Reassessment Invalid if PCIT Uses ‘May’ Instead of ‘Is’ | ITAT

Case Details: Rungta Irrigation Ltd. vs. ACIT - [2025] 174 taxmann.com 682 (Kolkata-Trib.)

Judiciary and Counsel Details

• Pradip Kumar Choubey, Judicial Member & Rajesh Kumar, Accountant Member
• Devesh Poddar, AR for the Appellant.
• Sailen Samadder, Addl. CIT

Facts of the Case

The assessee filed its return of income for the relevant assessment year. The case was selected for scrutiny, and the assessment was framed under section 143(3). Subsequently, a search operation was conducted on the assessee’s premises, and notice under section 148 was issued for reassessment of income. On perusal of the reasons recorded, the assessee contended that the reasons were recorded on borrowed satisfaction.

The Assessing Officer (AO) rejected the assessee’s contention and passed the reassessment order. On appeal, the assessee challenged the validity of the assessment proceeding under section 143 on the ground of borrowed satisfaction. However, the issue of invalid approval under section 151 was not present and was raised for the first time before the Tribunal.

ITAT Held

The Tribunal held that the Joint Commissioner of Income Tax (JCIT) approved mechanically without any independent satisfaction and application of mind. Satisfaction cannot be borrowed or done mechanically; the competent authority has to apply its mind to the facts placed before it by the AO, and only after recording an objective satisfaction does it have to approve.

The Hon’ble Delhi High court in the case of Capital Broadways (P) Ltd. v. ITO [2024] 167 taxmann.com 533/301 Taxman 506 (Delhi) while dealing with the issue of according the approval u/s 151 has held that the prescribed authority referred to in section 151 must be “satisfied” on the reasons recorded by the Assessing Officer that it is a fit case for the issuance of such notice.

Therefore, the satisfaction of the prescribed authority is a sine qua non for a valid approval. The competent authority must act independently based on the material presented before the grant of approval. Mere repetition of the statute’s words, mere rubber-stamping of the letter seeking sanction, or similar words like ‘Yes, I am satisfied’ will not satisfy the law’s requirement.

Therefore, the approval granted by the JCIT was held to be invalid.

List of Cases Referred to

• Vidarbha Industries Power Ltd. v. Axis Bank Ltd [2022] 140 taxmann.com 252 (SC) (para 5)
• State of Kerala v. Kandath Distilleries [Civil Appeal No. 1642 of 2013 (SC), dated 22-2-2013] (para 5)
• B. Premannand v. Mohan Koikal [Civil Appeal No. 2684 of 2007, dated 16.03.2011 (SC)] (para 6)
• CIT v. SPL’S Siddhartha Ltd. [2012] 17 taxmann.com 138/204 Taxman 115/345 ITR 223 (Delhi) (para 15)
• SBC Minerals (P.) Ltd. v. Asstt. CIT [2024] 167 taxmann.com 113/475 ITR 360 (Delhi) (para 15)
• Central India Electric Supply Co. Ltd. v. ITO [2011] 10 taxmann.com 169/202 Taxman 86/333 ITR 237 (Delhi) (para 17)
• Capital Broadways (P.) Ltd. v. ITO [2024] 167 taxmann.com 533/301 Taxman 506 (Delhi) (para 18).