Supreme Court Dismisses Revenue’s SLP As En Masse Section 153D Search Approvals Lacked Application Of Mind

Issue

Facts

• Search Assessment Proposals: Following search and seizure operations, the Assessing Officer (AO) submitted proposals along with draft assessment orders to the Additional Commissioner seeking prior statutory approval under Section 153D of the Income-tax Act, 1961.
• Mechanical Approvals: All approval orders issued by the Additional Commissioner were identically worded and contained no reference to the perusal of the draft assessment orders or underlying records.
• En Masse Issuance: The Additional Commissioner granted approvals en masse within a duration of less than 24 hours.
• Pre-dated Approvals: In several instances, the draft assessment orders prepared by the AO already recorded the date and reference number of the approval order before the approval was officially granted.
• Tribunal & High Court Orders: The Income Tax Appellate Tribunal (ITAT) quashed the approvals and set aside the consequent search assessment orders under Section 153A, which was subsequently upheld by the High Court.
• SLP by Revenue: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the decision of the High Court.

Decision

• Held that Section 153D provides an inbuilt statutory protection against arbitrary or unjust exercise of power by the Assessing Officer, which cannot be reduced to a mechanical exercise lacking serious application of mind.
• Held that approval granted en masse within less than 24 hours without perusal of draft orders—and pre-filled with approval reference numbers—demonstrates total non-application of mind.
• Held that no ground for interference was made out against the High Court’s order, and the Revenue’s Special Leave Petition (SLP) was accordingly dismissed.
• Decided in favor of the assessee.

Key Takeaways

• Mandatory Safeguard: Prior approval under Section 153D is a substantive legislative safeguard to prevent mechanical or arbitrary search assessments, not a mere administrative formality.
• Requirement of Due Deliberation: Statutory approvals granted en masse within unreasonable timeframes (e.g., under 24 hours) without evaluating individual draft orders fail the test of judicial scrutiny.
• Fatality of Pre-dated/Pre-filled References: Draft assessment orders reflecting approval details prior to actual grant conclusively prove mechanical rubber-stamping, rendering subsequent assessment orders void ab initio.