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2016 (3) TMI 328 - CALCUTTA HIGH COURT

2016 (3) TMI 328 - CALCUTTA HIGH COURT - [2016] 383 ITR 597 - Reopening of assessment - sanction u/s.151(2) from the competent authority - whether the Additional C.I.T. while according his approval u/s.151(2) of the Act did not apply his mind and mechanically granted sanction? - Held that:- In the instant case the assessee has not even contended that the reasons recorded by the assessing officer were irrelevant and as such he had no reason to believe that any income chargeable to tax had escaped .....

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ral principle or any rule of natural justice that a statutory tribunal should always and in every case give reasons in support of its decision. - Decided in favour of the revenue. - GA No. 2488 of 2006, ITA No.297 of 2006 - Dated:- 4-3-2016 - Girish Chandra Gupta And Asha Arora, JJ. For the Appellant : Mr. Ananda Sen, Adv For the Respondent : Mr. M. P. Agarwal Adv., Mr. Ranjan Sinha Adv ORDER Girish Chandra Gupta J. The assessee has come up in appeal under Section 260A of the Income Tax Act, 196 .....

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reassessment, when admittedly the approval accorded by the concerned authority for such reopening was given in a mechanical manner which was itself without jurisdiction and bad in law? II) Whether on the facts and in the circumstances of the case when the jurisdictional aspect in according the approval for reopening was absent, the action of the learned Tribunal in upholding such approval and thereafter in further upholding the assessment which was beyond four years is perverse? Briefly stated .....

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e assessee and other information in his possession came to the conclusion that income had escaped assessment for the assessment years 1990-91, 1991-92 and 1992-93. By the order dated 26th March, 2001 the assessing officer recorded the reasons for initiating the reassessment proceedings under Section 147 of the Act for the aforesaid years. Thereafter, the assessing officer obtained approval of the Additional CIT under Section 151(2) of the Act by the order dated 29th March 2001. Thereafter the as .....

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hereinafter referred to as the CIT(A) ). The assessee challenged the validity of the notice under Section 148 and the additions or disallowance made by the assessing officer. The CIT(A) by an order dated 9th June, 2004 while granting partial relief to the assessee rejected the assessee s plea as regards the validity of the notice issued under Section 148 and held as follows:- The Ld. AR has referred a case law reported in 79 ITR 603 SC (1971) in the case of Chhugamal RajPal Vs. S. P. Chaliha &am .....

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, he could never have come to conclusion on the material before him that it is a fit case to issue notice u/s. 148. The issue of the present case is totally different. In the instant case, for the AY 90-91 it was found by the AO that investment to the extent of ₹ 77,910/- for purchasing of truck was not disclosed before the I.T. Authorities, hence the appellant had taxable income for the relevant period but the same was not shown before the Department. In fact, the appellant did not file a .....

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ant assessment years and thereby she concluded that it was a fit case for reopening and thereby accorded her approval. The case cited by the Ld. AR apparently suggests that there is no material fact which may lead to the conclusion as derived by the Addl. Commissioner for according her approval. But in the instant case, the income has actually escaped assessment. Investment made towards purchase of truck was never disclosed before the I.T. Authorities. Hence I think that the present case is clea .....

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e view stating that though the notices were served beyond the prescribed time, they were saved u/s.4 of the Amending Act as held by the Hon ble Supreme Court. And thereafter before expiry of the due date, the notice was issued by the AO and it was served within 10 days which is quite reasonable period and to this extent, the submission made by the appellant is incorrect and not sustainable. Accordingly, I reject the ground of the appellant on the issue of validity of notice. Aggrieved by the ord .....

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atisfaction of the sanctioning authority as envisaged under Section 151 was not complied with . The assessee thus restricted his challenge only to the aforesaid ground and did not make any submission on the other ground which were originally taken in the memorandum of appeal before the Tribunal. The Tribunal by an order dated 7th July, 2005 dismissed the appeal of the assessee and held as follows:- … in the case before us the assessee has brought no other contrary material except that no .....

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he case of the assesse that the assessee has disclosed fully or truly all materials facts necessary for its assessment for the assessment years under appeal. Since all other conditions are fulfilled and the Addl. C.I.T. has signed question No..12 after verifying the contents of the form for recording of reasons and the assessee has not challenged the recording of reasons for reopening of the assessment as recorded by the Assessing Officer vide his order sheet entry dated 26.03.2001 as reproduced .....

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d he cannot accord approval mechanically. In support of his submissions, he relied on the judgement in the case of Chhugamal Rajpal v. S. P. Chaliha & Ors., reported in (1971) 79 ITR 603. He also relied on the judgement in the case of Johri Lal v. Commissioner of Income Tax reported in (1973) 88 ITR 439 (SC). Mr. Sen contended that since the approval was accorded without applying mind, the initiation of proceeding itself was bad and therefore, the judgement of the learned Tribunal should be .....

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urt. With respect to the judgement in the case of Johri Lal v. Commissioner of Income Tax (supra) he submitted that the Income Tax Officer had proceeded on the basis of Section 34(1)(b) but the Tribunal sought to justify the step on the basis of Section 34(1)(a). It is on this basis that the Apex Court interfered and therefore, that judgement has no manner of application to the facts and circumstances of the case. We have heard the arguments advanced at the bar and perused the record. To appreci .....

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ecorded by such Assessing Officer that it is a fit case for the issue of such notice: Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under Section 148 by an Assess .....

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cer about fitness of a case for the issue of notice under Section 148, need not issue such notice himself.] During the course of arguments Mr. Sen learned Advocate appearing for the assessee drew our attention to the form for recording the reasons for initiating proceedings u/s.148 and for obtaining the approval of the Commissioner of Income Tax/CBDT (appearing at page no 91-93 of the paperbook filed before the Tribunal), question number 12 whereof is as follows:- 12. Whether the Commissioner/Bo .....

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ase no prior assessment had been done for the three assessment years under consideration. Hence the assessing officer before issuing notice u/s.148 of the Act had to obtain sanction u/s.151(2) of the Act from the competent authority. The only contention raised by the assessee in the instant appeal is that the Additional C.I.T. while according his approval u/s.151(2) of the Act did not apply his mind and mechanically granted sanction. The assessee has not contended that the reasons cited by the a .....

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ugned notice first before CIT(A) and then before the tribunal. In Chhugamal Rajpal (supra) the assessing officer submitted a report to the Commissioner for initiating proceeding u/s.147 of the Act and to obtain sanction for issuing notice u/s.148 of the Act. In his report the assessing officer had made the following observations:- During the year the assessee has shown to have taken loans from various parties of Calcutta. From D.I.'s Inv. No. A/P/Misc.(5)D.I./63- 64/5623, dated 13-8-65, forw .....

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7; 1,00,000. The Apex Court held as follows: In his report the Income Tax Officer does not set out any reason for coming to the conclusion that this is a fit case to issue notice under Section 148. The material that he had before him for issuing notice under Section 148 is not mentioned in the report. In his report he vaguely refers to certain communications received by him from the CIT, Bihar and Orissa. He does not mention the facts contained in those communications. All that he says is that f .....

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ther words he must have some prima facie grounds before him for taking action under Section 148. further his report mentions: Hence proper investigation regarding these loans is necessary . In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under Section 148. Before issuing a notice under Section 148, the Income Tax Officer must have either reasons to beli .....

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is possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of clause (a) or (b) of Section 147 are satisfied, the Income Tax Officer has no jurisdiction to issue a notice under Section 148. From the report submitted by the Income Tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee's omission to disclose fully and truly all material facts necessary f .....

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Section 148. Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads whether the Commissioner is satisfied that it is a fit case .....

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hem under those provisions as of little importance. They have substituted the form for the substance. The judgment in Johri Lal (supra) was rendered with respect to the provisions of section 34 of the Income Tax Act, 1922, which dealt with income escaping assessment. In the facts of that case proceedings u/s.34(1)(b) of the Income Tax Act 1922 were initiated by the assessing officer. The assessee challenged the same before the Commissioner (Appeals) by contending that the proceeding u/s.34(1)(b) .....

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under Section 34(1)(b) could have been converted into proceedings under Section 34(1)(a) by the Income Tax Appellate Tribunal. It was in this context that the Apex Court held as follows: In the instant case, as seen earlier, the Income Tax Officer did not choose to proceed under Section 34(1)(a). Consequently, he may or may not have recorded the reasons as required by this section nor do we know whether those reasons were submitted to the required authority and his sanction obtained on the basis .....

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not on the basis of Section 34(1)(a). He himself had declined to proceed on the basis of Section 34(1)(a) for whatever reason it may be. Therefore, it was not open to the Tribunal to justify the proceedings taken by the Income Tax Officer under Section 34(1)(a). The Tribunal could not have initiated proceedings under Section 34(1)(a). If the Tribunal converts the proceedings into one under Section 34(1)(a) then the conditions prescribed in Section 34(1)(a) cannot be satisfied. The case of Chhug .....

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that he was satisfied that it was a fit case for the issue of a notice under Section 148. In the instant case the assessee has not even contended that the reasons recorded by the assessing officer were irrelevant and as such he had no reason to believe that any income chargeable to tax had escaped assessment. In United Electrical Co. P. Ltd. v CIT reported in (2002) 258 ITR 317 (Del) the Delhi High Court while explaining the circumstances where a notice u/s.148 may be quashed held as follows:- .....

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id section is not a justiciable issue. Even before the tribunal the assessee restricted his challenge only to the validity of notice u/s.148 on ground that sanction u/s.151 was not valid. Basis for the reasons furnished by the assessing officer in the notice u/s.148 was never in dispute. Hence the judgment in the case of Chhugamal Rajpal (supra) does not advance the cause of the assessee. Furthermore the judgment in Johri Lal (supra) is also of no assistance to the assessee as the issue in that .....

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ired, the sanction was obtained from the Dy. CIT for each of these two years which is on record. The grievance of the petitioner is that merely by saying "yes, I agree with the reasons recorded by the AO" it cannot be said that the requirements of the provisions of s. 151(2) was fulfilled. Under the said provisions, the Dy. CIT has to satisfy himself on the reasons recorded by the AO as to whether it is a fit case for issuance of notice. Therefore, he is required to apply his mind to t .....

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not recorded any reason and the authority had affirmed such an action under s. 151(2) of the Act. In the case of CIT -Vs- Norton Motors reported in (2005) 275 ITR 595 the Punjab & Haryana High Court has explained the scope of Section 292B in the following words:- A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent .....

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