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TMI Blog2024 (2) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... from Mr. Amit Sharma in lieu of the contracts awarded to him and the figure mentioned in the loose papers or the figures of illegal gratification and the same is taxable as unexplained cash credit in the hands of the assessee. The assessee during the year 2016 had taken a rented accommodation from one Mr. Amit Sharma, Dehradun to substantiate the said claim, the assessee produced the rent Agreement - A.O. mentioned several wrong facts in the reasons. Further, the case of the father of the assessee was reopened u/s 148 of the Act, but no addition has been made on the said issue. From reading the above facts and circumstances it is clear that the A.O. has entertained a wrong belief and was not having tangible material on the basis of which a person having common prudence can entertain a belief that any income has escaped assessment. As there is no independent application of mind by the A.O, there is an approval on the very same reasons which were earlier discarded by the Office of the JCIT and there is a contradiction compared to submissions made before the Settlement Commission by the very same officer, therefore, it can be safely concluded that the approval granted u/s 151 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be read as whole and not in piecemeal. 8. Appellant craves to leave add alter modify any grounds of appeal at the time hearing. Additional grounds of appeal : a) On the facts and circumstances of the case, the assessment order passed by DCIT Central circle-Dehradun as affirmed by CIT(A) is void ab initio as the same has been passed without there being an order issued in writing u/s 120(4)(b) of the Act which is sine-qua-non to confer jurisdiction upon JCIT Central Circle-Dehradun. b) On the facts and circumstances of the case, the jurisdiction assumed by DCIT-Central Circle Dehradun is a nullity as there is no order transferring jurisdiction from the AO of Tihri, who was having natural jurisdiction, to Central Circle as per the provisions of Section 127 of the Act. 3. The brief facts of the case as mentioned in the order of the Ld. CIT(A) for A.Y 2015-16 are as under: the assessee had filed his regular Return of Income u/s 139(1) of the Income-Tax Act, 1961 for the year under consideration on 15.08.2015, declaring thereon a total income of Rs. 6,54,730/-. As per AO, after the analysis of certain documents impounded during the course of surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for entries written on it. It can be said in view of the fact that, Shri V. N. Rajan father of the assessee has acknowledged the receipt and mode of amounts mentioned against his name on the page no. 186 187 of the said LP. Moreover, as per AO, he has completed the assessment proceedings u/s 143(3) of the Act in respect of one other persons' case i.e. Shri Sanjay Rawat, whose name was mentioned on the page no. 186 of the LP and the amounts as written against his name were found to be his income for the concerned period of time. Further, as per AO, the assessee stated that each entry as mentioned on page no. 186 187 of the LP can't be treated as his income carries some substance in view of the fact that receipts of amounts as mentioned against the name of V.K. Rajan or Shri V.N. Rajan, father of the assessee have been acknowledged by him as his income/loan and the amounts as mentioned against the name of Shri Sanjay Rawat in the said loose papers have been considered as his income only. However, it has been argued by the AO that at the top of page 186 of the said LP, 'Sh. Rajesh MD' which indicates that, other than the entries/amounts written against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral in nature, which requires no adjudication. 7. In Ground No. 2 3 of both the Appeals, the assessee challenged the jurisdiction of the A.O. u/s 147 of the Act. The Ld. Counsel for the assessee submitted that the CIT(A) erred in affirming the jurisdiction of the A.O u/s 147 of the Act ignoring that the A.O. has not followed the mandatory provisions of Sections 147 to 151 of the Act. Further submitted that the A.O. has mentioned wrong facts in the reasons recorded. The first reasons were sent to Addl. CIT, Meerut on 05/09/2019, the reasons were recorded by DCIT-Central Circle, Dehradun. The reasons were sent for approval within the period of four years and as per the reasons recorded, the alleged income escaped was Rs. 16.72 crores. The ACIT on 18/03/2020 refused to grant sanction u/s 151 of the Act on those reasons on the ground that the A.O. recorded reasons who has failed to corroborate page no. 186 187 with other documents and the A.O. has not applied his mind independently to allege material . After refusal to grant sanction, the JCIT (OSD) once again recorded the reasons and sent to PCIT, Kanpur, on 23/06/2020, which is after expiry of four years from the end of As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman 378(SC) CIT Vs N.C.Cables- 98 CCH 18(Del) f. Chuga Mal Rajpal:- 79 ITR 603(SC) Larger Bench- 8. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities, submitted that the approval granted u/s 151 of the Act to the reasons recorded by the A.O. is in accordance with law which requires no interference at the hands of the Tribunal, therefore, submitted that grounds to that effect requires to be dismissed. 9. We have heard both the parties and perused the material available on record. The Ld. A.O. initiated action u/s 147 of the Act on the basis of the documents impounded during the course of survey conducted in a group cases of Amit Sharma /Ram Assray Sharma which was marked No. 186 187 which are reproduced as under:- 10. Subsequently, on perusal of the facts and incriminating material, reassessment proceedings were initiated. On 05/09/2019 first proposal containing the reasons was sent along with the reasons to Additional CIT, Meerut by DCIT, Central Circle, Dehradun for seeking approval u/s 151 of the Act. The said proposal has been sent within four years from the end of the Assessment Year. The relevant porti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the JCIT, Meerut, sent back the proposal to DCIT, Central Circle, Dehradun for rectification. Thus, even the proposal dated 08/10/2020 has also not been sanctioned/approved. Thereafter, on 07/12/2020, 5th proposal was submitted by the ACIT, Central Circle, Dehradun before PCIT, Kanpur for approval u/s 151(2) of the Act. On 22/12/2020 the said proposal submitted by JCIT, Meerut to PCIT, Kanpur for approval u/s 151 of the Act has been granted despite none of the previous directions dated 23/11/2020 were complied by the A.O. 13. It is pertinent to note that on 27/12/2019 the said Sri Amit Sharma filed an application before the Settlement Commission. It is observed that the very same PCIT, in the report sent under Rule 9 to the Settlement Commission claimed that Amit Sharma was given contract by UPRNN as sub contractor and also alleged that illegal gratification of Rs. 20 lacs has been given to the Assessee and Rs. 30 lach have been paid to Mr. Malhotra in whose house Assessee was residing and the said stand was contrary to the reasons recorded. The relevant portion of the order of the Settlement Commission mentioning the said fact is reproduced as under: It is the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by an Under Secretary underneath a stamped 'yes' against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this Court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex Court in Union of India vs. M.L. Capoor Ors. AIR 1974 SC 87 wherein it was observed as under:- 27. We find considerable force in the submission made on behalf of the respondents that the rubber stamp reason given mechanically for the supersession of each officer does not amount to reasons for the proposed supersession. The most that could be said for the stock reason is that it is a general description of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Ors. vide order dated 10/10/2002 held as under:- What disturbs us more is that even the Addl. CIT has accorded his approval for action under s. 147 mechanically. We feel that if the Addl. CIT had cared to go through the statement of said V.K. Jain, perhaps he would not have granted his approval, which was mandatory in terms of proviso to sub-s. (1) of s. 151 of the Act as the action under s. 147 was being initiated after the expiry of four years from the end of the relevant assessment year. As highlighted above, the legislature has provided certain safeguards to prevent arbitrary exercise of powers by an AO, particularly after a lapse of substantial time from completion of assessment. The power vested in the CIT to grant or not to grant approval is coupled with a duty. The CIT is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. 15.3. The Hon ble High Court of Madhya Pradesh in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed. 15.5. The Hon ble Supreme Court in the case of Chhugamal Rajpal Vs. S. P. Chaliha ors. in Civil Appeal No. 1311 of 1967 vide order dated 21/01/1971 reported in (1971) 79 ITR 0603 held as under:- From the report submitted by the ITO to the CIT, it is clear that he could not have hat is to believe that by reason of the assessee's omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rong facts have been mentioned in the reasons recorded: Facts mentioned in reasons Correct facts Remark The AO observed that entries of cheque amounts pertaining to father of the assessee are actually the entries of the assessee and hence Mr V.K.Rajan version that these are friendly loans is not correct. Page number 64 of the paper book of sanctions i.e. reasons recorded In the assessment of father the revenue accepted the transactions of payment of loan and repayment of loan as correct Order of Assessment of father Page No-11- 12. Therefore the belief of the AO that entries are actually related to assessee is not correct The A.O. has alleged that the assessee has awarded contracts to Amit Sharma- See page Number-64 Para- 6 of the reasons recorded Amit Sharma was sub contractor of UPRNN he was getting contracts from UPRNN a UP Govt undertaking. Page Number -5 of the Commission order Para 4.1. Facts submitted by the same CIT who granted sanction to the AO for 148 Assessee was not an officer of UPRNN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final conclusion arrived at by the officer concerned, as a result of mental exercise made by him on the information received. But, the reason due to which the decision is reached can always be examined. 22. In the present case as discussed above, there were factual mistakes in reasons recorded, there is no independent application of mind by the A.O, there is an approval on the very same reasons which were earlier discarded by the Office of the JCIT and there is a contradiction compared to submissions made before the Settlement Commission by the very same officer, therefore, it can be safely concluded that the approval granted u/s 151 of the Act by the Office of PCIT is mechanical approval and hence the assumption of jurisdiction by the A.O. is bad in law. Thus, we find merit in Ground No. 2 to 4 of the Assessee s appeal in ITA No. 78/DDN/2021 and 79/DDN/2021. Accordingly, Ground No. 2 3 of Assessee s appeals are allowed. 23. Since, we have decided the Ground No.2 3 and quashed the reassessment, the other grounds of the assessee on legal issues as well as on merits are not decided as the same have become academic in nature. 24. In the result, Assessee s appeal in ITA No ..... 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