The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment proceedings holding that the common Principal Commissioner of Income Tax (PCIT) approval for 111 cases shows non-application of mind.

The bench of Mahavir Singh (Vice President) and Manish Agarwal Accountant Member) ruled that the sanctioning authority had granted approval for reopening assessments in 111 different cases through a single common order-sheet entry, making the reassessment proceedings legally unsustainable. The mandatory approval granted by the Principal Commissioner of Income Tax (Pr. CIT) under Section 151 of the Income-tax Act, 1961 was merely mechanical and lacked independent application of mind.

The appellant/assessee had filed his income tax return for AY 2013-14 declaring a total income of ₹58.64 lakh.

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Subsequently, based on information received through the Income Tax Department’s Insight Portal, the Assessing Officer (AO) alleged that the assessee had received accommodation entries amounting to ₹68 lakh from M/s Bhagwati Trading Co., an entity reportedly engaged in providing bogus entries. 

On the basis of this information notice under Section 148 was issued on 28 March 2021. As the assessee allegedly did not comply with various notices, the reassessment was completed ex parte. The AO made an addition of ₹68 lakh under Section 69A, treating it as unexplained money. The assessed income consequently increased to ₹1.26 crore. 

The Commissioner (Appeals) later upheld the reassessment, prompting the assessee to approach the ITAT.

Before the Tribunal, the assessee primarily challenged the validity of reopening itself, arguing that the reassessment notice was issued beyond four years. Mandatory sanction under Section 151 was granted mechanically. The Principal CIT failed to examine individual facts before granting approval.

The Tribunal examined the approval records and found that the assessee’s case appeared at Serial No. 12 in a list of 111 assessees, all of whom received approval through a single order-sheet dated 28 March 2021. 

The Bench noted that the Principal CIT merely recorded a generic satisfaction stating that all 111 cases appeared fit for reopening after a “careful perusal” of the information and reasons recorded.

However, the Tribunal observed that approvals from different Assessing Officers reached the Principal CIT between 26 March and 28 March 2021, all approvals covering multiple assessment years and different taxpayers were granted together on one day, no material suggested that each case had been examined independently. 

According to the Tribunal, such an approach demonstrated a complete absence of individual consideration.

It held that granting a blanket approval for a large number of taxpayers through a common order indicated non-application of mind, defeating the very object of Section 151.

The Tribunal referred extensively to the Delhi High Court’s decision in Sabh Infrastructure Ltd. v. ACIT, where the High Court had laid down safeguards governing reassessment proceedings.

Among the important principles reiterated were reasons for reopening must clearly disclose the basis of belief, documents relied upon should accompany the recorded reasons, objections raised by taxpayers must receive reasoned disposal, reopening cannot become a routine administrative exercise. 

The ITAT observed that these safeguards are intended to prevent arbitrary reopening of completed assessments.

The Tribunal also relied upon the Bombay High Court judgment in Saraswat Co-operative Bank Ltd. v. ACIT, where the Court had held that sanction under Section 151 is not an empty formality but an important statutory safeguard. The High Court had emphasised that the approving authority must independently examine both facts and law, approval must not be granted mechanically, arbitrary sanction vitiates the entire reassessment process. 

The ITAT found these observations directly applicable to the present case.

The Tribunal further relied upon its earlier decision in Smt. Sunita Bhardwaj, where reassessment proceedings based on the very same common approval covering multiple assessees had already been quashed.

That earlier order had similarly concluded that the Principal CIT had failed to apply independent judgment while approving reopening notices. 

Following judicial consistency, the Bench adopted the same reasoning in the present appeal.

The department argued that after the insertion of Section 292BC, procedural defects in approvals should not invalidate reassessment proceedings.

However, the Tribunal rejected this argument by noting that the impugned approval had been granted on 28 March 2021, Section 292BC became effective only from 1 April 2021, and therefore, the new provision had no application to the present case. 

The Tribunal held that approval under Section 151 had been granted mechanically, the Principal CIT had failed to consider individual facts, reopening based upon a common approval for 111 cases violated statutory safeguards, consequently, the reassessment proceedings initiated under Section 147 were invalid.

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