2022 (1) TMI 431 - HC - Income Tax

Reopening of assessment u/s 147 - Mandation of recording of satisfaction - HELD THAT - Additional Commissioner of Income Tax and Principal Commissioner of Income Tax have also endorsed and expressed they are satisfied that it was a fit case for issuance of notice under Section 148 - The recommendations made by the Additional Commissioner and the approval granted by the Principal Commissioner in our view are without application of mind that the same appears to have been granted in a routine and perfunctory manner. It is settled law as held by the Division Bench of this court in German Remedies Ltd. 2005 (10) TMI 76 - BOMBAY HIGH COURT that while granting approval it was obligatory on the part of the Principal Commissioner of Income Tax to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment order. If the PCIT had only read the reasons and also the form for recording the reasons together and referred to other documents in the file, none of which seems to have been done, he would have sent the file back to the person who has filled the form for recording the reasons. We are not certain it is Dhivya Ruth J who recorded the reasons or Jaya Lakhwani because now we find there are three sets of reasons instead of earlier two. Petitioner is justified in raising a contention that the approval granted itself suffered from non application of mind. In view of the above, the impugned notice and consequential order justifying reasons recorded are unsustainable. - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Approval process under Section 151 of the Income Tax Act.
3. Application of mind by the Principal Commissioner of Income Tax.
4. Legality of the notice and consequential order under Section 148 of the Income Tax Act.

Analysis:
1. The judgment addresses the issue of reopening the assessment under Section 148 of the Income Tax Act. The court notes discrepancies in the reasons provided for reopening the assessment. The reasons presented by the Deputy Commissioner of Income Tax differ from those initially annexed to the petition. The court highlights the importance of accurate and consistent reasons for reopening an assessment to ensure procedural fairness and compliance with the law.

2. The judgment delves into the approval process under Section 151 of the Income Tax Act. It critiques the mechanical approach taken by the Deputy Commissioner in granting approval without thoroughly examining the reasons and supporting documents. The court emphasizes the necessity for the approving authority to apply their mind and verify the completeness and accuracy of the information before granting approval for reopening an assessment.

3. The issue of the application of mind by the Principal Commissioner of Income Tax is also discussed in the judgment. The court scrutinizes the actions of the Additional Commissioner and the Principal Commissioner, pointing out that their endorsement and approval appear to be routine and perfunctory. The judgment cites precedent to underscore that the approving authority must ensure that all relevant facts are disclosed by the assessee before granting approval for reopening an assessment.

4. Lastly, the judgment evaluates the legality of the notice and consequential order issued under Section 148 of the Income Tax Act. Due to the deficiencies in the approval process and the lack of application of mind by the authorities involved, the court deems the notice and order unsustainable. Consequently, the court quashes and sets aside the impugned notice and order, ruling in favor of the petitioner and disposing of the petition accordingly. The judgment emphasizes the importance of procedural integrity and adherence to legal standards in the assessment and reassessment processes under the Income Tax Act.