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TMI Blog2016 (5) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Even otherwise, a perusal of the above demonstrates that the Addl. CIT has written “Yes, I am Satisfied” which establishes that he has not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... allow it to revise the said Grounds of Appeal. The appellant further craves leaves to add, alter, amend or delete any of the grounds of appeal on or before the date of hearing." 2. The brief facts of the case are that the Assessee had filed return declaring income of ₹ 4,38,958/- on 31.10.2014 which was processed u/s. 143(1) of the Act on 4.1.2005. Later on an information was received from the Investigation Wing, New Delhi that the assessee is amongst the beneficiaries of bogus accommodation entries totaling to ₹ 1,56,00,000/-. Accordingly, the proceedings u/s. 147 of the Act were initiated and notice u/s. 148 of the Act was issued on 25.3.2011 in name of M/s Pine View Construction & Traders P. Ltd. and was served through affixtgure on 31.3.2011 as the notice sent through speed post was received back unserved with the postal remarks 'No such company of this name at the given address'. No compliance was made thereof. Thereafter on the basis of the details of the bank account number and branch available in the information received from Investigation Wing, Notice u/s. 133(6) of the Act was issued to the bankers i.e. Canara Bank, Safdarjung Development Area, New Delhi. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT-4 vs. G&G Pharma India Ltd. In this behalf, he filed the copy of the order dated 9.1.2015 of the ITAT, Delhi Bench passed in the case of G&G Pharma India Ltd vs. ITO (Supra). Therefore, he requested that by following the decision of the Hon'ble Jurisdictional High Court in the case of Pr. CIT vs. G&G Pharma Ltd. (Supra) the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee. 6. On the contrary, Ld. DR relied upon the order passed by the CIT(A) on the issue of validity of reopening and stated that Ld. CIT(A) has rightly upheld the action of the AO of reopening and also rightly upheld the addition in dispute. 7. We have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case law cited by the assessee's counsel on the issue in dispute. In our view, it is very much necessary to reproduce the reasons recorded by the AO before issue of notice u/s. 148 and the approval of the Ld. Addl. CIT, Range-17, New Delhi for reopening of assessment which reads as under:- "FORM FOR RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 148 AND FOR OBTAINING THE APPROV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey / expenses / gift / purchase of shares etc. They have worked for commission. The assessee is a company incorporated on 11.09.1998. It is noticed that there is no return of come is available in the AST database of Income-tax Department. Therefore. it is clear that the assessee has not filed return of income for the A.Y. 2004-05 and consequently has not offered any income for taxation. Sources of the transactions are not explained. I, therefore, have reason to believe that on account failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment for the above assessment year, the income chargeable to tax to the extent of accommodation entry of ₹ 1,56,00,000/- has escaped assessment within the meaning of section 147 of I.T. Act. 1961. To bring to tax the income which has escaped assessment, I proposed to issue notice u/s. 148 of the I.T. Act. 1961. Since, four years has expired from the end of the relevant assessment year, and no scrutiny assessment was completed uls 143(3) in this case for thesaid assessment year, the reasons recorded above for the purpose of reopening of assessment is put up kind satisfaction of Addl. Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. A mere reference is made to certain information received from the Investigation Wing which was supplied to the assessee vide AO's letter dated 15.9.2010. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO had mechanically issued notices u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Investigation, Jhandewalan, New Delhi. Keeping in view of the facts and circumstances of the present case and the law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. year in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon'ble High Court of Delhi in the following cases:- (i) Signature Hotels (P)_ Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The AO did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his "reasons to believe"was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The AO had clearly substituted form for substance and therefore the action of the AO was not sustainable." 9. In view of above, we are of the considered view that above issue is exactly the similar to the issue involved in the present appeal and is squarely covered by the aforesaid decisions of the Hon'ble High Court of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity . 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed." (C) ITAT, 'E' Bench, New Delhi in the case of ITO vs. M/s NC Cables Ltd. in ITA No. 4122/Del/2009 (AY 2001-02) and in Cross Objection No. 388/Del/2009 in the matter of M/s NC Cables Ltd. vs. ITO, vide order dated 22.10.2014, the Tribunal has held as under:- "10.2. The Mumbai 'E' Bench of the Tribunal in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. In the present case, the order sheet which is placed on record show that the Commissioner has simply affixed "approved" at the bottom of the note sheet prepared by the ITO technical. Nowhere the CIT has recorded his satisfaction. In the case before the Hon'ble Supreme Court (supra) that on AO's report the Commissioner against the question "whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148 merely noted "Yes" and affixed his signature there under. On these facts, the Hon'bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the 9 Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, the Commissioner has simply put "approved" and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. 8. Hon'ble Delhi High Court in the case of' United Electrical Co. Pvt. Ltd. Vs CIT 257 has held that "the proviso to sub-section (1) of section 151of the 10 Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some inbuilts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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