ITAT Quashes Reassessment as Tax Department Fails to Produce Section 151 Approval

The ITAT Delhi allowed the assessee’s appeal and quashed the reassessment proceedings after holding that the non-supply of approval under Section 151 of the Income Tax Act rendered the reassessment invalid.

The assessee’s case was reopened through a notice under Section 148 dated 31.03.2022. The reopening was based on allegations that the assessee had purchased two properties at values lower than their stamp duty valuations, resulting in a difference of Rs 48 lakh. The Assessing Officer concluded that income had escaped assessment and subsequently made an addition of Rs 48 lakh under Section 56(2)(x) of the Act.

The assessee challenged the assessment before the CIT(A), who dismissed the appeal and upheld the addition. The assessee then appealed before the ITAT and also raised an additional legal ground contending that the reassessment proceedings were invalid because the Revenue failed to provide the approval or sanction obtained under Section 151 despite specific requests made through an RTI application.

The assessee argued that the issue was purely legal and did not require any fresh investigation of facts. The RTI response stated that, upon examination of the ITBA portal and records forwarded by the concerned Assessing Officer, no such approval document was available in the file records or the ITBA system.

The Tribunal admitted the additional ground, observing that it was a pure question of law and relying on the Supreme Court’s decision in National Thermal Power Company Ltd. v. CIT.

On merits, the Tribunal noted that despite repeated requests by the assessee and the RTI application, the Revenue failed to furnish a copy of the approval under Section 151. The Departmental Representative also acknowledged that the requested documents were not found in the records forwarded by the concerned Assessing Officer. Although the order passed under Section 148A(d) mentioned that prior approval of the Principal Commissioner had been obtained, the actual approval document was never supplied.

The Tribunal referred to its earlier decision in Arpit Goel v. ITO, where reassessment proceedings were quashed because the Revenue could neither demonstrate nor provide the approval required under Section 151. In that case, the Tribunal had held that reassessment proceedings undertaken without the mandatory approval of the competent authority were bad in law and void ab initio.

Applying the same reasoning, the Tribunal held that the failure to supply the approval under Section 151 amounted to non-compliance with the prescribed procedure. In view of the factual position and documentary evidence on record, the reassessment proceedings and the consequential assessment order could not be sustained.

Accordingly, the ITAT quashed the reassessment proceedings and the assessment order, allowed the additional ground raised by the assessee, and allowed the appeal.