2023 (7) TMI 980 - AT - Income Tax

Validity of reopening of assessment u/s 147 - non obtaining valid approval from the competent authority as per mandatory requirement u/s 151 - HELD THAT - PCIT has given his approval u/s 151 of the Act in Column 13 of page 15 wherein, he has given a detailed basis based on the exercise undertaken by him, before granting approval u/s 151 - We are unable to see any discrepancy therein, which could show nonapplication of mind by the PCIT at the time of granting approval u/s 151. Non application of mind by the AO, at the time of initiation of reassessment proceedings - The text and words used by the AO in the reasons recorded for reopening of the assessment clearly shows that the AO proceeded to initiate assessment proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act without having any valid satisfaction and assuming valid jurisdiction, only on the basis of borrowed satisfaction based on report of investigation wing only and there was no independent application of mind by the AO to the information and documents received from the Investigation Wing which could form a valid basis and reason to believe that income has escaped assessment. As decided in Meenashi Overseas 2017 (5) TMI 1428 - DELHI HIGH COURT and PCIT Vs. RMG Polyvinyl 2017 (7) TMI 371 - DELHI HIGH COURT where the reasons recorded by the AO failed to demonstrate link between the tangible material and the formation of reasons to believe that the income has escaped assessment, then, indeed it amounts to borrowed satisfaction and the conclusion of the AO based on reproduction of conclusion drawn in the investigation report cannot be held as valid basis and reason to believe after application of mind. AO did not assume valid jurisdiction for initiation of reassessment proceedings u/s 147 - Decided in favour of assessee.

Summary

Issues involved:
The issues involved in this case are related to the validity of the reassessment proceedings under Section 147 of the Income Tax Act, 1961, and the confirmation of additions made by the Assessing Officer.

Grounds 1 and 2:
The first and second grounds of appeal raised by the assessee were deemed general in nature and were dismissed by the tribunal.

Grounds 3 and 4:
The counsel of the assessee contended that the initiation of proceedings under Sections 147 and 148 by the Assessing Officer was flawed as the prescribed conditions were not met. It was argued that the reassessment order was based on vague reasons without independent application of mind. The tribunal observed that the AO proceeded without valid satisfaction and relied on borrowed satisfaction, thus lacking jurisdiction. Citing relevant case law, the tribunal held that the reassessment proceedings and order were invalid and unsustainable.

Ground 5:
The assessee argued that the reopening of assessment under Section 147 was done without proper approval as required under Section 151 of the Act. The tribunal noted that the Principal Commissioner of Income Tax (PCIT) had granted approval after considering the reasons recorded by the AO, demonstrating due application of mind. Consequently, the tribunal dismissed this ground raised by the assessee.

Conclusion:
After careful consideration, the tribunal allowed grounds 3 and 4 raised by the assessee, quashing the reassessment proceedings, notice, and order for the assessment year in question. As there were no arguments presented on other grounds, they were not adjudicated upon. The appeal of the assessee was partly allowed by the tribunal.

This summary encapsulates the key issues, arguments presented, and the tribunal's decision regarding the validity of reassessment proceedings and additions made by the Assessing Officer in the case.