The Income Tax Appellate Tribunal, Delhi Bench, in M/s Singhal Fasteners Company Pvt. Ltd. v. ITO (ITA No. 1992/Del/2020, AY 2006-07), held that reassessment proceedings initiated under Sections 147/148 of the Income Tax Act, 1961 are invalid where the statutory approval for reopening is granted in a mechanical manner without independent application of mind. In the present case, the assessee had filed its return of income declaring ₹4,83,598, which was subsequently reopened on the basis of information received from the Investigation Wing alleging receipt of accommodation entries. The Assessing Officer completed the reassessment by making an addition of ₹80,80,000, which was confirmed by the Commissioner of Income Tax (Appeals).

During appellate proceedings before the Tribunal, the assessee raised an additional legal ground contending that the reasons for reopening were recorded solely on the basis of third-party information received from the Investigation Wing, without any independent verification or satisfaction by the Assessing Officer, and that the approval granted by the Additional Commissioner of Income Tax merely stated “Yes, I am satisfied,” indicating a mechanical sanction. The Tribunal admitted this additional ground as it involved a pure question of law, relying on the decision of the Hon’ble Supreme Court in National Thermal Power Corporation Ltd. v. CIT (229 ITR 383).

After examining the record and rival submissions, the Tribunal observed that the sanctioning authority failed to demonstrate any independent application of mind while granting approval for reopening the assessment. The Tribunal placed reliance on the binding judgment of the Hon’ble Supreme Court in CIT v. Goyanka Lime & Chemical Ltd. (64 taxmann.com 313), wherein it was held that reopening of assessment based on mechanical approval is invalid in law. The Tribunal also followed the decisions in ITO v. Virat Credit & Holdings Pvt. Ltd., Signature Hotels Pvt. Ltd. v. ITO (338 ITR 51), Chiranjiv Lal v. ITO, and Kishan Chand Madan v. ITO, which consistently held that mere recording of satisfaction without proper examination of material vitiates reassessment proceedings.

In view of the settled legal position, the Tribunal held that the approval granted under Section 148 in the present case was mechanical and devoid of due application of mind, rendering the reassessment proceedings bad in law. Accordingly, the reassessment was quashed and the appeal of the assessee was allowed. Since the legal issue was decided in favour of the assessee, the remaining grounds were held to be academic and were not adjudicated.

SOURCE LINK

https://itat.gov.in/public/files/upload/1767948713-uA3fp8-1-TO.pdf

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