Tribunal quashes reassessment due to lack of independent assessment, invalidating reopening under Section 151.

The Tribunal allowed the appeal, quashing the reassessment proceedings and deleting the addition under Section 68. The invalidity of the assessment reopening was due to the AO's failure to independently apply his mind and the mechanical approval under Section 151. The decision was based on precedents emphasizing the necessity of independent assessment actions.

---

---

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Application of mind by the Assessing Officer (AO) in recording reasons for reopening.
3. Mechanical approval under Section 151 for issuance of notice under Section 148.
4. Validity of the addition made under Section 68 of the Act.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The reopening of the assessment was challenged on the grounds that the AO did not apply his mind independently and relied solely on the information provided by the Investigation Wing. The Tribunal observed that the reasons to believe recorded by the AO were mechanical and based on borrowed satisfaction from the Investigation Wing. The AO did not independently verify the material or information before recording the reasons for reopening. The Tribunal cited several case laws, including ACIT vs. Dhariya Construction Co. (2010) 328 ITR 515 (SC) and PCIT vs. G & G Pharma India Ltd. (2016) 384 ITR 147 (Delhi), to support its view that reopening based on borrowed satisfaction is invalid.

2. Application of Mind by the AO:
The Tribunal noted that the AO failed to apply his mind independently to the material provided by the Investigation Wing. The reasons recorded for reopening did not disclose the nature of the alleged accommodation entries and were merely a reproduction of the conclusions drawn by the Investigation Wing. The Tribunal emphasized that it is a prerequisite for the AO to apply his mind to the material/statement supplied by the Investigation Wing. The Tribunal relied on the decision in Pr CIT v. RMG Plyvinyl (I) Ltd. (2017) 83 taxmann.com 348 (Delhi), which held that the AO must independently verify the information before forming a belief that income has escaped assessment.

3. Mechanical Approval under Section 151:
The Tribunal found that the approval granted by the Joint Commissioner of Income Tax (JCIT) under Section 151 was mechanical. The JCIT merely stated, "Yes, I am satisfied that this is a fit case for issue of notice u/s. 148 of the I.T. Act," without any detailed reasoning or application of mind. The Tribunal cited the decision in CIT vs. S. Goyanka Lime & Chemical Ltd. (2015) 64 taxmann.com 313 (SC), where the Supreme Court held that mechanical approval without application of mind renders the reopening invalid.

4. Validity of the Addition under Section 68:
The AO added Rs. 1.30 crores to the assessee's income under Section 68, treating it as unexplained cash credit, and also added Rs. 2,34,000 as commission paid for obtaining accommodation entries. The Tribunal, having found the reopening invalid, did not delve into the merits of the addition under Section 68. The Tribunal quashed the reassessment proceedings and deleted the addition, emphasizing that the entire process of reopening was flawed due to lack of independent application of mind and mechanical approval.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the reassessment proceedings and deleting the addition made under Section 68. The decision was based on the finding that the reopening of the assessment was invalid due to the AO's failure to apply his mind independently and the mechanical approval granted under Section 151. The Tribunal's decision was announced on 14th January, 2021.

---