Case Law Details
CA Prarthana Jalan
The Hon’ble Delhi ITAT has in the case of The I.T.O Versus M/s Observer Investment & Finance Pvt. Ltd vide judgement dated 24.02.2016 has held that while granting sanction u/s 151 of the I.T Act,1961 for granting sanction for approval of re-assessment proceedings it is necessary for the authorithy to apply his/her mind. Mere affiction of signature along with date cannot be considered as proper approval.
Brief facts of the case are that on the basis of information recieved from the Investigation Directorate about the bogus accommodation entries, the case was reopened u/s 147 of the Income tax Act, 1961, In the assessment order passed u/s 143(3) r.w.s. 147 of the Act addition was made for unexplained credits u/s 68. In the appeal the assessee raised the point that in the reasons recorded , the ACIT, has put his signature alongwith date 27.2.2006 which clearly shows that the permission has been granted without perusal of record and without application of mind mechanically which cannot be held as valid permission for initiation of legal sustainable proceedings and notice u/s 147/148 of the Act and the same shall be quashed.
The operative part of the Hon’ble ITAT case is as under:-
“In view of the above, the proposition laid down by the Hon’ble High Court of Delhi when we logically analyse the facts and circumstances of the case, it is amply clear that while granting sanction u/s 151 of the Act for issuance of notice u/s 148 of the Act. The Additional CIT, Range 13, New Delhi only put his signature alongwith date 27.02.2006 which is not suffice to show application of mind by sanctioning authority. Furthermore, from the copy of reasons recorded by the AO for A.Y 2002-03, we are unable to see any sanction as required u/s 151 of the Act prior to issuance of notice showing the initiation of reassessment proceedings u/s 147 of the Act. In view of the above, we have no hesitation to hold that in the present case, mandatory sanction u/s 151 of the Act for issuance of notice has not been granted by the competent authority with full application of mind and thus, the AO could not assume valid jurisdiction for issuance of notice u/s 148 of the Act and initiation of proceedings and passing impugned order in pursuance thereto and hence, notice u/s 148 of the Act and re assessment orders u/s 143(3) r.w.s 147 of the Act cannot be held as valid and sustainable and we quash the same. Our view also gets fortified by the order of the decision of the Hon’ble High Court of Madhya Pradesh in ITA No. 82/2012 dated 14.10.2014 in the case of CIT Vs. S. Goenka Lime and Chemical Ltd wherein it was held that when the sanctioning authority only recorded so “Yes. I am satisfied”, then sanction has to be held as mechanical way of recording satisfaction which accords a sanction clearly unsustainable and hence the order of the Tribunal quashing the reassessment and notice u/s 148 of the Act was upheld. Accordingly, in the light of the foregoing discussion, the action of the AO issuing notice u/s 148 of the Act and passing impugned reassessment order is held as invalid assumption of jurisdiction and thus we quash the same. Accordingly, cross objections 1 and 2 of the assessee in both the appeals are hereby allowed.”
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