2019 (4) TMI 1787 - AT - Income Tax

Reopening of assessment u/s 147 - without recording valid reasons and without obtaining valid approval - HELD THAT - Approval was granted by the Pr. CIT, Faridabad by noting approved shows that the approval was given in a mechanical manner without recording proper satisfaction after due application of mind. The Hon ble Delhi High Court in the case of Pr. CIT Vs N. C. Cables Ltd. 2017 (1) TMI 1036 - DELHI HIGH COURT has held that mere appending of the expression approved says noting. It is not as if the CIT has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be distributed. Quash the impugned reassessment order and allow the grounds of appeal of the assessee.

Summary

Issues Involved:
Challenge to reopening of assessment under section 147 of the Income Tax Act, 1961 without valid reasons and approval.

Analysis:
In the case, the assessee appealed against the order of CIT(A), Faridabad, challenging the reopening of assessment under section 147 of the Income Tax Act, 1961. The assessee contended that the reassessment order was passed without complying with the mandatory conditions of sections 147 to 151 of the Act and without recording valid reasons or obtaining valid approval. The notice under section 148 was issued based on information regarding cash deposits in the bank account during the relevant financial year. The assessee argued that the reopening was not justified solely on the basis of bank deposits, citing precedents where such reassessments were quashed. The contention was supported by the argument that the approval granted was mechanical and lacked proper satisfaction after due application of mind, as per the decision in Pr. CIT Vs N. C. Cables Ltd. The Tribunal found the approval to be merely ritualistic and formal, lacking meaningful consideration, thus quashing the reassessment order based on the procedural irregularity in obtaining approval.

The Tribunal's decision was based on the principle that the approval process for reopening assessments under section 147 requires proper satisfaction and not just a mechanical "approved" notation. The Tribunal referred to the ruling in Pr. CIT Vs N. C. Cables Ltd., emphasizing the need for recording satisfactory reasons for approval. The Tribunal determined that the approval granted in this case lacked meaningful consideration and was merely a formality, not meeting the required standard of proper satisfaction. Consequently, the Tribunal quashed the reassessment order, highlighting the importance of a valid approval process in reassessment proceedings under section 147 of the Income Tax Act, 1961.

The Tribunal's decision serves as a reminder of the significance of the approval process in reopening assessments under section 147 of the Income Tax Act, 1961. It underscores the requirement for proper satisfaction and meaningful consideration in obtaining approval for reassessment, as highlighted in legal precedents. The Tribunal's ruling in this case focused on the procedural irregularity in the approval process, leading to the quashing of the reassessment order. This emphasizes the importance of adhering to the prescribed procedures and standards in conducting reassessment proceedings under the Income Tax Act, 1961, to ensure the validity and legality of such actions.