2020 (1) TMI 88 - AT - Income Tax

Reopening of assessment u/s 147 - whether reasons recorded and satisfaction / approval accorded is within the meaning of section 151 ? - HELD THAT - Approval granted by the Addl. CIT, Range-3, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings issue of notice u/s. 148 of the I.T. Act, 1961 and is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice issued u/s. 148 of the Act is invalid and accordingly the reopening in this is bad in law and therefore, the same is hereby quashed. - Decided in favour of assessee.

Issues Involved:
1. Insufficient opportunity for the assessee to be heard before best judgment assessment under Section 144.
2. Invalid and mechanical approval under Section 151 for reopening the case under Section 147/148.
3. Addition of ?15,37,500 on account of share capital as camouflaged transaction.
4. Addition of ?15,00,000 based on conjecture and surmises.
5. Addition of ?37,500 on account of commission estimated at 2.5%.
6. Non-confrontation of alleged evidence to the assessee.
7. Allegation of accommodation entry without providing opportunity for cross-examination.

Detailed Analysis:

1. Insufficient Opportunity for the Assessee:
The assessee argued that the assessment under Section 144 was concluded without providing sufficient opportunity to be heard, which violates the principle of natural justice. However, this issue was not substantively addressed in the judgment.

2. Invalid and Mechanical Approval under Section 151:
The primary issue argued by the assessee was the invalid and mechanical approval for reopening the case under Section 147/148. The assessee contended that the Additional CIT granted approval without independent application of mind, merely stating, "Yes, I am satisfied on the reasons recorded by the AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act." This was deemed mechanical and without proper satisfaction.

The Tribunal found merit in the assessee’s argument, noting that the approval did not indicate any specific material or documents examined by the Additional CIT. The Tribunal referenced the decision in Tara Alloys Ltd. vs. ITO and other judicial precedents, including United Electrical Company (P) Ltd. vs. CIT and CIT vs. S. Goyanka Lime & Chemical Ltd., which emphasized the need for a thorough and mindful application of Section 151. Consequently, the Tribunal quashed the reassessment proceedings, deeming them invalid.

3. Addition of ?15,37,500 on Account of Share Capital:
The assessee argued that the addition of ?15,37,500 as camouflaged transaction was made without appreciating the submissions filed. This issue was not substantively addressed in the judgment due to the primary focus on the legal ground of invalid approval under Section 151.

4. Addition of ?15,00,000 Based on Conjecture:
The assessee contended that the addition of ?15,00,000 was based on conjecture and surmises without specific cogent material. This issue was also not substantively addressed due to the focus on the invalid approval under Section 151.

5. Addition of ?37,500 on Account of Commission:
The assessee argued that the addition of ?37,500, estimated at 2.5%, was based on presumption without providing any opportunity to explain. This issue was not substantively addressed in the judgment.

6. Non-Confrontation of Alleged Evidence:
The assessee claimed that the alleged evidence, which mentioned the assessee’s name, was never confronted during the assessment proceedings. This issue was not substantively addressed in the judgment.

7. Allegation of Accommodation Entry:
The assessee argued that the ?15.00 lacs received by account payee cheque was alleged as an accommodation entry based on the statement of Mr. Tarun Goel without providing an opportunity for cross-examination. This issue was not substantively addressed in the judgment.

Conclusion:
The Tribunal primarily focused on the legal ground regarding the invalid and mechanical approval under Section 151 for reopening the case under Section 147/148. It found that the approval was granted without proper application of mind, rendering the reassessment proceedings invalid. Consequently, the Tribunal quashed the reassessment proceedings and allowed the appeal on this ground. Other grounds raised by the assessee were dismissed as they were not argued substantively. The appeal was partly allowed.

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