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2020 (2) TMI 781 - AT - Income TaxReopening of assessment u/s 147 - whether the reassessment proceedings initiated by the Assessing Officer by recording the reasons u/s. 147/148 of the Act and the satisfaction recorded by the JCIT u/s.151(2)? - reason to believe and not reason to suspect - HELD THAT - AO recorded the reasons and after getting approval from the JCIT, issued notice u/s.148 to the assessee. Accordingly, the AO completed reassessment proceeding holding that the assessee could not substantiate the source of investment made by the assessee. We have also gone through the reasons recorded by the AO/ITO, Ward-3(2), Ferozepur for reopening and the approval thereof by the Ld. Jt. CIT, Range-III, Ferozepur and found that the AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped assessment during the year under appeal. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the assessment year under consideration is bad in law and deserves to be quashed. In the instant case, we find from the perusal of the order sheets Jt. CIT has simply put yes satisfied and signed the report thereby giving sanction to the AO. JCIT has nowhere recorded his satisfaction note nor any brief of the satisfaction has been given therein. Therefore, it cannot be said that the Jt. CIT has accorded sanction after applying his mind and after recording his satisfaction. To support our view, reliance can be placed on the decision in the case of Pr.CIT Vs. N.C.Cables Ltd., 2017 (1) TMI 1036 - DELHI HIGH COURT wherein has observed that the satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. - Decided in favour of assessee.
Issues Involved:
1. Legality of additions made by the AO and sustained by CIT(A). 2. Alleged hurried decision by CIT(A) without allowing adequate time for document submission. 3. Validity of reassessment proceedings initiated by the AO. 4. Merits of additions regarding agricultural income, unexplained investment in agricultural land, and unexplained credits in the bank account. Detailed Analysis: 1. Legality of Additions: The assessee contested the additions amounting to ? 36,68,497 made by the AO under section 143(3) of the Income-Tax Act, 1961, which were sustained by the CIT(A) to the extent of ? 33,68,497. The assessee argued that these additions were "absolutely illegal, unwarranted and bad in law." 2. Alleged Hurried Decision by CIT(A): The assessee claimed that the CIT(A) decided the case hastily without considering the appellant's request for additional time to submit relevant documents. This, according to the assessee, was against the rules of natural justice. 3. Validity of Reassessment Proceedings: The assessee filed additional grounds challenging the validity of the reassessment proceedings on several bases: - The AO did not have "reason to believe" as required under section 147 of the Act. - The AO did not apply his own mind in recording the reasons for the belief that income had escaped assessment. - The satisfaction recorded by the JCIT was not in accordance with the mandate of law, and the requirements of section 151 were not fulfilled. The Tribunal admitted the additional grounds and evidences, and the appeal was heard on these legal issues. 4. Merits of Additions: a. Agricultural Income: The AO added ? 7,85,324 by not admitting the agricultural income claimed by the assessee. The assessee provided evidence of agricultural activities and sales through affidavits and J forms, which were ignored by the AO and CIT(A). b. Unexplained Investment in Agricultural Land: The AO added ? 17,40,000 as unexplained investment. The assessee explained that part of the investment came from current year income, loans from a proprietary concern, and "Stree-Dhan" (savings and contributions from relatives). c. Unexplained Credits in Bank Account: The AO added ? 11,43,173 as unexplained credits. The assessee provided explanations for various deposits, including amounts received from a proprietary concern and agricultural income, which were not accepted by the AO. Tribunal's Findings: Reassessment Proceedings: The Tribunal found that the AO did not apply his mind independently to form a belief that income had escaped assessment. The JCIT's approval was given in a mechanical manner by simply writing "Yes, satisfied" without recording proper satisfaction. This was against the requirements of section 151 of the Act, which mandates that the superior authority must record satisfaction after examining the reasons and material provided by the AO. Legal Precedents: The Tribunal relied on several legal precedents, including the Hon'ble Supreme Court's decision in ITO Vs. Lakhmani Mewal Das and the Hon'ble Delhi High Court's decision in Pr.CIT Vs. N.C.Cables Ltd., which emphasized that the reasons to believe must be based on objective material and the satisfaction for reopening must be recorded meaningfully. Conclusion: The Tribunal concluded that the reopening of the assessment was bad in law and quashed the reassessment proceedings. Consequently, the other grounds raised by the assessee on merits were not adjudicated upon. Result: The appeal of the assessee was allowed on legal grounds, and the reassessment proceedings were declared void ab initio. Order Pronouncement: The order was pronounced in the open court on 05/02/2020.
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