2025 (7) TMI 959 - AT - Income Tax

Revenue's application dismissed for penalty under section 271(1)(c) due to unsigned JCIT approval documents lacking statutory compliance

ITAT Mumbai dismissed revenue's miscellaneous application challenging penalty order under section 271(1)(c). The tribunal held that revenue failed to ... Penalty order and approval - Penalty u/s 271(1)(c) levied after receiving approval from prescribed authority or not? - proof of receipt of JCIT's approval for imposing penalty - HELD THAT:- We have to state that the revenue did not furnish any screenshot of the approval granted by the JCIT – 25(3), Mumbai dated 16/03/2020. The documents submitted by the ld. D/R showing approval was granted on 17/03/2020, are unsigned and, therefore, the same is not accepted in light of the decision of Vikas Gupta vs. Union of India [2022 (9) TMI 478 - ALLAHABAD HIGH COURT] wherein as interalia seized with the question relating to the notice or other documents were first to be signed by the Authority and thereafter it may be issued either in paper form or may be communicated in electronic form by the Authority. Also see Prakash Krishnavtar Bharadwaj [2023 (1) TMI 428 - BOMBAY HIGH COURT] Since no valid approval dated 17/03/2020 has been brought to our notice, we do not find any merit in this miscellaneous application by the revenue and the same is accordingly dismissed. The core legal questions considered by the Tribunal in this matter are:1. Whether the penalty order under section 271(1)(c) of the Income Tax Act, 1961, dated 17.03.2020, was validly passed in view of the approval requirement under the Act, specifically whether the approval from the Joint Commissioner of Income Tax (JCIT) was properly recorded and signed before issuance of the penalty order.2. Whether the subsequent approval dated 18.03.2020, which did not result in any penalty order, affects the validity of the penalty order dated 17.03.2020.3. Whether the documents submitted by the Revenue, including screenshots and approval letters, satisfy the statutory requirement of being duly signed by the competent authority as mandated under the Income Tax Act and relevant judicial precedents.4. Whether the Tribunal's earlier order dated 20.06.2024 in ITA No. 1022/Mum/2024 for AY 2013-14 requires recall or rectification under section 254(2) of the Act, based on the above factual and legal contentions.Issue-wise Detailed Analysis:Issue 1: Validity of penalty order dated 17.03.2020 in light of approval requirements under section 271(1)(c)The legal framework mandates that before imposing a penalty under section 271(1)(c), approval from the prescribed authority (here, the JCIT) must be obtained. The approval must be recorded with the application of mind and duly signed, as per the procedural requirements. The Revenue contended that the penalty order dated 17.03.2020 was passed after receiving approval from the JCIT on the same date, while the assessee challenged this on the ground that the penalty order preceded valid approval.The Tribunal examined the documents submitted by the Revenue, notably the screenshots and approval letters dated 17.03.2020. However, these documents were unsigned and thus failed to meet the statutory requirement of a signed approval. The Tribunal relied on the precedent set by the Hon'ble High Court of Allahabad in Vikas Gupta vs. Union of India, which emphasized that any notice or document issued by an Income Tax Authority must be signed by the authority to be valid. The Court held that the absence of signature invalidates the document and the consequent action taken thereunder.Applying this principle, the Tribunal found that since the Revenue did not produce a signed approval dated 17.03.2020, the penalty order purportedly based on that approval was not validly passed. The requirement of a signed approval is not a mere formality but a jurisdictional condition precedent to the imposition of penalty.Issue 2: Effect of subsequent approval dated 18.03.2020 and absence of penalty order thereonThe Revenue pointed out that a subsequent approval dated 18.03.2020 was issued by the JCIT, but no penalty order was passed pursuant to this approval. The Revenue argued that the penalty order dated 17.03.2020 was valid since it was issued after the approval of the same date, and the later approval dated 18.03.2020 was irrelevant as no penalty order followed it.The Tribunal noted that the assessee had filed an appeal contending that the penalty order was invalid as it was passed before the receipt of valid approval. The Tribunal scrutinized the case history and ITBA screenshots, which showed no penalty order generated after the approval dated 18.03.2020. The Tribunal held that the mere existence of a subsequent approval without a corresponding penalty order does not cure the defect of absence of valid approval before the penalty order dated 17.03.2020.The Tribunal also observed that the learned Commissioner of Income Tax (Appeals) had considered this ground and ruled in favor of the Revenue, but the current scrutiny of the documentary evidence and legal precedents led the Tribunal to a contrary conclusion.Issue 3: Requirement of signed documents and application of judicial precedentsThe Tribunal extensively relied on the decision of the Hon'ble High Court of Allahabad in Vikas Gupta vs. Union of India, which held that notices or documents issued by Income Tax Authorities must be signed by the authority to be valid. The Court emphasized that the signature is a jurisdictional requirement and the absence thereof renders the notice or document invalid and non-est in law.Further, the Tribunal cited the Bombay High Court decision in Prakash Krishnavtar Bharadwaj, which invalidated a notice under section 148 of the Act for lack of signature and held that such a notice is without jurisdiction and violative of Article 14 of the Constitution. This precedent reinforced the principle that procedural compliance, including signature of the competent authority, is mandatory.Applying these precedents, the Tribunal concluded that the Revenue's failure to produce a signed approval dated 17.03.2020 undermines the validity of the penalty order passed on the same date. The documents submitted were unsigned and thus inadmissible as evidence of valid approval.Issue 4: Whether the Tribunal's earlier order requires recall or rectificationThe Revenue sought recall of the Tribunal's order dated 20.06.2024 under section 254(2) of the Act, relying on the contention that the penalty order was validly passed after approval on 17.03.2020 and that the subsequent approval dated 18.03.2020 did not affect the validity of the penalty order.The Tribunal analyzed the submissions and documentary evidence and found no merit in the Revenue's application. The absence of a signed approval document dated 17.03.2020, as required by law and judicial precedents, meant that the penalty order was not validly passed. Consequently, the earlier order did not require recall or rectification.The Tribunal dismissed the miscellaneous application filed by the Revenue.Significant Holdings:'The first and foremost condition under sub-Section (1) of Section 282A is that notice or other document to be issued by any Income Tax Authority shall be signed by that authority. The word 'and' has been used in sub-Section (1), in conjunctive sense, meaning thereby that such notice or other document has first to be signed by the authority and thereafter it may be issued either in paper form or may be communicated in electronic form by that authority.''Unless the Prescribed Authority under section 151 of the Act, 1961 records his satisfaction on application of mind and under his signature, there cannot be a valid satisfaction empowering the Assessing Officer to assume jurisdiction to issue notice under section 148 of the Act, 1961.''In the present set of facts there was no valid satisfaction recorded by the Prescribed Authority under section 151 of the Act, 1961 when the Assessing Officer issued notice to the assessees under section 148 of the Act, 1961. ... Consequently the impugned notices issued by the Assessing Officer under section 148 of the Act, 1961 were without jurisdiction.''In the present case, the notice u/s.148 dated 02.04.2022 having no signature affixed on it, digitally or manually, the same is invalid and would not vest the Assessing Officer with any further jurisdiction to proceed to reassess the income of the petitioner.'The Tribunal established the core principle that any approval or order under the Income Tax Act must be duly signed by the competent authority to be valid and enforceable. The absence of such signature renders the document invalid and deprives the authority of jurisdiction to act thereon.Final determinations:- The penalty order dated 17.03.2020 under section 271(1)(c) was not validly passed due to absence of a signed approval from the JCIT on that date.- The subsequent approval dated 18.03.2020 without any penalty order does not validate the earlier penalty order.- The Revenue's application for recall or rectification of the Tribunal's earlier order is dismissed for lack of merit.