2022 (10) TMI 978 - AT - Income Tax

Reopening of assessment u/s 147 - Necessity to take valid approval before reopening - obtaining approval from the JCIT and the PCIT on the basis of the information received by the A.O. from the Non PAN AIR of the Department that the assessee deposited a sum in the saving bank account during the financial year 2009-10 - HELD THAT - In the instant case the A.O. has not applied his independent mind while reopening the assessment u/s 147 and simply relied on the Non PAN AIR information. Even for recording reasons for initiating proceedings u/s 148 and for obtaining approval of the JCIT, Range-2, Noida and PCIT, Noida respectively, the power vested by Commissioner under section 151 to grant or not to grant approval to the A.O. to reopen an assessment is coupled with a duty. Commissioner is required to apply his independent mind to the proposal put up to him for approval in the light of material relied upon by the A.O. That power by the Commissioner cannot be exercised casually and in a routine manner. Since, the authorities below has granted approval for reopening of the assessment in a routine and casual manner, based on such approval, reopening of assessment by the A.O. is not at all sustained in the eye of law - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act, 1961.
2. Legitimacy of the addition under section 68 of the Income Tax Act, 1961.
3. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee challenged the reopening of the assessment, arguing that the Assessing Officer (A.O.) recorded reasons for reopening without independent application of mind and relied on vague information provided by the Non PAN AIR. The Tribunal noted that the A.O. reopened the assessment based on information about a cash deposit of Rs. 21,55,000/- in the assessee's bank account during the financial year 2009-10. The approval for reopening was granted by the JCIT and PCIT in a mechanical manner, with the JCIT stating, "Yes, I am satisfied," and the PCIT noting, "Fit Case." The Tribunal found that such mechanical approval without independent application of mind renders the reopening invalid. This decision was supported by various precedents, including the cases of CIT vs. S. Goyanka Lime & Chemicals Ltd. and Pr. CIT vs. N.C. Cables Ltd., where similar mechanical approvals were deemed insufficient for valid reassessment proceedings. Consequently, the Tribunal quashed the reopening of the assessment.

2. Legitimacy of the Addition under Section 68:
The A.O. made an addition of Rs. 15,55,000/- under section 68 for unexplained cash deposits, as the assessee failed to provide satisfactory documentary evidence for the source of the cash deposits. The assessee argued that the cash deposits were from the sale of a property, but only Rs. 6,00,000/- was substantiated with a sale deed. The Tribunal, however, did not delve into the merits of the addition under section 68, as it had already quashed the reopening of the assessment. Therefore, the addition made by the A.O. was also deleted as a consequence of the invalid reopening.

3. Initiation of Penalty Proceedings under Section 271(1)(c):
The A.O. initiated penalty proceedings under section 271(1)(c) for concealment of income. However, since the Tribunal quashed the reopening of the assessment and deleted the addition made by the A.O., the initiation of penalty proceedings under section 271(1)(c) became redundant and was not further addressed.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the reopening of the assessment under section 147 due to the mechanical and non-application of mind by the approving authorities. Consequently, the addition made under section 68 and the initiation of penalty proceedings under section 271(1)(c) were also invalidated. The judgment emphasized the necessity for the A.O. and approving authorities to apply independent and judicious consideration before reopening assessments.