The division bench of the Delhi High Court held that mere approval by the concerned authority under section 151 of the Income Tax Act without stating the reasons for permitting re-assessment is not valid.
The bench was hearing an appeal filed by the Revenue against the order of the Appellate Tribunal quashing the proceedings.
The assessee, M/s N.C cables Ltd, questioned the correctness of the re-assessment proceedings initiated against the after eight years with the approval of the authorities under section 151 of the Income Tax Act, before the ITAT. The Tribunal quashed the proceedings by finding that there was no proper application of mind by the concerned sanctioning authority under Section 151 of the Act as a precondition for issuing notice under Sections 147/148 of the Act. The ITAT also concluded that in the given facts of the case, the AO had not conducted adequate and proper inquiry into the materials, while invoking Section 68 of the Act to add the amounts in issue.
The assessee maintained that the AO has not conducted a proper investigation of the case and the CIT (A), the concerned authority, merely approved the note put up by the AO which cannot be said to have satisfied the pre-condition of satisfaction contemplated under Section 151 of the Act.
Dismissing the appeal, the bench comprising of Justice S.Ravindra Bhat and Justice Najimi Waziri noted that “Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved’ says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer.”
Read the full text of the Judgment below.
