2022 (9) TMI 478 - HC - Income Tax

Reopening of assessment u/s 147 - valid approval u/s 151 - unsigned approval issued in electronic form - Valid Satisfaction noted by Prescribed Authority under section 151 - Whether an unsigned content in an electronic record said to be pushed through electronic mode at a particular point of time can be said to be a valid satisfaction of the PCIT under Section 151 for assumption of jurisdiction by the Assessing Officer to issue jurisdictional notice to an assessee under Section 148 of the Act 1961? - HELD THAT - The expression shall be signed used in Section 282A(1) of the Act 1961 makes the signing of the notice or other document by that authority a mandatory requirement. It is not a ministerial act or an empty formality which can be dispensed with. Signed means to sign one s name; to signify assent or adhesion to by signing one s name; to attest by signing or when a person is unable to write his name then affixation of mark by such person. The document must be signed or mark must be affixed in such a way as to make it appear that the person signing it or affixing his mark is the author of it. Therefore a notice or other document as referred in Section 282A (1) of the Act 1961 will take legal effect only after it is signed by that Income Tax Authority whether physically or digitally. The usage of the word shall make it a mandatory requirement. In the case of Chhugamal Rajpal vs. S.P. Chaliha and others 1971 (1) TMI 9 - SUPREME COURT Hon ble Supreme Court considered the validity of recording satisfaction under Section 151 by the Commissioner for the purposes of issuance of notice under Section 148 of the Act 1961. In the present set of facts there was no valid satisfaction recorded by the by the Prescribed Authority under section 151 of the Act 1961 when the AO issued notice to the assessees under section 148 of the Act 1961. At the time when the notice under section 148 was issued by the Assessing Officer to the petitioner there was no valid satisfaction recorded by the Prescribed Authority i.e. the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Subsequent to issuance of the notice under section 148 by the Assessing Officer the satisfaction under section 151 was digitally signed by the Prescribed Authority. The point of time when the AO issued notices u/s 148 he was having no jurisdiction to issue the impugned notices under section 148 of the Act 1961. Consequently the impugned notices issued by the AO u/s 148 were without jurisdiction. The questions no. (a) and (b) are answered accordingly. There was no valid satisfaction under section 151 therefore the question whether Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax for the purposes of recording of satisfaction under section 151 is a designated Income Tax Authority under section 282 A of the Act 1961 is left open.

Issues Involved:
1. Validity of notices under Section 148 of the Income Tax Act, 1961.
2. Validity of reassessment orders under Section 147/148 of the Income Tax Act, 1961.
3. Requirement of prior satisfaction/approval under Section 151 of the Income Tax Act, 1961.
4. Authentication of unsigned digital approvals under Section 282A of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Notices under Section 148 of the Income Tax Act, 1961:
The petitioners challenged the validity of notices issued under Section 148 of the Income Tax Act, 1961, arguing that they were issued without prior satisfaction/approval of the competent authority under Section 151 of the Act. The court noted that the notices were issued based on unsigned digital approvals, which were signed after the issuance of the notices. This sequence of events rendered the notices invalid as the Assessing Officer did not have the jurisdiction to issue them without prior valid satisfaction/approval.

2. Validity of Reassessment Orders under Section 147/148 of the Income Tax Act, 1961:
The reassessment orders were also challenged on the grounds that they were based on invalid notices issued under Section 148. Since the court found the notices to be without jurisdiction, it concluded that the subsequent reassessment orders were also invalid and without jurisdiction.

3. Requirement of Prior Satisfaction/Approval under Section 151 of the Income Tax Act, 1961:
The court emphasized that under Section 151 of the Income Tax Act, 1961, the Assessing Officer must obtain prior satisfaction/approval from the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner before issuing a notice under Section 148. The satisfaction must be recorded under the signature of the prescribed authority, either physically or digitally, before the notice is issued. In the present cases, the satisfaction was recorded digitally after the issuance of the notices, which did not meet the requirement of prior approval.

4. Authentication of Unsigned Digital Approvals under Section 282A of the Income Tax Act, 1961:
The respondents argued that unsigned digital approvals could be deemed authenticated under Section 282A of the Income Tax Act, 1961, read with Rule 127A of the Income Tax Rules, 1962, and the Information Technology Act, 2000. The court, however, held that Section 282A(1) requires that notices or other documents must be signed by the authority before being issued or communicated electronically. The word "signed" means affixing one's name or mark to signify authorship or authorization. Therefore, unsigned digital approvals did not constitute valid satisfaction under Section 151, and the notices issued based on such approvals were invalid.

Conclusion:
The court allowed the writ petitions, quashing the impugned notices under Section 148 and the reassessment orders passed by the Assessing Officer. It held that the Assessing Officer did not have jurisdiction to issue the notices without prior valid satisfaction/approval under Section 151. The court dismissed one writ petition (Writ Tax No. 694 of 2022) as the satisfaction and issuance of notice were simultaneous, granting the petitioner liberty to file an appeal against the reassessment order.

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