ITAT Quashes Reassessment for citing Invalid Section Reference by AO

After obtaining approval under Section 151, the Assessing Officer (AO) reopened the assessee’s assessment for AY 2006-07. However, the AO mistakenly cited Section 147(C), which wasn’t applicable for that year. The assessee contested the reassessment, claiming it was approved without proper consideration. The Tribunal ruled it invalid, since the reopening relied on a provision that didn’t exist, and the sanctioning authority didn’t address the issue. The assessee then filed a cross-objection with the Income Tax Appellate Tribunal, protesting the reassessment order.

Main Issue: Whether the Assessing Officer’s direct application of Rule 8D and failure to document the reasons for rejecting the taxpayer’s own computation can uphold the disallowance under Section 14A.

Tribunal Held: The Tribunal made it very clear that citing a non-existent provision for reopening cannot be brushed aside as a minor error. The AO had filled out the approval form mentioning Section 147(C), which didn’t exist in the statute for AY 2006-07, and the Addl. CIT blindly approved it without correcting or noticing the flaw.

The Tribunal leaned heavily on its earlier rulings in similar matters, where mechanical or non-speaking approvals under Section 151 were all held to be bad in law. The Tribunal also referred to the SC’s judgment in Chhugamal Rajpal and the MP High Court’s decision in S. Goyanka Lime & Chemicals, which was upheld by the Apex Court, to emphasise the importance of mindfully granted approval under Section 151.

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