2019 (1) TMI 941 - AT - Income Tax

Tribunal quashes reassessment: Section 148 notice invalid, appeal successful.

MARKS CONSOLIDATED BUSINESS LTD. Versus ITO, WARD 6 (2), NEW DELHI

The Tribunal allowed the appeal, quashing the reassessment proceedings due to the mechanical approval of the notice under Section 148 without proper ... Reopening of assessment - reasons recorded and satisfaction accorded is not within the meaning of section 151 - addition u/s 68 - reasons recorded and satisfaction accorded is not within the meaning of section 151 - Held that:- The satisfaction recorded and approval granted by the Addl. CIT, Range-6/Competent Authority is a mechanical and action has been taken mechanically because on perusing the reasons recorded, which demonstrates that Addl. CIT Range-6 has written “Approved” which establishes that the authority has not recorded proper satisfaction/approval, before issue of notice u/s. 148. AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the DIT (Inv.), New Delhi. We are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Issue of notice u/s. 148 of the I.T. Act, 1961 is not in accordance with section 151 of the I.T. Act, 1961, hence, the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and therefore, the same is hereby quashed - decided in favour of assessee. Issues Involved:1. Legality of the order passed under Section 144 read with Section 147 of the Income Tax Act, 1961.2. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.3. Legitimacy of the addition of Rs. 93,45,714/- under Section 68 of the Income Tax Act, 1961.4. Condonation of delay in filing the appeal.Issue-wise Detailed Analysis:1. Legality of the Order Passed Under Section 144 Read with Section 147 of the Income Tax Act, 1961:The assessee contested that the Assessing Officer (AO) erred in law and facts by passing the order under Section 144 read with Section 147, which is bad in law and against the facts and circumstances of the case. The Tribunal noted that the reopening of the assessment was based on information received from the Director of Income Tax (Investigation), indicating that the assessee received Rs. 1,53,11,000/- from various parties. The AO presumed that the assessee gave cash to these parties and received cheques after paying a commission. Consequently, the AO added Rs. 93,45,714/- to the income of the assessee under Section 68 of the Act.2. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:The assessee argued that the notice issued under Section 148 was not valid as the reasons recorded and satisfaction accorded were not within the meaning of Section 151 of the Income Tax Act, 1961. The Tribunal examined the approval process and found that the Additional Commissioner of Income Tax (Addl. CIT) granted approval in a mechanical manner, merely writing 'Approved' without proper satisfaction. The Tribunal referenced several case laws, including the Hon'ble Delhi High Court's decision in Pr. CIT vs. M/s NC Cables Ltd., which emphasized that the approval must reflect the application of mind. The Tribunal concluded that the reopening of the assessment was bad in law and deserved to be quashed.3. Legitimacy of the Addition of Rs. 93,45,714/- Under Section 68 of the Income Tax Act, 1961:The AO made an addition of Rs. 93,45,714/- under Section 68 by presuming that the assessee gave cash to parties and received cheques after paying a commission. The Tribunal did not specifically adjudicate on this ground as it quashed the reassessment on the basis of invalid approval under Section 151, rendering the issue academic.4. Condonation of Delay in Filing the Appeal:The assessee filed an application for condonation of delay of 283 days in filing the appeal, citing serious injury and medical treatment of the Director. The Tribunal considered the medical records and the affidavit submitted by the assessee, and in the interest of justice, condoned the delay. The Tribunal found the reasons for the delay plausible and supported by evidence, distinguishing the case laws cited by the Department.Conclusion:The Tribunal allowed the appeal filed by the assessee, quashing the reassessment proceedings on the grounds that the approval for issuing notice under Section 148 was granted mechanically without proper satisfaction, thus invalidating the reopening of the assessment. The other grounds of appeal were rendered academic and not adjudicated upon. The appeal was allowed, and the reassessment was quashed.Order Pronounced on 11-01-2019.