ITAT Quashes Reassessment Over Mechanical Approval Under Section 151

Background

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has quashed reassessment proceedings initiated against civil contractor Gopal Anil Kumar for Assessment Year 2018–19, holding that the approval granted for reopening the assessment under Section 151 of the Income Tax Act was based on an incorrect factual assumption and reflected non-application of mind. The assessee, engaged in civil works contracts through his proprietorship firm M/s Sri Chowdeshwari Enterprises, had originally filed his return of income on 16 July 2018 declaring total income of ₹83.45 lakh. Subsequently, a search under Section 132 of the Income Tax Act was conducted on 2 December 2021 at his business premises and residence. Based on this search, the Assessing Officer reopened the assessment under Section 147 and completed reassessment by determining income at ₹3.32 crore after making additions of ₹2.48 crore, including unexplained credits under Section 68 and disallowances under Section 37.

During appellate proceedings, the assessee challenged the validity of the reopening itself. It was argued that the Principal Commissioner of Income Tax (PCIT) had granted sanction under Section 151 on the erroneous assumption that the assessee had not filed any return of income for the relevant assessment year. However, the record clearly showed that the assessee had filed his return in July 2018 and even the reassessment order itself acknowledged this fact. The Tribunal observed that the very basis of the sanction was therefore incorrect and contrary to the factual record.

Findings

The Tribunal emphasized that sanction under Section 151 is not a mere formality but a jurisdictional safeguard intended to prevent arbitrary reopening of completed assessments. The sanctioning authority must apply its mind to the reasons recorded by the Assessing Officer and arrive at an objective satisfaction that income has escaped assessment. In the present case, the approval was granted mechanically and based on an incorrect premise that the assessee was a “non-filer.”

Holding that such approval reflects non-application of mind, the Tribunal ruled that the sanction under Section 151 was invalid. Consequently, the notice issued under Section 148 and the reassessment order passed under Section 147 were declared void and quashed. The appeal filed by the assessee was therefore allowed.