In I.T.A No.3693/DEL/2018-ITAT- ITAT (Delhi) emphasizes that grant of approval under Section 153D of Income Tax Act is not a mere formality but a mandatory requirement
Members Chandra Mohan Garg (Judicial) & Pradip Kumar Kedia (Accountant) [08-05-2023]

Read Order: M.G. Metalloy Private Limited v. DCIT Central Circle Noida

Chahat Varma

New Delhi, May 10, 2023: The Delhi bench of the Income Tax Appellate Tribunal has ruled that the assessment order in the present case, based on a hollow & cosmetic approval accorded under section153D of the Income Tax Act, without any application of mind, was deemed unenforceable and therefore, quashed.

The Tribunal upon reviewing the communication between the Assessing Officer (AO) and the Joint Commissioner of Income Tax (JCIT), observed that the AO had submitted draft assessment orders for multiple assessments on the last day of the limitation period. The JCIT, as the designated authority, was then compelled to grant a consolidated approval for all assesses and assessment years on the same day of receiving the orders. The Tribunal was of the view that this approach bypassed the intended safeguards of section 153D.

The Tribunal observed that the AO is bound by section 153D, which requires the AO to prepare a draft assessment order and present it to the approving authority, such as the Joint/Additional Commissioner, for their evaluation and prior approval. The approving authority must objectively assess the draft order, considering the legal provisions and factual circumstances, and provide conclusive satisfaction that the proposed action of the AO aligns with the law. The AO is obligated to issue the assessment order exactly as per the approval/directions of the designated authority and cannot modify it without their knowledge and agreement. The Tribunal emphasized that the granting of approval is not a mere formality but a mandatory requirement, demanding a genuine and considered assessment by the approving authority.

Placing reliance on The Pr. Commissioner of Income Tax and Another v. Sapna Gupta [LQ/AllHC/2022/20765], wherein the Allahabad High Court has emphasized the importance of complying with section 153D separately for each assessee and for each assessment year, the Tribunal held that the combined approval of multiple assessees for multiple assessment years ran contrary to the said judgment.