2023 (10) TMI 1201 - HC - Income Tax

Validity of reassessment proceedings commenced without the approval of the specified authority - HELD THAT - Revenue have filed a counter-affidavit in the matter in which the only assertion made is that PCIT had conveyed her approval to the AO via letter but admittedly, this communication has never seen light of the day. For reasons best known to the respondent/revenue it has chosen not to file the said letter even with the counter-affidavit, despite the petitioner raising a specific objection that the PCIT had not applied its mind while granting approval. To our minds, approval granted by statutory authorities, as required under the provisions of the Act, has to be furnished to an assessee along with the reasons to believe. The statutory scheme encapsulated in the Act provides that reassessment proceedings cannot be triggered till the AO has reasons to believe that income, which is otherwise chargeable to tax, has escaped assessment and, reasons recorded by him are placed before the specified authority for grant of approval to commence the process of reassessment. In this case, the sense we get is that the second condition requiring AO to obtain prior approval of the specified authority was not fulfilled, as otherwise, there was no good reason not to furnish the same to the petitioner along with the document which contained the AO s reasons for holding the belief that income otherwise chargeable to tax had escaped assessment. We are of the view that neither the impugned notice issued u/s 148 nor the impugned order can be sustained. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in this case are the validity of the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961 and the objection to the order dated 06.12.2018 regarding the commencement of reassessment proceedings without the approval of the specified authority.

Validity of Notice under Section 148:
The petitioner challenged the notice and order on the ground that the reassessment proceedings were initiated without the approval of the specified authority. The form required for initiating such proceedings must include reasons for reassessment and approval from the Principal Commissioner of Income Tax (PCIT). While the Additional Commissioner of Income Tax (ACIT) expressed satisfaction, the PCIT did not record any satisfaction or date, only providing a signature. The petitioner contended that there was no application of mind by the PCIT in deciding to commence reassessment proceedings.

Objections and Disposal of Petitioner's Plea:
The objections filed by the petitioner highlighted the mechanical recording of reasons without proper application of mind. The petitioner argued that the PCIT's approval was merely a signature without valid satisfaction, indicating a lack of proper assessment. The impugned order did not address the petitioner's concerns regarding the lack of application of mind by the PCIT in approving the reassessment proceedings. The petitioner emphasized the need for valid satisfaction by the PCIT before commencing such proceedings.

Counter-Affidavit and Missing Communication:
The respondent/revenue claimed that the PCIT had conveyed approval to the AO through a letter dated 30.03.2018. However, this communication was not provided to the petitioner, raising doubts about the validity of the approval process. Despite specific objections raised by the petitioner regarding the PCIT's lack of application of mind, the communication was not submitted with the counter-affidavit. The absence of this crucial communication raised questions about the approval process followed in initiating the reassessment proceedings.

Judgment and Conclusion:
The Court found that the approval granted by the statutory authorities was not furnished to the assessee along with the reasons to believe, as required by the Act. The absence of valid satisfaction from the PCIT and the failure to provide the communication regarding approval cast doubt on the legitimacy of the reassessment proceedings. Consequently, the Court set aside both the notice dated 30.03.2018 and the order dated 06.12.2018, concluding that they could not be sustained due to the lack of proper approval and application of mind. The writ petition was disposed of accordingly, with parties instructed to act based on the digitally signed copy of the order.