2023 (8) TMI 519 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - Valid approval u/s 151 or not? - as argued notice issued u/s 148 was wholly without jurisdiction as it does not meet the pre-requisite conditions stipulated under the amended scheme of reassessment - also approval granted u/s 151 by the specified authority reflects non application of mind - HELD THAT - Having considered the approval u/s 151 we are satisfied that there is no valid sanction. There is no evidence that PCIT has even granted any valid sanction. If respondents say there was a sanction by respondent No. 2, then it is an obvious case of utter non-application of mind because he would otherwise have not granted sanction if he had only read and applied his mind to what is stated in box 9, i.e., the time limit for current proceedings covered under is stated to be u/s 149(1)(b), or he would have sent it back to respondent no. 1 refusing to grant approval. It also goes to say that even respondent no. 1, who has sought approval, has not applied his mind. We are of the opinion that if only respondent No. 2 had read the report carefully, he would have never come to the conclusion that there is any material before him to treat it as a fit case to issue notice under Section 148 of the Act or pass order u/s 148A(d) - The safeguards provided in Sections 148 and 151 were lightly treated by respondent nos. 1 and respondent No. 2. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. On this ground alone, the order passed u/s 148A(d) and notice issued u/s 148 of the Act have to be quashed and set aside. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are the challenge to a reassessment notice issued under Section 148 of the Income Tax Act, 1961, and the order passed under Section 148A(d) of the Act. The main contentions raised include lack of jurisdiction in issuing the notice, non-application of mind in the order and approval granted, and the validity of the digital signature on the sanction order under Section 151 of the Act.

Reassessment Notice under Section 148:
The petitioner challenged the reassessment notice dated 12th April 2023, contending that it did not meet the pre-requisite conditions stipulated under the amended scheme of reassessment. The notice was based on third party information regarding a donation made by the petitioner to a charitable organization. The petitioner filed objections under Section 148A(c) of the Act, which were rejected, leading to the impugned order under Section 148A(d). The petitioner argued that the order reflected non-application of mind, as the alleged income escaping assessment was inaccurately calculated, indicating a lack of due diligence.

Approval under Section 151 of the Act:
The petitioner raised concerns regarding the approval granted under Section 151 of the Act, alleging that it was done in a mechanical manner without proper verification of the material available on record. The petitioner argued that the approving authority failed to correct errors and granted approval without due consideration. The petitioner contended that the absence of a digital signature on the sanction order rendered it invalid, as per the provisions requiring digital signatures for official documents. Moreover, discrepancies were highlighted in the time limit for current proceedings, suggesting a lack of application of mind by the sanctioning authority.

Judgment and Disposition:
The High Court, after considering the arguments presented, found that there was a clear lack of valid sanction in the approval under Section 151 of the Act. The Court noted that neither the issuing authority nor the sanctioning authority had applied their minds adequately, leading to a mechanical issuance of the notice and order. Consequently, the Court quashed and set aside the order passed under Section 148A(d) and the notice issued under Section 148 of the Act. The Court did not delve into the issue of the digital signature on the sanction order, leaving it open for consideration in a suitable case. The petition was disposed of with no order as to costs.