In a recent ruling, the Bombay High Court quashed the reassessment proceedings initiated against The Saraswat Co-operative Bank Ltd.,for the non-application of mind to both facts and law by the Principal Commissioner of Income Tax ( PCIT ) in granting Sanction.
The case challenged the issuance of a notice for reassessment under Section 147 of the Income Tax Act, 1961, which was approved by the Principal Commissioner of Income Tax (PCIT).
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The court found that the PCIT had mechanically approved the reassessment notice without properly applying his mind to the material facts. The case concerned the assessment for the year 2015-16, which had already been concluded through a scrutiny assessment, and the notice for reassessment was issued after four years from the original assessment year.
The court noted that under Section 147 of the Income Tax Act, reassessment after four years can only be initiated if there is a failure on the part of the taxpayer to fully and truly disclose material facts.
In this case, the petitioner, The Saraswat Co-operative Bank, had disclosed all material facts during the original assessment, and the reassessment notice was based on the same facts, amounting to nothing more than a change in opinion by the revenue.
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The Bombay High court also perused the process of sanction under Section 151, where it found that the approval by the PCIT lacked proper reasoning, as he merely expressed satisfaction with the reasons recorded by the Assessing Officer without providing an independent rationale. This mechanical approach was deemed arbitrary, leading the court to quash both the sanction and the reassessment proceedings.
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