Section 151: Sanction for Issue of Notice - An Important Safeguard

Introduction

Section 151 of the Income Tax Act 1961(Act), provides that Assessing officer (AO) has to take approval from the higher authority before issuing the notice u/s 148. AO, by the provisions of section 147 of the Act, has the power, to reopen the already completed Assessment.

Section 147 is Obviously, a revenue-friendly provision, but the Act, also provides safeguards, before the AO can, use the canons of the jurisprudence. These safeguards are necessary, since AO seeks to disturb, the settled position and assesse can be troubled, with reopening issues without satisfactory reasons. One of such safeguards is section 151 of the Act.

Although, Section 151 has been made otiose, for the reassessment notices issued on or after 1^st day of April' 2021 but it still, having wide ramifications, for the reassessment notice issued on or before 31^st day of March 2021.

Sanction of issue of notice

Here, it will be apt to reproduce the relevant pat below:

"151. Specified authority for the purposes of section 148 shall be, -

(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year.]"

The law here, is crystal clear, for specifying the higher authority. Different Authorities has been specified in section 116 of the Act, have to exercise their power in accordance with the law. If the power conferred, on a particular authority are arrogated by other authority, without the mandate of law. It will create chaos, in the administration of law & hierarchy of administration will mean nothing.

It is an established principle of the law, if a particular authority has been designated, to record satisfaction, then that authority alone, should apply his independent mind. The satisfaction of one authority cannot be substituted by the satisfaction of other authority.

Before issuing the notice u/s 148, AO has to apply his mind and act in due diligence manner but largely, it has been seen in many cases, AO exercised his power very casually, in a routine & perfunctory manner. If the notice has been approved, from other authority as specified, under the law. Even though it is a mere irregularity committed by AO & was rectifiable u/s 292B of the Act. But Still, the Judiciary is usually is not convinced. The Appellant finally get relief after judicial power quashes the notice in such cases.

There have been many judgments in various courts asserting this view, namely CIT vs SPL's Siddhartha Ltd. (2012) 345 ITR 223 (Delhi HC), United electrical Co. Private Limited Vs CIT (220) 258 ITR 317 (Delhi HC). Herein, it is again & again reiterated, that Section 151 cannot be taken, lightly by AO, since it is an important safeguard for the notice & not just an empty formality.

Some courts went ahead of the decisions and observed that even though detailed reasons, are not required to be given, by the approving authority however there has to be some discussion, which reflects application of mind, after considering the facts of the case. The Delhi High Court in the case of Pr. CIT vs. M/s NC Cables Ltd. in ITA No. 335/2015 has held as under:-

"Section 151 of the Act clearly stipulates that the CIT(A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved' says nothing. It is not as if the CIT(A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner"

Still, it has been repeatedly observed that, higher authority merely signs the approval, without displaying the application of mind. Hence leads to invalidity & defectiveness of notice and indeed the entire proceedings are quashed.

Conclusion

In the Income Tax Act 1961, Fiscal authorities have been provided with sufficient powers to prevent tax evasions. Reopening of assessment is not the new weapons in the armoury of the authorities. The laws is being shaped to be in consonance with, and not in violation of, the fundamental rights of the person (Part –III of the Constitution).

With Rights, comes Responsibilities. The aggrieved should oversee that, all the responsibilities of the authorities, has been duly acted upon. Here, it has been highlighted, the importance of the approval to be granted by the higher authorities. Any erroneous or insufficient approval, can destroy the very validity of the proceedings which could have been otherwise initiated validly.