Court sets aside notice & order under Sec 148 for AY 2015-16 due to flawed sanction process.

The court set aside the notice under Section 148 and the order disposing of objections for re-opening the assessment for AY 2015-16. The court found that the sanction process was flawed as the Commissioner granted approval before the reasons were finalized and recorded by the Assessing Officer, emphasizing the need for strict adherence to procedural requirements in tax matters to ensure validity and legality of actions by tax authorities.

---

---

Issues:
Impugning notice under Section 148 of the Income Tax Act, 1961 and order disposing objections for re-opening assessment for AY 2015-16.

Analysis:
The petitioner challenged a notice dated 05/09/2017 issued under Section 148 of the Income Tax Act, 1961, and an order dated 14/10/2019 disposing of objections raised for re-opening the assessment for AY 2015-16. The primary contention was the validity of the sanction required under Section 151 of the Act. Section 151 mandates that no notice shall be issued under Section 148 after four years from the end of the relevant assessment year unless specific authorities are satisfied with reasons recorded by the Assessing Officer. The petitioner argued that the sanction was granted before the reasons were recorded, rendering the notice and order invalid. The respondents contended that the sanction was prior to the notice, hence no error was committed.

The court disagreed with the respondents, emphasizing that the Commissioner must be satisfied with the reasons recorded by the Assessing Officer before granting sanction for issuing the notice under Section 148. The court noted a flawed procedure where the reasons were submitted in a draft form for approval, contrary to the requirement that the reasons must be final and recorded by the Assessing Officer. The court highlighted that the sanction cannot be given mechanically and must be based on the reasons provided by the Assessing Officer. Moreover, it was observed that the Addl.CIT displayed non-application of mind by granting approval for re-opening the assessment of a different entity, indicating a lack of due diligence.

Consequently, the court set aside the notice under Section 148 and the order disposing of objections. The court held that the sanction process was flawed and did not comply with the statutory requirements under Section 151. The judgment serves as a reminder of the importance of strict adherence to procedural requirements in tax matters to ensure the validity and legality of actions taken by tax authorities.

---