TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 328
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....urisdiction and bad in law? II) Whether on the facts and in the circumstances of the case when the jurisdictional aspect in according the approval for reopening was absent, the action of the learned Tribunal in upholding such approval and thereafter in further upholding the assessment which was beyond four years is perverse? Briefly stated the facts and circumstances of the case are as follows:- The assessee an individual is engaged in the business of trading in various goods under the name and style of Ujjwal Steel Udyog which is a proprietorship concern. Along with the return of income for the assessment year 1995-96 the assessee enclosed the particulars of accounts relating to earlier years claiming that there was no taxable income with respect to those years. The assessing officer on the basis of the information supplied by the assessee and other information in his possession came to the conclusion that income had escaped assessment for the assessment years 1990-91, 1991-92 and 1992-93. By the order dated 26th March, 2001 the assessing officer recorded the reasons for initiating the reassessment proceedings under Section 147 of the Act for the aforesaid years. Thereafter, th....
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....ment year 1995-96 only. The AO after duly recording the reasons has sent his proposal to the higher authority i.e. Addl. CIT and after scrutinizing the case, the Addl. CIT was also satisfied that the income has escaped assessment for the relevant assessment years and thereby she concluded that it was a fit case for reopening and thereby accorded her approval. The case cited by the Ld. AR apparently suggests that there is no material fact which may lead to the conclusion as derived by the Addl. Commissioner for according her approval. But in the instant case, the income has actually escaped assessment. Investment made towards purchase of truck was never disclosed before the I.T. Authorities. Hence I think that the present case is clearly distinguishable and there was enough reason for the AO to send proposal before the Addl. CIT and the Addl. CIT has rightly given her approval for reopening the case. Thereafter, notice were issued by the AO to the appellant. The Addl. CIT has put her signature on 29.03.01 and thereafter the AO issued notice u/s 148 to the appellant before expiry of 31.03.01 and the said notice was served within 10 days which is quite reasonable time, according to my....
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....hallenged the recording of reasons for reopening of the assessment as recorded by the Assessing Officer vide his order sheet entry dated 26.03.2001 as reproduced in Para 2 of this order and keeping in view the provision of section 292B of the Act, we are of the view that the notices issued the Assessing officer u/s. 148 are valid in law. Accordingly, the ground and the pleas taken by the assessee are rejected." The assessee has come up in appeal before this Court. Mr. Ananda Sen, learned advocate appearing for the appellant submitted that in according approval to notice under Section 148 of the Act, the Commissioner has to apply his mind independently and he cannot accord approval mechanically. In support of his submissions, he relied on the judgement in the case of Chhugamal Rajpal v. S. P. Chaliha & Ors., reported in (1971) 79 ITR 603. He also relied on the judgement in the case of Johri Lal v. Commissioner of Income Tax reported in (1973) 88 ITR 439 (SC). Mr. Sen contended that since the approval was accorded without applying mind, the initiation of proceeding itself was bad and therefore, the judgement of the learned Tribunal should be set aside and the questions formulated....
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....ase may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under Section 148, need not issue such notice himself.]" During the course of arguments Mr. Sen learned Advocate appearing for the assessee drew our attention to the form for recording the reasons for initiating proceedings u/s.148 and for obtaining the approval of the Commissioner of Income Tax/CBDT (appearing at page no 91-93 of the paperbook filed before the Tribunal), question number 12 whereof is as follows:- "12. Whether the Commissioner/Board is satisfied on the reasons recorded by the ITO/IAC(A) that it is a fit case for the issue of a notice u/s.148." He contended that in response to question no 12 the Additional CIT mechanically granted approval by affixing his signature without recording any satisfaction and therefore in view of section 151(2) it is not a valid sanction. He therefore contends that the notice issued u/s.148 is bad in law and the subsequent assessment u/s.143(3) and 147 are without jurisdiction. In the instant case no prior assessment had been done for the three assessment years under consideration. Hence the assessing officer....
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....t from those communications "it appears that these persons (alleged creditors) are name lenders and the transactions are bogus". He has not even come to a prima facie conclusion that the transactions to which he referred are not genuine transactions. He appears to have had only a vague feeling that they may be bogus transactions. Such a conclusion does not fulfil the requirements of Section 151(2). What that provision requires is that he must give reasons for issuing a notice under Section 148. In other words he must have some prima facie grounds before him for taking action under Section 148. further his report mentions: "Hence proper investigation regarding these loans is necessary". In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under Section 148. Before issuing a notice under Section 148, the Income Tax Officer must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under Section 139 for any assessment year to the Income Tax Officer or to disclose fully and truly all m....
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....ubstance." The judgment in Johri Lal (supra) was rendered with respect to the provisions of section 34 of the Income Tax Act, 1922, which dealt with income escaping assessment. In the facts of that case proceedings u/s.34(1)(b) of the Income Tax Act 1922 were initiated by the assessing officer. The assessee challenged the same before the Commissioner (Appeals) by contending that the proceeding u/s.34(1)(b) was barred by limitation. The Commissioner held that the proceedings were not barred by limitation. In an appeal by the assessee the Tribunal upheld the order of the Commissioner and further held that the proceedings were also justified u/s.34(1)(a). In a reference the High Court held that the proceedings were validly initiated u/s.34(1)(a). In further appeal before the Apex Court the question which inter-alia arose for determination was whether the proceedings which were commenced by a notice under Section 34(1)(b) could have been converted into proceedings under Section 34(1)(a) by the Income Tax Appellate Tribunal. It was in this context that the Apex Court held as follows: "In the instant case, as seen earlier, the Income Tax Officer did not choose to proceed under Sectio....
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....e Assessing Officer to form the requisite belief and the reasons for the belief have a rational nexus or a relevant bearing to the formation of such belief and are not extraneous or irrelevant for the purpose of the said section. But the sufficiency of the grounds, which induced the Assessing Officer to act under the said section is not a justiciable issue." Even before the tribunal the assessee restricted his challenge only to the validity of notice u/s.148 on ground that sanction u/s.151 was not valid. Basis for the reasons furnished by the assessing officer in the notice u/s.148 was never in dispute. Hence the judgment in the case of Chhugamal Rajpal (supra) does not advance the cause of the assessee. Furthermore the judgment in Johri Lal (supra) is also of no assistance to the assessee as the issue in that case was whether a proceeding u/s.34(1)(b) of Income Tax Act, 1922 could be converted to a proceeding u/s.34(1)(a) of the said Act. In the case of Stock Exchange v. Asst CIT, reported in (1997) 227 ITR 906, the Gujarat High Court held as follows:- "Similarly, for the asst. yrs. 1990-91 and 1993-94 the AO separately recorded his reasons for issuing the reassessment notice....