ITAT Confirms Re-Assessment ‘approved’ by Higher Authority than the Authority Prescribed in Section 151, Refuse to Follow Precedents [Read Order]

In Mayurbhai Mangaldas Patel v. ITO, the ITAT Ahmedabad upheld a re-assessment order under section 147/148 of the Income Tax Act though the same was approved by the Commissioner instead of Joint/Additional Commissioner of Income Tax who is the appropriate authority to approve the same. This view was against the judicial decisions passed by the Courts till now.

In the instant case, the assessee challenged the re-opening of assessment on ground that the approval for the same was granted by the Commissioner whereas the provision of Section 151 of the Income Tax Act mandates approval by Joint/Additional Commissioner of Income Tax. They relied on several judicial decisions in support of their claim.

The bench examined the internal processing sheet used by the income tax authorities for granting approval for reopening the assessment at the request of the Assessing Officer, and observed that “this internal processing sheet is a part of the standard operating procedure in the income tax department generally, and at least in the charge of the Commissioner concerned.”

The bench noted that as per the provisions of section 151, prescribed authority to satisfy himself that “on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice”.

The bench said that “The words “approved” or “sanctioned” are not even required to be used by the prescribed authority, because, under the scheme of section 151, it is satisfaction of the authority, on the reasons recorded by the Assessing Officer, that this is a fit case for reopening the assessment. The use of words that the reassessment is being done with the “approval” of the Commissioner is meaningless unless the actual satisfaction of the Commissioner is actually seen, and we see that actual processing sheet for so called approval of the Commissioner, it is plain on facts that the satisfaction “on the reasons recorded by the Assessing Officer that it is a fit case for issuance of notice under section 148” is not only of the Commissioner but also of the Joint/Additional Commissioner concerned.”

It was also noted that merely because an even higher authority has expressed similar satisfaction does not obliterate the satisfaction of appropriate authorities.

“It is indeed an inherent part of the approval being granted by the Commissioner that the Joint/Additional Commissioner of Income-tax expresses his satisfaction about the reason of reopening of assessment being sufficient to issue notice under section 148,” the bench said.

While concluding, the bench added that “Ironically, however, this aspect of the matter is not adequately highlighted and properly demonstrated, in most of the cases before the judicial forums, and that obviously is the reason that there are several judicial precedents quashing the reassessment proceedings on the ground that the approval is of the Commissioner concerned, and not of the Joint/ Additional Commissioner. All the judicial precedents filed before us fall in the category in which there is nothing on the record to demonstrate, or even suggest, that the Joint/ Additional Commissioner concerned has recorded his satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for initiating the reassessment proceedings. We have carefully perused these precedents but we do not find any reference to the finding that in those cases satisfaction of the Joint/Addl. Commissioner of Income-tax, to the effect that, on the reasons recorded by the Assessing Officer, it was a fit case for initiating the reassessment proceedings, was also on record. A decision rendered without taking note of this fact cannot be an authority for the proposition that even when such a satisfaction by the appropriate authority is on record, just because similar satisfaction is expressed by the higher authority is also on record, requirements of section 151 cannot be taken as having been complied with. The binding nature of judicial precedents is only for what they actually decide and not what can be inferred from these judicial precedents. Nothing, therefore, turns on these precedents in the present case.”