2020 (10) TMI 251 - AT - Income Tax

Reopening of assessment u/s 147 - Approach of CIT for granting satisfaction for granting approval - HELD THAT - Approval granted by the Ld. CIT-5, New Delhi is a mechanical and without application of mind, which is 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 Ld. CIT-5, New Delhi for reaching to the satisfaction for granting approval. AO has mechanically issued notice u/s. 148 - we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Approval granted by the Ld. CIT-5, 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 and is not in accordance with section 151 thus, the notice issued u/s.148 is invalid and accordingly the reopening in this case is bad in law and therefore, the same is hereby quashed. - Assessee appeal is allowed.

Summary

Issues:
Appeal against impugned order dated 21.2.2017 in quantum appeal and order dated 27.3.2018 in penalty appeal for assessment year 2006-07.

Analysis:
1. The assessee filed a return of income declaring NIL income, which was later reopened due to information received about accommodation entries totaling ?75 lacs. The AO made an addition of ?75 lacs as unexplained investment, which was upheld by the Ld. CIT(A) in the impugned order dated 21.2.2017. The assessee challenged the assessment order on various grounds, including the validity of the notice u/s. 148 of the Act.

2. The Ld. Counsel for the assessee argued that the approval for issuing notice u/s. 148 was mechanical and without application of mind, rendering the reopening of the assessment invalid. The Ld. CIT(A) and Ld. CIT(DR) supported the AO's decision. The Ld. Counsel for the assessee provided written submissions challenging the notice and the approval process, emphasizing that the notice u/s. 148 was not in accordance with the law.

3. The tribunal found that the approval granted by the Ld. CIT was mechanical and lacked application of mind, making it invalid for initiating reassessment proceedings. Citing relevant case laws, including the decision in Dharmender Kumar vs. ITO, the tribunal concluded that the reopening of the assessment was bad in law and quashed the notice u/s. 148. The tribunal allowed the legal ground involved in the appeal, leading to the allowance of the appeal.

4. Regarding the penalty appeal, since the reassessment in the quantum appeal was quashed, the penalty was deemed invalid and was deleted. Consequently, both appeals filed by the assessee were allowed, and the order was pronounced on 05-10-2020.