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2018 (8) TMI 2035
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....nse to notice issued under section 148 reached him, thereby rendering the entire assessment proceedings null and void. The appellants contend that on the facts and in the circumstances of the case and in law, the notice under section 143(2) of the Act is issued prior to the date on which the return of income in response to notice issued under section 148 reached the Assessing Officer and hence, the entire assessment is bad in law and thus, the assessment order needs to be quashed. 2. The Assessing Officer erred in issuing notice under section 148 of the Act without obtaining appropriate approval from the Commissioner of Income-tax- 2, Mumbai (CIT) and hence the assessment is bad in law, thereby rendering the entire assessment proceedings null and void. The appellants contend that the prior approval obtained by the Assessing Officer of the CIT as envisaged in section 151 of the Act is a mechanical approval inasmuch as column no 13 requiring recording the reasons for initiating proceedings u/s. 147 and or obtaining the approval of the Commissioner of Income-tax-2, Mumbai merely mentions 'Yes I am satisfied' and thus, there is total non-application of mind i....
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....d u/s 148 of the Act on 06-06-2014. In the said letter, the assessee has requested the AO to treat the original return filed on 30-10-2006 as the return filed in response to the notice issued u/s 148 of the Act. Hence the above said letter is considered to be the return of income. The above said letter was filed in the ASK (Aaykar Seva Kendra) counter by the assessee on 06-06-2014, vide ASK acknowledgement number.: 079060614012283. Subsequently, the AO issued notice u/s 143(2) of the Act on 16-06-2014, wherein he asked for various details. 6. It is the submission of the assessee that the return of income filed on 0606-2014 by way of letter has reached the hands of the assessing officer only on 17-06-2014. This is evidenced by the seal affixed in the office of the assessing officer on the letter filed by the assessee. The said seal bears the date of 1706-2014, where as the AO has issued notice u/s 143(2) of the Act on 16-062014, i.e., one day prior to the date of receipt of return of income. Based on these facts, the Ld A.R submitted that the AO is entitled to issue notice u/s 143(2) of the Act only after receipt of return in his hands, whereas in the instant case, the AO has iss....
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....on the seal affixed upon the letter filed by the assessee. As submitted by Ld D.R, it is an internal matter and hence without ascertaining the internal procedures adopted in this regard by the Income tax department, it may not be possible to draw any inferences. The assessee has not brought on record any material to show that the date of filing of return should not be considered to be the date on which the letter was filed with ASK counter or date of filing of return should be the date on which the same was received by AO in his hands. In this era of e-filing also, the date of filing of return of income is taken as the date on which the return of income is uploaded into the computer system of the department. In this view of the matter, we are of the view that the AO has issued notice u/s 143(2) of the Act after furnishing of return of income by the assessee. Accordingly we reject this ground of the assessee. 10. The next legal issue urged by the assessee is that the approval obtained by the AO from the Commissioner of Income tax is not in accordance with the mandate of provisions of sec. 151 of the Act, i.e., it is the contention of the assessee that the Ld CIT has given approva....
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....r obtaining the approval of the Commissioner of Income tax-2, Mumbai". The above said processing sheet is used by the assessing officer to obtain approval as contemplated u/s 151 of the Act. The Ld A.R submitted that the Ld CIT has mechanically granted approval and did not show that he was satisfied that it is a fit case for issuing notice u/s 148 of the Act, which is evident from the following facts:- (a) Item No. 6 of the sheet contains the question "The quantum of income which has escaped assessment". The AO has given answer as "To be quantified Above Rs. 1 lakh". (b) Item No.13 of the sheet contains the question "Whether the Commissioner of Income tax-2, is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of notice u/s 148". The Ld Commissioner of Income tax has stated "Yes I am satisfied". The Ld A.R submitted that the income escaping assessment should be quantified properly and further mere writing of "Yes I am satisfied" is considered as mechanical approval given by Ld CIT, as the same is given without making reference to the reasons recorded by the assessing officer. He submitted that the above said case law....
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....IT as required u/s 151 of the Act is available and he was the competent authority in the case before the Ahmedabad bench. This view of the Tribunal was also upheld by Hon'ble Gujarat High Court in the same case reported in (2018)(93 taxmann.com 220) with the following observations:- "10. The legal proposition is that when the statute casts a duty on a certain administrative officer, the same must be performed by him and satisfaction arrived at even by the higher authority would not be sufficient. However, in the present case, there was no lack of satisfaction or exercise of power by the Joint Commissioner. He, in clear terms, expressed his satisfaction that on the basis of the reasons recorded by the Assessing Officer, it was a fit case for issuance of notice under section 148 of the Act. Merely because the papers were thereafter for some erroneous reason also placed before the Commissioner who also recorded his similar satisfaction would not take away anything from the previous conclusion." The Ld A.R submitted that, in the instant case, the Ld CIT is required to satisfy himself on the reasons recorded by the AO. The Addl CIT has merely recommended the case for approva....
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....ile granting sanction. The satisfaction has to be with objectivity on objective material." 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9. As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue. 10- In view of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration. It is pertinent to note that the SLP filed by the revenue against the above said decision before Hon'ble Supreme Court has been dismissed as reported in (2015)(64 taxmann.com 313). 18. An ....
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....act has not been taken into consideration by the AO before initiating the proceedings u/s 147/148 of the Act. However, since reopening of assessment in this case is otherwise not sustainable, we are not entering into any merits. 14. Hon'ble Supreme Court in case cited as CIT vs. S. Goyanka Lime & Chemical Ltd. - (2015) 64 taxmann.com 313 (SC) examined the identical issue as to according the sanction for reopening the assessment u/s 148 of the Act by merely recording "Yes. I am satisfied." And held that reopening on the basis of mechanical sanction is invalid by returning following findings :- " Section 151, read with section 148 of the Income-tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under. section 148, reopening of assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [In favour of assessee] Search and Seizure-Procedure for black Assessment- Search was c....
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.... appeal on meritsRevenue appealed against appellate order on merits-Assessee's cross appeal was on correctness of reopening of assessment- Tribunal upheld assessee's cross-objections and dismissed Revenue's appeal holding that there was no proper application of mind by concerned sanctioning authority u/s Section 151 as a pre- condition for issuing notice u/s 147/148-Held, Section 151 stipulates that CIT (A), who was competent authority to authorize reassessment notice, had to apply his mind and form opinion- Mere appending of expression 'approved' says nothing-It was not as if CIT (A) had to record elaborate reasons for agreeing with noting put up-At same time, satisfaction had to be recorded of CO No.57/Del/2012 given case which could be reflected in briefest possible manner- In present case, exercise appears to have been ritualistic and formal rather than meaningful, which was rationale for safeguard of approval by higher ranking officerRevenue's appeal dismissed." 16. Furthermore, perusal of the noting sheet dated 09.03.2010 to 30.12.2010 made available to the Bench for perusal shows that only AO has recorded that Addl.CIT has considered the reas....
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....onclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons; (iv) the exercise of considering the Assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasijudicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for CO No.57/Del/2012 reopening of the assessment beyond what has already been disclosed." 17. In view of what has been discussed above, reassessment opened by the AO in this case is not sustainable in the eyes of law, hence hereby quashed. Consequently, cross objection filed by the assessee company stands allowed and the appeal filed by the Revenue has become infructuous." 19. In the case of RMG Polyvinyl (I) Ltd (supra), the Delhi bench of Tribunal has considered an identical issue. One of the reasons for quashing the reopening of assessment is that the Ld CIT has mechanically approved the reopening with the endorsement "Yes I am sat....
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....ruction & Traders Pvt. Ltd. is a beneficiary of accommodation entries received from certain established entry operators identified by the Investigation Wing during the period relevant to A.Y. 2004-05. A comprehensive investigation was carried out by the Investigation Wing for identification of entry operators engaged in the business of money laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a detailed report has been forwarded. In the instant case, the assessee is found to be the beneficiary of accommodation entry from such entry operators as per the transaction mentioned in the enclosed Annexure-'A' of Rs. 1,56,00,000/-. The accommodation entry provider have given accommodation entries in the grab of share application money / expenses / gift / purchase of shares etc. They have worked for commission. The assessee is a company incorporated on 11.09.1998. It is noticed that there is no return of come is available in the AST database of Income-tax Department. Therefore, it is clear that the assessee has not filed return of income for the A.Y. 2004-05 and consequently has not offered any in....
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....atisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. 20. The co-ordinate Mumbai bench of Tribunal has also considered an identical issue in the case of Amarlal Bajaj(ITA No.611/Mum/2004) and has held as under:- "5. We have considered the rival submissions and carefully perused the orders of the lower authorities and also the material evidences brought on record from both sides. We have also the benefit of perusing the order sheet entries by which the Ld. CIT has granted sanction. Let us first consider the relevant part of the provisions of Sec. 151 of the Act. 151. (1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessme....
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....ortant safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the AO. "Intimation has been received from DCIT-24(2), Mumbai vide his letters dt. 22nd February, 2002 that one Shri Nitin J. Rugmani assessed in his charge had arranged Hawala entries in arranging loans, expenses, gifts. During the year Shri Amar G. Bajaj, Prop. Of Mohan Brothers, 712, Linking Road, Khar (W), Mumbai-52 was the beneficiary of such loans, expenses and gifts. The modus-operandi was to collect cash from the parties to whom loans were given and cash was deposited into account of Shri Nitin J. Rugani and cheques were issued to the beneficiary of the loan transaction. In order to....
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.... section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be ex....
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....easons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the Apex Court in Union of India v. M.L. Capoor & Ors., AIR 1974 SC 87 wherein it was observed as under :- "27. ... We find considerable force in the submission made on behalf of the respondents that the "rubber-stamp" reason given mechanically for the supersession of each officer does not amount to "reasons for the proposed supersession". The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. ... ... ... ... 28. ... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasijudicial. They sho....
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....ion raised by the petitioner that the approval granted suffers from non-application of mind . In the above view of the matter, the impugned notices and consequently the order justifying reasons recorded are unsustainable. The same are liable to be quashed and set aside." 23. The Ld D.R placed his reliance on the decision rendered by Ahmedabad bench of Tribunal in the case of Mayurbhai Mangaldas Patel (supra). The facts prevailing in that case are different and the same has been rightly explained by the Ld A.R during the course of his rejoinder, which we have discussed earlier. Hence, we are of the view that the revenue cannot take support of that decision. In any case, we notice that the Addl CIT has only forwarded the proposal to Ld CIT. 24. In the instant case also, we have noticed that the AO had not quantified the income that is claimed to have escaped the assessment. We also notice that the Ld CIT has not applied his mind on this crucial aspect. The Hon'ble jurisdictional High Court in the case of Dulraj U Jain vs. ACIT (Writ Petition No.1641 of 2018), while examining the validity of reopening of assessment has, inter alia, noted that the AO has not quantified the tax wh....
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....ught on record to support the legal ground. Accordingly we do not find any merit in this legal ground of the assessee. 29. Since the orders of tax authorities are set aside on the basis of second legal ground urged by the assessee, there is no requirement to adjudicate grounds urged on merits. 30. In the result, the appeal of the assessee is treated as allowed. Order has been pronounced in the Court on 31.8.2018. ============= Document 1 Form for recording the reasons for initiating proceedings u/s.147 and or obtaining ine approval of the Commissioner of Income Tax-2, Mumbai Name and address of the assessee Permanent Account No. Status District/Circle/Range M/s Astra Exim P Ltd. Oberoi Garden, East, C-Wing, Unit No.4104, 4th floor, Off Saki Vihar Road, Chandiwali, Andheri (E), Mumbai-400 072 AADCA9987A Company 1.T.0.2 (1K1). Mumbai Assessment Year in respect of which it is proposed to issue notice u/s. 148 : 2007-08 (a) (b) The quantum of income which has escaped assessment Whether the provisions of Sec. 147(a) or 147(b) are applicable or both the sections are applicable Whether the assessme....