2023 (7) TMI 852 - AT - Income Tax

Reopening of assessment u/s 147 - validity of granting approval u/s. 151 - mandation of independent application of mind before granting approval - HELD THAT - PCIT only mentioned approved in column no 14 - PCIT has not recorded proper satisfaction and granted approval without application of mind in a mechanical manner which is not satisfying the mandatory requirement of provision of sec 151 - Therefore we are in agreement with the conclusion drawn by the ld. CIT(A) that the superior authorities have merely given their approval in a mechanical manner without independent application of mind, therefore, respectfully following the decision of N C Cables 2017 (1) TMI 1036 - DELHI HIGH COURT we hold that the reassessment proceedings are bad in law. Decided against revenue.

Issues involved:
The issues involved in the judgment are the deletion of addition made on account of share application money and share capital, failure to appreciate the reason recorded for reopening proceedings, failure to establish the genuineness of transactions, and the validity of reassessment proceedings based on approval u/s 151 of the Income Tax Act.

Deletion of Addition of Share Application Money and Share Capital:
The appeal was filed against the order of CIT(A)-28, New Delhi for A.Y. 2011-12, questioning the deletion of an addition of Rs. 4,97,14,844 on account of share application money and share capital. The revenue contended that the CIT(A) failed to appreciate the reason recorded for the addition, the nature of the transactions, and the onus of proving the transactions. However, the AR supported the CIT(A) by highlighting that the CIT(A) rightly quashed the initiation of reassessment proceedings based on the lack of valid approval u/s 151 of the Act, following relevant legal precedents.

Failure to Appreciate Reason Recorded for Reopening Proceedings:
The revenue argued that the CIT(A) did not consider the reason recorded for reopening proceedings, which mentioned an amount of Rs. 4,43,84,844 and the escapement of income. The revenue contended that the CIT(A) should have acknowledged the approval process for reopening u/s 148 of the IT Act. On the other hand, the AR pointed out that the approving authority's mere mention of "approved" without proper satisfaction did not meet the mandatory requirements of sec 151 of the Act, as per legal judgments. Consequently, the reassessment proceedings were deemed bad in law and rightly quashed by the CIT(A).

Failure to Establish Genuineness of Transactions:
The revenue argued that the CIT(A) failed to appreciate the bogus nature of transactions as the assessee did not provide relevant documents to establish their genuineness. However, the AR contended that the reassessment proceedings were invalid due to the lack of proper approval u/s 151 of the Act, as per legal precedents, which led to the quashing of the reassessment order by the CIT(A).

Validity of Reassessment Proceedings Based on Approval u/s 151:
The crucial issue revolved around the validity of reassessment proceedings based on the approval u/s 151 of the Income Tax Act. The revenue sought to challenge the CIT(A)'s decision to quash the reassessment proceedings, arguing that the CIT(A) granted relief to the assessee on legal grounds without a valid basis. However, the AR supported the CIT(A) by emphasizing that the approving authority's mechanical approval without proper satisfaction did not meet the legal requirements, leading to the dismissal of the revenue's appeal.

Conclusion:
The ITAT Delhi upheld the CIT(A)'s decision to quash the reassessment proceedings due to the lack of valid approval u/s 151 of the Income Tax Act. The appeal of the revenue was dismissed based on the failure to meet the mandatory requirements for approval, as highlighted by legal precedents. The judgment emphasized the importance of proper satisfaction and independent application of mind in approval processes to ensure the validity of reassessment proceedings.

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