2023 (5) TMI 1343 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - sanction from JCIT u/s 151 not recorded his satisfaction and merely approved the proposal of the AO in a mechanical manner without application of mind - compliance with provisions of section 151 or not? - HELD THAT - We clearly observe that the CIT(A) noted that the additional CIT(A) has mentioned a word approved on the proposal of the AO for issuance notice u/s 151 - He has not recorded his satisfaction towards reasons recorded by the AO therefore, in view of the judgment in the case United Electrical Co. (P) Ltd 2002 (10) TMI 86 - DELHI HIGH COURT wherein, it was held that the power vested to the Commissioner/ Additional CIT as in the case of the present assessee to grant or not to grant approval is couple with a duty. Their lordship further observed that such duty cannot be exercised casually and in a routine manner and he has required to apply his mind to the proposal put up to him for approval in the light of the material relied upon the AO. CIT(A) also noted that similar view has been expressed by the coordinate bench of Delhi in case of ITO Vs. NC Cables Ltd (Delhi) 2014 (11) TMI 593 - ITAT DELHI wherein, it was held that the commissioner did not record his satisfaction as contemplated u/s 151 rather approved the proposal by stating approved and putting his signature then the approval is invalid for the reason that ACIT has not recorded his satisfaction as required under the law in the light of the material relied upon by the AO. We are unable to see any infirmity, perversity or any other reason to interfere with the findings recorded by the CIT(A) on this count. Regarding a non compliance proposal rendered in the case GK Driveshaft India Ltd 2002 (11) TMI 7 - SUPREME COURT CIT(A) concluded that the assessment proceedings as well as the remand proceedings did not reflect objection filed by the assessee to the reopening of the assessment were disposed by the AO. CIT(A) rightly noted that the objections raised by the appellant were dealt with and disposed off by the AO in the assessment order itself and no separate order of disposing the objection of the appellant has been passed. Therefore, we are in agreement with the conclusion drawn by the CIT(A) that the AO has failed to follow the mandatory procedure laid down in the case of GK Driveshaft (supra) in the case of present appellant which was mandatory to follow on his part. We are also in agreement with the conclusion drawn by the CIT(A) since the order of assessment was passed by the AO without disposing objections raised by the appellant against the issuance of notice u/s 148 by a separate order the same is liable to be quashed. We are inclined to follow the order of the CIT(A) to allow in holding that notice issued u/s 148 as well as reassessment proceedings and consequent reassessment order is invalid and deserve to be annulled being bad in law and passed without following the mandatory provision of section 151 - Ground No. 1 of revenue is dismissed.

Summary

Issues involved: Appeal filed by revenue against CIT(A)'s order, validity of reassessment proceedings, compliance with provisions of section 151 of the Act, disposal of objections raised by appellant, satisfaction of JCIT, and adherence to Supreme Court's judgment in GKN Driveshaft case.

Validity of reassessment proceedings: The revenue contended that CIT(A) erred in annulling the assessment order, arguing that the AO had obtained approval from the Addl. CIT and recorded detailed reasons for reassessment. However, the appellant argued that the AO did not verify or examine the information before initiating reassessment and that the JCIT's approval under section 151 was not valid as it lacked proper satisfaction. The CIT(A) found in favor of the appellant, noting that the JCIT did not record satisfaction as required by law, rendering the notice u/s 148 invalid.

Compliance with section 151 of the Act: The CIT(A) highlighted that the AO did not follow the mandatory procedure laid down by the Supreme Court in the GKN Driveshaft case. The Addl. CIT's mere approval without proper satisfaction was deemed insufficient, as per statutory provisions. The CIT(A) referenced previous judgments emphasizing the duty of the approving authority to apply their mind and not grant approval casually. The failure to record satisfaction rendered the notice u/s 148 invalid.

Disposal of objections raised by appellant: The appellant raised objections to the reassessment, citing non-compliance with the Supreme Court's directive in the GKN Driveshaft case. The CIT(A) observed that the AO did not dispose of the objections separately but incorporated them into the assessment order. This failure to follow the prescribed procedure led the CIT(A) to conclude that the reassessment order was passed without due consideration of the appellant's objections.

Judgment: The CIT(A) upheld the appellant's contentions, annulling the reassessment proceedings and consequent order due to the invalidity of the notice u/s 148 and the failure to comply with section 151 of the Act and the Supreme Court's directives in the GKN Driveshaft case. The tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to quash the reassessment proceedings. The merits of the revenue's grounds were left unadjudicated, and the appeal was ultimately dismissed on 08/05/2023.