2025 (7) TMI 1094 - AT - Income Tax

Reopening of assessment u/s 147 - valid sanction/ approval u/s 151 - Mechanical approval - HELD THAT - Pr.CIT has stated in the sanction letter Yes it is fit case for issue of notice u/s 148 for reopening . However in the given case there is a standard format and ld. Pr.CIT has not even mentioned anything on the face of the proforma and simply recorded his signature without any date on top of the standard format written as 13. On the basis of reasons recorded it is a fit case for the issue of a notice under section 148 of the I.T. Act 1961 . It clearly indicates that it is only mechanical approval and following the aforesaid decision we are inclined to quash the reassessment proceedings which are against the provisions of section 151 of the Act. No reasons were supplied to the assessee which was relied upon by the AO to record the reasons for reopening of the same - We observed that the AO has no doubt mentioned the same in the assessment order however no record was brought to our notice that the abovesaid reasons were supplied to the assessee during assessment proceedings. See SARASWATI PETROCHEM PVT. LTD. 2023 (11) TMI 708 - DELHI HIGH COURT

Summary

ISSUES:

• Whether the reopening of assessment under section 147/148 of the Income Tax Act was validly initiated with proper sanction under section 151 of the Act.
• Whether the reference to the omitted provision of section 147(b) in the sanction proforma vitiates the reopening proceedings.
• Whether the absence of a date on the sanction proforma renders the approval invalid.
• Whether the sanction under section 151 was granted with proper application of mind or was merely mechanical.
• Whether the assessee was furnished with the material relied upon by the Assessing Officer (AO) in recording reasons for reopening under section 148(2).
• Whether the AO had tangible material to form a valid belief that income chargeable to tax had escaped assessment, or if the reopening was based on mere suspicion and conjecture.

RULINGS / HOLDINGS:

• The reopening was quashed as the sanction under section 151 was invalid due to reference to the omitted section 147(b) in the sanction proforma, which is "no longer res integra" and held fatal in a series of ITAT decisions.
• The absence of a date on the sanction proforma was held to be "fatal to the proceedings" and rendered the approval invalid, following precedents where undated sanctions were struck down.
• The sanction granted under section 151 was "mechanical and generic" without application of mind, which is insufficient and invalidates the reopening; mere generic remarks do not constitute proper satisfaction.
• The AO failed to supply the assessee with the material relied upon in recording reasons under section 148(2), which is a breach of the principle that the assessee must be furnished with relevant information that helped form the belief for reassessment.
• The AO's belief that income had escaped assessment was based on suspicion and conjecture, lacking tangible material, and thus the reassessment proceedings were invalid and quashed.

RATIONALE:

• The Court applied statutory provisions of the Income Tax Act, specifically sections 147, 148, and 151, and relied on established judicial principles requiring proper sanction and application of mind before reopening assessments.
• Precedents from various ITAT benches and High Courts were followed, which consistently held that reference to omitted statutory provisions in sanction proformas and undated or mechanical approvals vitiate reopening proceedings.
• The Court emphasized the principle that reassessment proceedings cannot be initiated on mere suspicion or conjecture; the AO must have tangible material and must furnish the assessee with the relevant information that led to the formation of belief.
• A doctrinal shift is reflected in strict scrutiny of procedural compliance in reopening cases, underscoring the necessity of valid sanction and transparency towards the assessee.
• The Court declined to adjudicate other grounds raised on merits since the reassessment was quashed on jurisdictional and procedural grounds.