2021 (4) TMI 376 - AT - Income Tax

Reopening of assessment u/s 147 - HELD THAT - In the present case, the Pr. CIT has recorded his satisfaction by writing yes, satisfied, it is a fit case for issue notice u/s 148 on the format. In our considered view, the satisfaction recorded in the present case is similar to the satisfaction recorded in the case discussed above. So far as, the application of mind by AO is concerned, the reasons recorded by AO for reopening of the case prima facie indicate that he has not applied his mind and proceeded on assumption that the bank deposit constitutes unexplained income of the assessee. As pointed out by the Ld. Counsel, the Delhi Bench of the ITAT in the case of Bir Bahadur Singh Sijwali vs. ITA 2015 (2) TMI 60 - ITAT DELHI has set aside the action of AO in reopening the case of the assessee initiated on fallacious assumption that bank deposits constitute undisclosed income of the assessee, overlooking the fact that source of deposit need not necessarily be income of the assessee. We further notice that in the present case, the Ld. Pr. CIT has accorded sanction for issuing notice u/s 148 of the Act, without ensuring that the AO has recorded the reasons after due application of mind. In our considered view, the Ld. CIT(A) has sustained the addition in question ignoring that the impugned order suffers from the legal infirmities discussed in the forgoing paras. In the light of the facts of the case and the cases relied upon by the Ld. Counsel, we are of the opinion that the impugned order is not sustainable in law as the ld. CIT(A) has passed the impugned order ignoring the ratio laid down by the hon ble High Court of Delhi and Madhya Pradesh and also the decision of the Delhi Bench of the Tribunal discussed above. We accordingly allow the legal grounds raised by the assessee and set aside the impugned order passed by the. ld. CIT(A).

Summary

Issues Involved:
1. Reopening of the case u/s 148 of the Income Tax Act, 1961 without proper justification.
2. Validity of notice u/s 148 and proceedings u/s 147 r/w section 148 of the Act.
3. Legal grounds challenging the action of the Assessing Officer and Principal Commissioner of Income Tax in initiating reassessment proceedings.
4. Consideration of documentary evidence by the Commissioner of Income Tax (Appeals).
5. Admissibility of additional ground raised by the assessee regarding notice u/s 148 not being served.

Analysis:

1. The assessee challenged the reopening of the case u/s 148, arguing that there was no valid reason to believe that income had escaped assessment. The Assessing Officer (AO) issued notice u/s 148 based on cash deposits in the bank account. The Commissioner of Income Tax (Appeals) partly allowed the appeal but sustained an addition. The Tribunal admitted the additional ground raised by the assessee, emphasizing that the notice u/s 148 was not served properly, following the Supreme Court's ruling in National Thermal Power Plant Co. Ltd. vs. CIT.

2. The Tribunal found that the notice u/s 148 was not served on the assessee, as mandated by law. Citing the Delhi High Court's judgment in CIT vs. Chetan Gupta, the Tribunal concluded that the reassessment proceedings were invalid and should be quashed. The Revenue failed to rebut the contention, leading to the Tribunal's decision in favor of the assessee.

3. Another legal ground challenged the initiation of reassessment proceedings based on mechanical approval by the Principal Commissioner of Income Tax (Pr. CIT). The Tribunal noted that the AO had not applied his mind before seeking approval, and the Pr. CIT granted sanction in a mechanical manner. Relying on legal precedents, including the decision in CIT vs. S. Goyanka Lime & Chemicals Ltd., the Tribunal held that the reassessment proceedings were unsustainable in law due to lack of proper application of mind.

4. The Commissioner of Income Tax (Appeals) was criticized for not considering documentary evidence regarding fund availability and ignoring submissions made during the proceedings. The Tribunal found that the impugned order suffered from legal infirmities, and the addition sustained by the CIT(A) was set aside due to legal errors in the assessment process.

5. The Tribunal admitted the additional ground raised by the assessee regarding the validity of the notice u/s 148, emphasizing the legal nature of the issue and the lack of fresh inquiry required. Relying on relevant case law and legal principles, the Tribunal allowed the appeal, highlighting the legal flaws in the assessment process and quashing the impugned order.

This comprehensive analysis addresses the various issues raised in the legal judgment, highlighting the legal arguments, precedents cited, and the Tribunal's conclusions on each aspect of the case.