Bulk approval of 67 search assessment drafts u/s153D challenged as mechanical; approvals invalidated and assessments set aside.

The dominant issue was whether approval under s.153D for completing search assessments was vitiated as mechanical and without independent application of mind. The Tribunal held that s.153D requires approval in respect of "each" assessment, and the grant of approval for 67 cases on the same date was inherently indicative of non-examination of the draft orders, making meaningful scrutiny humanly impossible. Relying on HC authority holding that approval without consideration of issues is invalid, the Tribunal treated the statutory approval as legally defective. Consequently, the impugned assessments framed pursuant to such invalid s.153D approval could not stand, and relief was granted to the assessee.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the prior approval granted under section 153D for passing search assessments was legally valid, or whether it was mechanical / without application of mind, thereby vitiating the consequential assessments.

(ii) Whether section 153D requires assessee-wise and assessment-year-wise application of mind (and effective compliance with the word "each assessment year"), and whether a composite approval for multiple assessees/years, granted in a manner indicating inability to examine the record, fails the statutory mandate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) Validity of section 153D approval: whether mechanical approval invalidates the assessments

Legal framework (as discussed by the Court): The Court examined section 153D and held that where the Assessing Officer is below the rank of Joint Commissioner, no search assessment/reassessment order can be passed except with prior approval of the Joint Commissioner. The Court treated this approval as a statutory safeguard with a mandatory character and not a procedural formality.

Interpretation and reasoning: The Court held that "approval" in the context of section 153D necessarily implies due application of mind to the material forming the foundation of the draft assessment order. It reasoned that the approving authority is required to verify, in substance, whether the Assessing Officer has properly appreciated the relevant material and followed due procedure, and that the approval function is quasi-judicial in nature. The Court further held that while detailed reasons may not be statutorily required to be recorded in the approval, the approval can still be tested on whether it was granted in a manner showing real consideration of the record, as opposed to a routine "go-ahead".

Application to facts and conclusion: The Court found decisive that the draft assessment orders were placed before the approving authority for the first time on the very day approval was granted, and that approval was issued for a very large number of cases on that same day, in circumstances indicating that meaningful scrutiny of the extensive seized material and related record was humanly impossible. Reading the approval and surrounding circumstances, the Court concluded that the approval was an eyewash/idle formality, granted without consideration of merits and therefore not an approval in the eyes of law. As prior valid approval is a condition precedent under section 153D, the Court held that the consequential assessments were vitiated and liable to be annulled.

Issue (ii) Requirement of "each assessment year" compliance and independent year-wise/assessee-wise application of mind

Legal framework (as discussed by the Court): The Court emphasized the statutory phrase "each assessment year" in section 153D and considered it in light of the scheme of search assessments, which involves separate notices, separate returns, and separate assessment orders for each relevant year, alongside the concepts of abated and non-abated assessments.

Interpretation and reasoning: The Court held that the word "each" must be given effective meaning consistent with the overall year-centric assessment scheme. It reasoned that the approving authority must apply an independent mind to the material on record for each assessee and for each assessment year separately, and that bundling multiple years and assessees into a single composite exercise, without discernible year-wise examination, defeats the legislative intent behind section 153D.

Application to facts and conclusion: The Court found that the impugned approval was granted through a single approval letter covering numerous assessees/years, with no indication of year-wise scrutiny and with circumstances showing that the approving authority did not meaningfully examine the matters placed for approval. The Court held that such a blanket approval, granted in a mechanical manner, does not satisfy the statutory requirement tied to "each assessment year". Consequently, the Court treated the section 153D condition as not properly fulfilled and annulled the assessments.

Final determination material to outcome: Ground challenging validity of section 153D approval was allowed; the assessments were annulled as having been made on the basis of an invalid/mechanical approval. Remaining grounds were not decided on merits as they were not pressed.

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