2021 (12) TMI 1091 - HC - Income Tax

Invalidity of AY 2014-15 assessment notice due to lack of Section 151 approval

The High Court held that the notice reopening the assessment for AY 2014-15 was invalid due to lack of prior approval under Section 151 of the Income Tax ... Reopening of assessment u/s 147 - validity of grant of sanction u/s 151 - HELD THAT:- It is clear from the digital signature on the notice issued by Respondent No.1 that the notice was issued at 2.40 p.m. on 31/03/2019. The sanction by the authority under Section 151 was digitally signed at 2.55 p.m. on 31/03/2019. The explanation furnished by Respondent No. 1 in the order of disposing of objections that initially physical approval was granted and thereafter online approval was granted has not been supported by any material on record. We fail to understand the need to grant online approval at 2.55 p.m. if physical approval was already granted before 2.40 p.m. In the absence of valid explanation by cogent material, we cannot accept explanation by Respondent No.1 in the order of disposing of objections that physical approval was granted before issuance of notice u/s 148. There is complete non application of mind on the part of Joint CIT, Range 5(3), Mumbai, while granting sanction under section 151 of Act. There is no prior sanction granted by Respondent No.2 before issuance of notice under Section 148 of the Act. Therefore, the jurisdictional condition of complying with Section 151 was not satisfied, resulting in Respondent No.1 committing the error of jurisdiction by issuing notice under Section 148 of the Act calling for interference under Article 226 of the Constitution of India. There is complete non application of mind on the part of Joint CIT, Range 5(3), Mumbai, while granting sanction under section 151 of Act. There is no prior sanction granted by Respondent No.2 before issuance of notice under Section 148 of the Act. Therefore, the jurisdictional condition of complying with Section 151 was not satisfied, resulting in Respondent No.1 committing the error of jurisdiction by issuing notice under Section 148 of the Act calling for interference under Article 226 of the Constitution of India. Issues:Challenging notice reopening assessment for AY 2014-15, order disposing objections against reopening, lack of prior approval under Section 151 of the Income Tax Act, 1961.Analysis:The petitioner challenged a notice dated 31/03/2019 reopening the assessment for AY 2014-15, an order disposing of objections against the reopening, and a notice under Section 143(2) and 142(1) of the Income Tax Act, 1961. The main issue addressed in this petition was the lack of prior approval as required under Section 151 of the Act. The petitioner, a company providing marine services, contended that the notice was issued without valid sanction. Respondent No.1 uploaded the notice on the ITBA portal at 2.40 p.m. on 31/03/2019, while the approval necessary under Section 151 was signed at 2.55 p.m. on the same day. The petitioner argued that the proceedings were vitiated due to the lack of prior approval.The petitioner filed objections against the reopening of assessment, citing that the notice was issued without fresh material and lacked prior sanction under Section 151. Respondent No.1 issued a notice under Section 143(2) and 142(1) requesting the petitioner's presence, even though objections were pending. The order disposing of objections stated that the notice under Section 147 was based on tangible material. The petitioner, through its counsel, argued that the lack of prior approval rendered the reassessment order erroneous, emphasizing the mandatory nature of Section 151's approval requirement.The High Court emphasized the importance of prior approval under Section 151 as a safeguard against arbitrary exercise of power by the Assessing Officer. The court highlighted that the superior officer granting approval must apply their mind and provide reasons for the approval. The expression 'No notice shall be issued' signifies the legislature's intent to make prior approval a prerequisite before issuing a reassessment notice, preventing harassment and arbitrary actions. In this case, the digital signature on the notice indicated it was issued before the approval was granted, leading to a lack of compliance with Section 151.The court referred to precedents where mechanical approval without proper reasoning was deemed insufficient. It was noted that the Joint CIT's approval lacked proper reasoning, indicating a lack of application of mind. Consequently, the court found a complete non-application of mind while granting sanction under Section 151, leading to the absence of prior sanction before issuing the notice under Section 148. Therefore, the court held that Respondent No.1 committed an error of jurisdiction by issuing the notice without valid prior approval, warranting interference under Article 226 of the Constitution of India. The court allowed the petition, quashing the impugned notice and order.