2024 (3) TMI 1082 - HC - Income Tax

Reopening under s.147 invalid; s.148A(d) order quashed where s.151 approval granted without application of mind

Bombay HC held the reopening under s.147 invalid and quashed the order issued under s.148A(d), finding the sanction/approval under s.151 was granted ... Sanction/approval under Section 151 of the Income Tax Act - order under Section 148A(d) of the Income Tax Act - notice under Section 148 of the Income Tax Act - non-application of mind in granting approval for reopening assessments - quashing of reopening notice for procedural infirmitySanction/approval under Section 151 of the Income Tax Act - non-application of mind in granting approval for reopening assessments - order under Section 148A(d) of the Income Tax Act - notice under Section 148 of the Income Tax Act - Validity of the approval under Section 151 and the consequent order under Section 148A(d) and notice under Section 148 for AY 2019-20 in view of alleged non-application of mind and discrepancies in the approval documents. - HELD THAT: - The Court found that the approval record accompanying the Section 148A(d) order contained internal discrepancies in the amounts stated and that the approving authority's brief remarks simply endorsed the Assessing Officer's proposal without addressing or reconciling those discrepancies. The draft order under Section 148A(d) itself showed differing figures for escaped income, and the approving officials (the recommending Additional/Joint Commissioner and the Principal Commissioner) did not demonstrate any independent application of mind to the approval request or the draft order. The Court rejected the Revenue's characterization of the discrepancy as a mere typographical error, observing that even if the error originated with the AO, the approving authorities ought to have detected and remedied it had they read and applied their minds to the material. For these reasons the approval was found to be vitiated by procedural infirmity and lack of bona fide consideration, rendering the resulting order under Section 148A(d) and the notice under Section 148 unlawful. [Paras 6, 7, 8]Order dated 31st March 2023 under Clause (d) of Section 148A and the consequent notice dated 31st March 2023 under Section 148 for AY 2019-20 quashed and set aside.Final Conclusion: The petition is allowed; the approval under Section 151 for issuance of the Section 148A(d) order and the consequent notice under Section 148 (both dated 31st March 2023) are quashed for lack of application of mind, and the petition is disposed with no order as to costs. Issues involved:The petition challenges an initial notice, an order, and a subsequent notice issued under different sections of the Income Tax Act, 1961 for the assessment year 2019-20.Details of the Judgment:1. The petitioner, a company that amalgamated with another company, filed its income tax return for the relevant year. Despite third parties booking transactions under the former PAN of the amalgamated company, the petitioner accounted for all transactions in its return. The petitioner received a notice under Section 148A(b) regarding certain transactions, to which it responded. 2. Despite the petitioner's explanation, an order was passed rejecting its objections and approving the issuance of a notice under Section 148 of the Act. The approval for the order was granted without proper application of mind, as noted in the petition. The approval mentioned the income that escaped assessment and the reasons for the belief, which were found inadequate upon review.3. The Court found that the approval process lacked scrutiny, as the officers involved did not pay attention to the discrepancies in the application and draft order. The Court concluded that this lack of diligence warranted interference, leading to the quashing of the order under Section 148A(d) and the subsequent notice under Section 148 issued on the same day.4. As a result, the petition was disposed of with no order as to costs, highlighting the Court's intervention due to the procedural lapses in the approval process.