2015 (3) TMI 1257 - AT - Income Tax

Validity of reopening of assessment - requisite sanction from competent authority u/s 151 was not obtained - Held that - We find that it is an undisputed fact that reopening was done after 4 years and the reasons recorded as placed at paper book page 2 just carried the signature of Addl. CIT and which even does not mention the word approval . ITAT n Shri Hirachand Kanuga Versus The DCIT, Circle-1, Khadakpada, Kalyan (W) 2015 (5) TMI 757 - ITAT MUMBAI has dealt with a similar matter and after relying upon a number of decisions, has arrived that such type of satisfaction u/s 151 is bad in law. We find that in this case law pronounced by ITAT Mumbai Bench, the Addl. CIT had placed his signature and had mentioned the word approved before affixing his signature, which in the present case, is missing, therefore, present case is worse than the case decided by ITAT Mumbai Bench, wherein even word approved has not been mentioned. In view of above ground No.1 (e) of appeal filed by assessee is allowed.

Summary

Issues:
Requisite sanction under section 151 not obtained for reopening assessment.

Analysis:
The appeal was filed by the assessee against the order of Ld. CIT(A) dated 12.02.2013, raising various grounds, including a legal issue regarding the absence of requisite sanction under section 151 for reopening the assessment. The assessee contended that the Addl. CIT had merely signed the reasons recorded without proper satisfaction as required by section 151 of the Act. Citing a case law pronounced by the Mumbai Tribunal, the assessee argued that the lack of proper satisfaction rendered the reopening invalid.

The Departmental Representative (D.R.) argued that the Addl. CIT's signature indicated the application of mind, emphasizing that it was not necessary to repeat the entire history. The D.R. heavily relied on the orders of the authorities below. After hearing both parties and examining the material on record, the Tribunal noted that the reopening was done after 4 years, and the reasons recorded only carried the Addl. CIT's signature without mentioning the word 'approval'. The Tribunal referred to a similar matter dealt with by the ITAT Mumbai Bench, where it was held that such satisfaction under section 151 was flawed.

The Tribunal quoted the findings of the Mumbai Tribunal, emphasizing the importance of proper satisfaction under section 151 to prevent arbitrary exercise of power by the Assessing Officer. It was highlighted that the Commissioner's approval should be based on a reasoned and bona fide belief formed after applying his mind. The Tribunal concluded that in the present case, as in the cited case law, the lack of proper satisfaction rendered the reopening proceedings bad in law, leading to the assessment being declared void ab initio.

The Tribunal distinguished the present case from the Mumbai Tribunal's case, noting that even the word 'approved' was missing in the Addl. CIT's signature in the present case, making it worse. Consequently, the Tribunal allowed ground No.1 (e) of the appeal filed by the assessee, as the absence of proper satisfaction rendered the reopening invalid. As a result, since the issue was decided in favor of the assessee on a legal ground, the other grounds of appeal were not adjudicated, and the appeal filed by the assessee was allowed.

In conclusion, the Tribunal pronounced the order in favor of the assessee on the issue of inadequate sanction under section 151 for reopening the assessment, declaring the assessment void ab initio.