TaxTMI 
TaxTMI 
2025 (2) TMI 1210
X X X X Extracts X X X X
X X X X Extracts X X X X
..... CIT(A) has erred in law and in facts in not appreciating that the reopening of the assessment u/s. 147 of the Act is invalid and bad in law. 3. The Ld. CIT(A) has erred in law and in facts in confirming the assessment order passed by Ld. A.O. in gross violation of principles of natural justice. 4. The Ld. CIT(A) has erred in law and in facts in confirming the addition made by Ld. A.O. to the extent of Rs. 16,00,000/-on account of share capital and securities premium treating the same as unexplained cash credits u/s. 68 of the Act. 5. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal." 4. Ground No. 1 is general in nature and needs no separate adjudication. 5. Vide Ground No. 2, the assessee has challenged the validity of the re-opening of the assessment u/s 147 of the Act claiming it to be invalid and bad in law. 6. Representatives were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules, 1963. 7. Vide notice dated 20/02/2015 issued u/s 148 of the Act, the AO initiated re-assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quarely clinches the issue before us in this regard in the case of Smt. Kalpana Shantilal Haria vs. ACIT referred to supra, wherein it was held that:- "6. The grievance of the petitioner is that there is no proper sanction in view of non application of mind by the Joint Commissioner of Income Tax. The Assessing Officer has invoked a provision of law to sustain the impugned notice which is admittedly not in the statute and the Joint Commissioner has yet approved it. 7. Mr. Chanderpal, learned Counsel appearing for the Revenue tendered a copy of the letter dated 19th December, 2017 issued to the petitioner wherein the Assessing Officer has stated that the words "147(b)" were inadvertently filled in the prescribed form, instead of Section 147 of the Act while obtaining the sanction from the Joint Commissioner of Income Tax. It is further submitted on behalf of the Revenue that the same is a curable defect under section 292B of the Act. Therefore, the impugned notice cannot be held to be bad for mere incorrect mentioning of section on account of the mistake. (emphasis supplied by us) 8. There can be no dispute with regard to the application of Section 292B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt and that there was absolutely no other material available before the ld. PCIT to apply his mind and come to a conclusion that it is a fit case for reopening of assessment. Hence, it could be safely concluded that the approval given by the ld. PCIT for reopening is only a mechanical approval without due application of mind on his part. One more strange point which we note from page 1 of the case law paper book containing the prescribed proforma for reopening is that the ld. PCIT had not even mentioned the date and his name while according approval in the prescribed proforma. 5.7. From the aforesaid proforma, it could be seen that the ld. PCIT had only mentioned for question No. 13 as under:- "Question Number 13. Whether the Pr. Commissioner is satisfied on the reasons recorded by the DCIT, that it is a fit case for the issue of a notice under section 148. Reply: Yes, it is fit case for issue of notice u/s. 148." 5.8. We find that the aforesaid approval granted by the ld. PCIT does not constitute proper sanction in terms of the Section 151(1) of the Act and rather it would only tantamount to mechanical approval granted by him without due applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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." 7. The learned Counsel for the assessee then drew our attention to the decision of Hon'ble Supreme Court in SLP, wherein SLP is being dismissed against the judgement of Hon'ble Madhya Pradesh High Court in the case of CIT vs. S Goyanka Lime & Chemical Ltd. (2016) 237 Taxman 378 (SC). The learned Counsel for the assessee also relied on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mentioned above on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of clause (a) or clause (b) of section 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under section 148. From the report submitted by the Income-tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee's omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the Income-tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147. Therefore, he could not have issued a notice under section 148. Further, the report submitted by him under section 151(2) does n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion recorded is just that "Yes I am so satisfied". We noted that this issue has time and again came up before Hon'ble High courts and Hon'ble High courts and Hon'ble Supreme Court has categorically held that the satisfaction should not be mechanical satisfaction and the important safe guards provided in section 147 to 151 of the Act, are not to be taken lightly by the department as well as by the concern Additional CIT or CIT as the case may be. While granting approval, the concern authority should be satisfied objectively. We also noted that in the present case, the authorities have accorded the satisfaction in a mechanical way which is unsustainable in law. Hence, on this very jurisdictional issue, we set aside the orders of the lower authorities and allow this appeal of the assessee. 11. As regards to the other grounds raised by the assessee, since we have adjudicated the issue on jurisdiction and quash the reopening, we need not to go into the other issues raised on jurisdiction as well as the merits of the case. 12. In the result, the appeal of the assessee is allowed." 5.9. We find that the aforesaid decision of Mumbai Tribunal considers the decisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment. d. Decision of Hon'ble Madras High Court in the case of Sterlite Industries (India) Ltd., vs. ACIT reported in 302 ITR 275 wherein it was held that information from Enforcement Directorate showing inflation of purchases could be a good ground for issuing notice u/s. 148 of the Act. e. Decision of the Hon'ble Delhi High Court in the case of AGR Investment Ltd., reported in 333 ITR 146 and the decision of Jaipur Bench in the case of Shalimar Buildcon 136 TTJ 701 wherein it was held that the notice u/s. 148 of the Act could be issued based on information from Investigation Wing about tainted transactions carried out by the assessee. 5.11. We find that all the aforesaid case laws referred by the ld. DR did not address on the crucial point canvassed by the ld. AR that ld. PCIT had only granted mechanical approval u/s. 151(1) of the Act without proper application of mind. Hence the reliance placed on the aforesaid decisions by the ld. DR does not come to the rescue of the revenue in the instant case. 5.12. Since the entire reopening of assessment had been quashed on the aforesaid aspect, we need not go into other grounds raised by the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quired under sub-section (1) shall be furnished in such form and verified in such manner and setting forth such other particulars, as may be prescribed, and the provisions of this Act shall, apply accordingly as if such return were a return required to be furnished under section 139: Provided that any return of income required under sub-section (1), furnished after the expiry of the period specified in the notice under the said sub-section, shall not be deemed to be a return under section 139." 11.1. It can be seen that such return is a return required to be furnished u/s 139 of the Act and, therefore, the provision of Section 143(2) of the Act clearly apply. 12. The Hon'ble Bombay High Court in the case of ACIT vs. Geno Pharmaceuticals Ltd. [32 taxmann.com 162], had the occasion to consider identical circumstances where a return was filed pursuant to the notice u/s 148 of the Act. The relevant findings read as under:- "4. So far as Tax Appeals No. 77/2012 and 78/2012 are concerned, in both these appeals, the ITAT has held that the issuance of notice after reopening of the case was mandatory and this order is under challenge. It is contended that the said or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with the finding of fact recorded by both the Authorities below. No substantial question of law is raised in these appeals as well." 13. Similarly, the Hon'ble High Court of Rajasthan in the case of PCIT vs. Kamla Devi Sharma [2018] 96 taxmann.com 659 (Rajasthan) again considered the return filed pursuant to notice u/s 148 of the Act held that the issue of notice u/s 143(2) in re-assessment proceedings prior to finalising the re-assessment order cannot be condoned by referring to Section 292BB of the Act and was fatal to order of re-assessment. The relevant findings read as under:- "In this regard, it is further submitted that there are catena of judicial pronouncements, which hold that Omission to issue notice u/s 143(2), is not a procedural irregularity and the same is not curable. Further, ld. AO in the remand report dated 12/02/2016 (APB 15-18) has stated that return of income has been filed belatedly thus he not required to issue such notice mandatorily. Your honours would appreciate that it has nowhere been provided in the Act that AO shall be absolved with the requirement of issuing notice u/s 143(2) in the event of late filing of return. In fact, proviso to sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing Officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdiction itself would be invalid." 14. Considering the facts of the case, in light of the date of return filed and the date of issue of notice u/s 143(2) of the Act qua the decisions discussed hereinabove, the impugned assessment order deserves to be quashed. Since we have quashed the assessment order, we do not find it necessary to delve into the merits of the case. 15. In the result, appeal of the assessee is allowed and that of the revenue is dismissed. Order pronounced in the Court on 14th February, 2025 at Mumbai. ============= Document 1 FORM FOR RECORDING THE REASONS FOR INITIATING PROCEEDI UNDER SECTION 148 AND FOR OBTAINING THE APPROVAL OF THE COMMISIONER OF INCOME-TAX / CENTRAL BOARD OF DIRECT TAXES 1. Name & Address of the assesse : M/s. Sukaniya Properties Pvt. Ltd. 1-A, Hill View, Apartment, J. P. Road, Mumbai-400058 Permanent Account No. : AADCS9585J 2. : COMPANY 3. Status District/Circle : Cen.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scaped assessment : Rs. 3,35,00.000/, 7. Whether the provisions of Sec. 147(a) or 147(b) are applicable or both the sections are applicable : Only 147(b) 8. Whether the assessment is proposed to be made for the first time. If the reply is in the affirmative please state : YES (a) Whether any voluntary return has YES already been filed: and [b] If so, the date of filing the said return 15.10.2010 9. If the answer to item 8 is in the negative, please state: (a) The income originally assessed : N.A. (b) Whether it is a case of under : N.A. assessment, assessment at too low a rate, assessment which has been made the subject of excessive relief or allowing of excessive loss or depreciation .. 10 Whether the provisions of Section 150(1) : No are applicable. If the reply is in the affirmative the relevant facts may be stated against item No.11 and it may also be brought out that provisions of Section 150(2) would not stand in the way of initiating proceedings under section 147. 11 Reasons for the belief that income has escaped assessment : As per Annexure Date: 08-01-2016 (DEEPIKA ARORA) DCIT CC-3(4), Mumbai. 12 Whether the Addl. Commissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as financial standing of these concerns does not justify receipt of such huge share premium. . The gist of share premium/share capital introduced by these concerns la as under : The gist No. of share premium/share capital Name of the Company FY Share Capital Share Premium TOTAL 1. M/s Seawood Hospitality & Realty Pvt. Ltd. 2009-10 22880000 205920000 228800000 TOTAL 22880000 205920000 228800000 The gist No. of share premium/share capital Name of the Company In order to verify the genuineness of the claim of receipt of share capital with share premium further enquires were made in Kolkata wherein 48 sham companies were identified. It was gathered that a search action u/s 132 was carried out by the DDIT(Inv). Unit1(3), Kolkata on 14.11.2011 at the premises of one Shri Deepak Patwari. Shri Patwari in his statement recorded u/s 132(4) on 14.11.2011, u/s 131 on 01.02.2012 and u/s 131 on 22.07.2013 had admitted that he has floated more than 100 companies through dummy directors to provide accommodation entries to various concerns. On the basis of such enquiries, out of the quantum of total share capital with premium, share investment to the tune of Rs .: 3 35 ....