The validity of tax assessments is contingent upon genuine prior approvals under Section 153D, and approvals granted without application of mind are deemed invalid.

Headnote:(A) Income Tax Act, 1961 - Section 153D - Prior approval for assessment orders - ITAT quashed approvals granted by Additional Commissioner, holding them to be vitiated by total non-application of mind, thus rendering subsequent assessments under Section 153A invalid - Approvals were granted mechanically without assessing relevant facts as required by the law. (Paras 5, 12, 20, 38)

(B) Administrative Law - Requirement of Application of Mind - The process of granting approvals under Section 153D must reflect genuine application of mind. A mechanical approach renders such approvals invalid, warranting quashing of consequential assessment orders. (Paras 20, 22)

Facts of the case:
Appeals were filed against ITAT’s decision which quashed the Additional Commissioner's approvals under Section 153D of the Income Tax Act, deeming them granted without proper consideration, thereby invalidating the associated assessment proceedings.

Findings of Court:
The court found no substantial questions of law to warrant interference; the ITAT correctly identified that the decisions were made without genuine application of mind, aligned with precedents on mandatory approvals.

Issues: Whether the ITAT was justified in finding non-application of mind in approvals under Section 153D, affecting the validity of subsequent assessments under Section 153A?

Ratio Decidendi: The court upheld the ITAT’s decision that approvals must reflect genuine consideration; mechanical grants by tax authorities contravene legal requirements, nullifying assessments based on such approvals.

Result: Appeals dismissed.

Table of Content
1. delay condonation request acknowledged. (Para 1 , 2)
2. context of the appeals clarified. (Para 5 , 6 , 7)
3. substantial question of law regarding approval under section 153d. (Para 8 , 9 , 10)
4. itat observed lack of application of mind. (Para 11 , 12 , 13)
5. analysis of rushed approvals noted. (Para 14 , 15 , 16)
6. mandatory approval condition emphasized. (Para 17 , 18 , 19 , 20)
7. judicial precedents highlight need for proper approval procedures. (Para 21 , 22 , 23)
8. examples of non-application of mind provided. (Para 24 , 25 , 26)
9. mechanical nature of approvals criticized. (Para 27 , 28 , 29 , 30)
10. reinforcement of previous findings against mechanical approvals. (Para 31 , 32 , 33)
11. further judicial support against overextensions of approval processes. (Para 34 , 35 , 36)
12. consistency demanded in sanctions across cases. (Para 37 , 38)
13. appeal based on flawed approvals dismissed. (Para 40 , 41 , 42)
14. final ruling on appeals and costs. (Para 43 , 44)

ORAL JUDGMENT:- (per M. S. Sonak, J)

1. Heard Mr Suresh Kumar for the Appellants/Applicants.

2. Mr Suresh Kumar states that notices have been served upon the Respondents in all these matters. He points out that the delay in matters listed at Sr. Nos. 401 to 462 ranges between 1 day to 51 days. Sufficient cause has been shown in the Interim Applications. Accordingly, he submits that the delay involved in instituting these Appeals be condoned.

3. We have perused the Interim Applications, and we are satisfied that sufficient cause has been made out for condoning the delay, which is not even inordinate.

4. Accordingly, all the Interim Applications are allowed, and delay is condoned.

5. With consent, the Appeals are immediately taken up for consideration, since, Mr. Suresh Kumar pointed out that all these Appeals are directed against the Income Tax Appellate Tribunal’s (ITAT) common order dated 30 April 2024 by which the ITAT has recorded a finding that the “prior approval” contemplated under Section 153D of the Income Tax Act (IT Act) was vitiated by total non-application of mind and on such basis, quashed such approval. The ITAT has held that the proceedings under Section 153A , based upon an approval under Section 153D which was vitiated by total non- application of mind, were not competent and accordingly, quashed the final orders in such proceedings, solely on such ground.

6. To the Court’s query that in several of these Appeals the tax effect is less than Rs. 2 Crores, Mr Suresh Kumar submitted that these Appeals related to accommodation entries and therefore, would be covered under the exceptions provided under the Central Board of Direct Taxes (CBDT) Circulars.

7. Without examining whether the Appeals where the tax effect is less than Rs. 2 Crores indeed fall within the exceptions carved out under the CBDT Circulars, we have heard Mr. Suresh Kumar on the merits of the Appeal.

8. Mr Suresh Kumar submits that the only substantial question involved in all these Appeals is “whether, in the facts and circumstances of the present case, the ITAT was justified in faulting the prior approval under Section 153D of the IT Act on the ground that the same was vitiated by non- application of mind”.

9. Mr. Suresh Kumar submits that the above question constitutes a substantial question of law for several reasons. At the outset, he submits that the ITAT has referred to instances of alleged non-application of mind only in four to five cases but has proceeded to allow the 34 Appeals by the assesses and dismiss the 31 by the Revenue, even though, in other than the four to five cases discussed by the ITAT, there was no evidence of any alleged non-application of mind. He submitted that even in the four to five cases, there may have been some discrepancies, but the inference of non-application of mind was not called for.

10. Mr Suresh Kumar submits that one of the circumstances held against the Revenue is that the approvals were granted in haste, i.e., within 24 hours of the da

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