Reassessment — Notice — Sanction of prescribed authority — To be obtained prior to issue of notice — Approval granted after issue of notice — No valid explanation by cogent material that physical approval was granted before issuance of notice — Approval saying merely “yes, I am satisfied” — Non-application of mind on part of specified authority — Notice not valid

Reassessment — Notice — Sanction of prescribed authority — To be obtained prior to issue of notice — Approval granted after issue of notice — No valid explanation by cogent material that physical approval was granted before issuance of notice — Approval saying merely “yes, I am satisfied” — Non-application of mind on part of specified authority — Notice not valid

For the A.Y. 2014-15, the Assessing Officer digitally issued a notice u/s 148 of the Income-tax Act, 1961 against the assessee and furnished the reasons for reopening. The notice was uploaded at 2.40 p.m. on 31st March, 2019 on the portal under the digital signature of the Assessing Officer and the copy of the approval u/s 151 was signed at 2.55 p.m. on 31st March, 2019 by the specified authority.

The assessee filed a writ petition and challenged the validity of notice on the ground that the notice u/s 148 was issued without prior sanction u/s 151 and that sanction had been granted without application of mind by the specified authority. The Bombay High Court allowed the writ petition and held as under:

“i) Prior approval of the superior officer as contemplated by section 151 of the Income-tax Act, 1961 operates as a shield against arbitrary exercise by the Assessing Officer of the power conferred on him u/ss. 147 and 148. The power to grant prior approval has been conferred on the superior officer so that the superior officer shall examine the reasons, material or grounds and adjudicate whether they are sufficient and adequate to the formation of necessary belief on the part of the Assessing Officer. Therefore, it is necessary for the superior officer to apply his mind and record his reasons howsoever brief so that the Assessing Officer’s belief is well reasoned and bona fide.

ii) The remark on the part of the superior authority must indicate application of mind by giving reasons for prior approval. The expression “no notice shall be issued” cannot be construed to mean post facto approval. The expression “no notice shall be issued” reflects the intention of the Legislature to indicate that prior approval is the sine qua non before issuance of notice u/s. 148. The sanction to be granted by the authority u/s. 151 has to be prior in point of time of issuance of notice u/s. 148.

iii) There was no prior sanction granted u/s. 151 by the Joint Commissioner before issuance of notice u/s. 148. Therefore, the jurisdictional condition of complying with section 151 was not satisfied. The explanation furnished in the order disposing of the objections of the assessee by the Assessing Officer that initially physical approval was granted and thereafter online approval was granted was not supported by any material on record. In the absence of valid explanation by cogent material the explanation in the order disposing of the objections of the assessee by the Assessing Officer that physical approval was granted before issuance of notice under section 148 could not be accepted.

iv) In his order of sanction, the Joint Commissioner had merely recorded his approval as “Yes, I am satisfied”. There was non-application of mind on the part of the Joint Commissioner while granting sanction u/s. 151.”