Search-Related Income-Tax Assessments: Approval U/S 153D Granted Mechanically Without Application of Mind Vitiates Entire Assessment Order: Bombay High Court

The Bombay High Court has dismissed a large batch of appeals filed by the Principal Commissioner of Income Tax (Central-4), affirming the Income Tax Appellate Tribunal’s finding that approvals under Section 153D were issued mechanically and without any application of mind, thereby invalidating the entire assessment process. The Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna has observed that the mandatory approval under Section 153D—intended as a critical safeguard—was reduced to a mere ritual. As a result, all assessment orders passed under Section 153A based on such defective approvals stood vitiated. The batch of cases arose from search and seizure operations conducted by the Income Tax Department on various entities and group companies linked to textile, trading, and infrastructure businesses. Pursuant to the search, the Department initiated assessment proceedings under Section 153A of the Income-tax Act for multiple assessment years. As required under law, the draft assessment orders prepared by the Assessing Officers were forwarded to the Additional Commissioner of Income Tax for prior approval under Section 153D, a mandatory statutory safeguard designed to prevent arbitrary or excessive assessments. However, several assessees—including Citron Infraprojects Ltd., Helios Mercantile Ltd., Vallabh Pittie South West Industries Ltd., SVP Global Textiles Ltd., and others—challenged the validity of these assessment orders before the Income Tax Appellate Tribunal (ITAT). The assessees contended that the Section 153D approvals were granted mechanically, without any real application of mind. All approvals were issued on the same day, within minutes of receiving the proposals. Draft assessment orders already contained details of the approval orders—even though the approvals were yet to be granted. There were glaring factual errors, such as assessing non-existent companies and applying tax provisions for years in which they were not in force. The ITAT accepted these arguments and quashed all the assessment orders, holding that the statutory requirement of prior approval under Section 153D had been rendered meaningless due to the mechanical manner in which approvals were granted. The department—through the Principal Commissioner of Income Tax (Central-4)—filed over 40 appeals before the Bombay High Court under Section 260A, arguing that the ITAT had erred in concluding that the approvals lacked application of mind. The finding did not raise merely factual issues but a substantial question of law. The assessments related to accommodation entries, which fall under exceptions to CBDT’s monetary limits for filing appeals. The High Court condoned the delay in filing the appeals but proceeded to examine whether the ITAT’s conclusions were justified and whether any substantial question of law arose. The High Court upheld the ITAT’s detailed factual findings, noting that proposals for approval were submitted as late as 5:02 pm and approvals were granted within minutes on the same day. Draft assessment orders already contained the date and number of the approval order, even before approval was granted—indicating a pre-decided outcome. Significant factual and legal discrepancies, including application of Section 115BBE to years when it did not exist, were left unchecked. Approvals were identical in wording, showing no independent evaluation by the Additional Commissioner. The Court observed that the statutory requirement of prior approval had been reduced to a “meaningless formality” and even a “mockery” of due process. Case Details Case Title: PCIT Versus Citron Infraprojects Limited Case No.: Income Tax Appeal (L) No. 34357 Of 2024 With Interim Application No. 1072 Of 2025 In Income Tax Appeal (L) No. 34357 Of 2024 Date: 26/11/2025 Counsel For Appellant: Suresh Kumar Click Here To Read Order Read More: IGST ITC Reported In GSTR-9 Can Be Allowed As Set-off, Even If It Was Missed In Monthly GSTR-3B: Calcutta HC

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Search-Related Income-Tax Assessments: Approval U/S 153D Granted Mechanically Without Application of Mind Vitiates Entire Assessment Order: Bombay High Court

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