PCIT’s Approval Based Solely on AO’s Recorded Reasons Reflects Non-Application of Independent Mind: ITAT

The assessee, Anchor Alloys (P) Ltd’s case was reopened based on the allegation of escapement of income towards the receipt of the share application money. The AO in the original assessment proceedings had asked the assessee to submit the details of the amount received from the share application money. The assessee had furnished all the required details, including bank statements, ITR, PAN details, share application form, share allotment letter and audited financial statements. The case was reopened after several years.

The assessee company filed an application seeking information under the Right to Information Act, 2005. The assessee had asked whether the reasons for reopening their case under section 147 were recorded, and the assessee also called for the certified copy of the same and further asked whether the approval under section 151 was obtained from the PCIT.

From the copies of the form mentioning the reasons for initiating the penalty under section 147 and obtaining approval of the PCIT under section 151(1), it was observed that the PCIT’s recorded satisfaction was “as per annexure“, which shows that he did not apply his mind independently and just relied on the reasons forming part of Annexure A to grant approval under section 151.

Therefore, the assessee argued that the reopening was invalid, saying that the approval under section 151 was not granted in accordance with law. Further, it was also contended that the reopening was beyond the period of four years.

The ITAT agreed with the assessee’s contention and said that there was no failure on the part of the assessee, as they had made the required submissions. Further, the Tribunal highlighted that giving approval based on the reasons recorded in Annexure A is bad and shows the non-application of an independent mind. Therefore, the tribunal quashed the reassessment.