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TMI Blog2020 (11) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction under s.147 r.w.s. 151 of the Act and consequent additions carried out under s.2(22)(e) of the Act within the framework of the provisions of Section 147 of the Act strikes to the root of the matter and therefore can be challenged before the Tribunal even if not raised or not argued diligently before the lower authorities. We, thus, do not concur with the objections of the Revenue on this score. Additions made under s.2(22)(e) of the Act in departure with recorded reasons, cannot be sustained in the current proceedings under s.147 of the Act where no additions towards retuned income has been made on the grounds for which powers under S. 147 were exercised. We thus are not inclined to go into the remaining aspects, if any, concerning merits of the additions. The proceedings under s.147/s.148 of the Act are thus quashed as void ab-initio and the additions made under s.2(22)(e) of the Act is held to be bad in law. - Decided in favour of assessee. - I.T.A. No. 2414/Ahd/2018 - - - Dated:- 20-11-2020 - Shri Pradip Kumar Kedia, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri Ketan H. Shah, A.R. For the Respondent : Shri Dileep K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act, the learned AR adverted to the reassessment order and submitted that the case of the assessee was reopened by issuance of notice under s.147 of the Act on the basis of certain information available with the AO as spelt out in the reasons assigned which purportedly gave rise to the alleged belief that chargeable income of the assessee has escaped assessment. A notice under s.148 of the Act was consequently issued dated 29.01.2016 for which the reasons recorded under s.148(2) of the Act is reproduced hereunder for immediate reference: On verification of the ITS details, i t is noticed that the assessee has purchased immovable property worth ₹ 1,72,00,000/- on 16 08 2012 Further the assessee is in contract receipt of ₹ 47,539/- However, the assessee has not f i led return of income for the A. Y. 2013 - 14 reflecting this income. Hence income of ₹ 1,72,47,539/- has escaped assessment. This escapement is because of the failure on the part of the assessee to disclose fully and truly all material facts related to his income. 2. Considering the above facts, I have reason to believe that the income of ₹ 1,72,47,539/- has escaped assessment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act was taken is wholly unsustainable in law. The legal proposition was cited that where for the ground on which action under s.147/s.148 of the Act was initiated were not acted upon, no additions could be made by the AO on other grounds which did not form part of the reasons recorded for the purposes of reassessment. It was thus submitted that the issue is beyond the pale of controversy anymore. The learned AR of the assessee relied upon the decision of the Hon ble Gujarat High Court CIT v. Mohmed Juned Dadani (2014) 355 ITR 172 (Guj). 6.2 The learned AR next submitted that the approval in the instant case for initiating action under s.147 of the Act was obtained from the competent authority i.e. Joint Commissioner of Income Tax (JCIT) on 25.01.2016 vide a consolidated order involving nine cases which inter alia included the name of the assessee. It was contended that the approval was combinedly given mechanically in a summary manner for nine cases which clearly shows non-application of mind qua the case of the assessee per se. It was submitted that in the absence of any application of mind, the approval granted by the Joint Commissioner of Income Tax under s.151 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee under s.2(22)(e) of the Act is not warranted even on merits where the assessee has admittedly not received any money from the lender company during the year at all as per its own books of accounts. The addition under s.2(22)(e) of the Act actually represents the money paid by the lender company to Mr. Alderin Raphel Fenandies and not to the assessee as per the books of a lender company. The learned AR thereafter submitted that the AO was satisfied with the explanation of the assessee towards transactions carried out to be satisfactory and did not invoke the provisions of Section 69 of the Act for transaction of purchase of property originally alleged in the reasons recorded and instead invoked altogether different provisions of deeming nature in the course of the assessment totally de horse the allegations made in the reasons recorded. It was thus contended that the additions made under s.2(22)(e) of the Act is on an altogether different tangent and is neither valid in law on the touchstone of Section 147 of the Act nor on facts on the touchstone of Section 2(22)(e) of the Act. 7. The learned DR, on the other hand, strongly defended the action of the revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... straightway address ourselves to the validity of assumption of jurisdiction under s.147 of the Act as well as validity of additions made on a ground altogether different from the ground for which reasons towards escapement was recorded under s. 148(2) of the Act. 8.1 To begin with, it may be pertinent to note that reason to believe is the source of jurisdiction and fulcrum of s.147 of the Act. Section 147 of the Act is of special or extraordinary nature. It creates, defines and regulates the rights of AO to reopen and assess the escaped assessment. The jurisdiction to assess the income under s.147 of the Act is thus substantive in nature. Hence, several safeguards have been inbuilt by the legislature in S. 147 for varied situations to prevent its abuse from the ipse dixit of revenue. If any of the inbuilt conditions are missing or have not been adhered to, then the Tax authority is precluded from invoking the powers of reopening an assessment. The provisions of S. 151 is intended to put yet another check on the power of the AO so that the action of AO is in knowledge and concurrence of senior Income Tax Authorities. 8.2 As noted, Section 147 of the Act confers upon the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief. In these circumstances, where the ground on which the jurisdiction under s.147 of the Act was exercised have not been reckoned and acted upon in the re-assessment proceedings and no additions were carried out for any of such grounds recorded, the AO could not make additions on an altogether different ground which did not form part of the reasons recorded by him as held by the Hon ble Gujarat High Court CIT v. Mohmed Juned Dadani (2014) 355 ITR 172 (Guj) and other judicial precedents. 8.4 The additions in the instant case were eventually made under the shelter of deeming fiction of S. 2(22)(e) of Act without questioning the legitimacy of source of investment in property. Significantly, no relevant material was referred to be in privy of AO for applicability of uniquely different Section 2(22)(e) of the Act for purchase of property at the time of reasons recorded. The alleged applicability of S. 2(22)(e) were discovered at a subsequent stage in the course of assessment. Needless to say, the conditions for applicability of S. 69 and S. 2(22)(e) are poles apart and totally dis-similar in law. Thus, in view of the decision of the Hon ble Gujarat High Court, it is not perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accord of approval without satisfaction is a nullity in the eyes of law. While a combined approval by designated authority is not a bar, ingredients of Section 151 of the Act is, however, required to be fulfilled qua each case. 9.1 At this juncture, it may be pertinent to note that satisfaction means to be satisfied with state or things, meaning thereby to be satisfied in one s own mind. Satisfaction is essentially a conclusion of mind. The word satisfied means make up its mind . The act of satisfaction is not an independent act. It is associated with existence of cogent material. The condition precedent is satisfied . It is not mere confirmation of the act of the AO but something more. It is statutory requirement and not a mere administrative act that the superior authorities viz. JCIT/ CIT etc. need to be satisfied on the conclusion of the AO. The satisfaction of the competent authority on the reasons recorded for initiation of action under s.147/148 of the Act precedes an approval. The approval granted without expressly satisfying himself cannot be regarded as valid approval for the purposes of Section 151 of the Act. Hence, in the absence of any express satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Cal.). The Hon ble Allahabad High Court in the case of Dr. Shashi Kant Garg v. CIT (2006) 285 ITR 158 (All.) has also similarly expressed that reopening is void on failure to obtain sanction of the superior authority accord with Section 151 of the Act. The Hon ble Delhi High Court in the case of Central India Electric Supply Co. Ltd. Vs. ITO (2011) 333 ITR 237 (Del.) has also reiterated that the superior authority requires to be satisfied on the validity of action under s.147 of the Act with due application of mind. The co-ordinate bench of Tribunal in the case of Amar Lal Bajaj vs. ACIT ITA No. 611/Mum/2004 order dated 24.07.2013 has also opined that merely writing approved in the sanctioned form without recording satisfaction renders the reopening void. The identical view has been expressed by the co- ordinate bench in ITO vs. N. C. Cables Ltd. ITA No.4122/Del/2009 order dated 22.10.2014 approved by the Hon ble Delhi High Court (2017) 98 CCH 0018 (Del.) and Direct Sales Pvt. Ltd vs. ITO ITA No. 3545/Del/2010 order dated 25.02.2015. 9.5 It is true that expression satisfied provides greater latitude and obligation cast on Superior authority towards satisfaction under S. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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