Sanction granted en masse under section 153D without application of mind renders search assessments void.

Issue

Facts

• Search and Seizure Action: Reassessment/assessment proceedings were initiated against the assessee under Section 153A following search and seizure operations.
• Draft Assessment Orders Submitted: The Assessing Officer (AO) submitted proposals along with draft assessment orders to the Additional Commissioner seeking mandatory prior approval under Section 153D.
• Defects in Approval Grant:
  • All approvals issued by the approving authority were identically worded and contained no reference to the perusal of draft assessment orders or record files.
  • Approvals were granted en masse within less than 24 hours of submission.
  • In several instances, the draft assessment orders prepared by the AO already mentioned the date and approval order number before the approval was actually issued.
• Tribunal & High Court Rulings: The Tribunal quashed the Section 153D approvals for total non-application of mind and set aside the consequent search assessment orders under Section 153A. The High Court affirmed the Tribunal’s view, holding that Section 153D is an inbuilt protection against arbitrary power that cannot be reduced to a mechanical exercise.
• Revenue’s Appeal: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the quashing of the search assessments.

Decision

• Dismissal of Revenue’s SLP: Since similar petitions arising out of the same common order had already been dismissed, the instant SLP filed by the Revenue was also dismissed. (In favour of assessee)
• Invalidation of Search Assessments: Search assessment orders passed pursuant to mechanical, non-application-of-mind Section 153D approvals remain null and void. (In favour of assessee)

Key Takeaways

• Mandatory Application of Mind: Approval under Section 153D is a statutory safeguard against arbitrary assessments; it requires independent and meaningful application of mind by higher tax authorities rather than a routine administrative stamp.
• Fatal Procedural Flaw: En masse approvals issued within absurdly brief timelines (e.g., less than 24 hours) or pre-numbered draft orders demonstrate lack of perusal of records and render the resulting assessment orders void ab initio.
• Jurisdictional Precondition: Valid grant of prior approval under Section 153D is a condition precedent for exercising jurisdiction to pass assessment orders under Section 153A/153C.