2024 (6) TMI 22 - AT - Income Tax

Reopening of assessment u/s 147 - Approval was granted mechanically by the JCIT without applying his mind - HELD THAT - JCIT has merely approved by recording as Yes, I am satisfied - Reasons/ satisfaction /approval recorded for issue of notice u/s.148 of the Act placed which is a copy of performa for recording the reasons for initiating proceedings u/s.148 wherein the JCIT has granted approval by mentioning that Yes, I am satisfied. As decided in Pioneer Town Planner Pvt. Ltd. 2024 (3) TMI 828 - DELHI HIGH COURT satisfaction has to be recorded to the effect that it is a fit case for issue of notice u/s 148 of the Act. In the present case of the assessee no such satisfaction has been recorded and the JCIT has merely written- Yes, I am satisfied. Mere appending of the expression 'approved' says nothing. It is not as if the commissioner has to record elaborate reasons for agreeing with the noting put up before him. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. When such exercise appears to have been ritualistic and formal rather than meaningful which is the rationale for the safeguard of an approval by a higher ranking official, the finding of the Tribunal quashing the reassessment proceedings cannot be disturbed. In the case of Chhugamal Rajpal vs. S.P. Chaliha Ors 1971 (1) TMI 9 - SUPREME COURT has held that where the commissioner had mechanically recorded permission and the important safeguards provided in the section 147 and 151 were lightly treated by the officer and the commissioner, the notice issued u/s 148 was held as invalid. Decided in favour of assessee.

Issues Involved:
1. Deletion of addition made under Section 56 of the Income Tax Act, 1961.
2. Jurisdictional validity of the notice issued under Section 148 of the Income Tax Act, 1961.

Detailed Analysis:

1. Deletion of Addition Made Under Section 56 of the Income Tax Act, 1961:

The Revenue raised several grounds challenging the deletion of an addition of Rs. 2,96,61,877/- made under Section 56 of the Income Tax Act, 1961, on account of deemed dividend under Section 2(22)(e). The key points raised by the Revenue include:
- The Ld. CIT(A) erred in deleting the addition despite the common shareholding of Shri Sandeep Bajaj in both M/s Jupiter Laminators Pvt. Ltd. and M/s Sampark Laminators Pvt. Ltd.
- The Ld. CIT(A) overlooked that Shri Sandeep Bajaj holds significant shares in both companies.
- The Ld. CIT(A) failed to consider that the assessee holds more than 10% voting power in M/s Sampark Laminators Pvt. Ltd. and is entitled to more than 20% of income in M/s Jupiter Laminators Pvt. Ltd.
- The Ld. CIT(A) did not appreciate that M/s Jupiter Laminators Pvt. Ltd. does not hold any shares in M/s Sampark Laminators Pvt. Ltd., and Shri Sandeep Bajaj is a common majority shareholder.
- The Ld. CIT(A) relied on case laws without distinguishing the facts of the present case from those of the relied-upon cases.

2. Jurisdictional Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:

The assessee raised jurisdictional issues in the Cross Objection, specifically challenging the validity of the notice issued under Section 148 of the Income Tax Act, 1961. The key points include:
- The notice under Section 148 is bad-in-law, void, and without jurisdiction.
- The notice is contrary to the specific provisions of Sections 147 to 151 of the Act.
- The assessment order passed by the Assessing Officer lacks valid sanction under Section 151 of the Income Tax Act, 1961.
- The addition of Rs. 2,96,61,877/- is beyond the scope of provisions of Section 147/148 of the Act.

The primary contention was that the approval granted by the Ld. JCIT under Section 151 was mechanical and without proper application of mind. The Ld. AR argued that the use of expressions like "Yes, I am satisfied" or "Approved" does not meet the legal requirements for valid approval. Several judicial precedents were cited to support this argument, including:
- United Electrical Co. (P) Ltd. vs CIT (2012) 258 ITR 317
- CIT v M/s S. Govanka Lime and Chemicals Ltd. (2015) 64 taxmann.com 313 (SC)
- ITO v. N.C. Cables Ltd. (Delhi ITAT) - Judgment dated 22.10.2014
- Amar Lal Bajaj v ACIT (2013) 37 Taxmann.com 7 (Mum) (Trib)

The Ld. DR argued that the sanctioning authority is not required to give elaborate reasons for his satisfaction and cited cases like:
- PCIT V Pioneer Town Planners Pvt. Ltd. ITA No 91/2019 Delhi High Court
- Experion Developers Pvt Ltd. V ACIT [2020] 422 ITR 355 (Del)
- PCIT v. Meenakshi Overseas Ltd. (ITA No. 692/2016) Delhi

Tribunal's Decision:

After considering the rival submissions and material on record, the Tribunal concluded that the approval granted by the JCIT by merely stating "Yes, I am satisfied" does not meet the requirements of Section 151 of the Income Tax Act, 1961. The Tribunal relied on several judicial precedents to support this conclusion, including:
- PCIT v. Pioneer Town Planner Pvt. Ltd.
- United Electrical Company (P) Ltd. Vs. CIT & Ors. 258 ITR 317 (Del.)
- Svitzer Hazira v. ACIT (441 ITR 19) (Bom)
- CIT v. Goyanka Line & Chemical Ltd (2-15) 56 taxmann.com 390 (MP)
- Pr. CIT vs. N.C. Cables Ltd. [2017]391 ITR 11

The Tribunal allowed the assessee's ground No. 3 in the Cross Objection, thereby deciding the jurisdictional issue in favor of the assessee. Consequently, the appeal filed by the Revenue was dismissed.

Conclusion:

The Tribunal held that the approval granted under Section 151 was invalid due to its mechanical nature, leading to the dismissal of the Revenue's appeal and partial allowance of the assessee's Cross Objection. The jurisdictional issues raised by the assessee were decided in their favor, rendering the reassessment proceedings invalid.

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