2022 (2) TMI 1189 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained bank deposits - valid approval from the appropriate authority as contemplated u/s 151 or not? - non application of mind by the approving authority, viz. Additional CIT-Range VI, Pathankot - HELD THAT - As in case of the assessee before us the prescribed authority, viz. Additional CIT-Range VI, Pathankot had granted the approval u/s 151 of the Act in a mechanical manner, i.e, without application of mind to the facts of the case as were there before him, therefore, the assessment framed by the AO u/ss. 147/143(3) of the Act, dated 24.02.2014 cannot be sustained and is liable to be vacated on the said count itself. Accordingly, for want of valid assumption of jurisdiction by the AO the assessment framed by him u/s 147/143(3) of the Act, dated 24.02.2014 is herein quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the reopening of the assessment under Section 147/148 of the Income-Tax Act, 1961.
2. Adequacy of the reasons recorded for reopening the assessment.
3. Validity of the approval granted under Section 151 of the Income-Tax Act.
4. Justification of the addition of ?44,00,000 on account of unexplained bank deposits.

Detailed Analysis:

1. Validity of the Reopening of the Assessment:
The assessee contended that the reopening of the case under Section 147 of the Income-Tax Act was illegal, invalid, and void ab initio. It was argued that the Assessing Officer (AO) had reopened the case without conducting any inquiries under Sections 131 or 133(6) of the Act, and the reasons for reopening did not bear any nexus with the material on record. The assessment was claimed to be based on suspicion rather than a bona fide belief. The AO was also alleged to have not obtained proper approval from the appropriate authority as required under Section 151 of the Act.

2. Adequacy of the Reasons Recorded for Reopening the Assessment:
The assessee argued that the reasons recorded for reopening the case were not sufficient and lacked tangible material. It was contended that the source of investment was yet to be verified and explained, and the AIR information used was not a tangible material to empower the AO to reach the requisite satisfaction under Sections 147/148.

3. Validity of the Approval Granted Under Section 151:
The assessee highlighted that the approval for issuing the notice under Section 148 was obtained from the Additional Commissioner of Income-tax, Range-VI, Pathankot, instead of the Commissioner of Income-tax (OSD), Range-VI, Pathankot, as stated in the reasons to believe. The approval was claimed to have been granted in a mechanical manner, without application of mind, as evidenced by the mere scribbling of "Yes" on the approval form. The Tribunal found substance in this claim, concluding that the statutory requirement of satisfaction under Section 151 was not met, rendering the reopening of the assessment invalid.

4. Justification of the Addition of ?44,00,000:
The assessee contended that the addition of ?44,00,000 on account of unexplained bank deposits was unjustified. It was argued that the assessee was illiterate about the complicated provisions of Income Tax Law and had made a surrender under a mistaken belief. The authorities were claimed to have taken advantage of the assessee's ignorance and illiteracy. The source of the deposits was explained with the help of an agreement to sell the property of family members, and no adverse material was brought by the department against the assessee. The Tribunal, however, did not address these contentions due to the quashing of the assessment on jurisdictional grounds.

Conclusion:
The Tribunal quashed the assessment framed by the AO under Sections 147/143(3) of the Act, dated 24.02.2014, for lack of valid jurisdiction. The approval granted under Section 151 was found to be mechanical and without proper application of mind. Consequently, the Tribunal did not address the other contentions regarding the validity of the jurisdiction assumed by the AO or the merits of the additions. The appeal filed by the assessee was allowed on the grounds of invalid jurisdiction.