2018 (1) TMI 195 - HC - Income Tax

Reopening of assessment - non-application of mind on the part of the sanctioning authority while granting the sanction - Held that - There can be no dispute with regard to the application of Section 292B of the Act to sustain a notice from being declared invalid merely on the ground of mistake in the notice. However, the issue here is not with regard to the mistake / error committed by the Assessing Officer while taking a sanction from the Joint Commissioner of Income Tax but whether there was due application of mind by the Joint Commissioner of Income Tax while giving the necessary sanction for issuing the impugned notice. It is a settled principle of law that sanction granted by the higher Authority for issuing of a reopening notice has to be on due application of mind. It cannot be an mechanical approval without examining the proposal sent by the Assessing Officer. Prima facie, it appears to us that if the Joint Commissioner of Income Tax would have applied his mind to the application made by the Assessing Officer, then the very first thing which would arise is the basis of the notice, as the provision of law on which it is based is no longer in the statute. Non pointing out the mistake / error by the Joint Commissioner of Income Tax on the part of the Assessing Officer is prima facie evidence of non-application of mind on the part of the sanctioning authority while granting the sanction.

Summary

Issues:
Challenging notice under Section 148 of the Income Tax Act for reopening assessment for Assessment Year 2014-15. Objection to reasons recorded in reopening notice. Allegation of mechanical grant of sanction by Joint Commissioner of Income Tax. Application of Section 292B of the Act to cure defects in notice. Prima facie evidence of non-application of mind by Joint Commissioner of Income Tax.

Analysis:
The petitioner filed a petition under Article 226 of the Constitution of India challenging a notice issued under Section 148 of the Income Tax Act to reopen the assessment for the year 2014-15. The petitioner objected to the reasons recorded in the notice and contended that the Joint Commissioner of Income Tax had granted the sanction for reopening without due application of mind. The Assessing Officer rejected the petitioner's objection, leading to the petitioner seeking relief from the High Court.

The petitioner argued that the Joint Commissioner of Income Tax had mechanically granted the sanction without proper consideration. The prescribed form filled by the Assessing Officer indicated a different section under which the notice was issued, and the Joint Commissioner approved it without addressing this discrepancy. The petitioner contended that the sanction lacked proper scrutiny and application of mind, highlighting a potential flaw in the process.

The Revenue, represented by its counsel, argued that the mistake in mentioning the incorrect section in the notice was a curable defect under Section 292B of the Act. However, the main issue raised was not the mistake itself but the lack of due application of mind by the Joint Commissioner while granting the sanction. The High Court emphasized that the sanction for reopening assessments must involve a thorough examination of the proposal and cannot be a mere mechanical approval.

The High Court granted interim stay based on the prima facie evidence of non-application of mind by the Joint Commissioner in granting the sanction. The court clarified that the petition was admitted solely on this issue and expedited the proceedings. This judgment underscores the importance of proper scrutiny and application of mind by the sanctioning authority in matters of reopening assessments under the Income Tax Act.