Reopening Based on Mechanical Approval of CIT is Bad in Law: ITAT

The Income Tax Appellate Tribunal (ITAT), Delhi, has ruled that reopening an assessment based on mechanical approval and without the independent application of mind by the tax authorities is bad in law.

The assessee company, Singhal Fasteners Company, filed its Income Tax Return (ITR), reporting Rs 4,83,598 income. Based on the information received by the investigation wing, the AO reopened the company’s case under section 147 of the Income Tax Act and issued notice under section 148 of the Income Tax Act. The assessment was completed, and the AO made an addition of Rs 80,80,000.

The assessee challenged the reopening of the assessment before the Income Tax Appellate Tribunal (ITAT), arguing that the AO recorded reasons for reopening without independent application of mind and just relied on the investigation wing information. Further, the approval for the reopening assessment by the Additional CIT was in a mechanical manner. The assessee argued that Additional CIT did not apply his mind independently and simply stated, “Yes, I am satisfied,” without mentioning the reasons for being satisfied to initiate the reopening.

The ITAT agreed with the assessee’s contentions that the approval was given in a mechanical manner and reassessment proceedings initiated on such approval are invalid. Therefore, the reassessment was quashed by the Tribunal.