The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings initiated against a transport company after finding that the approval furnished to the taxpayer under Section 151 of the Income Tax Act, 1961 was unsigned and undated.
The bench of Raj Kumar Chauhan (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that a valid sanction from the prescribed authority is a jurisdictional requirement for issuing a reassessment notice under Section 148. An approval that is neither signed nor dated cannot legally authorise the Assessing Officer to reopen an assessment.
The appellant/assessee was reportedly identified as a non-filer of its income tax return for Assessment Year 2012-13. Information available with the Income Tax Department indicated that the company had deposited cash amounting to ₹51 lakh in its bank account and had also received contract receipts of approximately ₹14.77 lakh during the relevant period.
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Based on this information, the Assessing Officer initiated proceedings under Sections 147 and 148 of the Income Tax Act. A notice under Section 148 was issued to the company on March 22, 2019.
The company subsequently filed its return of income in response to the reassessment notice. The reassessment proceedings culminated in an order under Section 143(3), read with Section 147 of the Act.
The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, upheld the action through an order dated September 26, 2024. The company thereafter approached the ITAT.
During the appellate proceedings, the company sought permission to raise an additional legal ground challenging the validity of the approval obtained under Section 151.
It argued that the reassessment proceedings were invalid because the Assessing Officer had not obtained a legally valid approval from the specified authority before issuing the Section 148 notice.
The company submitted that the additional ground involved a pure question of law, did not require investigation into fresh facts and went to the root of the Assessing Officer’s jurisdiction. It relied upon the Supreme Court’s decision in NTPC Ltd. v. CIT to support the admission of the ground.
The Revenue did not object to the admission of the additional legal ground. The Tribunal consequently admitted it for adjudication.
The taxpayer contended that the reassessment proposal had passed through two authorities—the Additional Commissioner of Income Tax and the Principal Commissioner of Income Tax.
According to the company, Section 151 identifies the authority competent to approve the issuance of a reassessment notice. Where the law requires approval from a specified authority, the prescribed procedure must be followed strictly.
The taxpayer argued that the approval relevant to its case was required to be granted by the Principal Commissioner. However, the records indicated the involvement of both the Additional Commissioner and the Principal Commissioner.
It further contended that the approval attributed to the Principal Commissioner did not bear a date, the name of the designated officer or a manual or digital signature.
The relevant endorsement merely stated that the authority had perused the reasons recorded by the Assessing Officer and was satisfied that it was a fit case for issuing a notice under Section 148.
The taxpayer maintained that this endorsement reflected a mechanical approval and did not demonstrate an independent application of mind by the sanctioning authority.
The Income Tax Department opposed the challenge and maintained that there was no infirmity in the approval granted under Section 151.
It argued that the statute did not prescribe any particular format in which the sanction had to be recorded. The Department also rejected the company’s contention that two separate approvals had been obtained.
According to the Revenue, the comments of the Additional Commissioner were only an endorsement and recommendation on the reasons recorded by the Assessing Officer. The final approval had been granted by the Principal Commissioner, Delhi-5, who was the competent authority.
The Department further submitted that the approval note was forwarded to the Assessing Officer through an official communication dated March 22, 2019, issued under the signature of an officer in the Principal Commissioner’s headquarters.
It also relied on judicial decisions holding that an approving authority is not required to record elaborate reasons when agreeing with the Assessing Officer’s reasons for reopening an assessment.
During the proceedings, the Department produced another copy of the approval which contained initials or a signature. Its contents, however, were the same as those contained in the copy available with the taxpayer.
After examining the material, the Tribunal found that the sanction furnished to the taxpayer neither carried a manual or digital signature nor mentioned a date.
The Bench refused to accept the Revenue’s reliance on a separate copy containing the authority’s initials. It observed:
“What is relevant is the copy shared with the assessee, not what is presumed to be kept in the assessment file.”
The Tribunal held that the validity of the reassessment proceedings had to be examined with reference to the document actually communicated to the taxpayer.
A signed document subsequently produced from the Department’s internal records could not cure the defects in the unsigned and undated approval furnished to the company.
The ITAT relied extensively on the Mumbai Tribunal’s decision in J Kumar Infraprojects Ltd. v. DCIT, which had examined the requirements governing the signing and authentication of income tax documents.
Section 282A provides that a notice or other document required to be issued by an income tax authority must be signed and issued in paper form or communicated electronically in accordance with the prescribed procedure.
The Tribunal explained that signing is not an empty formality. Where a document is issued physically, it must carry a manual signature. Where it is issued electronically, it must be authenticated using a valid digital signature in accordance with the prescribed procedure.
A signature establishes that the competent authority has adopted and approved the contents of the document. Authentication of the document’s origin cannot be treated as a substitute for the mandatory requirement of signing it.
The Bench referred to the Allahabad High Court’s rulings in Daujee Abhushan Bhandar Pvt. Ltd. v. Union of India and Vikas Gupta v. Union of India. Those decisions recognised signing and communication as distinct acts and held that a document must first be validly signed before it is issued or communicated electronically.
The Tribunal observed that Section 151 requires the specified authority to record its satisfaction on the reasons prepared by the Assessing Officer before a notice under Section 148 is issued.
Unless such satisfaction is validly recorded under the signature of the prescribed authority, the Assessing Officer does not acquire jurisdiction to issue the reopening notice.
The Bench also followed its earlier decision in Sanjay Kumar v. DCIT, where an undated approval under Section 151 was held to have no validity in law. In that case, the absence of a valid approval had rendered the entire reassessment proceeding void from its inception.
Applying the same principle, the Tribunal concluded that the unsigned and undated sanction in the present case was invalid.
The ITAT ultimately held that the Assessing Officer did not validly assume jurisdiction to issue the notice under Section 148.
The Tribunal consequently quashed the reassessment notice for want of a valid sanction under Section 151. The assessment order passed under Section 143(3), read with Section 147, for Assessment Year 2012-13 was also declared legally unsustainable and quashed.
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