ITAT Quashes Reassessment Due to PCIT’s Mechanical Approval

ITAT Quashes Reassessment Due to PCIT’s Mechanical Approval

The Income Tax Appellate Tribunal (ITAT), Delhi, has quashed a reassessment order over the PCIT’s mechanical approval given for reopening the case.

The assessing officer (AO) had issued an assessment order under section 147 based on the information that the assessee company, Sun Itech and Broadcast Private Ltd, had received a loan amount from a shell company. The AO made an addition of the same amount to the assessee’s income under Section 68 of the Income Tax Act. This decision was confirmed by the CIT(A).

The assessee challenged the reopening of the assessment before the Income Tax Appellate Tribunal (ITAT), Delhi. The main argument of the assessee was that the reassessment proceedings were initiated by the AO without obtaining a proper approval under Section 151 of the Income Tax Act, which was illegal and invalid.

The company claimed that the approval given by PCIT was in a mechanical manner and without the application of the mind, as it only mentioned the word “approved” without providing any reasoning.

The ITAT, after hearing the case, agreed with the company’s argument. It cited earlier rulings where courts had held that merely stamping “Yes, I am satisfied” without recording the reason for satisfaction is bad in law, as the same does not reflect an independent application of mind.

The Tribunal held that the approval granted by the PCIT was in a mechanical way and the same is invalid. Additionally, the reassessment proceedings initiated based on this approval are also invalid. As a result, the ITAT quashed the reassessment.