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2019 (4) TMI 555 - AT - Income TaxReopening of assessment u/s 147 - non fulfillment of mandate of provisions of Section 151(1) - non independent application of mind by AO - borrowed satisfaction - approval given by the Pr. CIT for issuing notice U/s 148 was in a very routine and mechanical manner which was without application of mind by simply putting her signatures below the rubber stamped Yes, satisfied - addition u/s 68 on Share Capital - HELD THAT - We also found that the proceedings u/s 147/148 have been initiated after four years from the end of the relevant assessment year without fulfilling the mandate of proviso to Sec. 147 of the Act. Therefore, the notice issued u/s 148 is bad in law. In view of the above discussion and judicial pronouncements it is abundantly clear that it is a case of change of opinion and the ld. AO has not fulfilled the mandatory requirement of proviso to section 147. Therefore, the notice issued by him is liable to be quashed being void ab initio. The ld. Pr. CIT, Ajmer has accorded approval for issuing notice u/s 148 in a very routine, mechanical manner & without application of mind by simply putting her signatures below the rubber stamped Yes, satisfied . The approval has been accorded by the ld. Pr. CIT, Ajmer simply for verifying the transactions mentioned in the letter of DDIT (Inv.), Kolkata received by the ACIT, Bhilwara on 21.03.2017. In his proposal the AO has not mentioned the fact that the reopening was being made after 4 years from the end of the relevant assessment year and in the original assessment proceedings this issue had been examined by the then AO. The reopening in the case of the assessee has been made after four years from the end of the relevant assessment year. Proviso to section 147 is clearly applicable in this case. There is no whisper of applicability of such proviso in the reasons recorded by the AO and approved by the ld. Pr. CIT, Ajmer. If she had read over the reasons and applied her mind she must not have accorded the permission under such circumstances in absence of any cogent material at all. The approval granted by her is clearly without application of mind and is not as per the mandate of the provision of section 151 of the I.T. Act, 1961. The notice issued u/s 148 on the basis of such approval and consequent assessment made on the basis of such notice are bad in law and deserve to be quashed. With regard to the merit of the addition, we found that the detailed finding has been given by the ld. CIT(A) with regard to identity, genuineness and creditworthiness of the share applicants. The ld. CIT(A) also observed that the addition has been made by the Assessing Officer merely on suspicion and without bringing any positive material on record to substantiate that the share application money emanated from the coffers of the assessee, we found that the genuineness of the share capital/share premium was thoroughly examined by the then AO who completed the original assessment u/s 143 (3) on 21.12.2012 and he recorded a categorical finding of his satisfaction regarding identity, creditworthiness and genuineness of transaction of the two companies to whom the shares were allotted. During the course of reassessment proceeding the AO again asked the assessee to prove the genuineness of the share capital and the assessee again filed all the documentary evidences, confirmations etc. before the AO on 28.11.2017 and 08.12.2017. Yet, the Assessing Officer has made addition of ₹ 15,59,00,000/-, without undertaking any further inquiry, investigation etc. and without bringing anything new on record. AO has made addition purely on the basis of his suspicion without any evidence or basis at all which deserves to be deleted. - Decided against revenue.
Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act. 2. Validity of reassessment proceedings under Sections 147/148. 3. Issuance and service of notice under Section 143(2) within the specified period. 4. Approval for issuing notice under Section 148. 5. Charging of interest under Section 234B on assessed income. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68: The CIT(A) deleted the addition of ?15.59 crores and ?1.94 crores made by the AO under Section 68 on account of unexplained share capital. The CIT(A) observed that the AO initiated reassessment proceedings based on a report from the DDIT (Inv.), Kolkata, without conducting any independent inquiry or verification. The assessee had provided all necessary documents, including confirmations, bank statements, and financial statements, to prove the identity, creditworthiness, and genuineness of the transactions. The CIT(A) concluded that the assessee had discharged its burden under Section 68, and the AO's addition was based on mere suspicion without any concrete evidence. 2. Validity of Reassessment Proceedings: The assessee challenged the validity of the reassessment proceedings on several grounds, including the absence of issuance and service of notice under Section 143(2) within the specified period, initiation of proceedings based on a change of opinion, and initiation after four years without fulfilling the mandate of the proviso to Section 147. The CIT(A) found merit in the assessee's contentions and noted that the AO had reopened the assessments based on the DDIT's report without any independent application of mind or tangible material. The reassessment proceedings were held to be invalid as they were initiated merely for verification purposes and based on suspicion. 3. Issuance and Service of Notice under Section 143(2): The assessee argued that the notice under Section 143(2) was issued beyond the specified period, rendering the assessment invalid. The CIT(A) agreed with the assessee, noting that the notice was issued after the statutory time limit, making the assessment bad in law. The AO's failure to issue the notice within the prescribed period invalidated the reassessment proceedings. 4. Approval for Issuing Notice under Section 148: The assessee contended that the approval for issuing notice under Section 148 was granted in a routine and mechanical manner without application of mind. The CIT(A) observed that the Pr. CIT had accorded approval by merely putting a rubber-stamped 'Yes, satisfied' without considering the specifics of the case. Such mechanical approval did not fulfill the mandate of Section 151(1), rendering the notice under Section 148 and the consequent assessment invalid. 5. Charging of Interest under Section 234B: The assessee argued that interest under Section 234B should be charged on the returned income, not on the assessed income. The CIT(A) directed the AO to recompute the interest under Sections 234A, 234B, and 234C after giving effect to the appellate order, noting that interest is compensatory and mandatory in nature but should be computed correctly based on the returned income. Conclusion: The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeals and allowing the assessee's cross-objections. The reassessment proceedings were held invalid due to the AO's failure to issue notice under Section 143(2) within the specified period, initiation of proceedings based on a change of opinion, and mechanical approval for issuing notice under Section 148. The addition under Section 68 was deleted as the assessee had discharged its burden of proving the identity, creditworthiness, and genuineness of the share capital transactions. Interest under Section 234B was directed to be recomputed based on the returned income.
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