidate such approval. It was contended that the amendment applied retrospectively and should govern the case because the appeal was being heard after the amendment had come into effect.
The Tribunal examined the approval dated 30 December 2016 and noted that the approving authority had expressly described it as a “technical approval.” The approval authorised passing of assessment orders based on draft orders and directed the Assessing Officer to ensure that seized documents, papers, and comments contained in the appraisal report were taken into account. It further instructed the Assessing Officer to incorporate the fact of initiation of penalty proceedings in the assessment orders and to invoke the appropriate penalty provisions under Sections 271(1)(c) or 271AAB, depending on the facts of the case.
According to the Tribunal, the use of the expression “technical approval” indicated that the approval had been granted merely as a formality. The approving authority’s directions to the Assessing Officer to consider seized documents and appraisal report comments also suggested that those materials had not been independently examined before granting approval. The Tribunal further observed that approval had been granted for as many as sixteen assessees covering Assessment Years 2009-10 to 2015-16 without identifying whether the draft assessment orders related to proceedings under Sections 153A, 153C, or 143(3).
The Tribunal held that these circumstances did not reveal a simple inadequacy of reasons but demonstrated a mechanical exercise of statutory power under Section 153D. Referring to earlier judicial precedents and a coordinate bench decision in SEH Realtors Pvt. Ltd., the Tribunal reiterated that prior approval under Section 153D is a mandatory requirement before completion of search assessments under Sections 153A and 153C.
The Tribunal observed that the approval process under Section 153D is quasi-judicial in nature and requires the approving authority to apply its mind judiciously. It emphasised that the approving authority is expected to examine the seized material, questionnaires issued by the Assessing Officer, replies furnished by the assessee, and the conclusions reached in the draft assessment orders. The Tribunal further noted that the approving authority must independently assess these materials rather than merely adopting conclusions drawn in the appraisal report or by the Assessing Officer.
Rejecting the Department’s submissions, the Tribunal stated that accepting the proposition that no independent application of mind was required would render the approval mechanism under Section 153D meaningless. The statutory requirement was intended to function as an important safeguard by providing checks and balances in search assessments.
FULL TEXT OF THE ORDER OF ITAT DELHI
These are appeals preferred by the assessee against the common order of the Ld. Commissioner of Income-tax (Appeals)-3 (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in CIT(Appeals) Kanpur-4/11505/16-17 & CIT(Appeals) Kanpur-4/11564/16-17 arising out of the common order dated 30.12.2016 u/s 153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, Central Circle, Ghaziabad for AYs: 2011-12 & 2014-15.
2. At the time of hearing ld. Counsel has stressed for disposal of ground No. 1 by which the assessment order has been challenged on the basis that the approval granted u/s 153D of the Act was not in accordance with law.
3. As for convenience we reproduce the impugned approval:
4. Ld. DR has vehemently opposed the grounds submitting that Section 292BC has been introduced by way of amendment recently and the same holds that the approval is supervisory and administrative function and any deficiency in the reasons would not vitiate the approval. It was submitted that the provision is applicable retrospectively. It was submitted on behalf of the department that the date referred 01.04.2021 in the amendment brought with the introduction of Section 292BC of the Act has to be read in consonance to the date of hearing of the appeal and when the Tribunal hears this appeal on that day the amendment u/s 292BC should be looked into.
5. We find that in para 3 of the said Approval Order’ dt.30.12.2016, the learned CIT, Central Range Meerut had mentioned: –
“A technical approval is recorded to pass assessment orders in the above cases on the basis of the drafts assessment orders submitted for the assessment years in reference years. You are directed to ensure taking into account the seized documents/papers and comments in the appraisal report pertaining to AYs. The fact of initiation of penalty proceedings, wherever, applicable, must also be incorporated in the last para of the order. The initiation of correct penalty provisions of I.T. Act u/s 271(1)(c)/ 271AAB, as per facts of the case, must be ensured”.
5.1 The learned JCIT, Central Range Meerut had specifically used the term `Technical Approval’ which clearly indicates that the learned JCIT, Central Range Meerut had granted approval by way of formality.
5.2 Then the ld. JCIT, directed the learned AO to ensure that the seized documents/papers and comments in the appraisal reports have been considered which clearly indicates that the learned JCIT, Central Range Meerut had not looked into the seized documents/papers and comments in the appraisal reports while granting approval.
5.3 Further, the learned CIT, Central Range Meerut, at this stage, had directed the learned AO to ensure that the fact of initiation of penalty proceedings is incorporated in the last para of the assessment order and also to initiate correct penalty provisions under section 271(1)(c)/ 271AAB, as per the facts of the case.
5.4 Very apparently the approval has been granted in regard to as many as 16 assessee for 2009-10 to 2015-16 without even referring as to under what provisions of the Act i.e. u/s 153A or 153C or 143(3) the draft assessment orders pertain too.
6. The aforesaid, pointed out, facts do not indicate insufficiency of reasons, but mere mechanical manner in which approval is granted. The law in this regard is settled that such mechanical exercise of powers u/s 153D of the Act, vitiates the assessment order. Reliance can be placed on decisions in Asst. CIT v. Serajuddin and Co. [2023 SCC OnLine Ori 992], PCIT v. Anuj Bansal [ITA 368/2023]. The Co-ordinate Bench of the Tribunal while examining the similar issue in the case of SEH Realtors Pvt. Ltd. Vs. ACIT in ITA No. 2503/De1/2017 and connected matters for Assessment Year 2013-14 vide order dated 23/07/2024, considered all the judicial pronouncements on the issue and has held as under: –
“8. We find as per the scheme of the Act, for framing search assessments, the Ld. AO can pass the search assessment order u/s 153A or u/s 153C of the Act only after obtaining prior approval of the draft assessment order and the conclusions reached thereon from the ld. JCIT, in terms of section 153D of the Act. This is a mandatory requirement of law. The said approval granting proceedings by the ld. JCIT is a quasi judicial proceeding requiring application of mind by the ld. JCIT judiciously. In order to ensure smooth implementation of the aforesaid provisions, in consonance with the true spirit of the scheme of the Act, it is the bounden duty of the Ld. AO to seek to place the draft assessment order together with copies of the seized documents before the ld. JCIT well in time much before the due date of completion of search assessment. The ld. JCIT is supposed to examine the seized documents, questionnaires raised by the Ld. AO on the assessee seeking explanation of contents in the seized documents, replies filed by the assessee in response to the questionnaires issued by the Ld. AO and the conclusions drawn by the Ld. AO vis- et-vis the said seized documents after considering the reply of the assessee. All these functions, as stated earlier, are to be performed by the ld. JCIT in a judicious way after due application of mind. Even though as vehemently argued by the Ld. CIT-DR, the ld. JCIT is involved with the search assessment proceedings right from the time of receipt of appraisal report from the Investigation Wing, still, the ld. JCIT, while granting the approval u/s 153D of the Act has to independently apply his mind dehors the conclusions drawn either by the Investigation Wing in the appraisal report or by the Ld. AO in the draft assessment order. The copy of the appraisal report submitted by the Investigation Wing to the Ld. AO and ld. JCIT are merely guidance to the Ld. AO and are purely internal correspondences on which the assessee does not have any access. Moreover, the Act mandates the Ld. AO to frame the assessment after getting prior approval from ld. JCIT u/s 153D of the Act. The ld. JCIT getting involved in the search assessment proceedings right from inception does not have any support from the provisions of the Act as no where the Act mandates so. The scheme of the Act mandates due application of mind by the Ld. AO to examine the seized documents independently dehors the appraisal report of the Investigation Wing and seek explanation/clarifications from the assessee on the contents of the seized documents. When the scheme of the Act provides for a leeway to both the Ld. AO as well as the ld. JCIT to even ignore the conclusions drawn in the appraisal report by the Investigation Wing and take a different stand in the assessment proceedings, the fact of ld. JCIT getting involved in the search assessment proceedings right from the receipt of copy of appraisal report, as argued by the Ld. CIT DR, has no substance. In other words, irrespective of the conclusions drawn in the appraisal report by the Investigation Wing, both the Ld. AO and the ld. JCIT are supposed to independently apply their mind in a judicious way before drawing any conclusions on the contents of the seized documents while framing the search assessments. As far as the argument of the Ld. CIT DR that the details were normally filed by the assessee at the last moment is concerned, the ld. AO has got every right to reject the said replies if not filed within the stipulated time. It is not the case of the revenue that the details were filed by the assessee in the instant case at the last moment. Even if it is so, as stated above, it is the prerogative of the ld. AO to accept the said letter containing details or reject the same as it was not filed within the stipulated time. On the contrary, if the ld. AO himself grants time to the assessee to furnish the details till the last moment, then no fault could be attributed to the assessee. In such circumstances, the only irresistible conclusion that could be drawn is that the ld. AO is not serious about the statutory deadlines provided in the Act. In our considered opinion, if the arguments of the Ld. CIT DR are to be appreciated that the ld. JCIT need not apply his mind while granting approval of the draft assessment orders u/s 153D of the Act as it is not provided in section 153D of the Act, then it would make the entire approval proceedings contemplated u/s 153D of the Act otiose. The law provides only the Ld. AO to frame the assessment, but, certain checks and balances are provided in the Act by conferring powers on the ld. JCIT to grant judicious approval u/s 153D of the Act to the draft assessment orders placed by the Ld. AO.
7. The contention on behalf of department that Section 292BC of the Act introduced by way of amendment by Finance Act, 2026 w.e.f from 1.04.2021 would be applicable in the case of present assessee also have not substance as we find that legislature has made the amendment applicable retrospectively w.e.f 01.04.2021 in regard to approvals granted after 01.04.2021. Thus, by no stretch of imagination we can accept the contention that because the matter is being heard subsequent to the amendment it becomes applicable to also in cases where approval was granted prior to 01.04.2021.
8. We also bring on record the fact that subsequent to the hearing a request was made on behalf of the department by ld. CIT, DR Shri Mahesh Kumar by letter dated 16.04.2026 that because a reference u/s 255 of the Act has been made to Hon’ble president on 16.04.2026 for constitution of special bench in the several cases, including the present, in regard to issue of approval u/s 153D of the Act, the case be released. We do not appreciate that after a matter has been kept heard and order reserved department can take a plea to release the matter as subsequently, reference has been made by the department for Constitution of Special Bench. We have found issue to be covered by decision of Hon’ble jurisdictional High Court, thus too, we find no reason to release the matter. Thus we allow the corresponding ground raised and allow the appeals of the assessee. The impugned assessment arising out of the vitiated approval u/s 153D of the Act stand quashed.
Order pronounced in the open court on 20.05.2026
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