TaxTMI 
TaxTMI 
2016 (3) TMI 328
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....thority for such reopening was given in a mechanical manner which was itself without jurisdiction 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 r....
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.... and P & L A/c for all the assessment years under consideration were filed along with the return for the assessment 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 e....
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.... fulfilled and the Addl. C.I.T. has signed question No..12 after verifying the contents of the form for recording of reasons and the assessee has not challenged 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 appl....
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....se for the issue of such notice. 1[Explanation.-For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case 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 subse....
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....nder Section 148 is not mentioned in the report. In his report he vaguely refers to certain communications received by him from the CIT, Bihar and Orissa. He does not mention the facts contained in those communications. All that he says is that 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 Inc....
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....ions 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance." 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 conver....
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....e circumstances where a notice u/s.148 may be quashed held as follows:- "It is, thus, trite, that when a challenge is made to the action under Section 147 of the Act what the Court is required to examine is whether some material exists on record for the 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)....