TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 2035
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....hereby 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 in granting the approval by the CIT as such, the entire assessment is bad i....
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....at 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 issued notice u/s 143(2) of the Act before receipt of return in his hands. 7. On the contrary, the L....
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....scertaining 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 approval in a mechanical manner without application of mind and hence the entire assessment proceedings is rendered null and void. 11. ....
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.... 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 laws deal with identical approval granted by Ld CIT(A) and the Hon'ble Madhyra Pradesh High Court has held it to be a mechanical approval and accordingly quashed the assessment proceedings.....
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....e 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 approval. As such, the Ld CIT has not applied his mind at all and has granted approval only mechanically. Had he applied his mind, he would have noticed that the AO has not quantified the income escaping assessment,....
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....missioner, 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 identical issue was considered by Delhi bench of Tribunal in the case of M/s Virat Credit & Holdings P Ltd (supra). The following observations made by the Tribunal are relevant here:- 10. First of all, ld. AR for the assessee company drew our att....
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....s. 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 conducted at residential and business premises of Assessee and notice for block assessment u/s. 158-BC was issued- For block period, returns were filed that were processed u/s. 143 (1)- However, notice u/s. 148 was issued by AO, on basis of certain reasons recorded-Assessee objected to same before AO, th....
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....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 reasons recorded before according the sanction, however even no prima facie material is there, if Addl.CIT has applied his mind by considering the reasons recorded before according the sanction. We are of the considered view that the AO who has recorded the reasons cannot enter into the mind of the sanctioning authority (Addl.C....
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....unction. 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 satisfied". The relevant observations made by the Tribunal are extracted below:- 7. We have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case law cited by the assessee's counsel on the issue in dispute. In our view, it is very much necessary to reproduce the reasons recorded by the AO before ....
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....stant 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 income for taxation. Sources of the transactions are not explained. I, therefore, have reason to believe that on account failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment for the above assessment year, the income chargeable to tax to the extent of accommodation entry of Rs. 1,56,00,000/- has escaped assessment within the meaning of section 147of I.T. Act. 1961. To bring to tax the income which has escaped assessment, I proposed to issue notice u/....
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....e 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 assessment year, no notice shall be issued under section 148 [by an Assessing Officer, who is below the rank of Assistant Commissioner [or Deputy Commissioner], unless the [Joint] Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case f....
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....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 ensure that the money reached by cheques to the beneficiary Shri Nitin J. Rugani kept blank cheques of the third parties. The assessee Shri Amar G. Bajaj had taken benefit of such entries of loans, commission and bill discounting of Rs. 8,00,000/-, 11,21,243/- and 9,64,739/- respectively. The st assessment was completed u/s. 143(3) of the I.T. Act on 31 March, 1998 by DCITSpl. Rg. 40, Mumbai. It is seen from records that the aforesaid points have not been verified in the assessment. I have therefore reason to believe that by reason of the failure on the part of the assessee to disclose full....
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....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 exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval". 9. The observations of the Hon'ble High Court are very much relevant in the instant case as in the present case also the Commissioner has simply mentioned "approved" to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon'ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are ....
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.... 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 should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. ..." (emphasis supplied) This is completely absent in the present case. Thus, we find force in the contention of learned counsel for the appellant that there has not been proper application of mind by the Board and if a proper application had taken place, there would have been no reason to re-open the closed chapter in view of what we are setting out hereinafter. 22. The Hon'ble Bombay High Court has also made certain observations on the duty of Ld CI....
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....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 which has escaped assessment. Accordingly the Hon'ble Bombay High Court took the view that the reasons recorded do not indicate reasonable belief of Assessing Officer himself to issue notice u/s 148 of the Act. This aspect alone shows that the AO as well as Ld CIT has not applied their mind on the reasons recorded. 25. Further, in the reasons for reopening, the AO has referred to the affidavit filed by a person by mentioning wrong name. While the afffidavit was given by Shri Vinod Shenoy, the AO referred it as given by Shri Vijay Shenoy. This aspect would have come to the notice of Ld CIT, had he examined the reasons for the purpose of arriving at his satisfaction. ....