2018 (7) TMI 222 - AT - Income Tax

Reopening of assessment - Whether the Joint/Addl. Commissioner is satisfied on the reasons recorded by the ITO/IAC/(A) that it is a fit case for the issue a notice u/s 148? - approval in accordance of law - approval has been granted by observing thus Yes - Held that - Sections 147 and 148 of the IT Act, it is trite, are charter to the Revenue to reopen completed assessments. Section 151 of the Act provides a safe-guard that the sword of section 147 of the Act may not be used unless the competent statutory officer is satisfied that the AO has good and adequate reasons to invoke the reopening provisions. As per the mandate of section 151 (2) of the Act, the Competent Authority has to examine the reasons, material or grounds on which the reopening is sought to be based and to judge as to whether they are sufficient and adequate to the formation of the necessary belief of escapement of income from taxation on the part of the AO. It is if and only if the Competent Authority, after applying his mind, is of the opinion that the AO s belief is well reasoned and bonfide, that he will accord his sanction thereon. See case of Shri Ghanshyam 2018 (7) TMI 143 - ITAT AGRA Also In Chhugamal Rajpal vs. S.P. Chaliha (1971 (1) TMI 9 - SUPREME COURT), it has been held that where the Commissioner, while granting the sanction just noted the word Yes and affixed his signature thereunder, he had only mechanically accorded permission, and that the important safe-guards provided in section 151 were lightly treated. Thus the approval granted by the Pr. CIT in the present case, is also found to be unsustainable in law and the same is quashed alongwith all proceedings pursuant thereto - Decided in favour of assessee.

Issues Involved:

1. Validity of initiation of proceedings under Section 148 of the Income Tax Act.
2. Validity of reasons to believe recorded by the Assessing Officer (AO).
3. Validity of assessment proceedings under Section 148 concerning the sale of property.
4. Consideration of PAN details in the reasons recorded by the AO.
5. Legality and adherence to the principles of natural justice in the order passed by CIT (Appeals).
6. Validity of the approval granted by the Principal Commissioner under Section 151 for issuing notice under Section 148.

Detailed Analysis:

1. Validity of initiation of proceedings under Section 148 of the Income Tax Act:

The assessee contended that the initiation of proceedings under Section 148 was invalid. The CIT (Appeals) upheld the initiation, but the assessee argued that there was no valid reason assigned by the AO, and the reasons were based on conjectures and surmises, making the proceedings illegal and without jurisdiction.

2. Validity of reasons to believe recorded by the Assessing Officer (AO):

The assessee argued that the AO's reasons to believe were not valid and were based on bad faith. The CIT (Appeals) upheld the validity of these reasons, but the assessee maintained that the reasons recorded did not constitute a valid reason to believe for initiating proceedings under Section 147 of the Act.

3. Validity of assessment proceedings under Section 148 concerning the sale of property:

The CIT (Appeals) upheld the assessment proceedings under Section 148 concerning the sale of property amounting to ?3,001,000. The assessee argued that the CIT (Appeals) wrongly distinguished and ignored binding precedents referred to and relied upon before him on this issue.

4. Consideration of PAN details in the reasons recorded by the AO:

The CIT (Appeals) was swayed by the reference to PAN AAHY1679P mentioned by the AO in the reasons recorded. The assessee argued that this PAN was not mentioned by the appellant in the sale deed, and thus, the CIT (Appeals) erred in upholding the validity of the assessment proceedings.

5. Legality and adherence to the principles of natural justice in the order passed by CIT (Appeals):

The assessee contended that the order dated 22.08.2017 passed by the CIT (Appeals) was wrong, illegal, against the principles of natural justice, and bad in law.

6. Validity of the approval granted by the Principal Commissioner under Section 151 for issuing notice under Section 148:

The additional ground raised by the assessee concerned the mechanical approval granted by the Principal Commissioner under Section 151, which was argued to be without application of mind. The approval was simply a "Yes" without any detailed reasoning. The Tribunal found that this approval was not in accordance with the law, citing several precedents where similar approvals were quashed for being mechanical and lacking proper satisfaction.

Judgment Summary:

The Tribunal admitted the additional ground raised by the assessee as it concerned a legal issue going to the root of the matter. Upon reviewing the merits of the additional ground, the Tribunal found that the approval granted by the Principal Commissioner was mechanical and without application of mind, as it merely stated "Yes" without any detailed reasoning. This was found to be unsustainable in law, and the Tribunal quashed the approval along with all proceedings pursuant thereto, culminating in the order under appeal.

The Tribunal cited several precedents, including decisions from the ITAT Delhi, Hon'ble Delhi High Court, Hon'ble High Court of Madhya Pradesh, and Hon'ble Supreme Court of India, which supported the view that mechanical approvals without proper application of mind are invalid.

As a result, the Tribunal allowed the appeal (ITA No. 409/Agra/2017) and quashed the reassessment proceedings. Consequently, the penalty appeal (ITA No. 419/Agra/2017) was also allowed, as the basis for the penalty no longer existed.

Conclusion:

Both appeals were allowed, and the reassessment proceedings and the penalty were quashed due to the invalidity of the approval granted under Section 151, which was found to be mechanical and without proper application of mind. The judgment emphasized the importance of detailed and reasoned approvals in the reassessment process to ensure adherence to legal standards and principles of natural justice.

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