In a recent case, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that reassessing the assessee’s account was invalid. The appeal was made against an order made by the Commissioner of Income Tax (Appeals) [CIT(A)], which started the reassessment proceedings under Section 147 of the Income Tax Act.
The assessee, Anil Kumar Jain, declared an income of ₹ 81 Lakhs for the assessment year (AY) 2016-17, which was processed under Section 143(1) of the Income Tax Act. A search and seizure action under Section 132 targeted a group to which the assessee was linked and, based on the assessing officer’s (AO) findings, reopened the assessment under Section 147, issuing notice under Section 148 of the Income Tax Act.
The additional CIT approved the reassessment by stating he was satisfied that the case was fit for reopening. Under section 151 of the Act, this sort of approval was seen as approval without application of mind. It was considered mechanical by the Madhya Pradesh High Court in the case of CIT vs S. Goyenka Lime and Chemicals Ltd.
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The Jurisdictional High Court, in the case of PCIT Vs NV VAbles Ltd, also held the same, wherein the approving authority had merely stated “approved” while approving terms of Section 151 of the Act. The High Court held this approval as a mechanical approval.
The ITAT observed that Section 151 of the Income Tax Act requires the approving authority to evaluate the reopening proposal and record satisfaction independently. In the present case, the approval lacked reasoning. The ITAT also held that the ruling of the High Courts of Madhya Pradesh and Delhi asserts that mechanical approvals violate the safeguards provided in the statute.
The ITAT consisting of Satbeer Singh Godara (Judicial Member) and M Balaganesh (Accountant Member) held the reassessment proceedings invalid due to non-compliance with Section 151 and quashed the reassessment. As a result, the Appeal of the assessee was allowed.
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