Assessment under s.153A quashed for invalid service of notice to a person in Judicial Custody and mechanical s.153D approval and held that approval u/s 153D is not just a ritual formality, entire proceedings held void
The ITAT Delhi in the case of
Rajiv Singh Kushwaha Versus ACIT, Circle-16, Delhi. 2025 (12) TMI 490 - ITAT DELHI- order dated 28-11-2025
allowed the assessee's appeal and quashed the assessment framed under s.153A. It held that no valid service of notice under s.153A was effected on the assessee who was in Judicial Custody, rendering the entire assessment proceedings void ab initio. Additionally, the Tribunal found that the approval under s.153D by the Addl. CIT was granted mechanically, without independent application of mind to each assessment year and each assessee, contrary to the statutory mandate. The approving authority failed to examine the assessment records and the issues raised by the AO, defeating the legislative purpose of s.153A-153D. Consequently, the impugned assessment was annulled in toto.
1. ISSUES PRESENTED AND CONSIDERED
1.1 Whether notice issued under section 153A of the Income-tax Act to an assessee who was in judicial custody, without following the mode of service prescribed for persons confined in prison, constituted valid service so as to confer jurisdiction for assessment.
1.2 Whether the approval granted under section 153D of the Income-tax Act was vitiated for being mechanical and treated as a mere administrative formality, particularly when granted for multiple assessees and years in one day, and whether such approval requires independent judicial application of mind.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of service of notice under section 153A on assessee in judicial custody
Legal framework
2.1 The Court noted that section 131 of the Income-tax Act vests tax authorities with powers of a Civil Court in respect of summons, and section 282(b) provides that service of a notice, summons, requisition, order or any other communication under the Act may be made by delivering or transmitting a copy thereof to the person named in such manner as provided under the Code of Civil Procedure, 1908.
2.2 Order V Rule 24 of the Code of Civil Procedure, 1908, stipulates that when a defendant is confined in a prison, the summons should be delivered or sent to the officer in charge of the prison, who is then responsible for serving the summons on the defendant.
2.3 The Court relied on a decision of a High Court holding that where information is received that an assessee to whom notice has to be served is in judicial custody, an appropriate order should be passed requiring service of notice through the Superintendent of the concerned jail, and that mere appearance of staff or other persons cannot substitute such service.
Interpretation and reasoning
2.4 It was undisputed that at the time when notice under section 153A was issued and purportedly served, the assessee was in judicial custody and that the Assessing Officer had been informed of this position by the assessee's spouse.
2.5 The Court held that, in view of section 282(b), service of notice in such a situation must conform to the procedure prescribed under the Code of Civil Procedure for persons confined in prison, i.e., by service through the officer in charge of the prison under Order V Rule 24.
2.6 The contention of the Revenue that there is no specific procedure in the Income-tax Act requiring compliance with Order V Rule 24, and that representation by the assessee's wife cured any defect, was rejected in light of the statutory reference in section 282(b) to the Code of Civil Procedure and the strict interpretation of service provisions adopted by the referenced High Court.
2.7 The Court emphasized that a person in judicial custody is deprived of many constitutional rights and that tax authorities, once informed of such custody, are legally obliged to ensure proper service through the Superintendent of the jail. Failure to do so is a fatal defect and cannot be cured by the mere participation or representation of relatives or others.
Conclusions
2.8 The Court held that notice under section 153A was not validly served on the assessee while in judicial custody, as the mandated mode of service via the prison authorities was not followed.
2.9 Consequently, the assumption of jurisdiction under section 153A was invalid, and the entire assessment proceedings were liable to be quashed. Ground No. 2 was sustained.
Issue 2: Validity and nature of approval under section 153D and requirement of application of mind
Legal framework
2.10 The Court noted that, in search cases, where the Assessing Officer is below the rank of Joint Commissioner, section 153D requires that no order of assessment or reassessment under sections 153A or 153C shall be passed by such Assessing Officer except with the prior approval of the Joint Commissioner/Addl. Commissioner.
2.11 It was observed that the approving authority is required, in law, to consider all search material including incriminating material, seized documents, appraisal report, enquiries made by the Investigation Wing, enquiries made by the Assessing Officer, and the replies of the assessee, and, after due application of mind, to grant approval to the draft assessment order.
2.12 The Court referred to a High Court judgment which held that different income-tax authorities under section 116 are distinct and must exercise their powers independently; that consultation by the Assessing Officer with superior officers in the course of quasi-judicial functions may vitiate the independent exercise of discretion; and that an order passed under the influence or directions of superior officers is vitiated.
2.13 The Court also relied on a Third Member decision of the Tribunal holding that approval under section 153D is not a mere administrative approval; it can be examined for want of application of mind; and if found mechanical, it cannot be sustained in law.
Interpretation and reasoning
2.14 The First Appellate Authority had treated it as a standard practice that the Addl. CIT remained associated with the Assessing Officer throughout the assessment process, including approving the draft questionnaire, and concluded that approval under section 153D given on a single day in multiple cases did not indicate non-application of mind.
2.15 The Court disagreed with the approach that continuous association of the approving authority with the assessment process converts approval under section 153D into a mere administrative or supervisory formality. It held that such reasoning undermines the legislative purpose of requiring a distinct and independent approval at the stage of the draft assessment order.
2.16 On facts, the Court noted that the draft assessment order was prepared on 28.12.2018; approval under section 153D was granted on 29.12.2018; and the final assessment order was also passed on 29.12.2018. The approval letter showed that approval was granted in 23 cases, including multiple assessment years, on the same day.
2.17 The Court held that it was practically impossible to properly examine 23 draft assessment orders in a single day so as to ensure meaningful scrutiny of search materials, seized documents, appraisal reports, and assessment records for each case. The only way to justify such approval would be to treat it as an empty formality, which is contrary to the statutory scheme.
2.18 The Court emphasized that the purpose of section 153D is twofold: (i) to protect the assessee against undue or irrelevant additions and disallowances by ensuring that a senior officer independently reviews whether proper enquiries and investigations have been conducted on relevant material; and (ii) to safeguard the interest of the Revenue by ensuring the assessment is properly framed on the basis of available material.
2.19 The Court stressed that the word "each" in sections 153A and 153D must be given effective meaning, mandating case-wise, year-wise independent consideration by the approving authority, and that "approval" requires cognizance of the whole assessment record and independent application of mind.
2.20 The Revenue's reliance on a Coordinate Bench decision treating approval under section 153D as administrative was rejected. The Court held that such view was rendered in ignorance of the binding High Court judgment and the binding Third Member decision and, therefore, was per incuriam and could not be relied upon to dilute the quasi-judicial nature of section 153D approval.
2.21 The Court further observed that the very casualness in assumption of jurisdiction under section 153A (invalid service on a person in judicial custody) reflected on how casually the approval under section 153D was also granted.
Conclusions
2.22 The Court held that approval under section 153D is not a mere administrative formality but a substantive safeguard requiring independent judicial application of mind by the approving authority to each case and each assessment year.
2.23 In the present case, the approval under section 153D, having been granted for multiple assessees and multiple years on a single day, without demonstrable independent consideration of each draft order and search material, was held to be not in accordance with law and hence vitiated.
2.24 Ground No. 3 was sustained, and, as a consequence of allowing both Ground Nos. 2 and 3, the assessments stood quashed and the assessee's appeals were allowed.