Mechanical Approval Under Section 151 Invalidates Reassessment: ITAT Delhi Quashes Section 147 Proceedings for Want of Conscious Application of Mind

The Income Tax Appellate Tribunal, Delhi Bench, has delivered a significant ruling that reinforces the importance of meaningful approval under Section 151 of the Income Tax Act, 1961, before initiating reassessment proceedings. In the matter of Krishan Kumar Bansal (Legal Heir) versus the Assessing Officer for Assessment Year 2017-18, the Tribunal categorically held that a perfunctory endorsement bearing merely the word "approved" without demonstrable application of mind by the Joint Commissioner of Income Tax fails to satisfy the statutory safeguard mandated by law.

Background of the Case

The present appeal arose from an order issued by the National Faceless Appeal Centre/Commissioner of Income Tax (Appeals), New Delhi, dated 05.07.2024. The original assessment order was passed on 29.09.2021 under Section 147 of the Income Tax Act, 1961, for Assessment Year 2017-18. The assessee had initially raised grounds challenging additions made under Section 69A amounting to Rs. 72,90,000 towards unexplained cash deposits in the bank account, along with objections to penalty proceedings initiated under Section 271AAC.

However, during the appellate proceedings before the Tribunal, the assessee sought permission to introduce additional grounds of appeal that were purely technical and legal in nature. These grounds fundamentally challenged the very foundation of the reassessment proceedings.

Additional Grounds Raised Before the Tribunal

The assessee raised two critical additional grounds:

Additional Ground No. 1: The assessment framed under Section 143(3) read with Section 147 was contrary to law and facts, as the initiation of proceedings failed to satisfy statutory preconditions envisaged under the relevant provisions. The entire exercise was alleged to be without proper jurisdiction and deserved to be quashed.

Additional Ground No. 2: The approval granted under Section 151 of the Act was mechanical, arbitrary, and devoid of any application of mind. It failed to satisfy the statutory preconditions mandated by law, rendering the entire assessment null and void.

The Critical Defect in Section 151 Approval

The heart of the controversy revolved around the approval dated 20.03.2013 granted by the Joint Commissioner of Income Tax, Range-46, New Delhi. Upon examination of the approval document, it was revealed that the approving authority had merely inscribed the word "approved" in the remarks column. There was no other material, observation, or reasoning that could demonstrate that the JCIT had actually examined the reasons recorded by the Assessing Officer or applied his mind to the factual matrix of the case.

This ritualistic endorsement became the focal point of judicial scrutiny. The assessee's counsel argued vehemently that such perfunctory approval cannot be deemed to fulfill the legislative intent behind Section 151, which is designed as a meaningful safeguard against arbitrary reopening of concluded assessments.

Section 151 of the Income Tax Act, 1961, mandates that before issuing a notice under Section 148 for reopening an assessment, the Assessing Officer must obtain the approval of the Commissioner of Income Tax (or a designated higher authority). This requirement is not a mere procedural formality but serves as a substantive safeguard to protect assessees from capricious or ill-conceived reassessment proceedings.

The legislative intent is clear: a senior officer must independently verify that there exist valid grounds justifying the reopening of an assessment. This verification presupposes the exercise of judgment, evaluation of material, and conscious satisfaction about the escapement of income.

Arguments Advanced by the Assessee

The learned counsel representing the assessee placed reliance on a consistent line of judicial precedents from the Supreme Court and various High Courts, all of which emphasized that approval under Section 151 must be conscious, informed, and demonstrable—not mechanical or ritualistic.

Key Judicial Precedents Cited

Chhugamal Rajpal vs. S.P. Chaliha & Ors [1971] 79 ITR 603 (SC): The Supreme Court in this landmark judgment held that when the Commissioner mechanically records permission and treats the safeguards provided under Section 147 and Section 151 lightly, the notice issued under Section 148 becomes invalid. The Court emphasized that these safeguards exist to prevent abuse of power and must be taken seriously.

CIT vs. Goyanka Lime & Chemical Ltd. (2015) 56 taxmann.com 390 (MP): The Madhya Pradesh High Court categorically held that merely recording words such as "Yes, I am Satisfied" cannot constitute valid approval or sanction. The approving authority must demonstrate that he has examined the material and formed an opinion.