2023 (5) TMI 1222 - AT - Income Tax

Reopening of assessment u/s 147 - accommodation entry receipts - reason to believe - HELD THAT - It is pertinent to mention that even at the time of initiating the reassessment proceedings the AO himself was not sure about the mode of accommodation entry/allege transactions therefore reason to believe had no legs to stand. Therefore ground of assessee deserve to be allowed. Valid approval u/s. 151 - HELD THAT - As relying on M/S N.C. CABLES LTD. 2017 (1) TMI 1036 - DELHI HIGH COURT in the present case also the exercise of approving powers u/s. 151 of the Act appears to have been only ritualistic and formal rather than based on application of mind to the material placed by the AO before the approving authority which could lead to a valid and meaning full approval. Therefore notice u/s. 148 of the Act without obtaining valid approval u/s. 151 of the Act and all consequent reassessment and first appellate order are not validly sustainable and deserve to be quashed - Decided in favour of assessee.

Issues involved:
The issues involved in this legal judgment include the initiation of proceedings under Section 147, the validity of the reassessment order, and the requirement of obtaining valid approval under Section 151 of the Income Tax Act, 1961.

Initiation of Proceedings under Section 147:
The appeal challenged the initiation of reassessment proceedings, arguing that the Assessing Officer (AO) did not comply with the prescribed conditions and procedures. The counsel contended that the AO proceeded without independent application of mind, relying solely on information from the Investigation Wing Kolkata. It was argued that the AO erred in issuing the notice without valid approval from the competent authority, as required under Section 151 of the Act. The counsel cited relevant case law to support the argument that the approval obtained was not meaningful and did not reflect a valid application of mind, thus seeking to quash the notice and subsequent proceedings.

Validity of Reassessment Order:
The counsel highlighted discrepancies in the reasons recorded by the AO for initiating reassessment proceedings. It was pointed out that the AO inaccurately stated that the return for the relevant assessment year did not exist, despite the assessee providing evidence of filing the return. The counsel argued that the reasons were vague and lacked a proper basis, indicating a lack of application of mind by the AO. Citing legal precedents, it was contended that the reassessment was based on borrowed satisfaction and did not meet the requirements of validly assuming jurisdiction under Sections 147 and 148 of the Act.

Requirement of Valid Approval under Section 151:
The dispute also centered around the approval obtained by the AO under Section 151 of the Act before issuing the notice under Section 148. While the Revenue argued that the approval was obtained from the competent authority, the counsel contended that the approval was merely a formality and lacked meaningful consideration of the material presented. Referring to a relevant judgment, it was argued that the approval process appeared ritualistic and not based on a genuine application of mind. Consequently, the Tribunal held that the notice issued without a valid approval under Section 151 was not sustainable, leading to the quashing of the reassessment order and subsequent proceedings.

Separate Judgment by the Judge:
The judgment was delivered by Shri Chandra Mohan Garg, Judicial Member, who carefully analyzed the arguments presented by both sides. The Tribunal allowed the appeal in part, ruling in favor of the assessee on the grounds related to the initiation of proceedings, validity of the reassessment order, and the requirement of valid approval under Section 151. The Tribunal did not delve into the merits of the case due to the relief granted to the assessee on legal grounds.

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