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TMI Blog2018 (5) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment. 2.1. The ld. Counsel for the assessee referred to the reasons of re-opening and challenged the validity of the same on the following grounds:- a) Notice was issued in the name of M/s. Navalco Commodities Pvt. Ltd., which had merged into the assessee company w.e.f. 01/04/2010 and hence notice was issued to a non-existing company, which is bad in law and hence the reassessment framed in pursuance of such notice is also bad in law. b) Notice was issue by the ITO Ward 7(3), who had no jurisdiction over the assessee, as is evident from the remand report submitted by him, wherein at para 5.2.2., the Assessing Officer admitted that the assessee was assessed by the ITO Ward 2(4). Hence, there was no application of mind and a notice issue by a non-jurisdictional Assessing Officer is bad in law. c) The reassessment was based on the direction of the DDIT and suffers from nonapplication of mind by the Assessing Officer. The reasons recorded that income subject to tax has escaped assessment, should be that of the Assessing Officer and not of some other authority. d) The reopening was beyond a period of four years and there was no approval by the authority prescribed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s beyond the period of four years from the end of the Assessment Year and the original assessment was completed u/s 143(3) of the Act. Under these circumstances, the proviso to Section 147 of the Act, comes into play. A perusal of the reasons recorded demonstrate that the Assessing Officer has not alleged that the assessee has failed to disclose fully and truly the material facts necessary for completion of the assessment. There is no whisper of such a violation by the assessee in the reasons. We find that the 'A' Bench of this Tribunal in the case of M/s. Beekay Steel Industries Ltd. vs. DCIT CC-XXX, Kolkata, in I.T.A. No. 105/Kol/2015, order dt. 31/05/2017, held as follows: 4.4. The Hon'ble Bombay High Court in the case of Tao Publishing (P) Ltd. v. Dy.CIT reported in (2015) 370 ITR 135 (Bom.), has held as follows:- "10. As stated above, the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment forsuch assessment year by reason of the failure on the part of the assessee: (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is not even a whisper in the reasons recorded for the reopening of the assessment that there is a failure on the part of the assessee to disclose fully and truly all the necessary material facts required for assessment in view of the 1st proviso to Section 147 of the Act. In this case no tangible materials have come to the possession of the Assessing Officer subsequent to the Assessment Order u/s 143(3). Re-opening is done based on the same material and record and hence it is bad in law. As far as the contention, that there is a change in opinion is concerned, we are unable to agree with the ld. Counsel for the assessee as there was neither a query on this issue by the Assessing Officer during the original assessment proceedings, nor there was a reply by the assessee. Hence there was no opinion formed. Thus, the question of change of opinion does not arise. 4.9. In any event, as we have held that the re-opening is bad in law as it does not fulfill the requirement of the Proviso to Section 147 of the Act, and as no tangible material has come to the possession of the Assessing Officer, we quash the assessment and allow the appeal of the assessee. 5. In the result, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner (1) conveying approval to the proposal submitted by the Assessing Officer. There is merit in the contention raised on behalf of the assessee that the requirement of section 151(2) could have only been fulfilled by the satisfaction of the Joint Commissioner that this is a fit case for the issuance of a notice under section 148. Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner. That expression has a distinct meaning by virtue of the definition in section 2(28C). The Commissioner is not a Joint Commissioner within the meaning of section 2(28C). In the instant case, the Additional Commissioner forwarded the proposal submitted by the Assessing Officer to the Commissioner. The approval which has been granted is not by the Additional Commissioner but by the Commissioner. There is no statutory provision under which a power to be exercised by an officer can be exercised by a superior officer. When the statute mandates the satisfaction of a particular functionary for the exercise of a power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner, it has to be done in that manner. [Para 6] Once the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "borrowed" or "dictated" satisfaction. Law in this regard is now wellsettled. [Para 8] The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. [Para 9] Therefore, the Tribunal has rightly decided the legal aspect, keeping in view wellestablished principles of law laid down in catena of judgments including that of the Supreme Court. [Para 10] No question of law arises. This appeal is accordingly dismissed. [Para 11] The Hon'ble Delhi High Court in the case of Pr. CIT vs N.C. Cables in ITA No. 335/2015 judgement dated 11.01.2017 held that approval under section 151 is to be made after application of mind. It is not so in this case as mechanical approval is given by an officer who is not authorised to do so in law. 6.2. Thus on this count also we hold that the reopening is bad in law. 7. Further a perusal of the reasons recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Tribunal. No substantial question of law arises for our consideration. The appeals are dismissed. There shall be no order as to costs. 7.2. The Jurisdictional High Court in the case of Principal CIT vs G&G Pharma India Ltd. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows: "12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were termed as accommodation entries, which information was given to him by the Director Investigation, the A.O. stated: 'I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has, introduced its own unaccounted money in its bank account by way of above accommodation entries'. The above conclusion is unhelpful in understanding whether the A.O. applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be a link between the reasons and the evidence material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during F.Y.2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, bad a paid up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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