Mechanical Approval Granted En Masse Under Section 153D Without Application of Mind Invalidates Search Assessment

Issue

Facts

• Search & Assessment: Following search and seizure proceedings under Section 132, search assessments under Section 153A were initiated against the assessee.
• Draft Orders Submitted: The Assessing Officer (AO) submitted draft assessment orders alongside approval proposals under Section 153D to the Additional Commissioner of Income Tax for prior approval.
• Mechanical Grant of Approvals: The approving authority issued all approvals en masse within less than 24 hours using identical boilerplate wording. None of the approvals contained any reference to the perusal or verification of the draft orders.
• Procedural Irregularities: In several cases, the draft assessment orders already cited the date and reference number of the approval order before the approval was actually formally granted.
• Lower Forum Rulings: The ITAT quashed the Section 153D approvals and set aside the resulting Section 153A assessment orders for total non-application of mind. The High Court subsequently upheld the Tribunal’s view, holding that Section 153D provides a statutory safeguard that cannot be reduced to a routine, mechanical exercise.
• Appeal to Apex Court: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the decision of the High Court.

Decision

• Dismissal of SLP: The Supreme Court dismissed the Special Leave Petition filed by the Revenue, finding no grounds to interfere with the High Court’s ruling.
• Absence of Mindful Exercise: The Court affirmed that Section 153D approval granted en masse without genuine perusal or serious application of mind renders the resulting assessment orders invalid.

Key Takeaways

• Mandatory Statutory Safeguard: Prior approval under Section 153D acts as a vital protective shield for taxpayers against arbitrary or unjust assessments by Assessing Officers.
• Requirement of Serious Application of Mind: Approvals under Section 153D must reflect independent, meaningful, and judicious perusal of draft assessment orders and underlying search records; rubber-stamping or issuing en masse approvals within unreasonable timeframes invalidates the entire assessment.
• Incurable Jurisdictional Defect: An approval granted mechanically without application of mind goes to the root of jurisdiction, rendering consequential search assessment orders under Section 153A void ab initio.