Reassessment Quashed as JCIT Granted Routine Sanction Under Section 151

Sukumar Buildwell Pvt. Ltd Vs ITO (ITAT Delhi)

The Delhi Bench of the Income Tax Appellate Tribunal allowed Sukumar Buildwell Pvt. Ltd.’s appeal for assessment year 2008–09 and quashed reassessment proceedings because the statutory approval under Section 151 of the Income-tax Act, 1961 was mechanical and did not demonstrate proper application of mind. The appeal arose from an assessment dated 29 March 2016 and a CIT(A) order dated 31 August 2018.

The assessee had filed its original return on 2 September 2008 declaring income of Rs. 2,09,260. Following information from the Investigation Wing concerning alleged accommodation entries linked to the Surendra Kumar Jain group, the Assessing Officer issued a reopening notice under Section 148 on 31 March 2015. The proposal referred to alleged escaped income of Rs. 16 lakh.

The Tribunal examined the prescribed approval proforma. The Joint Commissioner had merely endorsed that he was satisfied it was a fit case for issuing notice under Section 148. Following CIT v. S. Goyanka Lime and Chemicals Ltd. and PCIT v. N.C. Cables Ltd., the Tribunal held that this formulaic endorsement was not the meaningful sanction contemplated by Section 151.

Consequently, the Tribunal allowed the additional jurisdictional ground, quashed the entire reassessment and left all remaining legal and merits-based grounds open without adjudication. The order was pronounced on 8 January 2025.

Cases Discussed

• CIT Vs. S. Goyanka Lime and Chemicals Ltd., 56 taxmann.com 390 (Madhya Pradesh High Court); Revenue SLP dismissed, 64 taxmann.com 313 (Supreme Court) — Followed regarding mechanical approval under Section 151.
• PCIT Vs. N.C. Cables Ltd., 391 ITR 11 (Delhi High Court) — Followed regarding the insufficiency of a mere “approved” endorsement.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. The appeal in ITA No.1943/Del/2021 for AY 2008-09, arises out of the order of the Commissioner of Income Tax (Appeals)-31, New Delhi [hereinafter referred to as ^„ CIT(A)’, in short] in Appeal No. 263/17-18 dated 31.08.2018 against the order of assessment passed u/s 148 r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ^„the Act’) dated 29.03.2016 by the Assessing Officer, ITO, Ward-24(3), New Delhi (hereinafter referred to as ^„ld. AO’).

2. Though the assessee has raised several grounds, one of the grounds raised is challenging the validity of reassessment proceedings. The assessee has also raised additional grounds dated 22.04.2021 specifically stating that notice u/s 148 of the Act was issued without obtaining proper approval u/s 151 of the Act in the proper manner. This additional ground goes to the root of the matter and hence, we proceed to adjudicate the same first together with the regular legal grounds raised in the original ground of appeal.

3. We have heard the rival submissions and perused the materials available on record. The assessee is a private limited company and had filed its return of income originally for the AY 2008-09 on 02.09.2008 declaring income of Rs. 2,09,260/-. This return was duly processed u/s 143(3) of the Act on 29.07.2009. Later information was received from Investigation Wing, New Delhi vide letter dated 21.03.2012 and 12.03.2013 that there was search operation carried out in the case of Shri Surendra Kumar Jain group of cases by the Investigation Wing wherein, it revealed that the group was engaged in providing accommodation entries to various beneficiaries. Based on such information, the assessment of the assessee was sought to be reopened u/s 147 of the act and accordingly notice u/s 148 of the Act was sought to be reopened u/s 148 of the Act stood issued to the assessee on 31.03.2015 after taking approval of ld JCIT, Range-24, New Delhi in terms of Section 151 of the Act.

4. We find that the assessee in its paper book had enclosed the sanction accorded u/s 151 of the Act by the ld JCIT in the prescribed proforma in page 3 of the paper book. For the sake of convenience, the said proforma seeking approval for reopening the assessment is reproduced below:-

“Form for recording the reasons for initiating proceedings u/s 148 of the IT Act, 1961 for obtaining the approval of the Joint Commissioner of Income, Tange-24, New Delhi

5. On perusal of the proforma seeking approval u/s 151 of the Act, we find that the ld JCIT had merely stated that he is satisfied that this is fit case for reopening. This sort of approval granted u/s 151 of the Act was held to be approval granted without application of mind and construed as mechanical by the Hon’ble Madhya Pradesh High Court in the case of CIT Vs. S. Goyenka Lime and Chemicals Ltd reported in 56 taxmann.com 390 (MP HC). The Special Leave Petition (SLP) filed by the revenue against this decision was dismissed by the Hon’ble Supreme Court reported in 64 taxmann.com 313. Further, we find that the Hon’ble Jurisdictional High court in the case of PCIT Vs. NC Cables Ltd reported in 391 ITR 11 (Del) had also held the same, wherein, the approving authority had merely stated “approved” in the proforma while granting approval in terms of section 151 of the Act. This approval was held by the Hon’ble Jurisdictional High court to be a mechanical approval. The relevant observation of the Hon’ble Jurisdictional High Court in this regard are reproduced herein:-

“11. 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. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed.

12. The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed.”

6. Respectfully following the aforesaid decisions, we hold that the reopening has been made in the instant case by not taking approval u/s 151 of the Act from the competent authority in the manner known to law. Accordingly, the entire reassessment proceedings are hereby quashed. Hence, one of the additional legal grounds challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above mentioned terms.

7. Since, the reassessment is quashed on invalid assumption of jurisdiction u/s 147 of the Act as stated above, the other legal grounds raised in the original grounds of appeal, other additional grounds raised by the assessee and other grounds raised on merits in the original grounds of appeal need not be gone into as adjudication of the same would become academic in nature. No opinion is rendered thereon and they are left open.

8. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 08/01/2025.