Top Stories Reassessment Proceedings under Income Tax Act without Application of Mind: Delhi HC upholds order of ITAT [Read Order] The court observed that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of the imagination, the expression “Yes” could be considered to be a valid approval By Yogitha S. Yogesh – On March 16, 2024 5:03 pm – 3 mins read The Delhi High Court upheld the order of the Income Tax Appellate Tribunal [ “ITAT” ]  since the reassessment proceedings under the Income Tax Act, 1961 were without application of mind. Pioneer Town Planners Pvt Ltd, the respondent-assessee filed its income tax return [ “ITR” ] which was processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, a search operation was carried out on the premises of Shriji Group entities, of which the respondent-assessee was one of the concerns. Under the said search operation, reassessment proceedings were initiated against the respondent-assessee, whereby, the AO held that the respondent-assessee has taken accommodation entry amounting to Rs.4,79,00,000/- which had escaped assessment. Upon recording of “reasons to believe” by the concerned authority, a notice under Section 148 of the Act was duly issued to the respondent-assessee. Consequently, the respondent-assessee replied to the said notice with a request to consider the ITR it originally filed as the one filed in response to the notice under Section 148 of the Act. The provisions encapsulated under Section 143(3) read with Section 147 of the Act, the AO framed a reassessment order by making additions on account of unexplained (i) share premium and (ii) expenditure of commission for accommodation entries.

The total taxable value determined by the AO amounted to Rs.10,80,47,000/-.  The respondent-assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [“CIT (A)”]. The respondent-assessee challenged the aforesaid order passed by the CIT (A) before the ITAT, whereby, the appeal of the respondent-assessee has been allowed and it has been held that the AO initiated the reassessment proceedings based on borrowed satisfaction and without any application of mind.  Counsel appearing on behalf of the Revenue submitted that the mandate of Section 151 of the Act requires the prescribed authority while approving, to concur with the reasoning of the AO in the reasons recorded or else the approval would be denied by the approving authority. According to him, Section 151 of the Act stipulates that the concurrence of the prescribed authority is a matter of subjective satisfaction of the concerned authority and the rigour of law is duly followed as soon as the approving authority provides its consent for issuance of notice under Section 148 of the Act. He contended that the conditions envisaged in Section 151 of the Act stand satisfied till the time the wordings are unambiguous and cannot be mistaken for approval instead of rejection by the prescribed authority. He further submitted that it is only in cases where the prescribed authority differs from the reasoning assigned by the AO, that is it required to record its reasons for disagreement.

Counsel additionally submitted that the ITAT has erroneously taken the view that the AO had acted upon borrowed satisfaction from the Investigation Wing, without any independent application of mind. Per contra, counsel appearing on behalf of the assessee vehemently opposed the submissions advanced by the Revenue and submitted that the instant appeal raises no substantial question of law.  The PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of the imagination, the expression “Yes” could be considered to be a valid approval. In fact, the approval in the instant case is apparently akin to the rubber stamping of “Yes” in the case of Central India Electric Supply. The Court upheld the order of ITAT and dismissed the appeal.