Reassessment Quashed: Unsigned Approval Under Section 151 Renders Notice Void Ab Initio

Reassessment Quashed: Unsigned Approval Under Section 151 Renders Notice Void Ab Initio

Issue

Whether a notice issued under Section 148 for reopening an assessment is valid if the mandatory sanction/approval required under Section 151 from the Principal Commissioner of Income Tax (PCIT) is not signed by the competent authority.

Facts

• Background: For AY 2020-21, the assessee filed a return declaring Nil income.

• Trigger for Reopening: A search was conducted on the Galaxy Group and certain entry operators. Documents seized suggested the assessee was a beneficiary of an accommodation entry of Rs. 11,00,000/-.

• The Process: The Assessing Officer (AO) sought approval from the competent authority under Section 151 to reopen the case. A notice under Section 148 was subsequently issued on 22.03.2024.

• The Defect: The assessee challenged the validity of the reopening on a technical ground. It was pointed out that the approval document (appearing at pages 68-71 of the paper book), which bore the name of “PCIT, Delhi-7,” was not signed by the said authority.

• Lower Authorities: The AO completed the assessment adding the amount, and the CIT(A) upheld the validity of the proceedings despite the objection regarding the unsigned approval.

Decision

• The ITAT Delhi Bench allowed the appeal and quashed the reassessment order.

• Invalid Approval: The Tribunal held that the approval granted under Section 151 is a statutory safeguard. The document granting such approval must be signed by the competent authority to demonstrate application of mind and valid authorization.

• Fatal Defect: Relying on precedents like J Kumar Infraprojects Ltd. v. DCIT, the Tribunal ruled that an unsigned approval is no approval in the eyes of the law.

• Outcome: Since the foundation of the reassessment (the Section 151 approval) was invalid, the consequential notice under Section 148 was held to be void ab initio, arbitrary, and illegal.

Key Takeaways

• Signatures Matter: In tax proceedings, valid jurisdiction flows from valid documentation. A sanction or approval under Section 151 must be authenticated by a signature (physical or digital). An unsigned approval sheet is a fatal jurisdictional defect.

• Section 151 Safeguard: The requirement for higher authority approval is meant to prevent arbitrary reopening by AOs. Courts view this strictly; it cannot be treated as a mechanical or empty formality.

• Quashing without Merits: Even if there is evidence of tax evasion (like accommodation entries), the entire proceeding can be quashed if the department fails to follow the strict procedural mandates for assuming jurisdiction.