2016 (3) TMI 328 - HC - Income Tax

Reopening of assessment - sanction u/s.151(2) from the competent authority - whether the Additional C.I.T. while according his approval u/s.151(2) of the Act did not apply his mind and mechanically granted sanction? - Held that - In the instant case the assessee has not even contended that the reasons recorded by the assessing officer were irrelevant and as such he had no reason to believe that any income chargeable to tax had escaped assessment. In R.P. Bhatt (1986 (12) TMI 372 - SUPREME COURT) the Apex Court relied on judgment rendered by a Constitutional Bench in the case of Som Datt Datta v. Union of India 1968 (9) TMI 113 - SUPREME COURT OF INDIA wherein their lordships held that apart from any requirement imposed by the statute or statutory rule either expressly or by necessary implication, there is no legal obligation that the statutory tribunal should give reasons for its decision. There is also no general principle or any rule of natural justice that a statutory tribunal should always and in every case give reasons in support of its decision. - Decided in favour of the revenue.

Issues Involved:
1. Validity of reassessment action when approval for reopening was given mechanically.
2. Jurisdictional aspect of the approval for reopening and its impact on assessments beyond four years.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Action:
The primary issue was whether the Tribunal erred in law by upholding the reassessment action when the approval for reopening was given in a mechanical manner. The assessee argued that the approval by the Additional CIT under Section 151(2) of the Income Tax Act was mechanical and lacked proper jurisdiction. The Tribunal, however, found that the assessee did not challenge the sufficiency of the reasons recorded by the Assessing Officer for initiating reassessment proceedings under Section 147. The Tribunal noted that the assessee complied with the notice under Section 148 by filing returns and participating in the reassessment process, only to later challenge the validity of the notice. The Tribunal concluded that the notices issued under Section 148 were valid, as the Additional CIT had signed off on the reasons recorded by the Assessing Officer, fulfilling the requirements of Section 151(2).

2. Jurisdictional Aspect of Approval:
The second issue concerned whether the Tribunal's action in upholding the approval for reopening, despite the absence of jurisdictional aspects, was perverse. The assessee contended that the approval for reopening was granted without the application of mind, rendering the entire proceeding invalid. The Tribunal, however, found that the reasons for reopening were sufficient and that the Additional CIT had duly signed the approval form, indicating satisfaction with the reasons provided. The Tribunal emphasized that the sufficiency of the grounds for reopening is not a justiciable issue, as long as some material exists on record for the Assessing Officer to form the requisite belief.

Detailed Judgment Analysis:

Approval for Reopening:
The Tribunal and the CIT(A) both held that the approval for reopening was valid. The CIT(A) distinguished the present case from the Chhugamal Rajpal case, where the Supreme Court found the approval to be mechanical due to the lack of material facts. In the present case, the CIT(A) noted that the Assessing Officer had sufficient material, including undisclosed investments, to believe that income had escaped assessment. The Additional CIT's approval was based on these recorded reasons, thus fulfilling the requirements under Section 151(2).

Jurisdictional Validity:
The Tribunal found that the assessee did not dispute the reasons recorded by the Assessing Officer for initiating reassessment. The Tribunal also noted that the assessee participated in the reassessment proceedings without initially challenging the validity of the notice. The Tribunal held that the procedural requirements under Section 151(2) were met, as the Additional CIT had signed off on the reasons recorded by the Assessing Officer. The Tribunal emphasized that the sufficiency of the reasons is not a matter for judicial review, as long as the reasons have a rational nexus to the belief that income had escaped assessment.

Legal Precedents:
The Tribunal referred to several legal precedents, including the Chhugamal Rajpal and Johri Lal cases, to support its decision. The Tribunal distinguished the present case from these precedents, noting that the reasons for reopening were adequately recorded and the approval process was not mechanical. The Tribunal also cited the United Electrical Co. P. Ltd. case, emphasizing that the existence of some material on record for forming the requisite belief is sufficient for the validity of the notice under Section 148.

Conclusion:
The High Court upheld the Tribunal's decision, dismissing the appeal and answering the questions in favor of the revenue. The Court concluded that the approval for reopening was not mechanical and the jurisdictional requirements under Section 151(2) were met. The Court emphasized that the sufficiency of the reasons for reopening is not a matter for judicial review, as long as the reasons have a rational nexus to the belief that income had escaped assessment.

Final Judgment:
The appeal was dismissed, and the questions were answered in the negative and in favor of the revenue. The Court found that the reassessment action and the approval for reopening were valid and in accordance with the provisions of the Income Tax Act.

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