Section 153D approval held mechanical; assessments under Section 153A quashed for lack of proper mind application

The ITAT Cutack held that the assessee was provided all relevant seized documents and statements recorded under section 132(4), rejecting the claim of denial of natural justice. The assessee did not request cross-examination of witnesses or statements during assessment proceedings; hence, no violation of natural justice occurred. However, the tribunal found that the approval under section 153D was granted mechanically without proper application of mind, rendering the assessments under section 153A void and bad in law. Consequently, the impugned assessment orders were quashed and set aside.

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ISSUES:

Whether the assessment orders passed under sections 143(3)/144/153A of the Income Tax Act, 1961, violated the principles of natural justice by not providing copies of statements and seized materials and denying opportunity for cross-examination.Whether the Assessing Officer complied with the mandatory requirement of prior approval under section 153D of the Income Tax Act, 1961, before passing the assessment orders in search cases.Whether the approval granted under section 153D was validly accorded with due application of mind or was a mechanical approval rendering the assessments void ab initio.

RULINGS / HOLDINGS:

On the natural justice issue, the court held that the assessee was provided with all relevant seized documents and statements recorded under section 132(4) of the Act, as evidenced by correspondence and admissions by the assessee. The assessee neither requested copies beyond what was provided nor sought opportunity for cross-examination during assessment proceedings. Therefore, the contention of violation of natural justice was dismissed.Regarding compliance with section 153D, the court found that the approval purportedly granted by the Additional Commissioner of Income Tax (ACIT) was given the day after the Assessing Officer's request, without any indication that the ACIT had perused the relevant assessment records or draft orders. The approval letter lacked any mention of application of mind or examination of materials, and the assessment orders did not record the receipt of such approval. Consequently, the approval was held to be mechanical and without due application of mind, rendering the assessment orders void and bad in law.Following the above, all assessment orders for the relevant assessment years were quashed as non-est and nullities due to the invalidity of the section 153D approval.

RATIONALE:

The court applied the statutory framework under sections 132, 143(3), 144, 153A, and 153D of the Income Tax Act, 1961, and relevant judicial precedents concerning principles of natural justice and procedural compliance in search assessments.It recognized that section 153D mandates prior approval of a Joint or Additional Commissioner before passing assessment or reassessment orders in search cases, requiring the approving authority to apply mind to the assessment records and draft orders.The court emphasized that such approval is a statutory duty, not a mere formality, serving as a safeguard against arbitrary assessments and protecting taxpayer rights.Reliance was placed on multiple precedents, including decisions of High Courts and coordinate ITAT benches, which held that mechanical or cursory approvals without examination of records violate the statutory mandate and render assessments void.The court distinguished between natural justice requirements and procedural rules of evidence, holding that absence of formal cross-examination does not per se violate natural justice if the assessee fails to seek such opportunity.The decision reflects a doctrinal reaffirmation that procedural safeguards embodied in section 153D are integral to the validity of search assessments and that non-compliance cannot be cured by subsequent explanations or administrative acts.

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