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Facts
The assessee's initial return was processed under Section 143(1). A subsequent survey under Section 133A led to the reopening of assessment under Section 147 by issuing a notice under Section 148, after obtaining PCIT's approval. The assessee challenged the validity of this reopening, alleging mechanical approval without application of mind.
Held
The tribunal held that the PCIT's approval under Section 151, merely stating "as approved" or "yes" without recording reasons or showing application of mind, was mechanical and invalid. Citing precedents, the tribunal quashed the notice issued under Section 148 and the subsequent assessment framed under Section 147.
Key Issues
Whether a mechanical approval granted by the PCIT for reopening an assessment under Section 147/148, without application of mind, invalidates the reopening notice and the subsequent assessment.
Sections Cited
143(1), 133A, 147, 148, 139(1), 151, 151(1)
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN, JM & SHRI RAJESH KUMAR, AM
This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals)-27, (hereinafter referred to as the “Ld. CIT(A)”] dated 30.09.2024 for the AY 2013-14.
At the outset, we note that the appeals of the assessee in to 2470/KOL/2024 are barred by limitation by 5 days. At the time of hearing the counsel of the assessee explained the reasons for delay in filing the appeal. The Ld. A.R did not raise any objection in condoning the delay. After hearing the rival contentions and perusing the
3. As the facts and circumstances are exactly identical in all the appeals of the assessee, hence we take and decide the issue accordingly.
4. At the time of hearing the ld. Counsel for the assessee pressed the ground no.5 which is extracted below:-
“FOR THAT the Ld. Commissioner of Income Tax (Appeals). Kolkata-27 acted unlawfully in upholding the validity of notice u/s. 148 of the Income Tax Act, 1961 issued by the Ld. Assistant Commissioner of Income Tax. Central Circle 4(4). Kolkata without any valid approval required u/s. 151 of the Income Tax Act, 1961 from the competent authority as required under the statute and the purported action on that behalf is thoroughly opposed to law.” 4.1. The facts in brief are that the assessee filed the return of income on 30.09.2013, declaring total income of ₹1,45,910/-, which was processed u/s 143(1) of the Act on24.04.2014, accepting the returned of income. Thereafter, a survey u/s 133A of the Act was conducted at the business premises of the assessee on 28.02.2020, wherein certain incriminating documents were found. The case of the assessee was accordingly, reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 25.03.2021, which was complied with by the assessee by filing the return of income on 23.04.2021, declaring the same income as was declared u/s 139(1) of the Act. Thereafter, the statutory notices along with questionnaire were issued and the assessee duly complied with the said notices by furnishing all the details/information as called for. Thereafter, the AO assessed the income at ₹6,90,60,997/- vide order dated 21.03.2022, passed u/s 147 of the Act.
5.2.9. Hence, in view of the above discussions, it is evident that the AO was right to initiate reopening proceedings with necessary approval from the respective higher authority. Moreover, from the assessment record, it is also noticed that the AO had followed all the requisite procedure to reopen the case of the assessee for the current AY with issuing all the statutory notices in timely manner to the assessee and approval u/s 151 of the Act was granted by the Ld. PCIT, Cen-2, Kolkata with verifying all the nitty-gritty of the present case. The assessee is arbitrarily saying that the approval was given by the PCIT without application of own mind and in a general manner. The assessee can't put itself into the shoes of the approval giving authorities. Hence, the allegations of the assessee are totally misleading and wild mixed with baseless arguments. Hence, these grounds of appeal raised by the assessee are dismissed.
4.3. The ld. AR vehemently submitted before us that the assessment was reopened by the ld. AO u/s 147 of the Income-tax Act, 1961 (the Act) by issuing notice u/s 148 of the Act, after obtaining the approval of the ld. PCIT u/s 151(1) of the Act, which was invalid and without application of mind as it was simply stated in the said approval (‘as approved’) without any endorsement and only stamped “yes”. Therefore, the said approval of the ld. PCIT has been given mechanically, without recording any satisfaction and reasons for according such approval. The ld. AR therefore prayed that the proceeding u/s 148 of the Act pursuant to such approval is bad in law and so is the consequent assessment framed by the AO. In defense of his argument, the ld. AR relied on series of decision namely; (i) Chhugamal Rajpal Vs. S.P. Chaliha & Ors on 21.01.1971, (ii) Sheo Nath Singh Vs. AAC (1971)
82. ITR 147 (SC) (iii) S Narayanaappa Vs. CIT (1967) 63. ITR 219 (SC) (iv) Ganga Saran & Sons Pvt. ltd. Vs. ITO (1981) 130 ITR 1. (SC).
4.5. The ld. DR on the other hand relied heavily on the orders of authorities below by submitting that the approval has been validly granted by the ld. Pr. Commissioner of Income Tax. The ld. DR submitted that it is not necessary that a very detailed and lengthy reason is to be recorded as this is an administrative hierarchy wherein all the files placed before the higher authorities are carefully perused and only thereafter the permissions to issue notice u/s 148 of the Act is accorded. The ld. DR therefore prayed that the ground raised by the assessee may kindly be dismissed.
4.6. After hearing the rival contentions and perusing the materials available on record, we find that the reopening has been done in this case u/s 147 of the Act by issuing notice u/s 148 of the Act. We observe that notice u/s 148 of the Act was issued after obtaining the approval from the ld. PCIT u/s 151 of the Act. We also find from the approval granted by the ld PCIT that it is only mentioned “as approved” and stamped “yes”. Therefore, the said approval granted by the ld. PCIT is apparently without application of mind and without recording any satisfaction and is granted in an mechanical manner. In our opinion such action by ld. PCIT is not sustainable in the eyes of law. Accordingly, notice issued u/s 148 of the Act on such mechanical approval as well as the assessment framed is bad in law. The Hon'ble “Further his report mentions : "Hence proper investigation regarding these loans is necessary". In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under section 148. Before issuing a notice under section 148, the Income-tax Officer must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of clause (a) or clause (b) of section 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under section 148. From the report submitted by the Income-tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee's omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the Income-tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147. Therefore, he could not have issued a notice under section 148. Further, the report submitted by him under section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under section 148. To question No. 8 in the report which reads "Whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148", he just noted the word "Yes" and affixed his signature thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. The important safeguards provided in sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. They have substituted the form for the substance. In the result this appeal is allowed, the order of the High Court is set aside and the impugned notice quashed. The respondent No. 2 shall pay the costs of the appellant both in this court and in the High Court.” 4.7. Similarly, where the approval has been granted in a mechanical manner, mentioning in the approval status as “approved”. In our opinion, in the case of the assessee, such an approval is mechanical “17. Such letter sent by the Additional CIT to the ITO clearly reveals that the sanction was accorded after due application of mind and on considering the reasons narrated by the Assessing Officer. However, in the present case, there is no such material to come to the conclusion that PCIT granted approval after considering the reasons assigned by the Assessing Officer. The decision rendered in Meenakshi Overseas (P.) Ltd. (supra), is therefore not applicable to the facts and circumstances of the present case.
Dealing with an identical challenge where the competent authority just recorded "Yes I am satisfied", the Madhya Pradesh High Court in the case of CIT v. S. Goyanka Lime & Chemicals Ltd. ITA 82/2012/[2015] 56 taxmann.com 390)/231 Taxman 73 (MP) held as under:- "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- "The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.
If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration."
In so far as the other grounds are concerned, as we have already quashed the reopening as well as assessment framed , other grounds become infructuous and are dismissed.
In the result, the appeals of the assessee are allowed.
Order pronounced in the open court on 26.11.2025.