TaxTMI 
TaxTMI 
2020 (10) TMI 1407
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....re taken up together and disposed off by this common order for the sake of convenience. ITA No.92/Mum/2019 (A.Y.2010-11) - Seawoods Hospitality and Realty P. Ltd., 2. Though the assessee has raised several grounds, we find that it has raised a legal ground challenging the validity of reopening of the assessment. Hence, we proceeded to address the legal issue raised by the assessee on the validity of reopening of assessment. 3. We find that the assessee is a private limited company engaged in the business of investment in shares and securities. The return of income for the A.Y. 2010-11 was filed by the assessee on 15/10/2010 which was duly processed u/s. 143(1) of the Act. The said return was not selected for scrutiny by issue of notice u/s. 143(2) of the Act and as such, the said assessment became final. Subsequently a notice u/s.148 of the Act dated 14/01/2016 was issued by the ld. AO on the ground that income of the assessee had escaped assessment with regard to issue of share capital and share premium in the sum of Rs. 3,35,00,000/- which in the opinion of the ld. AO was bogus, as certain fresh tangible information had emanated out of the search and seizure operation u/....
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.... not applied his mind at all in the instant case for according approval and granted mechanical approval by simply stating "yes, it is a fit case for issue of notice u/s.148". The ld. AR argued that the reasons recorded for reopening the assessment were done by the ld. AO only on 14/01/2016 which was subsequent to sending the proforma dated 08/01/2016 for seeking approval to the ld. PCIT. The reasons recorded are enclosed in page 7 of the paper book filed by the assessee. This clearly goes to prove that the ld. PCIT while according sanction in terms of Section 151(1) of the Act, had not applied his mind and had given a mechanical sanction for reopening the case even when the reasons recorded for reopening the assessment were not even placed before him by the ld. AO. Infact, in question No.11 of the prescribed proforma, the reasons recorded for reopening the assessment is one of the main question mentioned therein for which the ld. AO has replied "As per Annexure" and the said annexure is enclosed in page 7 of the paper book which is nothing but the reasons recorded for reopening the assessment which is dated on 14/01/2016. Hence, the ld. AO could not have sent the proforma for appro....
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....cisions in support of his contention that reopening of assessment could be made where information has been received from external agencies as under:- ● "Sterlite Industries(lndia) Ltd. V/s. ACIT (MAD) (302 ITR 275) where it was held that information from Enforcement Directorate showing possible inflation of purchases ' notice issued u/s.148 valid'. ● In AGR Investment Ltd. v/s, Addl.CIT & Anr.(Del) (333 ITR 146) ● Shalimar Buildcon (P) Ltd. Vs ITO ITAT Jaipur (136 TTJ 701) wherein it was held that information from investigation Wing ' notice u/s. 148 issued on the basis of such letter'." 5.3. We find that the reopening in the instant case has been made beyond four years from the end of the relevant assessment year which requires sanction of approval from the ld. PCIT u/s.151(1) of the Act. We find from page 1 of the Case Law Paper book filed by the assessee before us containing proforma in the prescribed format seeking sanction of approval u/s.151(1) of the Act, that the said proforma was sent by the ld. AO to the ld. PCIT through proper channel i.e. Additional CIT on 08/01/2016. For the sake of convenience, the entire....
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.... notice has to be on due application of mind. It cannot be an mechanical approval without examining the proposal sent by the Assessing Officer. Prima facie, it appears to us that if the Joint Commissioner of Income Tax would have applied his mind to the application made by the Assessing Officer, then the very first thing which would arise is the basis of the notice, as the provision of law on which it is based is no longer in the statute. Non-pointing out the mistake / error by the Joint Commissioner of Income Tax on the part of the Assessing Officer is prima facie evidence of non-application of mind on the part of the sanctioning authority while granting the sanction." (emphasis supplied by us) 5.5. From the aforesaid proforma, it is also evident that the question No.11 mandate the ld. AO to specify the reasons which enabled him to form the belief that income of the assessee had escaped assessment and in reply to the said question, the ld. AO had mentioned "As per Annexure". The said annexure containing the reasons recorded for reopening the assessment is enclosed in page 7 of the paper book of the assessee which is reproduced herein for the sake of convenience:- 5.6. We ....
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....er Section 148." Reply: Yes, I am so satisfied 5.8.1. The operative portion of decision of this tribunal in ITA No.1664/Mum/2019 dated 09/01/2020 is reproduced hereunder:- 6. The learned Counsel for the assessee stated that this issue is squarely covered in favour of assessee by wherein mechanical approval is held to be no approval by Hon'ble Madhya Pradesh High Court in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. (2015) 231 Taxman 73 (Madhya Pradesh), wherein Hon'ble High court has considered the satisfaction accorded by the Joint Commissioner of Income Tax, wherein it is recorded that "Yes I am satisfied" and Hon'ble High court held that the mechanical way of recording satisfaction by the JCIT, which accords sanction for issuing notice under section 148 of the Act is unsustainable. The Hon'ble Madhya Pradesh High court held as under: - "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are l....
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.... and form an opinion. The mere appending of the expression "approved" says nothing. It is not as if the Commissioner of Income-tax (Appeals) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the court is satisfied that the findings by the Income-tax Appellate Tribunal cannot be disturbed." 8. The learned Counsel for the assessee also relied on the decision of Hon'ble Supreme Court in the case of Chhugamal Rajpal vs. S.P. Chaliha and Others and stated that Hon'ble Supreme Court long back in 1971 while adjudicating the issue of according of sanction for issue of notice under section 148 of the Act has considered this issue and finally observed as under: - "Further his report mentions: "Hence proper investigation regarding these loans is necessary". In other words his conclusion is that there is a case for investigating as t....
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....y he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. The important safeguards provided in sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. They have substituted the form for the substance." 9. On the other hand, the learned Sr. Departmental Representative, Shri Michael Jerald strongly opposed the issue raised because this issue was never raised before CIT(A) by the assessee and even now before Tribunal this issue is not raised, hence, he strongly opposed the adjudication of this issue. When it was pointed out to the learned Sr. Departmental Representative that the Revenue itself has filed this information regarding according of approval for issuance of notice under section 148 of the Act and approval accorded under section 151 of the Act, still he opposed the adjudication of this issue because this issue has not been raised before the lower authorities by the assessee. 10. We have heard rival conten....
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....n terms of Section 151 of the Act. In view of the aforesaid decisions of various other High Courts and also by the decision of the Hon'ble Supreme Court on the impugned issue, it could be safely concluded that the ld. PCIT, being a competent authority had granted mechanical approval without due application of mind on the prescribed proforma for reopening of assessment in terms of Section 151 of the Act. We find that the case law relied upon by the ld. DR of Hon'ble Andhra Pradesh High Court in the case of P. Munirathnam Chetty and P.Satyanarayana Chetty reported in 101 ITR 385 does not advance the case of the revenue and there is no need for us to go into it at this juncture in view of various other High Court decisions and Supreme Court decision in favour of the assessee on the similar issue. Respectfully following the aforesaid judicial precedents, we have no hesitation to hold that the entire re-assessment has been initiated without obtaining proper sanction in terms of Section 151(1) of the Act from the ld. PCIT and hence, we hold that the approval accorded by the ld. PCIT in a mechanical way is unsustainable in law, hence, on this very jurisdictional issue, we set aside the or....
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....assessment were done on 11/02/2016. For the sake of convenience, the proforma as well as the reasons recorded are reproduced herein:- 7.1. In view of the identical facts, the decision rendered by us in ITA No.92/Mum/2019 would apply mutatis mutandis for this appeal also. Accordingly, we quash the reopening of assessment for the A.Y.2009-10 in the case of Sukaniya Properties Pvt. Ltd., in ITA No.93/Mum/2019. ITA No.94/Mum/2019 - (A.Y. 2010-11) M/s. Sukaniya Properties P. Ltd., 8. The facts of M/s. Sukaniya Properties Pvt. Ltd., in ITA No.93/Mum/2019 are exactly the same to the facts of the case in M/s. Sukaniya Properties P. Ltd., in ITA No.93/Mum/2019 except the fact that the reasons were recorded for reopening the assessment was done by the ld . AO on 08/01/2016, whereas the proforma in the prescribed format seeking approval of ld. PCIT under section 151(1) of the Act was sent on 19/01/2016. Here the reasons recorded were part of the proforma sent to ld. PCIT for his approval in terms of section 151(1) of the Act. The only distinguishing fact is that the ld. AO proposed to add in the reassessment a sum of Rs.1,50,00,000/- as unexplained cash credit towards receipt of shar....
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....r-3(4). Mumbal 5. Assessment Your in respect of which it is : A.Y. 2010-11 proposed to issue notice u/s 148 6. The Quantum of Income which has : Rs. 3.35,00,000/- escaped assessment 7. Whether the provisions of Sec. 147(a) or : Only 147(b) 147(b) are applicable or both the sections are applicable 8. Whether the assessment is proposed to : YES be made for the first time. If the reply is in the affirmative please state (a) Whether any voluntary return has already been filed: and YES (b) If so, the date of filing the said return Rs. 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 i....
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....r enquires were marie 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), Uniti(3), Kolkata on 14.11.2011 at the premises of one Shri Deepak Patwari, Shri Patwari in his statement recorded u/s 13:2(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 te 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 cruces have been detected as bogus, as listed below :: Name of the Assetlee PY Ammint of hogue share capital with premium detected M/a Scawood Hospitality & Realty Pyt. Lid. 2010-11 Hs. 3,35,00,000/- Therefore, it is evident that the assessee company, i.e., M/s Seawood Hospitality & Realty Pvt. Ltd. has failed to disclose fully and truly all material facts relevant to the assessment year under consideration. Further the balance amount of share capital with share premium also does not appear to be genuine and is most likely accommodation entry. In the above factual bac....
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....e belief that income has : As per Annexure escaped assessment Date: 02-02-2016 12 Whether the Addi/Jt. 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 Date: 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 Date: Any (DEEPIKA ARORA) DCIT/CC-3(4), Mumbai. Yes, I am satisfied that this is a fit case for re-opening 0/3148. The POCIT, centrals may kindly approve as the period is beyond a year Paul.P 3/2/16 Addl. Commissioner of Income-Tax Central Ratige-3, Mumbai yes. It is fit care for the issue of notice 4 168 1 Permanent Account No. Status Document 4CE RECORDING THE REASONS FOR INITIATING PROCEEDINGS UNDER SECTION 148 FOR OBTAINING THE APPROVAL OF THE COMMISIONER OF INCOME-TAX / CENTRAL BOARD OF DIRECT TAXES amme & Address of the assesse : M/s. Sukaniya Properties Pvt. Ltd. 1-A, Hill View Apartment, J. P. Road, Mumbai-400058 Permanent Account No. : AADCS9585J = Starus : COMPANY - District/Circle 1 : Cen. Cir-3(4), Mumbai 5. Assessment Year in respect o....