PCIT Must Reflect an Independent Application of Mind Before Giving Approval for Reopening Assessment: ITAT

The Income Tax Appellate Tribunal (ITAT), Rajkot, has recently ruled that before issuing a reassessment notice under 148 of the Act, the designated authority must apply its own mind and then give its approval to reopen the case. The Tribunal further ruled that just being convinced that the case is appropriate for reopening without giving tangible material and relying on borrowed satisfaction is bad in law.

The assessee, Girish Lahori, challenged the reopening of the assessment under Section 148, arguing that the reasons recorded by the AO were factually incorrect. The AO had treated Rs 18,91,257 from F&O trading as income, leading to an estimated addition of the same amount. The CIT(A) also upheld the same. Therefore, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the reopening of the assessment under section 147/148 of the Income Tax Act, 1961.

The main argument of the assessee was the incorrect approval given by the ld. PCIT, which has stated, “Yes, I am Satisfied“. The assessee argued that the approval was mechanical and without the application of the mind.

The Tribunal noted that the approval given by the PCIT before reopening the assessment is mechanical in nature and the said authority did not give the reasons as to why it was satisfied with the reasons recorded by the AO. The Tribunal noted that PCIT gave the approval without application of mind and based on borrowed satisfaction. The Tribunal observed that the PCIT did not give any tangible material and just gave the approval, relying on the reasons recorded by the Assessing Officer.

Therefore, based on these facts, the Tribunal held that the approval given by the PCIT is incorrect and the reopening of the assessment proceeding is also invalid. Therefore, the reassessment proceedings were quashed by the Tribunal.