2025 (2) TMI 1210 - AT - Income Tax

Reopening of assessment u/s 147 - date of issue of notice u/s 143(2) - issue of notice u/s 143(2) in re-assessment proceedings prior to finalising the re-assessment order - HELD THAT - As per the provisions of Section 143(2) of the Act the notice has to be served on the assessee within 6 months from the end of the Financial Year in which the return in furnished. Since the return of income pursuant to notice u/s 148 of the Act was treated to be filed on 02/03/2025 which means from the end of the Financial Year 2014-15 the notice u/s 143(2) of the Act was supposed to be served on or before 30/09/2015 and since the notice u/s 143(2) is dated 01/02/2016 the same is beyond the period of limitation. As decided in Kamla Devi Sharma 2018 (11) TMI 874 - RAJASTHAN HIGH COURT considered the return filed pursuant to notice u/s 148 of the Act held that the issue of notice u/s 143(2) in re-assessment proceedings prior to finalising the re-assessment order cannot be condoned by referring to Section 292BB of the Act and was fatal to order of re-assessment. Thus in light of the date of return filed and the date of issue of notice u/s 143(2) of the Act qua the decisions discussed hereinabove the impugned assessment order deserves to be quashed. Assessee appeal allowed.

Summary

ISSUES:

Whether the reopening of assessment under Section 147 of the Income Tax Act is valid when the sanction under Section 151(1) is granted mechanically without due application of mind.Whether the approval granted by the competent authority under Section 151(1) of the Act can be considered valid if it merely records satisfaction in a cryptic or mechanical manner.Whether the issuance of notice under Section 143(2) of the Act is mandatory before completing reassessment under Section 143(3) read with Section 147, particularly when return is filed in response to notice under Section 148.Whether a return filed pursuant to notice under Section 148 is to be treated as a return under Section 139 for the purpose of applying provisions such as Section 143(2).Whether reliance on judicial precedents supporting reopening based on sufficiency of reasons recorded by AO can sustain reopening when sanction under Section 151(1) is defective.

RULINGS / HOLDINGS:

The reopening of assessment under Section 147 was held invalid as the approval granted under Section 151(1) was a "mechanical approval without due application of mind" by the competent authority, which is "unsustainable in law."

The approval recorded by the competent authority merely stating "Yes, I am so satisfied" without examining the proposal or reasons recorded does not constitute proper sanction in terms of Section 151(1) of the Act.

Notice under Section 143(2) of the Act is mandatory before completion of reassessment under Section 143(3) read with Section 147, and failure to issue such notice within prescribed time renders the reassessment invalid.

A return filed pursuant to notice under Section 148 is deemed to be a return furnished under Section 139, and thus, the provisions of Section 143(2) apply accordingly.

Judicial precedents relied upon by the revenue addressing sufficiency of reasons for reopening do not validate reopening where the sanction under Section 151(1) is defective due to non-application of mind.

RATIONALE:

The legal framework applied includes Sections 147, 148, 151(1), 143(2), and 292BB of the Income Tax Act, 1961, alongside relevant ITAT Rules, 1963.The Court emphasized the principle that sanction for reopening must be granted on "due application of mind" and cannot be a mere formality or mechanical act, citing authoritative precedents including decisions of the Hon'ble Supreme Court and various High Courts.The Court referred to established jurisprudence holding that mechanical or cryptic recording of satisfaction by the sanctioning authority is insufficient to confer jurisdiction for reopening assessments.The Court distinguished the issue of sufficiency of reasons recorded by the Assessing Officer from the separate requirement of proper sanction under Section 151(1), holding that the latter is a jurisdictional safeguard that cannot be bypassed.The Court relied on precedents clarifying that a return filed in response to notice under Section 148 is to be treated as a return under Section 139, thereby mandating issuance of notice under Section 143(2) before reassessment.The Court noted that Section 292BB's deeming fiction does not cure the absence of jurisdictional conditions such as the mandatory issuance of notice under Section 143(2).No doctrinal shift was indicated; rather, the Court reaffirmed settled principles regarding reopening and sanctioning authority's role, rejecting arguments based on procedural irregularities or reliance on irrelevant case law.