Smrutisudha Nayak Vs Union of India and Others (Orissa High Court)
Orissa High Court adjudicated on the validity of assessment proceedings initiated under Section 153A of the Income Tax Act following a search and seizure operation. The case involved a petitioner, director of Sambit Resorts Pvt. Ltd., whose residence and bank locker were searched in 2007. While no incriminating material was found, notices were issued in 2009 for six preceding assessment years. The petitioner challenged the initiation of these proceedings and the retrospective amendment to Section 132(1), which authorized the Additional Director of Income Tax to issue search warrants. The court upheld the amendment as clarificatory but ruled that assessment proceedings under Section 153A must rely on incriminating materials, which were absent in this case. Citing precedents from the Delhi and Rajasthan High Courts, it emphasized that mere issuance of search warrants does not justify arbitrary assessments without material evidence. The court highlighted that Section 153A requires a nexus between seized materials and income additions, reaffirming that completed assessments cannot be reopened arbitrarily unless supported by post-search findings. While the department argued the amendment was procedural, the petitioner contended it violated Article 14 due to differential treatment of assessees. Ultimately, the court concluded that in the absence of incriminating material, the initiation of Section 153A proceedings in the petitioner’s case was unwarranted.
