The Calcutta High Court has set aside reassessment proceedings for Assessment Year 2017-18 after finding that the approval granted under Section 151 of the Income Tax Act, 1961 was issued in a mechanical manner without reflecting consideration of the assessee’s response to the notice issued under Section 148A(b).

The bench of Justice Smita Das De has observed that where an assessee has submitted a response to a notice under Section 148A(b), the sanctioning authority is required to consider that response while granting approval for issuance of a notice under Section 148. The sanction order incorrectly recorded that no response had been filed, even though the assessee had in fact submitted its response. The approval to be mechanical and held that the consequential order under Section 148A(d) could not be sustained.

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The matter arose from a writ petition challenging the order dated April 16, 2024 passed under Section 148A(d) of the Income Tax Act and the consequential notice issued under Section 148 for AY 2017-18.

The principal issue before the Court was whether the approval granted under Section 151 by the sanctioning authority, identified in the judgment as the CCIT, Kolkata-2, was legally valid. The assessee contended that the authority had failed to consider its response to the earlier notice under Section 148A(b).

The assessee pointed out that Column No. 15 of the sanction order specifically recorded that no response had been filed to the Section 148A(b) notice. According to the assessee, this recording was factually incorrect because a response had actually been submitted.

On this basis, it was argued that the sanction had been granted without proper application of mind. Since the order under Section 148A(d) was passed pursuant to the approval under Section 151, the assessee contended that the defect in the sanction also rendered the reassessment proceedings unsustainable.

The department sought to justify the entry made in the sanction order. However, it did not produce the relevant case records before the Court and instead relied upon a short affidavit.

The department explained that where a response to a Section 148A(b) notice is filed online, the response ordinarily gets reflected automatically in the sanction order. According to the Revenue, where the response is filed manually, it may not be reflected in the sanction order.

The Revenue therefore described the incorrect recording as an unintentional administrative oversight in the documentation process. It argued that the mistake was not deliberate and should not invalidate the sanction because, according to its submission, the sanctioning authority had actually considered the assessee’s response.

The Court, however, was not persuaded by this explanation.

After examining the material disclosed in the writ petition, the Court found that the assessee had in fact filed a response to the notice under Section 148A(b). The Court noted that this was also corroborated by the order dated April 16, 2024.

Significantly, although the sanctioning authority recorded in the sanction order that the draft order had been considered, the Court found that the sanction appeared to have been granted mechanically. The reason was that the sanction proceeded on the premise that no response had been filed by the assessee and contained no indication that the response actually submitted by the assessee had been considered.

The Court observed that, while recommending the case as fit for issuance of notice under Section 148, the sanctioning authority appeared to have merely considered the proposal of the Assessing Officer and the material on record. There was no reflection in the approval that the assessee’s response had been examined.

Accordingly, the Court concluded that the sanction was mechanical. Since the Section 148A(d) order had been passed on the basis of that sanction, the defect in the sanction also vitiated the Section 148A(d) order. The Court therefore set aside the order.

As a consequence of the Court’s finding regarding the defective sanction, the notice issued under Section 148 for AY 2017-18 was also set aside.

However, the Court clarified that the Revenue was not barred from initiating proceedings afresh. The authorities were permitted to issue a fresh notice and proceed from the stage of receipt of the response already filed by the assessee.

The Court specifically directed that, while deciding the proceedings afresh, the authority must consider the response submitted by the assessee in accordance with law.

The Court also addressed the limitation period applicable to the fresh proceedings.

It directed that, for the purpose of limitation for passing the order under Section 148A(d), the period of one month would commence when the jurisdictional Assessing Officer issues the relevant notice, provided that such notice is issued within four months from the date specified by the Court.

Thus, while the existing reassessment proceedings were invalidated, the judgment did not permanently prevent the Revenue from pursuing the matter. Instead, the authorities were permitted to restart the process from the stage at which the assessee’s response had been received, subject to the conditions laid down by the Court.

The High Court clarified that it had not examined the other grounds raised by the assessee. Those issues were expressly kept open.

The Court also observed that if the assessee was entitled to and sought any additional document, the same was to be supplied if found eligible. With these observations and directions, the writ petition was disposed of. There was no order as to costs.

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