2024 (5) TMI 156 - AT - Income Tax

Validity of reopening of assessment - Valid approval granted by PCIT u/s 151 or not? - HELD THAT - We observed from the record that AO has received the approval from the PCIT-7 for reopening of the assessment and Ld. PCIT in point No.13 mentioned that it is a fit case for issue of notice u/s 148 by observing that Yes I am satisfied . As in the case of Safonia Tradelinks (P.) Ltd. 2021 (3) TMI 1177 - DELHI HIGH COURT wherein the approval u/s 151 was granted simply and endorsing as approved. Even in this case the issue was decided in favour of the assessee. Further, it is brought to our notice in the case of VCR Township Pvt. Ltd. 2020 (10) TMI 1223 - ITAT DELHI wherein similar approval was granted for reopening of the assessment by approving authority as Yes, I am satisfied and the Co-ordinate Bench has decided the similar issue in favor of the assessee. Respectfully following the above decision, the facts in the present case are also exactly similar to the above facts on record. Accordingly, ground No.3 raised by the assessee is allowed.

Summary

Issues Involved:

1. Jurisdiction of proceedings u/s 147/148.
2. Adjudication of objections against reopening proceedings.
3. Validity of approval u/s 151.
4. Addition of Rs. 20,00,000/- u/s 68 for share capital/share premium from Shalini Holdings Ltd.
5. Addition of Rs. 10,00,000/- u/s 68 for share capital/share premium from Apporva Leasing Finance & Investment (P) Ltd.
6. Addition of Rs. 54,000/- as unexplained expenditure u/s 69C for alleged commission expenses.

Summary:

1. Jurisdiction of proceedings u/s 147/148:
The Assessee contended that the proceedings u/s 147/148 were without jurisdiction, mechanical, and unsustainable. The ITAT observed that the Assessing Officer (AO) had received credible information from the Director of Income Tax (Investigation-II) regarding accommodation entries provided by the Entry Operator. The AO formed reasons to believe based on this information and issued a notice u/s 148. The Tribunal upheld the jurisdiction, noting that the AO had applied his mind and followed due process.

2. Adjudication of objections against reopening proceedings:
The Assessee argued that the AO failed to adjudicate all objections properly as per the directions of the Hon'ble Supreme Court in the case of G.K.N Drive Shafts. The Tribunal found that the AO had considered and rejected the objections raised by the Assessee, thereby adhering to the required legal procedure.

3. Validity of approval u/s 151:
The Assessee challenged the approval u/s 151, claiming it was mechanical and without application of mind. The Tribunal noted that the Principal Commissioner of Income Tax (PCIT) had merely recorded "Yes, I am satisfied" without detailed reasoning. Citing precedents like PCIT vs. Pioneer Town Planners (P.) Ltd. and Safonia Tradelinks (P.) Ltd. vs. ITO, the Tribunal concluded that such an approval was mechanical and invalid. Consequently, the reassessment proceedings were quashed.

4. Addition of Rs. 20,00,000/- u/s 68 for share capital/share premium from Shalini Holdings Ltd.:
The Assessee contended that the addition was illegal as the AO did not provide copies of materials used against the Assessee or allow cross-examination of individuals whose statements were relied upon. The Tribunal did not adjudicate this ground since the reassessment itself was quashed.

5. Addition of Rs. 10,00,000/- u/s 68 for share capital/share premium from Apporva Leasing Finance & Investment (P) Ltd.:
Similar to the previous issue, the Assessee argued that the addition was unsustainable due to lack of proper opportunity and violation of natural justice principles. This ground was also not adjudicated by the Tribunal due to the quashing of the reassessment.

6. Addition of Rs. 54,000/- as unexplained expenditure u/s 69C for alleged commission expenses:
The Assessee challenged the addition of Rs. 54,000/- as unexplained expenditure for alleged commission expenses at 1.8% of Rs. 30,00,000/-. This ground was not adjudicated by the Tribunal as the reassessment proceedings were invalidated.

Conclusion:
The appeal filed by the Assessee was partly allowed, primarily on the basis that the approval u/s 151 was granted mechanically without proper application of mind, rendering the reassessment proceedings invalid. Other grounds were not adjudicated due to the quashing of the reassessment.