2020 (3) TMI 956 - AT - Income Tax

Valadity of Reopening of assessment u/s 147 - AO not applying his mind and without getting the approval of the competent authority - recording satisfaction in mechanical manner - HELD THAT - CIT is required to apply his mind to the proposal put up to him for approval in the light to the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. CIT is required to apply his mind to the proposal put up to him for approval in the light to eh material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. - Decided in favour of assessee.

Summary

Issues:
Validity of reassessment proceedings under sections 147 and 151 of the Income Tax Act, 1961.

Analysis:
The appeal challenged the order of the Ld. CIT(A)-7, New Delhi related to the assessment year 2010-11, focusing on the legality of reassessment proceedings initiated by the Assessing Officer (AO). The main argument centered on the contention that the AO had failed to follow the provisions of sections 147 and 151 of the Income Tax Act, 1961. The key point raised was that the AO had initiated proceedings under section 147 without proper application of mind and without obtaining approval from the competent authority. The appellant's counsel highlighted that the approval granted by the Pr. Commissioner of Income Tax-7, New Delhi was merely mechanical and lacked proper satisfaction, as evidenced by the phrase "Yes, I am satisfied," indicating a lack of detailed consideration.

The appellant relied on a decision by the ITAT, SMC, Bench, New Delhi in a similar case, Tara Alloys Ltd. vs. ITO Ward 25(1), New Delhi, to support the argument that the reassessment proceedings should be quashed due to the procedural irregularities. The appellant's position was further reinforced by citing relevant case laws, including United Electrical Company (P) Ltd. Vs. CIT & Ors. and a judgment by the Hon’ble Supreme Court of India in the case of CIT vs. S. Goyanka Lime & Chemical Ltd., emphasizing the necessity for proper application of mind and satisfaction before granting approval for reassessment.

After considering the arguments presented by both parties and examining the relevant documents, including the approval granted by the Pr. CIT-7, New Delhi, the tribunal concluded that the approval was mechanical and lacked proper scrutiny of the material and information presented. The tribunal found that the reopening of the assessment for the appellant was invalid in law due to the deficiencies in the approval process. Consequently, the reassessment proceedings were deemed unlawful and were quashed, in alignment with the legal principles and precedents cited during the proceedings. As a result, the appeal was partially allowed, with the legal ground no. 2 raised by the assessee being upheld, while other grounds not argued were dismissed accordingly.