Facts of the Case

The Revenue filed an appeal before the Delhi High Court challenging the order dated 31.10.2022 passed by the Income Tax Appellate Tribunal (ITAT) for AY 2017–18.

The Tribunal had earlier annulled the assessment order on the ground that approval granted under Section 153D of the Income Tax Act was invalid due to lack of application of mind by the approving authority.

It was also noted that a connected matter involving the same assessee had already been decided by the High Court in ITA No. 368/2023, wherein similar findings of the Tribunal were upheld.

Issues Involved

  1. Whether the approval granted under Section 153D without proper examination of records is valid in law?
  2. Whether such defect can be cured under Section 292B of the Income Tax Act?
  3. Whether any substantial question of law arises from the Tribunal’s findings?

Petitioner’s Arguments (Revenue)

  • The Revenue sought to challenge the Tribunal’s order annulling the assessment.
  • It implied that the approval granted under Section 153D should be treated as valid.
  • The Revenue attempted to argue that the Tribunal erred in its factual and legal findings.

 

Respondent’s Arguments (Assessee)

  • The assessee contended that the approval under Section 153D was granted mechanically.
  • It was argued that:
    • No proper examination of assessment records or search material was conducted.
    • There were glaring inconsistencies in income figures which were ignored.
  • The assessee relied on Tribunal findings highlighting complete non-application of mind by the approving authority.

Court Findings / Order

  • The Tribunal’s findings were purely factual and did not give rise to any substantial question of law.
  • The approval under Section 153D was granted without application of mind, making it invalid.
  • Such defect is not curable under Section 292B, as it is not a procedural irregularity but a substantive illegality.
  • Since the assessment order itself was vitiated due to invalid approval, the Tribunal was justified in annulling it.

Accordingly, the appeal was closed/dismissed.

Important Clarifications

  • Approval under Section 153D is not a mere formality; it requires proper scrutiny.
  • Mechanical approval without examining:
    • Assessment records
    • Search material
      renders the entire assessment invalid.
  • Section 292B cannot cure jurisdictional or substantive defects like absence of application of mind.
  • Findings of fact by the Tribunal, when well-reasoned, are generally not interfered with by High Courts.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60819092023ITA5372023_174859.pdf

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