ITAT Quashes Reassessment for Mechanical Approval Under Section 151

The appellant, M/s. Exel Rubber (P) Ltd, challenged the reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961, for the Assessment Year 2014-15. The Assessing Officer (AO) had reopened the assessment based on information suggested by certain seized materials.

However, the petitioner argued that the mandatory approval required from the “prescribed authority” under Section 151 of the Act was granted mechanically. It was contended that the approving authority merely repeated the AO’s observations without any independent verification of the seized materials or the alleged escapement of income.

Issue Before Court: Whether the reassessment notice issued under Section 148 and the subsequent assessment order are valid if the prescribed authority granted the statutory approval under Section 151 without an independent application of mind.

ITAT’s Ruling: The ITAT allowed the appeal and quashed both the Section 148 notice and the resulting assessment order. The Tribunal observed that the approval granted under Section 151 is a crucial safeguard against arbitrary reopening of assessments. In this case, the Bench found that the prescribed authority had blindly followed the AO’s report without independent verification.

The Tribunal held that such “mechanical approval” is not in conformity with the law and renders the entire proceeding void ab initio. Since the very foundation of the reassessment was bad in law, the later assessment order could not be sustained.

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