TaxTMI 
TaxTMI 
2023 (2) TMI 263
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.... is without jurisdiction and bad in law. 3. That as the very basis of issuance of notice u/s 148 has vanished in view of the subsequent remand report, the impugned order of assessment is liable to be quashed. 4. That the initiation of reassessment proceeding having been made on borrowed satisfaction and without satisfying the pre-requisite conditions of the law and on a vague and self-contradictory recorded reasons which contains various errors, inconsistencies and therefore, the impugned order of reassessment is bad in law. 5. That the initiation of re-assessment proceeding being barred by limitation provided under first proviso to section 147 of the Act, the impugned order of reassessment is bad in law. 6. That the objections to reopening of assessment having been rejected on extraneous grounds only, the same is bad in law and consequently, the impugned order is liable to be quashed. 7. That CIT(A) ought to have held that addition of Rs. 74,50,000/- being a part of money received from M/s. Rahul Enterprises by invoking provisions of section 68 is self-contradictory, unjustified, without jurisdiction and bad in law and hence, the same i....
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....tion Wing. The Ld. A.R. took us through the copy of reasons recorded by the AO ,which is filed at page 4 to 6 of PB and contended that a careful perusal of the reasons recorded by the AO u/s 148(2) of the Act revealed that there was complete non-application of mind by the AO and also that reasons were recorded in a mechanical and most casual manner as there were several factual mistakes committed by the AO in the reasons recorded. Referring to second part of the said reasons recorded , the Ld. A.R submitted that as per information received from ITO(Inv), Unit-1, Kolkata on 4.8.2019 in respect of M/s Ajay Trading Co. wherein it has been stated that M/s Rahul Enterprise is a sole proprietorship maintaining account no. 029005003254 opened in August, 2017 in Faizabad Branch, UP. The Ld. A.R, while laying stress on the date of the opening of the bank account in August, 2017, submitted that instant assessment year involved in this case was AY 2012-13 whereas the AO has referred to the account opened by M/s Rahul Enterprises a sole proprietorship in August, 2017 which is totally and factually incorrect and wrong and can not have any bearing on the instant assessment year. Thereafter the l....
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....hlighted and corrected but in absence of any application of mind by Ld. PCIT also the reasons as placed before him by the AO were approved which showed blatant non-application of mind on the part of the Ld. PCIT too which is against the spirit of the provisions of the Act. The Ld. A.R. argued that the safeguards of obtaining approval from Ld. PCIT is provided in the Act so that the AO does not reopen the assessment on wrong information or without application of mind but the whole scheme as envisaged under the Act was proved unfruitful when the ld PCIT also accords approval in casual manner resulting into the case of the assessee being reopened in a manner which is not permissible under the Act. In defense of his arguments the Ld. A.R. relied on the following decisions: i) Decision of Hon'ble Calcutta High Court in the case of Harish Gangji Dedhiya vs. Union of India &Ors. In Writ Petition NO. 1065 of 2022 dated 29.03.2022 ii) Decision of Hon'ble Delhi High Court in the case of PCIT vs. M/s N.C. Cable Ltd. in ITA 335/1015 dated 11.01.2017 iii) Decision of Co-ordinate Bench of Gauhati in the case of M/s Royal Heritage Tripura Castle vs. ITO in ITA Nos. 470 ....
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.... to the proceedings initiated on the basis of valid and correct information received from ITO(Inv), Unit-1, Kolkata. The Ld. D.R submitted that though the account number as well as the Branch where the account was opened were wrongly mentioned in the first para at page 4 and page 5 at second para and the date of reopening account was stated to be August, 2017 which apparently appears to be wrong as assessment year under consideration is AY 2012- 13. However clerical mistakes are not substantive and fatal which renders the assessment proceedings as invalid as well as assessment on the issue of non-application of mind by the AO. The ld DR stated that the similarly the approval granted by the PCIT was also given after due application of mind. The Ld. D.R argued that it is sufficient if it is mentioned by PCIT that approval is granted by stating "Yes, I am satisfied, case may be reopened". The Ld. D.R. submitted that such approval showed the satisfaction arrived at by the Ld. PCIT before according the permission to re-open the assessment and only thereafter the said approval was granted. Therefore there is no merit in the contentions of Ld. A.R that the Ld. PCIT has not applied his min....
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.... 133(6) of the Income Tax Act, 1961 was issued to Branch Manager, ICICI bank, for the bank statements by the Investigation Department. The bank statements were duly received and analyzed by the Investigation department. Further, on going through the bank statement of M/s. Rahul Enterprises A/c./io. 029003254 maintained with ICICI Bank, Kolkata, it is perused that there were high value cash deposits followed by debits through RTGS/transfers in favour of M/s. Ajay Trading company. Subsequently, notice u/s.133(6) of the Income Tax Act, 1961 was issued to M/s. Ajay Trading Company and M/s. Rahul Enterprises. In response to this, submissions were received from M/s. Ajay Trading Company. However, the explanation for the transfer from M/s. Rahul Enterprises is not acceptable and remained unexplained. The Assessee M/s Ajay Trading Company is one of the beneficiaries which received funds amounting to Rs. 42,00,000/- Source Bank A/c. Details: 029005003254, ICICI Bank, Kolkata(Rahul Enterprises) Si. No. Beneficiary PAN Jurisdiction F.Y Amount(In Rs. lakh) 1 M/s. Ajay Trading Company AAEFA5369A Central Circle- 3(2), Kolkata 2011 -12 42 T....
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....at there was a total non-application of mind and mechanical recording of reasons by the AO. We note that there is a contradiction in the bank account no. as mentioned in para 1 at page 4 & 5 of the PB and also the branch of the bank where the account was reopened. In other words, Para 2 states that account was opened in Faizabad Branch, UP whereas in page 5 of the PB stated that it has been opened in ICICI Bank, Kolkata. We are also failed to understand as to how the account could be reopened in August, 2017 as stated in Para 2 page 4 while the case at hand relates AY 2012-13. Similarly we note that the Ld. PCIT while according to approval for reopening the assessment has either not perused these reasons and merely given a mechanical approval by stating in Item no. 13 of the approval granted dated 30.03.2019 that "Yes, I am satisfied case may be reopened". In our opinion such a casual approach on the part of the authorities cannot be appreciated and encouraged because by reopening the assessment, the settled assessment are being unsettled and authorities are supposed to exercise utmost care and caution while recording the reasons and also while granting the approval. On this count ....
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....the information, it is noticed that the assessee has involved in the share trading activity during the year and it involved an amount of Rs.2,46,07,261/-. It came to noticed that during the year assessee has made of shares/derivatives amounting to Rs. 2,46,07,261/- and made huge profit from these transactions. However, it has not been accounted in books of account. Further, it is observed that the assessee had earned long term profit from trading on shares/derivative, which found to be fictious and claimed as exempted profit as long term capital gain on share trading. Thus, it is crystal clear that the assessee has routed his unaccounted income as long term capital gain and accounted in books of account. Accordingly, given colour of genuine transaction. Thus, I am at the opinion that assessee has escaped assessment exceeding Rs. One Lakh." 10. Reading this, nobody can make out or atleast we are unable to make out any demonstrable link between the information and the formation of belief. This paragraph does not even indicate what was the trading activity during the year that the petitioner was involved in or from what shares or derivatives the petitioner is alleged to have ....
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.... the reasons for re-opening assessment has to be tested / examined only on the basis of the reasons recorded at the time of issuing a notice under Section 148 of the Act seeking to re-open the assessment. These reasons cannot be improved upon and/or supplemented much less substituted by an Affidavit and/or oral submissions (First Source Solutions Limited vs. The Assistant Commissioner of Income Tax - 12(2)(1) and Another). Therefore, the submission of Mr.Sharma that respondent no.2 has explained in the order on objections what was the report and information and details on which he formed a reason to believe, will be of no assistance to respondents. 13. In the circumstances, we hereby allow the petition in terms of Prayer Clause (a) which reads as under : "That this Hon'ble Court be pleased to issue a writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ under Article 226 of the Constitution of India, calling for records pertaining to the impugned reopening notice dated 31.03.2021 issued by the Respondent No.2 (being Exhibit A hereto) and after going into the validity and legality thereof to quash and set aside the same." ....
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....val granted" still according to me the action of the Addl. CIT cannot satisfy the requirement of law which is expected from an authority while exercising approval before issuance of notice for re-opening. It should be kept in mind that approval u/s 151 of the Act is a power given to the higher officer (Addl. CIT / Joint CIT) in certain cases like that of the assessee in this cases is for granting approval to re-open the assessment of the assessee which is a valuable safeguard to check against any arbitrary exercise of power by ITO/AO. This safeguard given by the Parliament to the higher officer cannot be granted mechanically or in a ritualistic manner. Merely by scribbling "approved" or for argument sake even if the Ld. Addl. CIT has written "I am satisfied with the reason so approval given". This standard of approval cannot satisfy the test as to whether the Addl. CIT has applied his mind or not before approval was granted. It is noted that even this kind of approvals given by the higher authorities as contended by the Ld DR has been found not to satisfy the test as to whether the approving authority has applied its mind to the information received by the AO and to the reason reco....