The Delhi High Court held that Income Tax reassessment was based on mechanical approval by PCIT.
The court observed that the prescribed authority must be “satisfied”, on the reasons recorded by the AO, that it is a fit case for the issuance of such notice. Thus, the satisfaction of the prescribed authority is a sine qua non for a valid approval.
The court stated that it is a trite law that the grant of approval/sanction is neither an empty formality nor a mechanical exercise. The Competent Authority must apply its mind independently on the basis of material placed before it before grant of approval/ sanction.
“It is evident that the approval dated 28.03.2021 is in respect of 111 cases of reassessment. It is a general order of approval for all the 111 cases. There is not even a whisper as to what material had weighed in the grant of approval in the present case. While the PCIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The sanction order does not refer to the material of any of the 111 cases”, the bench noted.
The court opined that the PCIT has failed to satisfactorily record its concurrence and by no stretch of imagination, the approval granted by common order, could be considered to be a valid approval.
Facts
The return of income for the Assessment Year 2015-16, declaring an income of Rs. 23,14,930/-. Revised return was filed, declaring an income of Rs. 26,64,930/-. The return was processed under Section 143(1) of the Income Tax Act, 1961.
Respondent issued a notice under Section 148 of the Act for the AY 2015-16. 4. To comply with the notice, petitioner filed his return of income, declaring income amounting to Rs. 26,64,930/-. Notice under Section 143(2) of the Act was issued by respondent on the basis of information received by respondent from Insight portal. Petitioner was identified as one of the parties/entities who made financial transactions with BKR Capitals Pvt. Ltd. He had made a transaction of Rs. 31,07,963/- with BKR Capitals Pvt. Ltd. to bring his unaccounted money/cash into his books of accounts to avoid tax during the relevant AY 2015-16.
Petitioner filed detailed objections to the reasons recorded, specifically objecting to the re-opening without there being valid reasons to believe. According to him, the reasons recorded for issuing the impugned notices were based on incorrect facts.
Submissions
The counsel for the Respondents has defended the order granting approval, arguing that the proforma for seeking approval along with sheet containing the reasons for re-opening of assessment under section 147 of the Act was placed before the Principal Commissioner, Income Tax, who after considering the entire record including the information received, relevant details, evidence submitted and the reasons recorded by the Assessing Officer, accorded the approval.
Conclusion
The court viewed that the approval granted by PCIT for action under Section 147/148 of the Act is not valid. Consequently, the bench set aside the notice issued by respondent under Section 148 of the Act for the AY 2015-16.
Case Details
Case Name: Vinod Kumar Solanki V/S Assistant Commissioner Of Income Tax CIRCLE61-1, DELHI & ORS.
Citation: W.P.(C) 4196/2022 & CM APPL. 39982/2022
Court: Delhi High Court
Judge: Justice Yashwant Varma And Justice Ravinder Dudeja
Decision Date: 14/08/2024
