PCIT Failed To Satisfactorily Record Its Concurrence; Approval By Common Order Is Not Valid: Delhi HC Quashes Notice U/S 148 Income Tax Act

The Court was hearing a Writ Petition seeking to quash the impugned notice issued by the Respondent under Section 148 of the Act, along with the order disposing of objections and related proceedings. The petition also sought a Prohibition order directing the Respondents to refrain from acting on or taking any steps pursuant to the notice under Section 148 of the Act or any proceedings initiated thereunder for the Assessment Year 2015-16.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja perused Section 151 and observed, “…approval/sanction is neither an empty formality nor a mechanical exercise. The Competent Authority must apply its mind independently on the basis of material placed before it before grant of approval/ sanction….The approval is a safeguard and has to be meaningful and not merely ritualistic or formal.”

Advocate Salil Kapoor appeared for the Appellant and Advocate Sanjay Kumar appeared for the Respondent.

Brief Facts-

The Petitioner filed a revised income tax return for AY 2015-16, which was processed under Section 143(1) after which the respondent issued a notice under Section 148. The Petitioner declared the same income. Subsequently, a notice was issued by Respondent No. 3 under Section 143(2) based on Petitioner’s transactions with BKR Capitals Pvt. Ltd to which Petitioner objected and explained that it was a loan repayment from AY 2014-15. Respondents dismissed the objections and issued further notices under Section 142(1). The Petitioner filed the present Petition challenging the notice under Section 148 as illegal.

The Court perused Section 151 of the Act and said that the provision indicated that the prescribed authority must be “satisfied”, on the reasons recorded by the AO, that it is a fit case for the issuance of such notice. Thus, according to the Court, the satisfaction of the prescribed authority is a sine qua non for a valid approval.

The Court noted that PCIT issued a general order of approval for all the 111 cases and there was not even a whisper as to what material had weighed in the grant of approval in the present case. The Court said, “while the PCIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal.”

The Court mentioned the decision in The Principal Commissioner of Income Tax-7 vs. Pioneer Town Planners Pvt. Ltd. (2024) SCC OnLine Del 1685 and quoted, “Section 151 of the Act stipulates that the Commissioner of Income-tax (Appeals), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression "approved" says nothing. It is not as if the Commissioner of Income-tax (Appeals) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner.”

Accordingly, the Court said, “we are of the firm opinion that the PCIT has failed to satisfactorily record its concurrence and by no stretch of imagination, the approval granted by common order, could be considered to be a valid approval.”

The Court quashed and set aside the impugned notice issued by the respondent under Section 148 of the Act for the AY 2015-16 and the proceedings emanating therefrom.

Finally, the Court disposed of the Writ Petition.

Cause Title: VINOD KUMAR SOLANKI v. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE- 61-1, DELHI & ORS. (Neutral Citation: 2024:DHC:6132-DB)

Appearance:

Appellant: Adv. Salil Kapoor, Adv. Ananya Kapoor, Adv. Sumit Lalchandani and Adv. Utkarsh Gupta

Respondent: Adv. Sanjay Kumar & Adv. Easha

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