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Facts
The assessee's assessment for AY 2015-16 was reopened under Section 147 by issuing a notice under Section 148, leading to an addition of ₹90,45,180/- under Section 68. The assessee challenged the validity of the reopening, citing the Assessing Officer's non-application of mind and the mechanical approval granted by the PCIT, which the CIT(A) had dismissed. The Tribunal also condoned a 122-day delay in filing the appeal.
Held
The Tribunal held that the reopening of assessment was invalid because the reasons recorded by the Assessing Officer were scanty, vague, and showed a gross non-application of mind, containing conflicting amounts. Furthermore, the approval granted by the PCIT under Section 151 was mechanical, merely marked as 'approved' or 'yes, I am satisfied' without independent application of mind, thus failing the legal requirement for a valid sanction. Consequently, the notice issued under Section 148 and the reassessment proceedings were set aside.
Key Issues
The primary issues were the validity of the reopening of assessment under Sections 147/148 due to the Assessing Officer's non-application of mind and the mechanical nature of the approval granted by the competent authority under Section 151 of the Income Tax Act, 1961.
Sections Cited
147, 148, 143(1), 143(2), 142(1), 68, 151, 151(1), 151(2), 148(2), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 18.12.2023 for the AY 2015-16.
At the outset, we observed that there is a delay of 122 days in filing the appeal by the assessee. The ld. Counsel for the assessee stated that the CA, who was looking after the taxation matter of the assessee ,out of inadvertence and oversight missed to prepare/ file the appeal before the Tribunal. Immediately after coming to know about this, assessee contacted the present counsel, who advised the assessee to file the appeal along with condonation application. The ld. Counsel for
The ld. DR on the other hand stated that the reasons stated by the Counsel of the assessee are not cogent and convincing and therefore, the appeal of the assessee should not be admitted by not condoning the delay.
After perusing the contents of the condonation application, we find that the delay is for bonafide and genuine reasons, delay is condoned and the appeal is admitted for adjudication.
The legal issue raised by the assessee is against the invalid reopening of assessment u/s 147 read with section 148 of the Act without any application of mind and without there being a proper approval of the competent authority.
The facts in brief are that the assessee filed the return of income on 28.08.2015, declaring total income at ₹36,10,940/- after claiming deduction under Chapter VIA of ₹1,85,000/-. The return was processed u/s 143(1) of the Act. Thereafter, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021, by the ld. AO which was complied with by the assessee by filing the return of income on 30.04.2021. Thereafter, the statutory notices were duly issued and served upon the assessee. The statutory notices u/s 143(2) of the Act as well as notice u/s 142(1) of the Act were complied with by the assessee by filing the details/ evidences as called for by the ld. Assessing Officer. Finally, the ld. AO
In the appellate proceedings, the ld. CIT (A) dismissed the legal issue of invalid reopening of assessment u/s 143 read with section 148 of the Act thereby upholding the re-opening of assessment.
The ld. AR vehemently submitted before us that the reopening of assessment u/s 147 read with section 148 of the Act has been made by the ld. AO without any application of mind and also without there being any valid approval given by the competent authority. The ld. AR referring to the reasons recorded which are extracted on page no.2 of the assessment order submitted that even the amount mentioned in the reasons recorded were different and therefore, there has been no application of mind by the ld. AO and therefore the reasons recorded are vague and scanty. The ld AR argued that the re-opening of assessment based on the ambiguous and scanty reasons is invalid. In defense of his arguments the ld counsel relied on the decision of Hon’ble Delhi High Court in the case of CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi), Besides the ld. AO has not recorded any details of transactions of the assessee in the reasons recorded u/s 148(2) of the Act to record his satisfaction and therefore, the reopening made on the basis of said reasons is invalid and deserved to be quashed. Besides the ld. AR while referring to page no. 162 of the Paper Book which is the approval granted u/s 151 of the Income-tax Act, 1961 (the Act) by the ld. PCIT, Kolkata-18, wherein it has been stated in the approval status as ‘approved’ and also in the remark of approving authority as ‘approved’. The ld. Counsel for the assessee submitted that such mechanical approval by the ld. PCIT, Kolkata-18, is invalid as the same is mechanical and is a
The ld. DR on the other hand submitted that this is a system of the department involving the administrative hierarchy where the files are moved for the approval with all details , notings and explanation. The ld DR argued that it is only after going through the same, the higher ups granted the approval/ sanction on the same. Accordingly, in this case also when the file was put up before the ld. PCIT, the said authority granted the approval after perusing the detailed notings and mentioned as satisfied as a token of having granted approval for reopening. Therefore, the ground raised by the assessee may be dismissed.
After hearing the rival contentions and perusing the materials available on record, we find that in this case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021. Perusal of the reasons recorded states that there is no application of mind by the ld. AO to the information received and even the amounts stated in the reasons recorded are different and conflicting. At one place the ld. AO stated that the assessee has entered into fictious profit in equity / derivative trading to the tune of ₹95,62,800/-, whereas in the very next line it was stated that the assessee had claimed an amount of ₹92,25,773/- as exempted Long Term Capital Gain on which STT, was paid. Finally, the ld. AO noted
11. 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 “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 sought to be made after the expiry of four years from the end of the relevant AY, a further check by the further superior officer is contemplated."
We take note that request for approval under Section 151 of the Act in a printed format (Annexure P-6) was placed before the ACIT, who after according his
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 01.04.2025.