2023 (3) TMI 364 - AT - Income Tax

Reopening of assessment u/s 147 - approval order u/s. 151 - HELD THAT - Requirement of approval u/s. 151 of the Act is not a formal ritual but it is mandatory legislative requirement which has to be done after due application of mind to the material gathered by the AO and reasons recorded by him. The approving authority has to consider entire material before granting approval for initiation reassessment proceedings u/s. 147 and issuance of notice u/s. 148 of the Act. We unable to agree with the contention of the learned Senior DR that the putting seal as statement of approval is sufficient as the any exercise in the part of the Ld. PCIT for application of mind towards the said material which was gathered by the AO and the reasons recorded by him for the purpose of initiation of reassessment proceedings and issuance of notice u/s. 148 of the Act. Merely putting a seal as approving statement is not sufficient and make it clear that the approving authority has granted approval in a mechanical manner without application of mind to the relevant material and reasons recorded by the AO. Therefore the initiation of reassessment proceedings also fails on this count. Therefore additional grounds of assessee are allowed and initiation of reassessment proceedings, issuance of notice u/s. 148 of the Act and all consequent proceedings and orders are hereby quashed. Decided in favour of assessee.

Summary

Issues involved:
1. Admission of additional grounds by the assessee.
2. Validity of impugned reopening action under section 148.
3. Validity of approval under section 151 of the Principal Commissioner of Income Tax (PCIT).
4. Legality of reassessment proceedings initiated by the Assessing Officer (AO).

Admission of additional grounds:
The assessee sought to admit additional grounds challenging the impugned reopening action under section 148. The assessee's counsel argued that these grounds were legal in nature and could be decided based on the existing record, citing relevant judgments. The Senior DR opposed the admission, but the tribunal allowed the additional grounds, following Supreme Court and High Court judgments, noting that they were crucial to the case.

Validity of impugned reopening action under section 148:
The AO initiated reassessment proceedings under section 147/148 based on the absence of PAN and alleged non-filing of the return for A.Y. 2009-10. However, the assessee had indeed filed the return on 30.09.2009, declaring capital gains. The tribunal found the AO's premise invalid, rendering the initiation of proceedings void ab initio. The tribunal emphasized the mandatory nature of the approval under section 151, highlighting that mechanical approval without proper consideration of facts and reasons rendered the reopening action flawed.

Validity of approval under section 151 of the PCIT:
The tribunal scrutinized the approval granted by the PCIT under section 151 and found it lacking proper application of mind. Merely putting a seal as an approving statement was deemed insufficient, as the approving authority must consider all relevant material and reasons before granting approval for reassessment proceedings. The tribunal concluded that the approval was given in a mechanical manner, without due diligence, further undermining the validity of the reassessment proceedings.

Legality of reassessment proceedings initiated by the AO:
Given the flaws in the impugned reopening action and the approval process, the tribunal quashed the entire reassessment proceedings, including the issuance of notice under section 148. Consequently, the tribunal did not delve into the merits of the case, as the grounds became academic after annulling the reassessment process. The appeal of the assessee was partly allowed, with the tribunal pronouncing the order on 06.03.2023.