Shri Umesh Kumar Bajaj vs DCIT

Introduction

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), comprising Judicial Member Shri Sudhir Kumar and Accountant Member Shri Manish Agarwal, delivered a significant ruling on August 22, 2025, in the case of Shri Umesh Kumar Bajaj vs. DCIT & Others (ITA No.2076/Del/2023 & Others). This consolidated order addresses a series of appeals and cross-objections spanning Assessment Years (AYs) 2011-12 to 2019-20, arising from a search and seizure operation conducted on June 28, 2018, under Section 132 of the Income Tax Act, 1961. The core issue revolved around the validity of assessment orders passed under Section 153A, particularly challenging the approval granted under Section 153D. The ITAT quashed the assessment orders, holding that the approval was mechanically granted without independent application of mind, thereby reinforcing procedural safeguards in search proceedings. This case commentary provides a deep legal analysis of the Tribunal’s reasoning, its implications for tax jurisprudence, and the broader principles governing search assessments.

Facts of the Case

The assessee, Shri Umesh Kumar Bajaj, derived income from house property, business or profession, and other sources. A search under Section 132 was conducted on June 28, 2018, as part of the “Shri Harish Bajaj & Others Group of cases.” Following the search, a notice under Section 153A was issued on February 3, 2021, and the assessee filed a return of income on February 15, 2021, declaring total income of INR 6,72,340. The Assessing Officer (AO) completed the assessment under Section 143(3)/153A, determining the total income at INR 1,98,30,042, which included additions for unexplained investments under Section 69, unexplained credits under Section 68, and estimation of net profit at 2% of turnover. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the assessee’s appeal, leading to cross-appeals by both the assessee and the Revenue before the ITAT.

A critical procedural challenge was raised by the assessee regarding the approval granted under Section 153D by the Additional Commissioner of Income Tax (Addl. CIT), Central Range-Gurugram. The approval was issued via a single letter dated July 14, 2021 (Letter No. Addl. CIT/CR/MRT/Approval/153D/2021-22/305), covering five different assessees and twenty assessment years. The assessee argued that this was a mechanical approval, as the Addl. CIT did not examine individual assessment records or seized material, and the approval was common for multiple years and persons. The Revenue defended the approval, citing compliance with statutory requirements.

Reasoning of the ITAT

The ITAT’s reasoning focused on the mandatory nature of Section 153D, which requires that no assessment order under Section 153A shall be passed without the prior approval of the Principal Commissioner or Commissioner, or the Additional Commissioner as specified. The Tribunal meticulously analyzed the approval letter and found it deficient on several grounds.

1. Lack of Independent Application of Mind: The ITAT observed that the Addl. CIT granted a single approval for five assessees across twenty assessment years without separate consideration for each case. The approval letter did not state that the Addl. CIT had gone through the seized material, assessment records, or the replies filed by the assessee with reference to the proposed additions. The Tribunal emphasized that Section 153D mandates a judicious, case-specific approval process to prevent arbitrary assessments. The blanket approval, issued via a common letter, indicated a mechanical exercise of power, violating the legislative intent behind the provision.

2. Distinction from Revenue’s Precedents: The Revenue relied on certain judgments to support the approval’s validity. However, the ITAT distinguished these cases on factual grounds, noting that in those precedents, the approving authority had demonstrated independent application of mind by reviewing individual records. In the present case, the Addl. CIT, stationed at Meerut, could not have physically examined the assessment records located in Ghaziabad, further undermining the claim of due diligence.

3. Procedural Violation and Consequences: The Tribunal held that the approval under Section 153D is a mandatory procedural safeguard, and its violation renders the assessment order null and void. The ITAT cited its own decision in M/s Tavleen Resorts & Spa Pvt. Ltd. vs. DCIT (ITA No. 3361-3366/Del/2024) and Smt. Peu Vee to support the principle that mechanical approval without application of mind is invalid. Consequently, the assessment orders for all AYs were quashed.

4. Incriminating Material Requirement: Although the primary ground for quashing was the defective approval, the ITAT also reiterated the settled principle that in search assessments under Section 153A, additions must be based on incriminating material found during the search. The Tribunal noted that the additions made by the AO, such as estimation of net profit and rejection of books of account, were not supported by incriminating evidence. This reinforced the need for substantive evidence in search cases, limiting the Revenue’s discretion to make blanket additions.

5. Impact on Cross-Objections and Revenue’s Appeals: Since the assessment orders were quashed on the preliminary legal ground, the ITAT did not adjudicate the other grounds raised by the assessee or the Revenue, including the validity of additions under Sections 68 and 69, interest under Section 234B, and limitation issues. The cross-objections filed by the assessee were rendered infructuous.

Conclusion

The ITAT’s ruling in Umesh Kumar Bajaj is a landmark decision that underscores the importance of procedural compliance in search assessments. By quashing the assessment orders for AYs 2011-12 to 2019-20, the Tribunal reinforced the mandatory nature of Section 153D approval, requiring independent application of mind for each assessee and each assessment year. The decision also reaffirms the principle that additions in search cases must be based on incriminating material, preventing arbitrary estimations. This ruling serves as a check on the Revenue’s power, ensuring that procedural safeguards are not bypassed through mechanical approvals. Taxpayers and practitioners should note that any deviation from the case-specific approval process under Section 153D can lead to the nullification of assessment orders, providing a strong defense in search-related disputes.

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