The Delhi Bench of the Income Tax Appellate Tribunal has quashed reassessment proceedings against Researchco Reprints, holding that the sanction granted under Section 151 of the Income-tax Act, 1961 was mechanical and suffered from non-application of mind. The Tribunal found that the jurisdiction assumed under Sections 147 and 148 could not survive when the statutory approval forming the foundation of the reopening was itself invalid.
The assessee had originally filed its return for Assessment Year 2013-14 declaring income of Rs. 3,09,830. The return was initially processed under Section 143(1), and a regular assessment under Section 143(3) was subsequently completed on 8 February 2016 determining total income at Rs. 31,19,850. Following search, seizure and survey proceedings conducted in December 2015 in the cases of certain alleged entry operators, the Revenue alleged that the assessee had obtained accommodation entries representing bogus purchases aggregating to Rs. 1,04,33,780. A notice under Section 148 was thereafter issued on 14 March 2019.
In the reassessment, the Assessing Officer added Rs. 1,04,33,780 on account of alleged bogus purchases/accommodation entries and a further Rs. 2,08,675 towards alleged commission paid at 2%. The CIT(A) upheld the action of the Assessing Officer, following which the assessee approached the ITAT.
Mechanical Sanction Under Section 151
Before the Tribunal, the assessee primarily challenged the validity of the sanction obtained under Section 151. It was argued that the approval was undated, mechanical and granted without proper application of mind.
The Tribunal examined the approval proforma and noted a significant omission. Although a regular assessment under Section 143(3) had already been completed on 8 February 2016, the relevant column in the approval form did not mention this assessment. Similarly, the reasons recorded for reopening referred only to the earlier intimation under Section 143(1) and did not acknowledge the completed scrutiny assessment under Section 143(3).
The Principal Commissioner had merely recorded that the reasons had been perused and that the case was fit for issuance of notice under Section 148. According to the Tribunal, no material or record was referred to while recording such satisfaction, and the approval itself was signed but undated.
On these facts, the ITAT concluded that the sanction under Section 151 had been granted mechanically and without application of mind.
Even Administrative Approval Must Reflect Application of Mind
The Tribunal rejected the Revenue’s argument that sanction under Section 151 was merely an administrative act having no adverse bearing upon reassessment proceedings.
Referring to judicial principles concerning reasoned administrative decisions, the ITAT observed that even where an approval is administrative in character, it must demonstrate proper consideration and cannot be treated as an empty procedural formality. The absence of meaningful reasons and consideration of the relevant assessment history supported the assessee’s contention that the statutory safeguard under Section 151 had not been properly exercised.
Earlier Section 143(3) Assessment Was Material
A crucial factor in the Tribunal’s decision was the failure of both the reasons recorded for reopening and the sanctioning proforma to recognise that the assessee’s case had already undergone scrutiny assessment under Section 143(3).
The Tribunal considered this omission material because the existence of an earlier scrutiny assessment was directly relevant while determining whether the statutory conditions for reopening were satisfied. The sanctioning authority was expected to apply its mind to the complete factual and legal position before permitting reassessment.
The ITAT also relied upon its earlier decision in Anil Kumar Jain v. DCIT, ITA No. 475/Del/2025, which arose from the same search and seizure action and involved a similarly granted sanction under Section 151. Following that decision, the Tribunal held that the assumption of jurisdiction under Section 147 through issuance of notice under Section 148 was unsustainable.
Reassessment Quashed
The Tribunal ultimately held that the sanctioning order under Section 151 was invalid and, consequently, the reassessment proceedings had no legal foundation.
Accordingly, the reassessment order was quashed and the assessee’s appeal was allowed. Since the reassessment itself was annulled on the jurisdictional ground, the Tribunal did not adjudicate the remaining grounds relating to the additions on alleged bogus purchases, commission and other issues, treating them as academic and leaving them open.
Key Takeaway
The ruling reiterates that approval under Section 151 is a substantive statutory safeguard and not a routine formality. Where the sanctioning authority fails to consider material facts such as an earlier scrutiny assessment and records only a generic satisfaction without demonstrating application of mind, the sanction may be invalid. Once the jurisdictional approval fails, the consequential reassessment under Sections 147 and 148 cannot be sustained.