CIT vs. SPL’s Siddhartha Ltd (Delhi High Court)

DATE: (Date of pronouncement)
DATE: January 6, 2012 (Date of publication)

Click here to download the judgement (SPL_siddhartha_147_reopening_sanction.pdf)

S. 147: Sanction of CIT instead of JCIT renders reopening invalid

The AO issued a notice u/s 148 to reopen an assessment. As a s. 143 (3) order had not been passed & 4 years had elapsed, the AO ought to have obtained the sanction of the Joint/Additional CIT u/s 151(2). Instead, he routed the file through the Additional CIT and obtained the sanction of the CIT. On appeal by the assessee, the Tribunal struck down the reopening on the ground that correct sanction had not been obtained. On appeal by the department, HELD upholding the Tribunal:

(i) S. 151(2) requires the sanction to be accorded by the Joint/Additional CIT. The AO sought the sanction of the CIT. Though the file was routed through the Addl. CIT, the latter only made an endorsement “CIT may kindly accord sanction”. This showed that the Addl. CIT did not apply his mind or gave any sanction. Instead, he requested the CIT to accord approval. This is not an irregularity curable u/s 292B;

(ii) The different authorities specified in s. 116 have to exercise their powers in accordance with law. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. If the statute requires a thing to be done in a certain manner it has to be done in that manner alone. Also, the designated authority should apply his independent mind to record his satisfaction and it should not be at the behest of a superior authority.

See also Central India Electric Supply 333 ITR 237 (Del) where “mechanical sanction” was held invalid

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