2019 (10) TMI 398 - AT - Income Tax

Validity of proceedings u/s. 147 - basis of report of the investigation wing of the department, reopened the assessment - Addition on account of client code modification through broker which has been upheld by the CIT(A) - HELD THAT - A perusal of the proforma for approval to issue of notice u/s. 148, copy of which is placed at page 12 of the paper book shows that as per clause 12 of the proforma, the PCIT while giving approval has simply mentioned satisfied . Similarly as per clause 11, the Addl. CIT has simply mentioned Yes , it is a fit case to issue notice u/s. 148 of the IT Act, 1961. As decided in M/S N.C. CABLES LTD. 2017 (1) TMI 1036 - DELHI HIGH COURT mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case as both the approving authorities have given the approval in a mechanical manner, the reassessment proceedings are not in accordance with law Addition on account of client code modification to be deleted as relying on PAT COMMODITY SERVICES PVT. LTD. 2019 (2) TMI 720 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to addition of &8377; 4,25,810 and validity of proceedings u/s. 147.

Analysis:
1. The appeal was against the CIT(A)'s order confirming the addition of &8377; 4,25,810 and challenging the validity of proceedings u/s. 147 for A.Y. 2009-10.
2. The case involved the assessee, an individual, who initially declared a total income of &8377; 5,49,980 and later faced reassessment due to contrived loss availed through brokers.
3. The Assessing Officer concluded that the assessee claimed exempt long term capital gain through brokers by changing client codes, leading to the addition of &8377; 4,39,342 as non-genuine income.
4. The CIT(A) upheld the Assessing Officer's decision based on various precedents, prompting the appeal to the Tribunal by the assessee.
5. The assessee's counsel argued that the reopening was mechanical without proper application of mind, citing relevant court decisions and jurisdictional issues.
6. Referring to a Bombay High Court decision, the counsel contended that both legally and factually, the CIT(A)'s order was unsustainable.
7. The Department's representative supported the lower authorities' orders.
8. The Tribunal considered arguments, orders, and cited decisions. It noted the mechanical nature of reopening and lack of opportunity for the assessee to defend, ultimately concluding the reassessment was not in accordance with the law.
9. Quashing the reassessment proceedings, the Tribunal cited Delhi and M.P. High Court decisions emphasizing the importance of proper satisfaction in reopening cases.
10. On the merit of the case, the Tribunal referred to the Bombay High Court's decision, dismissing the addition on account of client code modification, and allowed the assessee's appeal.
11. Following the Bombay High Court's precedent, the Tribunal held the addition made by the Assessing Officer on account of client code modification was not justified, and allowed the grounds raised by the assessee.
12. Consequently, the appeal filed by the assessee was allowed, and the order was pronounced on 07.10.2019.