2019 (4) TMI 1734 - AT - Income Tax

Reopening of assessment - notice issued u/s 148(2) - as argued that the approval granted by the Pr. CIT- 7, New Delhi was bad in law as it was granted without due application of mind - HELD THAT - Hon ble Delhi High Court in the case of Pr. CIT Vs N. C. Cables Ltd. reported in 2017 (1) TMI 1036 - DELHI HIGH COURT has held the mere appending of the expression approved says nothing, Commissioner of Income Tax has to record elaborate reasons for agreeing with the noting put up, and at the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. Approval was granted by the Pr. CIT-7, New Delhi by noting Yes I am satisfied shows that the approval was given in a mechanical manner without recording proper satisfaction after due application of mind. The Hon ble Delhi High Court in the case of Pr. CIT Vs N. C. Cables Ltd. (supra) has held that mere appending of the expression approved says noting. It is not as if the CIT 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 ITAT cannot be distributed.

Summary

Issues Involved:
1. Validity of notice of reopening of assessment under section 148(2) of the Income Tax Act, 1961.
2. Compliance with mandatory conditions of sections 147 to 151 for framing the reassessment order.
3. Addition of unsecured loans under section 68 without proper justification and natural justice.
4. Denial of opportunity for cross-examination.
5. Adequacy of opportunity of being heard before passing the order.

Issue 1: Validity of Notice of Reopening of Assessment:
The appellant challenged the notice of reopening of assessment under section 148(2) of the Income Tax Act, claiming it was bad in law. The Principal Commissioner granted approval for reopening the assessment without proper application of mind. The Tribunal referred to a Delhi High Court case emphasizing the need for elaborate reasons and proper satisfaction while granting approval. The Tribunal found the approval in this case to be mechanical and lacking proper satisfaction, leading to the quashing of the reassessment order and allowing the grounds of appeal.

Issue 2: Compliance with Mandatory Conditions for Reassessment:
The appellant contended that the reassessment order was passed without complying with the mandatory conditions of sections 147 to 151 of the Income Tax Act. The Tribunal noted that the approval granted for reopening the assessment was not based on proper satisfaction and lacked meaningful consideration. Citing a Delhi High Court decision, the Tribunal held that the approval process appeared ritualistic and formal rather than substantial. Consequently, the reassessment order was quashed, and the appellant's appeal was allowed.

Issue 3: Addition of Unsecured Loans without Justification:
The appellant raised concerns regarding the addition of unsecured loans under section 68, arguing that it was done without proper justification and without following principles of natural justice. However, due to the primary issue of the validity of the notice of reopening and subsequent quashing of the reassessment order, this issue became academic and was not adjudicated upon by the Tribunal.

Issue 4: Denial of Opportunity for Cross-Examination:
The appellant raised a point about not being given the opportunity to cross-examine individuals whose statements led to the addition of unsecured loans. This issue was not specifically addressed in the Tribunal's decision, as the primary focus was on the validity of the notice of reopening and the subsequent quashing of the reassessment order.

Issue 5: Adequacy of Opportunity of Being Heard:
The appellant argued that the Assessing Officer passed the order without providing adequate opportunity to be heard. The Tribunal did not delve into this issue in detail due to the main issue of the validity of the notice of reopening and the consequent decision to quash the reassessment order. As a result, this issue was not specifically addressed in the Tribunal's judgment.

In conclusion, the Tribunal found the notice of reopening of assessment to be invalid due to the lack of proper satisfaction and meaningful consideration in the approval process. Consequently, the reassessment order was quashed, and the appellant's appeal was allowed. The other issues raised by the appellant became academic in nature and were not adjudicated upon by the Tribunal.