TaxTMI 
TaxTMI 
2019 (12) TMI 756
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....the AO never supplied the copy of reason recorded u/s. 148 of the Act to the appellant, which is in clear violation of provisions of law and of various judicial pronouncements. 6. That the Ld. CIT(A) erred in not following the proper procedure in enhancing the addition of the appellant. 7. That the appellant craves leave to add or alter any of the grounds of appeal. 2. Later on, the assessee has filed the following additional grounds:- "Gr. No. 4 of Form 36 (Additional Ground No. 1) That the AO erred in issuing the notice u/s. 148 of the Act to the appellant, although there was no reason to believe for him to issue notice to the appellant and thus the notice issued is without jusridcition. Additional Ground No. 2 That the approval of the Additional CIT u/s. 151 of the I.T. Act is not as per law and not competent so as to provide a legally valid jurisdiction to AO to initiate the re-assessment proceedings, more so the approval / satisfaction is mechanical, without application of mind and in stereo typed manner." 3. At the time of hearing, Ld. Counsel for the assessee only argued the additional ground no. 2 and stated that t....
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....r law and not competent so as to provide a legally valid jurisdiction to AO to initiate the re-assessment proceedings, more so the approval / satisfaction is mechanical, without application of mind and in stereo typed manner." 5.1 I have also perused the page no. 1 placed in Paper Book which is a copy of RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 147 AND FOR OBTAINING THE APPROVAL OF THE Addl. Commissioner of Income Tax, Range-23, New Delhi wherein, the Ld. Addl. Commissioner of Income Tax, Range-23, New Delhi while granting approval for issue of notice u/s. 148 of the Act has only mentioned that "ON THE BASIS OF 'A' ABOVE, I AM SATISFIED",, which establish that the approving authority has given approval to the reopening of assessment in a mechanical manner without due application of mind and therefore, on this account the reassessment is not sustainable in the eyes of law and needs to be quashed. 5.2 I have also perused the decision referred by the Ld. Counsel for the assessee of the ITAT, SMC, Bench, New Delhi dated 21.8.2019 in the case of Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards ....
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.... CIT is satisfied on the reasons recorded under section 147 that it is a fit case for issue of notice under section 148 of the IT Act. 11. In response to aforesaid question no.13 in the prescribed proforma, Addl. CIT has written "Yes. I am satisfied." No doubt, columns of reasons recorded was there and it is also mentioned in column no.12 that reasons for belief that income has escaped assessment are as per annexure enclosed but such annexure has not been produced before the Bench for perusal. 12. Apparently, from the approval recorded and words used that "Yes. I am satisfied.", it has proved on record that the sanction is merely mechanical and Addl.CIT has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/s 148 of the Act. 13. Even AO while recording the reasons for initiating the reopening of assessment has not applied his mind independently. When we peruse the reasons recorded, available at pages 31-32 of the paper book, the entire reasons have been based....
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....manner-Held, while according sanction, Joint Commissioner, Income Tax only recorded "Yes, I am satisfied"- Mechanical way of recording satisfaction by Joint Commissioner, that accorded sanction for issuing notice u/s. 147, was clearly unsustainable-On such* consideration, both Appellate authorities interfered into matter- No error was committed warranting reconsideration-As far as explanation to S. 151, brought into force by Finance Act, 2008 was concerned, same only pertained to issuance of notice and not with regard to manner of recording satisfaction-Amended provision did not help Revenue-No question of law involved in matter, that warranted reconsideration-Revenue's Appeals dismissed." 15. The Hon'ble Delhi High Court has also decided this legal issue in case cited as Pr. CIT vs. N.C. Cables Ltd. in ITA 335/2015 order dated 11.01.2017 by returning following findings :- " Reassessment-Issuance of Notice- Sanction for issue of Notice- Assessee had in its return for A Y 2001-02 claimed that sum of Rs. 1 Crore was received towards share application amounts and a further sum of Thirty Five Lakhs was credited to it as an advance towards loan-Original assessm....
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....manned by highly qualified officers they are to evolve legally sustainable standard operating procedure for discharging quasi- judicial function. 16. Hon'ble High Court of Delhi in case cited as SABH Infrastructure Ltd. vs. ACIT in WP (C) 1357/2016 order dated 25.09.2017 has issued guidelines to the Revenue authorities while deciding the issue of reopening u/s 147/148 of the Act. Operative part of which is reproduced as under:- "19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superi....
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.... Act of the superior authorities is not in accordance with law. The relevant ground of appeal No.2 taken before the CIT(A) reads as under:- "2. That under the facts and circumstances, approval u/s 151 of the superior authorities is not accordance with law and otherwise also mechanical and without application of mind, making the reasstt. Proceedings unsustainable in law." 9. I find the above ground has been extracted by the CIT(A) in the body of the order. She has also mentioned at para 3.2 of the order that the assessee contended that there was no proper compliance of the provisions of section 151 of the IT Act, 1961. However, her finding on this issue is missing in the entire order. A perusal of the approval given u/s 151, copy of which is placed at pages 20 and 21 of the paper book shows that the Pr. CIT while giving approval has simply mentioned as under:- "Yes. I am satisfied." 10. I find, the Hon'ble Delhi High Court in the case of United Electrical Company Pvt. Ltd. (supra) while deciding an identical issue has held that the power vested in the commissioner u/s 151 to grant or not to grant approval to the Assessing Officer to r....
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....essee are not being adjudicated being academic in nature." 22. Since, in the instant case, both the approving authorities have given approval in a mechanical manner without due application of mind, therefore, such reassessment proceedings have to be treated as not in accordance with law and has to be quashed. 23. Even otherwise also, a perusal of the reasons recorded show that the notice has been issued in a mechanical manner without independent application of mind by the Assessing Officer and the satisfaction by the Assessing Officer is based on borrowed satisfaction of the Investigation Wing. The Assessing Officer, without applying his mind, has simply, on the basis of the information of the Investigation Wing, jumped to the conclusion that there is escapement of income. The reasons so recorded do not show that there is any application of mind by the Assessing Officer for reaching the conclusion that there was escapement of income except the information from the Investigation Wing. The Hon'ble Delhi High Court in a number of decisions has held that reopening of assessment on the basis of report of the Investigation Wing without independent applicati....
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.... is not the bonafide one. Therefore, I have reason to be believe that an income of Rs. 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... " 22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The....