ITO Vs Tia Enterprises Pvt. Ltd. (Supreme Court of India)
The matter concerned Assessment Year (AY) 2011–12 and arose from a writ petition filed before the Delhi High Court challenging a notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961 for initiation of reassessment proceedings. The petitioner also challenged the order dated 06.12.2018 whereby its objections to the reopening were rejected.
The challenge before the High Court was confined to a singular ground: that the reassessment proceedings were initiated without proper approval of the specified authority, as mandated under the Act. The petitioner relied on the statutory requirement that before issuing a notice under Section 148, the Assessing Officer (AO) must record reasons to believe that income has escaped assessment and obtain prior approval from the competent authority, namely the Principal Commissioner of Income Tax (PCIT).
The record included a prescribed form titled “Form of recording the reasons for initiating proceedings under Section 147/148 and for obtaining the approval of Pr. Commissioner of Income Tax.” The form required (i) recording of reasons by the AO, and (ii) recording of satisfaction by the Additional Commissioner of Income Tax (ACIT) and the PCIT.
Upon examination of the form, the High Court noted that the reasons were recorded in Annexure-A. The ACIT had recorded satisfaction in writing, stating that it was a fit case for issuance of notice under Section 148. However, in respect of the PCIT, the form bore only the signature, without any recorded satisfaction or date.
The petitioner contended that the PCIT had granted approval mechanically and without application of mind. It was pointed out that the reasons were recorded on 30.03.2018, approval by the Additional Commissioner was granted the same day, the PCIT appended her signature without date, and the notice under Section 148 was also issued on 30.03.2018. According to the petitioner, this sequence demonstrated non-application of mind and mechanical approval by the statutory authority.
The High Court observed that the objection regarding lack of application of mind by the PCIT had been specifically raised by the petitioner in its objections to the reopening. However, the order dated 06.12.2018 disposing of objections did not address this contention.
In its counter-affidavit, the Revenue asserted that the PCIT had conveyed approval through a letter dated 30.03.2018. However, this letter was not produced before the Court, nor had any such assertion been made in the impugned order disposing of objections. The High Court noted that despite the petitioner’s specific objection, the alleged communication had not been placed on record.
The Court emphasized that approval granted by statutory authorities, as required under the Act, must be furnished to the assessee along with the reasons to believe. The statutory scheme mandates that reassessment proceedings cannot be triggered unless two conditions are fulfilled: first, the AO must record reasons to believe that income has escaped assessment; and second, the recorded reasons must be placed before the specified authority for prior approval.
The High Court formed the view that the second condition—obtaining prior approval of the specified authority—had not been fulfilled. It observed that if valid approval had been obtained, there was no justification for not furnishing the same to the petitioner along with the recorded reasons. The absence of recorded satisfaction by the PCIT in the prescribed form, coupled with non-production of the alleged approval letter, led the Court to conclude that the statutory requirement had not been satisfied.
Accordingly, the Delhi High Court held that neither the notice dated 30.03.2018 issued under Section 148 nor the order dated 06.12.2018 disposing of objections could be sustained. Both were set aside, and the writ petition was disposed of in those terms.
The Revenue carried the matter to the Supreme Court of India by way of a Special Leave Petition under Article 136 of the Constitution of India. The Supreme Court condoned the delay. However, in view of the categorical finding recorded in paragraph 13 of the High Court’s judgment and in the facts of the case, the Court held that no case for interference was made out in exercise of its jurisdiction under Article 136. Consequently, the Special Leave Petition was dismissed, and pending applications, if any, were disposed of.
The effect of the Supreme Court’s order is that the High Court’s decision setting aside the reassessment notice and the order disposing of objections stands affirmed.
Also Read HC Judgment in this case: Section 148 Notice Quashed for Mechanical Approval Without Recorded Satisfaction: Delhi HC
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