Unsigned Sanction Note Costs Revenue: ITAT Quashes Section 147 Proceedings
The assessee had not filed a return of income for the relevant year. On the basis of the information, the Assessing Officer issued a notice under Section 148 after recording reasons under Section 148A. During the assessment, it was noted that the assessee had invested Rs. 1,00,60,306 in time deposits with Corporation Bank. As no acceptable explanation was furnished, the Assessing Officer treated the deposits as unexplained investment under Section 69 read with Section 115BBE. The assessee went to the Dispute Resolution Panel and filed salary slips, passport, bank statements, information of previous FDRs and closure proceeds. The Panel still upheld the addition, and the final assessment order was made.
In appeal, the assessee raised a legal argument questioning the sanction under Section 151. It was pointed out that the approval note did not bear any physical or digital signature and that the satisfaction recorded was only mechanical. The Tribunal examined the record and found that the recommending and approving authorities had merely endorsed what was placed by the Assessing Officer, without showing any independent reasoning or application of mind.
Issue Raised: Whether reassessment under Section 147 could survive when the sanction under Section 151 was unsigned and recorded mechanically without independent satisfaction.
ITAT’s Decision: The Tribunal observed that the sanction required under Section 151 is not a mere formality but a statutory safeguard. On examining the approval form, it was evident that neither a physical nor digital signature was affixed and that the satisfaction recorded was in a standard format without reference to the facts of the case. Both the recommending authority and the approving authority had reproduced the proposal of the Assessing Officer, which showed that there was no independent application of mind. Such mechanical recording of satisfaction, according to the Tribunal, does not meet the mandate of Section 151. In these circumstances, the very foundation of the reassessment was held to be invalid.
On this reasoning, the Tribunal quashed the notice issued under Section 148, the order passed under Section 148A(d), and the reassessment completed under Section 147 r.w.s.144C(13). As the reassessment itself was set aside, the addition of Rs. 1,00,60,306 made under Section 69 and taxed under Section 115BBE was treated as infructuous. The appeal was allowed in favour of the assessee.
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