2025 (4) TMI 1664 - AT - Income Tax

Reopening of assessment - valid approval accorded u/s 151 or not? - Addition made u/s 68 - HELD THAT - We hold that the reopening has been made in the instant case by not taking approval u/s 151 of the Act from the competent authority in the manner known to law. Accordingly the entire reassessment proceedings are hereby quashed. Hence one of the legal grounds in the Rule 27 Petition challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above mentioned terms. Since the reassessment is quashed the other legal grounds raised by the assessee in the Rule 27 Petition as well as the grounds raised by the revenue on merits need not be adjudicated and they are left open.

Summary

ISSUES:

Whether the approval granted under section 151 of the Income-tax Act, 1961 for reopening assessment under section 147 was valid and not mechanical.Whether the addition made under section 68 of the Act amounting to Rs. 2,50,00,000/- was justified in the facts and circumstances of the case.Whether the reassessment proceedings initiated by issuance of notice under section 148 of the Act were valid.

RULINGS / HOLDINGS:

The approval under section 151 of the Act was held to be mechanical and without application of mind as it merely stated "Yes, it's a fit case for issue of notice u/s 148," which is insufficient to constitute valid approval.The reassessment proceedings initiated pursuant to such mechanical approval were quashed as the approval was not granted "in the manner known to law."Since the reassessment was quashed on the ground of invalid approval under section 151, the addition under section 68 and other merits were not adjudicated and were left open.

RATIONALE:

The Court applied the statutory framework of sections 147, 148, and 151 of the Income-tax Act, 1961, which require that reopening of assessment must be preceded by approval from the competent authority with application of mind and recorded satisfaction.Precedents relied upon include the Madhya Pradesh High Court decision in CIT Vs. S. Goenka Lime and Chemicals Ltd (56 taxmann.com 390) where mechanical approval was held invalid, and the dismissal of the Special Leave Petition by the Supreme Court (64 taxmann.com 313) affirming this principle.The Jurisdictional High Court's ruling in PCIT Vs. NC Cables Ltd (391 ITR 11) was followed, which emphasized that mere use of the word "approved" without recorded satisfaction is insufficient and constitutes "ritualistic and formal" approval, lacking the "application of mind."This decision reflects a doctrinal emphasis on safeguarding taxpayers' rights by ensuring that reopening of assessments is not done arbitrarily or mechanically, requiring meaningful approval by a higher authority.