2019 (10) TMI 736 - AT - Income Tax

Invalid initiation of tax proceedings under sections 147/148 due to mechanical approval. Reassessment quashed.

DHARMENDER KUMAR C/O RAJ KUMAR & ASSOCIATES Versus ITO, WARD 65 (5), NEW DELHI

The Tribunal found the initiation of proceedings under sections 147/148 to be invalid due to mechanical and non-reasoned approval under section 151. ... Reopening of assessment u/s 147 - absence of approval u/s. 151 - addition u/s. 69A as alleged unexplained cash deposit in savings bank account - HELD THAT:- Addl. CIT, Range-65, New Delhi, I find that the approval granted by the Addl. CIT, Range-65, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it is not coming out as to which material; information; documents and which other aspects have been gone through and examined by the Addl. CIT, Range-65, New Delhi for reaching to the satisfaction for granting approval. AO has mechanically issued notice u/s. 148 Approval granted by the Addl. CIT,Range-65, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings issue of notice u/s. 148 of the I.T. Act, 1961 and is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice issued u/s. 148 of the Act is invalid and accordingly the reopening in this is bad in law and therefore, the same is hereby quashed. Accordingly, the ground raised by the assessee is allowed. Issues Involved:1. Validity of initiation of proceedings under sections 147/148.2. Absence of proper approval under section 151.3. Addition of Rs. 13,26,000/- under section 69A as unexplained cash deposit.Issue-wise Detailed Analysis:1. Validity of initiation of proceedings under sections 147/148:The assessee argued that the initiation of proceedings under sections 147/148 was without jurisdiction, mechanical, and without application of mind. The Tribunal examined the reasons recorded for initiating proceedings under section 148 and found that the approval granted by the Additional Commissioner of Income Tax (Addl. CIT) was mechanical and lacked application of mind. The Tribunal noted that the approval did not specify which materials, information, or documents were examined by the Addl. CIT to reach satisfaction for granting approval. This lack of detailed examination rendered the initiation of reassessment proceedings invalid. The Tribunal's view was supported by precedents such as United Electrical Company (P) Ltd. vs. CIT and CIT vs. S. Goyanka Lime & Chemical Ltd., where similar mechanical approvals were deemed invalid.2. Absence of proper approval under section 151:The Tribunal highlighted that the approval for issuing notice under section 148, as required by section 151, was granted in a mechanical manner. The Addl. CIT's approval merely stated, 'Yes, I am satisfied on the reasons recorded by AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act, 1961,' without detailing the basis for this satisfaction. This lack of specific examination and reasoning was found to be insufficient for valid approval under section 151. The Tribunal relied on the judgments in United Electrical Company (P) Ltd. vs. CIT and CIT vs. S. Goyanka Lime & Chemical Ltd., which emphasized the need for a detailed and reasoned approval process.3. Addition of Rs. 13,26,000/- under section 69A as unexplained cash deposit:The assessee contended that the addition of Rs. 13,26,000/- as unexplained cash deposit in his savings account was unwarranted and unjustified. The Tribunal noted that the assessee had provided various explanations for the cash deposits, including money received from the Land Acquisition Collector, gifts from family members, interest-free loans from friends, and proceeds from the sale of gold jewelry. However, the Assessing Officer (AO) found discrepancies in these explanations, such as the absence of cash withdrawals from the joint account and the lack of original bills for the jewelry sale. Despite these findings, the Tribunal did not delve into the merits of this issue in detail, as it had already quashed the reassessment proceedings on the grounds of invalid initiation and approval.Conclusion:The Tribunal concluded that the reassessment proceedings were invalid due to the mechanical and non-reasoned approval under section 151. Consequently, the notice issued under section 148 was deemed invalid, and the reassessment was quashed. The appeal was partly allowed, with the primary ground of invalid initiation and approval being upheld. The other grounds were dismissed as they were not raised by the assessee. The Tribunal's decision was pronounced on 16-10-2019.