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Facts
The assessee's income tax assessments for A.Y. 2014-15 and 2015-16 were reopened based on information of receiving accommodation entries. For A.Y. 2015-16, the reopening was challenged as time-barred. For A.Y. 2014-15, the assessee challenged the validity of the approval granted under Section 151 for issuing the notice under Section 148, arguing it was mechanical and without application of mind.
Held
For A.Y. 2015-16, the Tribunal held that the reopening was time-barred as per the Hon'ble Apex Court's decision in Rajeev Bansal's case, quashing the notice and assessment. For A.Y. 2014-15, the Tribunal found that the approval by the PCCIT under Section 151 was mechanical, without proper application of mind, and therefore invalid, leading to the quashing of the reassessment proceedings.
Key Issues
1. Whether the reopening of assessment for A.Y. 2015-16 was time-barred. 2. Whether the approval under Section 151 for issuing notice under Section 148 for A.Y. 2014-15 was granted with proper application of mind or in a mechanical manner.
Sections Cited
147, 148, 148A(b), 148A(d), 143(3), 144B, 151, 151(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN, JM & SHRI RAJESH KUMAR, AM
After hearing the rival contentions and perusing the materials available on record, we find that the A.Y. 2015-16 is barred by limitation as has been held by the Hon'ble Apex court in the case of Rajeev Bansal (supra). The co-ordinate Bench in the case of M/s Kothari Metals Ltd. Vs. DCIT in vide order dated 19th March, 2025, has decided the appeal having similar issue in favour of the assessee. Respectfully, following the same, we allow the appeal of the assessee. The notice u/s 148 of the Act and the consequent assessment framed are quashed as barred by limitation. The appeal of the assessee is allowed.
ITA No. 262/KOL/2025 for A.Y. 2014-15
The only issue pressed at the time of hearing was in respect of approval from specified authority for issuing notice u/s 148 of the Act,
The brief facts of the case are that the assessee filed the return of income on 28.10.2014, declaring total income of ₹380/-. The case of the assessee was reopened after the ld. AO received information that assessee is a beneficiary of accommodation entries in the form of sale of investment after the decision Hon'ble Apex court in the civil appeal No. 3005/2022 in case of Union of India & Ors. Vs. Ashish Agarwal (2022 SCC Online SC 543) vide order dated 04.05.2022, wherein it was directed to treat all the notices issued u/s 148 of the Act from 01.04.2021 to 30.06.2021 as notice u/s 148A(b) of the Act. Thereafter, the order u/s 148A(d) of the Act was passed on 20.07.2022, was issued by the ld. AO and subsequently, notice u/s 148 of the Act was issued u/s 148 of the Act on 20.07.2022 after obtaining approval from the PCCIT on 15.07.2022, copy of which is available at page no.8 of the Paper Book. Finally, the assessment was framed by the ld. AO by making an addition of ₹5,05,18,770/- vide order dated 30.05.2023, passed u/s 147 read with section 144B of the Act.
In the appellate proceedings, the ld. CIT (A) affirmed the order of the ld. Assessing Officer.
Aggrieved, assessee preferred the appeal before us. The ld. Counsel for the assessee submitted before us that the case of the assessee has been invalidly reopened by the ld. AO by issuing notice u/s 148 of the Act on 22.07.2022 as the approval for issuing notice u/s 148 has been granted by the ld. PCCIT on 15.07.2022 without application of mind and in a mechanical manner. The ld. AR submitted while granting the approval for issuance of notice u/s 148 of the Act,
The ld. DR on the other hand relied on the order of the ld. lower authorities.
After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee has been reopened and notice u/s 148 of the Act was issued on 20.07.2022, after obtaining approval from the competent authority i.e. ld. PCCIT u/s 151 of the Act on 15.07.2022, a copy of which is available at Paper Book No. 8 of the assessee. For the sake of ready reference the said approval is extracted below: -
11. We observe from the said approval as accorded u/s 151 of the Act that the PCCIT only fixed his stamp (approved) and has not recorded his satisfaction and therefore, the approval granted is without any independent application of mind to the proposal received from the ld. AO as forwarded by the ld. PCIT-2, Kolkata. Therefore, the said approval in our opinion is not a valid approval as the same is given without independent application of mind and without recording the satisfaction of the ld. PCCIT the sanctioning authority. The said mechanism of approval by the senior authority u/s 151 of the /act has been provided a safeguard against any wrong or invalid re-opening and therefore approval has to be accorded after due application of mind. The case of the assessee is squarely covered by the decision of the Hon’ble Delgi High Court in case of Capital Broadways Pvt. Ltd.
“Similarly, the approval has been granted in a mechanical manner, wherein it was only mentioned in the approval status as approved. In our opinion, in the case of the assessee, such an approval is mechanical approval and cannot be considered as valid approval. In our opinion, the PCIT has to record the reasons and the satisfaction Page | 6 Sudha Surana; A.Y. 2015- 16 for having granted such approval. In our opinion, the reopening of assessment on the basis of said approval is bad in law. Case of the assessee find force from the decision of Capital Broadways Pvt. Ltd. Vs. ITO (supra), wherein Hon'ble HC has held that the approval granted by the ld. PCIT by just using the words like ‘yes, I am satisfied’ will not satisfied the requirement of law and accordingly, the notice was set aside. The operative part of the decision is extracted below:- “10. Section 151(1) of the Act categorically provides that no notice shall be issued under Section 148 by the Assessing Officer, after expiry of period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Commissioner or Principal Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. In the present case, since reopening was beyond the period of four years, it was for the PCIT to record satisfaction for reopening the assessment. In the case of SBC Minerals Pvt. Ltd. vs. Assistant Commissioner of Income Tax Circle 22(2), Delhi, WP (C) 7885/2023, we had clearly held that prescribed authority referred to in Section 151 must be "satisfied" on the reasons recorded by the Assessing Officer that it is a fit case for the issuance of such notice and therefore the satisfaction of the prescribed authority is a sine qua non for a valid approval. We had also held that the competent authority must apply its mind independently on the basis of material placed before it before grant of the sanction.
While dealing with the scope and requirement under Section 151 of the Act for initiating proceedings under Section 147 read with 148 of the Act, this Court in the case of Yum! Restaurants Asia Pte. Ltd v. Deputy Director of Income Tax (2017) 397 ITR 665, held as under:- "11. The purpose of Section 151 of the Act is to introduce a supervisory check over the work of the AO, particularly, in the context of reopening of assessment. The law expects the AO to exercise the power under Section 147 of the Act to reopen an assessment only after due application of mind. If for some reason, there is an error that creeps into this exercise by the AO, then the law expects the superior officer to be able to correct that error. This explains why Section 151 (1) requires an officer of the rank of the Joint Commissioner to oversee the decision of the AO where the return originally filed was assessed under Section 143 (3) of the Act. Further, where the reopening of an assessment is
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 08.10.2025.