2020 (1) TMI 1358 - AT - Income Tax

Validity of re-assessment proceedings - Eligibility of reasons recorded - non supply of reasons to assessee - eligibility of approval granted by ACIT - addition u/s 68 - HELD THAT - Addl. CIT while granting or forwarding copy of the reasons to the Pr. CIT for his approval did not mention any fact in the proforma which is blank and no remarks have been mentioned by him despite his signature appeared thereon. The Pr. CIT while granting sanction/approval to reasons recorded for reopening of the assessment has simply mentioned Yes, I am satisfied . Such type of approval was not found valid in many cases. The ITAT Delhi C-Bench in the case of M/s. Ganesh Ganga Investments Pvt. Ltd 2019 (11) TMI 862 - ITAT DELHI quashed the reopening of the assessment in the similar circumstances. All the documents and Annexures referred to in the reasons have not been supplied to the assessee and that approval granted by Pr. CIT is invalid. Therefore, reopening of the assessment is wholly invalid and void abinitio. Resultantly, the reopening of the assessment is liable to be quashed. Following the reasons for decision in the case of M/s. Ganesh Ganga Investments Pvt. Ltd. supra we set aside the Orders of the authorities below and quash the reopening of the assessment. In the result, all the additions stand deleted. - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening the assessment under section 147/148 of the Income Tax Act.
2. Validity of the approval granted by the Principal Commissioner of Income Tax (Pr. CIT) under section 151 of the Income Tax Act.
3. Non-provision of relevant documents and annexures to the assessee.
4. Merits of the additions made under section 68 of the Income Tax Act and the addition on account of commission paid.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment:
The assessee challenged the reopening of the assessment on the grounds that the reasons recorded for reopening were undated and incomplete, and that the Assessing Officer (A.O.) did not apply his mind to the material facts. The A.O. had based the reopening on information received from the Serious Fraud Investigation Office (SFIO) and other sources, but did not provide the complete annexures or the SFIO report to the assessee. The Tribunal noted that the reasons recorded for reopening were merely a reproduction of the information received and lacked independent application of mind by the A.O. This was evidenced by the fact that the reasons were undated and the A.O. failed to provide the necessary documents to the assessee, which hindered the assessee's ability to file detailed objections. The Tribunal relied on the judgment in SABH Infrastructure Ltd. vs. ACIT, which emphasized the need for the A.O. to provide all relevant documents and reports to the assessee before initiating reopening proceedings. Consequently, the Tribunal held that the reopening of the assessment was invalid and bad in law.

2. Validity of the Approval Granted by Pr. CIT:
The assessee argued that the approval granted by the Pr. CIT was mechanical and without application of mind. The Tribunal observed that the Pr. CIT's approval merely stated "Yes, I am satisfied" without providing any detailed reasoning or consideration of the facts. This type of approval was deemed invalid in several judicial precedents, including Chhugamal Rajpal vs. S.P. Chaliha and CIT vs. M/s. S. Goyanka Lime and Chemicals Ltd. The Tribunal found that the approval granted by the Pr. CIT in this case was similarly mechanical and lacked the necessary application of mind, rendering the approval invalid.

3. Non-provision of Relevant Documents and Annexures:
The assessee contended that the A.O. did not provide the complete reasons along with the annexures and the SFIO report, which were crucial for filing objections against the reopening. The Tribunal noted that the A.O. had refused to supply these documents, citing confidentiality. However, the Tribunal emphasized that it was the duty of the A.O. to provide all relevant documents and reports that formed the basis for reopening the assessment. The failure to provide these documents violated the principles laid down in the SABH Infrastructure Ltd. case, which required the A.O. to provide all documents referenced in the reasons for reopening. This non-provision of documents further invalidated the reopening proceedings.

4. Merits of the Additions:
The A.O. made an addition of ?7 crores under section 68 of the Income Tax Act, citing unexplained share capital/share premium received by the assessee, and an additional ?14 lakhs on account of commission paid. The assessee provided confirmations and Income Tax Returns (ITRs) of the parties from whom the share capital was raised, but the A.O. was not satisfied as most parties did not respond to notices issued under section 133(6) and the directors of the concerned parties were not produced. The Tribunal, however, focused on the procedural lapses in the reopening process and the invalid approval by the Pr. CIT. Since the reopening of the assessment itself was found to be invalid, the Tribunal did not delve into the merits of the additions. The invalidity of the reopening rendered the assessment order void, and as a result, all additions were deleted.

Conclusion:
The Tribunal quashed the reopening of the assessment on the grounds of invalid reasons for reopening, mechanical approval by the Pr. CIT, and non-provision of relevant documents to the assessee. Consequently, all additions made in the reassessment order were deleted, and the appeal of the assessee was allowed.

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