AMQ Frozen Foods Pvt. Ltd. vs DCIT

PER MANISH AGARWAL, AM:

Both the appeals are filed by the assessee against the respective orders dated 08.08.2025 passed by Ld. Commissioner of Income Tax (A)-24, New Delhi [“Ld. CIT(A) in short”] u/s 250 of the Income Tax Act, 1961 [“the Act in short”] arising from the respective assessment orders tabulated as under:

At the time of hearing, it was stated that the issues involved both appeals filed by the assessee for captioned assessment years are common, interlinked and arising from the search action on the assessee and other persons. Hence, both these appeals have been heard together and accordingly, adjudicated by this common order. First we take up the appeal of the assessee in ITA No.6372/Del/2025 for Assessment year 2012-13.

Brief facts of the case are a search and survey action u/s 132/133A of the Act was carried out in the case of Moin Qureshi Group of cases, on 15.02.2014. During the course of search certain assets/documents belong/ pertain to assessee were also found. Thus, proceedings u/s 153C of the Act were initiated in the case of assessee after recording the satisfaction and notice u/s 153C of the Act dated 26.12.2016 was issued, in response to which return of income was filed by the assessee on 30.01.2017, declaring total income of INR 1,08,658/-. Thereafter, various notices were issued from time to time and in response, the assessee furnished the requisite documents/reply to the lower authorities. After considering the submissions of the assessee, AO passed the assessment order u/s 143(3) r.w.s 153A/153C on 30.11.2017, assessed the total income of assessee at INR 1,05,14,445/-.

Against the said order, assessee preferred an appeal before the ld. CIT(A) who vide impugned order dated 08.08 2025, dismissed the appeal of the assessee.

Aggrieved by the order of Ld. CIT(A), the assessee preferred appeal before the Tribunal by taking following grounds of appeal:-

First we take Ground of appeal Nos. 6 & 6.1 raised by the assessee wherein assessee has challenged the validity of assessment order with regard to the approval granted u/s 153D in mechanical manner.

Before us, Ld. AR for the assessee submitted that in the present case, approval was granted by ld. JCIT, Central Range-5, New Delhi vide letter dated 29.11.2017 which is mechanical approval. Ld. AR further submits that ld. JCIT granted common approval for various Assessment Years from 2010-11 to 2013-14 in terms of letter bearing No. Joint CIT/CR-5/153D/2017-18/1172 dated 29.11.2017. He submits that from the perusal of the same, it could be seen that approval granted by the Id. Joint CIT was mechanical approval and separate approval for each Assessment Year was not given rather approval was given by a single order for various assessment years. The letter seeking approval by the AO and the approval so granted by ld. Joint CIT are reproduced as under:

Ld. AR further submits that from the perusal of the approval, it could be seen that Joint CIT while granting the approval has not stated whether he has gone through the seized material, assessment records including the replies filed by the assessee with reference to the additions/ disallowance proposed in the drafts assessment orders for various assessment years. As per ld. AR, Joint CIT in the approval letter has referred the action taken by AO of making enquiries and considering all the material and providing sufficient opportunity to the assessee. Nowhere in the approval letter ld. Joint CIT has made reference of any discussions the AO and the Joint CIT nor has referred the seized material before granting the approval. As per ld. AR, the Joint CIT has not verified the material, nor any reference was made in the approval letter about the material supplied to him by the AO alongwith the draft assessment orders for his consideration and thus it is a mechanical approval given.

Ld. AR finally submits that common approval is given for various Assessment Years which is contrary to the provisions of section 153D of the Act and therefore, he prayed that there was no proper application of mind before granting the approval by ld. Joint CIT and thus assessment order so passed deserved to be held as null and void. He placed reliance on the following judgements:-

On the other hand, Ld. Sr. DR for the Revenue supports the order of AO and submits that approval was though was granted on the same day but is not a mechanical approval. As per CBDT Circular dated 22.12.2006, the Range head i.e. the JCIT/ Addl. CIT is fully aware of the assessment proceedings and actively discussed with the AO from time to time with reference to the issues relating to different assessment years and the nature of contents of the seized material. Ld. CIT DR thus submits that by any stretch of imagination, it cannot be inferred that Range Head was not in a position to apply his mind independently in a judicious manner while granting approval under section 153D of the Act. The CBDT guidelines explicitly emphasize the close coordination required in search and seizure assessments. Therefore, it is reasonable to conclude that, in accordance with prevailing administrative practices and guidelines, the approving authority has a comprehensive understanding of the issues involved in a particular case well in advance, prior to the case being submitted to him for approval under section 153D of the Act. It is thus, prayed by Id. CIT DR that the contentions of the assessee on the issue of approval u/s 153D of the Act may please be rejected and the order of the AO may please be upheld. Reliance is placed on the judgement of Co-ordinate Mumbai Bench of Tribunal in the case of Usha Satish Salvi Vs. ACIT in ITA No. 4237 to 4239/Mum/2023 order dated 23.01.2025 wherein the issue of validity of assessment order passed u/s 143(3) r.w.s.153A of the Act in light of provisions of section 153D of the ACT was decided against the assessee.

Heard the contentions of both the parties and perused the material available on record. In the instant case, from the perusal of common approval letter as reproduced above, for Four assessment years, it is incumbent upon the Joint CIT while granting the approval, to examine all the material including the assessment records, full appraisal report and seized material pertaining to each Assessment Year with reference to the addition proposed by the AO for each individual assessment year for which approval is sought. Further, approval is to be granted for each assessment year separately.

The Hon'ble Jurisdictional High Court in the case of Shiv Kumar Nayyar in ITA No.285/2024 [TS-343-HC-2024-Delhi] has held that approval u/s 153D of the Act has to be granted for each Assessment year independently. The relevant observations of the judgement of Hon'ble High Court are as under:-

[Emphasis supplied]

The Hon'ble Orissa High Court in the case of ACIT vs Serajuddin & Co. 454 ITR 312 (Orissa) had an occasion to examine substantial question of law on the propriety of approval granted u/s 153D of the Act. The Hon'ble Orissa High Court made wide ranging observations towards the manner and legality of approval u/s 153D of the Act. The Hon'ble High Court inter-alia observed that approval u/s 153D of the Act being mandatory, while elaborate reasons need not be given, there has to be some indication that approving authority has examined draft orders and finds that it meets the requirement of law. The approving authority is expected to indicate his thought process while granting approval, held that it is not correct on the part of the Revenue to contend that the approval itself is not justifiable. Where the Court finds that the approval is granted mechanically, it would vitiate the assessment order itself. The Hon'ble High Court inter-alia observed that there is not even a token mention that draft order has been perused by the Ld. Joint CIT. The approval letter simply grants approval. In other words, even the bare minimum requirement of approving authority having to indicate what thought process involved leading to the aforementioned approval has not been provided. As explained, the mere repeating of words of the Statue or mere rubber stamping of the communication seeking sanction by using similar words like 'approval' will not, by itself, meet the requirement of law. The Hon'ble Court made reference to manual issued by the CBDT in the context of erstwhile section 158BG of the Act and observed that such manual serves as a guideline to the AOs. Since it was issued by CBDT, the powers of issuing such guidelines can be traced to section 119 of the Act. The Hon'ble High Court also held that non-compliance of requirement of section 153D of the Act is not a mere procedural irregularity and lapse committed by Revenue may vitiate the assessment order. The SLP filed against the aforesaid judgement in the case of ACIT vs Serajuddin & Co. was dismissed as reported in (2024) 163 taxmann.com 118 (SC).

In so far as the order of the Co-ordinate Bench of the Tribunal (Mumbai Bench) relied by the Ld. Department's Representative in the case of Usha Satish Salvi (supra), in the said case, certain modifications were suggested to the A.O. in the draft assessment order, which have been carried out by the A.O. while passing the Assessment Order and the coordinate Bench observed that the said fact shows that approving authority approved the draft order not in mechanical manner but after due application of mind. However, in the present case, no such application of mind is forthcoming. Further in the case of Usha Satish Salvi (supra), the Ld. Department's Representative has filed affidavit of the then Assessing Officer and the approving authority who have denied the allegations raised by the Assessee. After relying on the same so called unchallenged depositions made in the Affidavit of the then A.O. and the approving authority, (which has been filed much after the granting of the approval and at the stage of second Appeal before the Tribunal), upheld the order of the Id. CIT(A). Therefore, the present case in hand is factually distinguishable. In view of the judgement of the Hon'ble Delhi High Court in the case of Shiv Kumar Nayyar (supra), which is having binding precedent, and the order/ratio of the Tribunal in the case of Usha Satish Salvi (supra) has no effect of binding precedent.

Such mechanical approval cannot be sustainable in law in the light of judicial dicta available. The approval memo is totally silent on the issues involved and has granted omnibus approval without any thoughtful process being discernible. A single approval u/s 153D has been accorded in respect of Four assessment years and there is no other material to show involvement of the superior authority in the course of assessment proceedings. Thus, applying the ratio of judgements delivered as noted above, the assessment order based on ritualistic approval stands vitiated and thus, quashed by allowing Grounds of appeal No. 6 & 6.1 of the Assessee.

Since we have already allowed Ground of appeal No. 6 & 6.1 taken by the assessee thus, other grounds of appeal are not adjudicated.

In the result, the appeal of the assessee is allowed.

Before us, both the parties have agreed that the facts involved are common in both the assessment years. In this year also, assessee has taken ground of appeal No. 6 & 6.1 challenging the validity of assessment order passed u/s 143(3) r.w.s. 153C in light of provisions of section 153D of the Act which issue has been decided in favour of the assessee in ITA No. 6372/Del/2025 for AY 2012-13, hereinabove. As admitted by both the parties, the facts are identical, and the approval was granted by Joint CIT for both these assessment years also by a common order vide letter No. Joint CIT/C.R.-5/153D/2017-18/1172 dated 29.11.2017 for AYrs. 2010-11 to 2013-14, as reproduced above, thus following our aforesaid observations, the grounds of appeal Nos. 6 & 6.1 taken by the assessee are allowed.

In the result, appeal of the assessee for AY 2013-14 is allowed.

In the final result, both the appeals filed by the assessee in ITA Nos.6372 & 6373/Del/2025 for AYs 2012-13 and 2013-14 respectively, are allowed.