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2015 (2) TMI 1246 - AT - Income TaxReopening of assessment - Addition u/s 68 - satisfaction non recorded u/s 151 - Held that - The reopening is bad in law for the reason that the Ld.CIT has not recorded his satisfaction as contemplated u/ s 151 of the Act. Commissioner has simply mentioned approved to the report submitted by the concerned AO. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO s belief is well reasoned and bonafide, he is to accord his sanction to the issue of notice u/ s. 148 of the Act. In the instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put approved and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction.- Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment under Sections 147 to 151 of the Income Tax Act, 1961. 2. Deletion of addition of Rs. 10.50 lakhs under Section 68 of the Income Tax Act, 1961. Detailed Analysis: 1. Validity of Reassessment under Sections 147 to 151 of the Income Tax Act, 1961: The assessee challenged the reassessment order, arguing that the necessary and mandatory conditions of Sections 147 to 151 of the Income Tax Act, 1961, were not complied with. The case was reopened based on information from the Investigation Wing indicating that the assessee company was a beneficiary of accommodation entries from entry operators. The assessee contended that the Additional CIT did not record his satisfaction by applying his independent mind but merely affixed his signature, which does not meet the legal requirements. The Tribunal referred to a previous order (I.T.A. No. 4122 and C.O. No. 388 dated 22 Oct 2014) where similar reasons and satisfaction were recorded under Section 151, and it was decided in favor of the assessee. The Tribunal noted that the CIT's approval was merely an "approved" signature without recorded satisfaction, which does not comply with Section 151. The Tribunal cited several judgments, including the Mumbai Bench in ITA 611/Mum/2004 and the Delhi High Court in United Electrical Co. Pvt. Ltd. Vs CIT, emphasizing that the superior authority must apply its mind and record satisfaction before granting approval for reassessment. The Tribunal concluded that the reassessment was invalid due to the lack of proper satisfaction as required by law, thereby allowing the assessee's cross-objection. 2. Deletion of Addition of Rs. 10.50 Lakhs under Section 68 of the Income Tax Act, 1961: The Revenue was aggrieved by the CIT(A)'s action of deleting the addition of Rs. 10.50 lakhs made by the Assessing Officer (A.O.) under Section 68. The A.O. had added this amount, holding that the assessee failed to establish the creditworthiness of the share applicants and the genuineness of the transactions, despite filing copies of IT returns, confirmation copies, and bank statements. The A.O. relied on statements from certain individuals indicating that the shareholders were used for providing accommodation entries. The CIT(A) granted relief to the assessee, relying on the case law of Lovely Exports Ltd. and other decisions, noting that the assessee had filed all necessary documents and that the A.O. did not issue summons to the shareholders for examination. The Tribunal, after hearing both parties, noted that the assessee had provided sufficient documentation, and the A.O. did not take further steps to verify the shareholders' identities. The Tribunal upheld the CIT(A)'s decision, emphasizing that mere non-production of shareholders does not justify the addition under Section 68 if the assessee has provided adequate documentation. Conclusion: - The reassessment was deemed invalid due to non-compliance with the mandatory satisfaction requirements under Sections 147 to 151, leading to the allowance of the assessee's cross-objection. - The addition of Rs. 10.50 lakhs under Section 68 was deleted as the assessee had provided sufficient documentation, and the A.O. did not adequately pursue verification of the shareholders. Thus, the Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection.
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