2022 (4) TMI 295 - HC - Income Tax

Reopening of assessment u/s 147 - Whether no proper sanction/approval on the date of issuance of notice under Section 148 is concerned, provision under Section 151? - HELD THAT - Perusal of Section 282-A of the Act of 1961 would show that this provision is brought into by way of amendment for the purpose of authentication of notice and other documents. Sub-section (2) of Section 282-A of the Act of 1961 envisages that every notice or other document to be issued, served or given for the purpose of this Act by any Income Tax authority shall be deemed to be authenticated if name and office of designated income tax authority is printed/stamped or otherwise written thereon. In view of specific provision under the Act of 1961, the document i.e. sanction/approval under Section 151 of the Act of 1961 issued by Competent Authority in case of petitioners will be deemed to be an authenticated document. In the 'Note' appended at the bottom of sanction/approval under Section 151 it is mentioned that if digitally signed , the date of signature may be taken as date of document. Further submission of learned counsel for respondents in this regard is that approval is an inter-departmental correspondence; notices issued to petitioners are digitally signed by AO. Hence, in view of aforementioned provision of law as also submission of learned counsel for respondents based on the Notification No.4/2017 dated 03.04.2017 documents granting sanction/approval under Section 151 of the Act of 1961 cannot be said to be an unauthenticated document. We not find present to be a fit case to interfere with proceedings of re-assessment initiated by respondent Department against petitioners upon issuance of notice under Section 148.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the Assessing Officer had "reason to believe" that income had escaped assessment.
3. Non-supply of reasons and sanction/approval under Section 151 of the Act.
4. Validity of the approval/sanction under Section 151 of the Act.
5. Whether the approval/sanction was granted with proper application of mind.
6. Requirement of tangible material for reopening assessment.
7. Authentication of the approval/sanction document.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The challenge in the writ petitions was to the notice issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2016-17. The petitioners argued that the notice was issued without proper sanction/approval from the competent authority and without providing the reasons to believe that income had escaped assessment.

2. Whether the Assessing Officer had "reason to believe" that income had escaped assessment:
The petitioners contended that there was no reason to believe as required under Section 147 of the Act. They argued that the Assessing Officer did not supply the reasons to believe along with the notice under Section 148. The respondents countered that based on information collected about suspicious transactions, the Assessing Officer formed reasons to believe that income had escaped assessment. The court found that the Assessing Officer had prima facie material to believe that income had escaped assessment, thus complying with Section 147.

3. Non-supply of reasons and sanction/approval under Section 151 of the Act:
The petitioners argued that the material based on which the Assessing Officer recorded reasons to believe was not supplied, nor was the sanction/approval under Section 151 provided. The respondents provided the reasons but delayed the supply of the sanction/approval. The court noted that the reasons to believe were provided, and the sanction/approval was eventually supplied, though late.

4. Validity of the approval/sanction under Section 151 of the Act:
The petitioners argued that the sanction/approval was not signed by the authority concerned and was granted in a mechanical manner. The respondents provided a screen shot of the ITBA Portal showing that the approval was uploaded on 31.3.2021. The court found that there was prima facie evidence of the sanction/approval being granted, as indicated by the DIN number and the ITBA Portal screenshot.

5. Whether the approval/sanction was granted with proper application of mind:
The petitioners contended that the approval was granted without proper application of mind, as it only mentioned "fit case." The court held that the approving authority had recorded satisfaction based on the reasons provided by the Assessing Officer, and this was sufficient for the sanction/approval under Section 151.

6. Requirement of tangible material for reopening assessment:
The petitioners argued that there was no tangible material for reopening the assessment. The court referred to the Supreme Court's judgment in M/s Phoolchand Bajrang Lal vs. Income Tax Officer, which stated that reassessment could be initiated based on fresh facts coming to light. The court found that the Assessing Officer had verified transactions and issued notices under Section 131A, thus having prima facie material for reopening the assessment.

7. Authentication of the approval/sanction document:
The petitioners argued that the approval/sanction was not digitally signed and dated. The respondents contended that as per Section 282-A of the Act, mentioning the name and designation of the authority was sufficient for authentication. The court agreed with the respondents, stating that the document would be deemed authenticated if the name and office of the designated authority were printed, stamped, or otherwise written thereon.

Conclusion:
The court dismissed the writ petitions, finding no merit in the petitioners' arguments. The court held that the notice under Section 148 was validly issued, the reasons to believe were properly recorded, and the sanction/approval under Section 151 was granted with due application of mind and in accordance with the law. The court also found that there was prima facie material for reopening the assessment and that the approval/sanction document was sufficiently authenticated.