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2025 (5) TMI 284 - AT - Income TaxInitiation of proceedings u/s 147/148 due to non compliance of the statutory provision - Allegation of non independent application of mind - case of the assessee that assessment proceeding is a product of non-application of mind; the reasons recorded was only on the basis of the statement recorded of one person who was not a director of the appellant company at the time of recording of his statement during the course of survey. Also allegation leveled against the assessee to this effect that all material facts necessary for assessment u/s 143(3) have not been fully and truly disclosed is not sustainable in the eyes of law in view of the facts that during the course of assessment proceedings the entire details as asked for were duly furnished HELD THAT - As perused the report of the Investigation Wing it appears that the reasons recorded by AO is the replica of the observations made by the Investigation Wing. Independent application of mind by the AO while recording reasons is thus totally absent. We also note that claiming the reasons so recorded by the AO was upon perusal of the ITR and assessment records of the assessee is found to be an incorrect statement keeping in view the reply of the RTI application filed by the assessee. On this score the reason recorded since found to be non application of mind the entire reassessment proceedings is vitiated and thus quashed. Satisfaction recorded by PCIT - Mere perusal of the reasons recorded and expressing satisfaction without recording any observation as to how the Ld. PCIT has come to the level of satisfaction on the reasons recorded by AO that the assessee has failed to disclose fully and truly all material facts necessary for the assessment the satisfaction is found to be a mechanical one and liable to be quashed. Thus on both the grounds raised by the assessee as narrated above are adjudicated in favour of the assessee. The order of assessment is thus quashed with the above observations. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in these appeals arising from reassessment proceedings under Sections 143(3), 147, and 148 of the Income Tax Act, 1961 ("the Act") are:
2. ISSUE-WISE DETAILED ANALYSIS Validity of Reopening under Section 147/148 of the Act Relevant Legal Framework and Precedents: The reopening of assessment under Section 147 is permissible only if the AO has "reasons to believe" that income chargeable to tax has escaped assessment. The AO must apply independent mind and record cogent reasons. The sanctioning authority under Section 151 must also apply independent judgment before granting approval. Precedents relied upon include PCIT v. Meenakshi Overseas Pvt. Ltd., PCIT v. G & G Pharma India Ltd., Dhawan Creative Prints v. UOI, Sabh Infrastructure Ltd. v. ACIT, CIT, Jabalpur v. M/s S. Goyanka Lime and Chemical Ltd., PCIT v. M/s N.C. Cables Ltd., and others. Court's Interpretation and Reasoning: The Tribunal examined the reasons recorded by the AO for reopening, which were found to be verbatim reproduction of the Investigation Wing's report without independent application of mind. The AO's assertion that the ITR and assessment records were considered was contradicted by an RTI reply indicating that such records were not maintained by the department. Therefore, the AO's reasons were based on incomplete or non-existent records, evidencing non-application of mind. The sanction for reopening under Section 151 was granted by the Principal Commissioner of Income Tax (PCIT) solely on the basis of these reasons without recording any independent satisfaction or deliberation. This mechanical approval was held to be invalid. Key Evidence and Findings: The Investigation Wing's report, reasons recorded by AO (pages 50-56), RTI reply dated 23.06.2022 (page 919), and sanction order (page 67) were critical documents. The reasons recorded were largely a copy-paste of the Investigation Wing's report (pages 828-842). The RTI reply negated the AO's claim of having assessment records, undermining the validity of reasons. Application of Law to Facts: The law requires independent application of mind by the AO and sanctioning authority. Mere reproduction of investigation reports and mechanical sanction without scrutiny do not satisfy the statutory mandate. The Tribunal applied these principles and found the reassessment proceedings vitiated. Treatment of Competing Arguments: The Department argued that reopening was justified based on the investigation report and prior approval. The Tribunal rejected this, holding that the AO did not apply mind independently and the sanction was mechanical. The Department's reliance on the orders below was not accepted. Conclusion: The reopening under Section 147/148 was invalid due to non-application of mind by the AO and mechanical sanction by the PCIT. The reassessment proceedings were quashed. Validity of Assessment Order and Notice of Demand without DIN Relevant Legal Framework: Circular No. 19/2019 mandates mentioning Document Identification Number (DIN) in assessment orders and notices of demand for authenticity and tracking. Court's Interpretation and Reasoning: Although the assessee raised this issue, it was not pressed during arguments. Accordingly, the Tribunal dismissed these grounds as not pressed. Rejection of Books of Accounts and Additions on Bogus Purchases and Commission Relevant Legal Framework: Books of accounts maintained as per law cannot be rejected without giving the assessee opportunity to produce them. Additions on account of bogus purchases require prima facie evidence. Court's Interpretation and Reasoning: Since the reassessment proceedings were quashed on legal grounds, the Tribunal did not delve into these issues, rendering them academic. Other Grounds Challenging Reopening as Mere Change of Opinion and Time Barred Reopening Relevant Legal Framework: Reopening cannot be based on mere change of opinion. Reopening beyond four years requires specific conditions. Court's Interpretation and Reasoning: These grounds were subsumed within the primary issue of validity of reopening. Since reopening was quashed on non-application of mind, these grounds were not separately adjudicated. 3. SIGNIFICANT HOLDINGS The Tribunal held:
Core principles established include the necessity for the AO to exercise independent judgment while recording reasons for reopening and for the sanctioning authority under Section 151 to record independent satisfaction. Mechanical or non-deliberative actions render reassessment proceedings invalid. Final determinations:
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