ITAT quashes assessment order for erroneous section 153D approval on seized jewellery as unexplained investment

ITAT Delhi quashed assessment order for erroneous approval under section 153D regarding seized jewellery treated as unexplained investment. The court held that approval authority must apply due diligence and not grant mechanical approval, as this defeats the statutory protection purpose. Citing SC precedent in Serajuddin case, the tribunal found the approval lacked legitimacy due to inadequate scrutiny of seized documents. The assessment order was deemed nullity and set aside, with CIT(A) order also overturned in favor of assessee.

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Issues:
Appeal against assessment order for AY 2018-19; Validity of approval granted under section 153D; Addition of unexplained investment in jewellery under section 69A r.w.s 115BBE.

Analysis:
1. The appeal was filed against the assessment order for AY 2018-19, where the assessee declared income at Rs. 26,61,930, but the income was computed at Rs. 50,27,095 post search and seizure operation under section 132 of the Income Tax Act. The CIT(A) confirmed the addition of Rs. 15,19,998 for unexplained investment in jewellery but deleted the addition of Rs. 2,39,757 for cash seized during the search. The assessee challenged the assessment order on various grounds.
2. The main contention of the assessee was the validity of the approval granted under section 153D of the Act. The approval was granted in a generic and listless manner for 178 cases of 29 assessees, including the present case, without proper examination of facts or seized material. The approval lacked due application of mind, as per the CBDT Circular and judicial precedents, which require a thorough scrutiny of seized documents before granting approval.
3. The tribunal analyzed past judgments, including the Shreelekha Damani case, where the approval was deemed invalid due to lack of application of mind by the Additional CIT. Additionally, in the ACIT vs. Serajuddin and Co. case, the High Court quashed an assessment order due to inadequacy in the approval procedure under section 153D. The tribunal found merit in the assessee's plea against the erroneous approval and declared the assessment order as non-est and nullity, setting it aside.
4. As the assessment order was quashed based on the invalid approval, other grounds on merits became irrelevant. The tribunal allowed the assessee's appeal, setting aside the assessment order and the CIT(A)'s decision, rendering them null and void.

This detailed analysis highlights the key issues raised in the appeal, focusing on the validity of the approval granted under section 153D of the Income Tax Act, leading to the quashing of the assessment order for AY 2018-19.

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