2022 (3) TMI 172 - AT - Income Tax

Reopening of assessment u/s 147 - Valid grant of approval u/s. 151 or not - As per assessee authority granting the sanction u/s. 151 of the Act, viz. Pr. CIT, Bhatinda, had granted the approval in a mechanical manner, i.e., without application of mind - HELD THAT - A mere scribbling or stating Yes would not suffice the statutory requirement of Sec. 151 of the Act, i.e., satisfaction on the part of the sanctioning authority, on the reasons recorded by the A.O, that it is a fit case for issuance of a notice u/s. 148 of the Act. As provided in Section 151 of the Act, no notice u/s. 148 is to be issued by an AO unless the specified approving authority is satisfied, on the reasons recorded by the AO, that it is a fit case for the issue of such notice Section 151 requires an officer of the rank of a Joint Commissioner of Income-tax to oversee the decision of the AO where the return originally filed was assessed u/s. 143(3) of the Act, and further, in a case where such reopening of an assessment is sought to be made after the expiry of a period of four years from the end of the relevant assessment year, then, the said obligation is shifted on a superior officer as therein contemplated. In our considered view, as the reopening of a case results to disturbing the finality of a concluded assessment, therefore, the authorities specified for granting of approval u/s. 151 of the Act remain under a statutory obligation of clearly applying their mind on the reasons to believe recorded by the AO and, only after being satisfied that it is a fit case for issuance of Notice u/s. 148 of the Act, approve the same. In our considered view, mere scribbling of Yes by the approving authority, as is the case before us, can by no means suffice the statutory obligation cast upon him for granting approval after due application of mind for issuance of notice u/s. 148 of the Act by the AO, as the said statutory check would otherwise be rendered as a mere idle formality, nugatory or in fact nothing better than an eye wash, which would beyond any doubt defeat the very purpose for which the said supervisory jurisdiction of the superior authorities had been made available on the statute by the legislature. Our aforesaid conviction is supported by the order of this Tribunal in the case of Shri Charanjiv Lal Aggarwal 2017 (4) TMI 390 - ITAT AMRITSAR and SHRI TRALOCHAN SINGH 2021 (9) TMI 329 - ITAT AMRITSAR We, thus, in terms of our aforesaid observations, are of the considered view, that as in case of the assessee before us the prescribed authority, viz. Principal Commissioner of Income-Tax, Bhatinda, 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. 143(3)/147 cannot be sustained and is liable to be vacated. - Decided in favour of assessee.

Issues Involved:
1. Validity of initiation of proceedings under Section 147 of the Income Tax Act, 1961.
2. Service of notice under Section 148 of the Income Tax Act, 1961.
3. Recording of satisfaction by the Principal Commissioner of Income Tax under Section 151(1) of the Income Tax Act, 1961.
4. Sustaining the addition of ?63,33,000 as unexplained cash deposits under Section 69A of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of initiation of proceedings under Section 147 of the Income Tax Act, 1961:
The assessee challenged the initiation of proceedings under Section 147, arguing that the proceedings were initiated only for verification of the source of cash deposits, which is against the settled principles of law. The Tribunal found that the authority granting the sanction under Section 151, i.e., the Principal Commissioner of Income Tax, had granted the approval in a mechanical manner without application of mind. The Tribunal emphasized that a mere scribbling of "Yes" does not suffice the statutory requirement of Section 151, which mandates that the approving authority must be satisfied with the reasons recorded by the AO for reopening the case. The Tribunal cited several judicial pronouncements to support this view, including the cases of Smt. Nirmal Kaur vs. DCIT and CIT Vs. M/s. S. Goyanka Lime and Chemicals Ltd., where similar approvals were struck down for being mechanical.

2. Service of notice under Section 148 of the Income Tax Act, 1961:
The assessee contended that the AO had framed the assessment without validly effecting service of notice under Section 148. The Tribunal did not delve deeply into this issue as the primary ground for quashing the assessment was the mechanical approval under Section 151.

3. Recording of satisfaction by the Principal Commissioner of Income Tax under Section 151(1) of the Income Tax Act, 1961:
The Tribunal scrutinized the approval form and found that the Principal Commissioner merely stated "Yes" to the question of whether he was satisfied with the reasons recorded by the AO for issuing notice under Section 148. The Tribunal held that this did not meet the statutory obligation of Section 151, which requires a clear application of mind and a detailed recording of satisfaction. The Tribunal referenced multiple cases where similar approvals were deemed invalid, reinforcing that the approval must be more than a mere formality.

4. Sustaining the addition of ?63,33,000 as unexplained cash deposits under Section 69A of the Income Tax Act, 1961:
The AO had added ?63,33,000 to the assessee's income as unexplained deposits, rejecting the assessee's explanation that the cash belonged to another individual, Sh. Baljinder Singh. The Tribunal noted that Sh. Baljinder Singh, when summoned, did not recognize the assessee and denied any dealings with him. However, since the reopening of the assessment was quashed due to invalid approval under Section 151, the Tribunal did not provide a detailed analysis on the merits of this addition.

Conclusion:
The Tribunal quashed the assessment framed by the AO under Sections 143(3)/147, dated 19.12.2016, for want of valid assumption of jurisdiction, primarily due to the mechanical approval given by the Principal Commissioner under Section 151. Consequently, the Tribunal allowed the appeal filed by the assessee. The other contentions regarding the validity of jurisdiction and the sustainability of the additions on merits were left open as the primary issue itself was decided in favor of the assessee.

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