2020 (5) TMI 507 - AT - Income Tax

Reopening of assessment u/s 147 - defective approval u/s. 151 - whether approval mechanical and without application of mind? - HELD THAT - Referring to remarks of the Addl. CIT, Range-55, New Delhi as well as Pr. CIT, Delhi-19, New Delhi, find that the approval granted by both the authorities are mechanical and without application of mind, which are not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it is not coming out as to which material; information; documents and which other aspects have been gone through and examined by the Addl. CIT, Range-55, Delhi as well as Pr. CIT, Delhi-19 for reaching to the satisfaction for granting approval. Thereafter, the AO has mechanically issued notice u/s. 148 Reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. See DHARMENDER KUMAR C/O RAJ KUMAR ASSOCIATES VERSUS ITO, WARD 65 (5) , NEW DELHI 2019 (10) TMI 736 - ITAT DELHI - Decided in favour of assessee.

Summary

Issues involved:
1. Admission of additional grounds of appeal regarding the legality of proceedings under sections 147/148.
2. Validity of approval granted under section 151 of the Income Tax Act for initiating reassessment proceedings.

Detailed Analysis:
1. Admission of additional grounds of appeal:
The appeal was filed by the assessee against the order passed by the Ld. CIT(A)-21, New Delhi for the assessment year 2010-11. The assessee filed two additional grounds during the appeal, challenging the initiation of proceedings under sections 147/148 based on seized material from a third party and the alleged defective approval under section 151 of the Income Tax Act. The assessee argued that the second additional ground was crucial and purely legal, going to the root of the matter. The counsel cited the decision of the Hon'ble Supreme Court in the case of NTPC vs. CIT (1998) 229 ITR 383 (SC) to support the admission of the additional ground. The counsel pointed out that the approvals granted by the tax authorities lacked proper satisfaction and were done in a mechanical manner, similar to the case of United Electrical Company (P) Ltd. vs. CIT & Ors. 258 ITR 317 (Del.). The DR opposed the admission of the additional ground, citing procedural reasons and reliance on previous orders.

2. Validity of approval under section 151:
After hearing both parties and examining the relevant documents, including the approvals for issuing notice under section 148, the tribunal found that the approvals granted by the Addl. CIT, Range-55, New Delhi, and the Pr. CIT, Delhi-19, were mechanical and lacked proper application of mind. The tribunal noted that the approvals did not indicate a thorough examination of material or reasons for initiating reassessment proceedings. Citing the decisions in similar cases, including the ITAT, SMC, Bench, New Delhi decision dated 16.10.2019, the tribunal concluded that the reopening of the assessment for the assessee for the relevant assessment year was legally flawed and should be quashed. The tribunal referenced the case of United Electrical Company (P) Ltd. vs. CIT & Ors. 258 ITR 317 (Del.) and the Supreme Court decision in CIT vs. S. Goyanka Lime & Chemical Ltd. to support its findings. Consequently, the tribunal allowed the legal additional ground raised by the assessee's counsel and partially allowed the appeal, dismissing the other grounds not raised by the counsel.

In conclusion, the tribunal partly allowed the appeal filed by the assessee, emphasizing the importance of proper approval under section 151 for initiating reassessment proceedings and the need for a valid legal basis for such actions.