2018 (7) TMI 143 - AT - Income Tax

Reopening of assessment - Additional CIT granted the approval by observing merely that he was satisfied - approval in accordance of law - Held that - Sections 147 and 148 of the IT Act, it is trite, are charter to the Revenue to reopen completed assessments. Section 151 of the Act provides a safe-guard that the sword of section 147 may not be used unless the competent statutory officer is satisfied that the AO has good and adequate reasons to invoke the reopening provisions. As per the mandate of section 151 (2) the Competent Authority has to examine the reasons, material or grounds on which the reopening is sought to be based and to judge as to whether they are sufficient and adequate to the formation of the necessary belief of escapement of income from taxation on the part of the AO. It is if and only if the Competent Authority, after applying his mind, is of the opinion that the AO s belief is well reasoned and bonfide, that he will accord his sanction thereon. In Chhugamal Rajpal vs. S.P. Chaliha 1971 (1) TMI 9 - SUPREME COURT , it has been held that where the Commissioner, while granting the sanction just noted the word Yes and affixed his signature thereunder, he had only mechanically accorded permission, and that the important safe-guards provided in section 151 were lightly treated. The approval in the case at hand is clearly an approval granted without application of mind, and therefore, it is not at all a legally tenable approval. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of Notice under Section 148 of the Income Tax Act.
2. Addition of ?22,65,000/- to the Assessee's income.
3. Validity of the approval granted by the Additional Commissioner of Income Tax under Section 151.
4. Levy of penalty under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Validity of Notice under Section 148 of the Income Tax Act:
The appellant challenged the liability to be assessed based on the notice dated 26.03.2015 issued under Section 148 of the Act. The appellant argued that the reasons provided for the notice did not show any application of mind by the Assessing Officer (AO) to indicate that any income liable for tax had escaped assessment. The Tribunal examined the reasons recorded and found them to be lacking in material substance, thus deeming the notice invalid.

2. Addition of ?22,65,000/- to the Assessee's income:
The appellant contended that the addition of ?22,65,000/- was unjustified as the appellant was an agriculturist with no other source of taxable income. The appellant had entered into an agreement with another agriculturist, who provided funds for purchasing agricultural land. The Tribunal noted that the authorities below failed to consider these facts and found the addition to be unwarranted.

3. Validity of the approval granted by the Additional Commissioner of Income Tax under Section 151:
An additional ground was raised regarding the mechanical approval granted by the Additional Commissioner of Income Tax, Range-3, Mathura, for issuing the notice under Section 148. The Tribunal scrutinized the approval, which merely stated "Ji Haan Main Santusht Hoon" (Yes, I am satisfied). The Tribunal referenced several judicial precedents, including 'Sunil Agrawal vs. ITO' and 'Virat Credit & Holdings (P) Ltd. vs. ITO', where similar mechanical approvals were deemed invalid. The Tribunal concluded that the approval in this case was granted without proper application of mind, rendering it legally untenable. Consequently, the approval and all subsequent proceedings, including the impugned assessment order, were quashed.

4. Levy of penalty under Section 271(1)(c) of the Income Tax Act:
The penalty of ?7,12,090/- imposed on the assessee under Section 271(1)(c) was also contested. Given that the basis for the penalty was the subject matter of ITA No. 238/Agra/2018, which had been allowed in favor of the assessee, the Tribunal found that the penalty no longer had a valid basis and thus deleted it.

Conclusion:
Both appeals were allowed, with the Tribunal quashing the notice under Section 148, the additional income addition, the approval under Section 151, and the penalty under Section 271(1)(c). The order was pronounced in the open court on 19/06/2018.