Mandatory Application of Mind: ITAT Invalidates Search Assessments Due to Omnibus Approval Under Section 153D
In the realm of income tax litigation, the procedural safeguards embedded within the Income Tax Act 1961 act as a critical shield against arbitrary state action. Among these, Section 153D holds a paramount position regarding assessments arising from search and seizure operations. A recent pronouncement by the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Neetal Relan Vs ACIT has reinforced the sanctity of this provision. The Tribunal held that granting approval in a mechanical, "rubber-stamp" manner—without independent application of mind for each assessment year—renders the entire assessment proceedings void ab initio.
The Statutory Landscape: Section 153D
Search and seizure actions under the Income Tax Act 1961 are intrusive measures that grant the Revenue extensive powers. To balance this, the legislature introduced Section 153D, which mandates that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in search cases without the prior approval of the Joint Commissioner.
This provision is not merely a procedural formality or a ritualistic signing of papers. It is a jurisdictional requirement designed to ensure that a superior authority reviews the work of the Assessing Officer to prevent frivolous additions and ensure adherence to the principles of natural justice. The approving authority is expected to scrutinize the draft assessment order and the seized material before granting sanction.
Factual Matrix of the Case
The controversy in the present matter emerged from a search and seizure operation conducted by the Investigation Wing on the Nagpal Group on January 10, 2018. During this operation, incriminating material, specifically loose papers, was discovered at the premises of third parties, namely Sh. Gokul Kumar and Rashmi Kumar. These individuals asserted that the documents pertained to the assessee, Neetal Relan.
Initiation of Proceedings
Based on the statements and material seized, the Assessing Officer of the searched person recorded satisfaction, and the relevant documents were handed over to the assessee's Assessing Officer. Consequently, proceedings under Section 153C were initiated against the assessee.
The assessee filed returns of income in response to the notices. However, the Assessing Officer, relying on the seized loose papers which allegedly indicated unexplained investments and expenditures, proceeded to make significant additions to the assessee's income.
- For Assessment Year (AY) 2017-18, an addition of Rs. 10,00,000 was made.
- For Assessment Year (AY) 2018-19, an addition of Rs. 51,00,000 was made.