TMI Blog2016 (1) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment. Further, the Tribunal has also discussed about the merits of the reopening of the assessment and formation of belief by the AO for the said reopening and thereafter relying upon the decision of the Hon’ble Delhi High Court in the case of “Sarthak Securities Co. Pvt. Ltd.” [2010 (10) TMI 92 - DELHI HIGH COURT] as held that the reopening was bad in law as from the perusal of the reasons recorded and the order of rejection of objections, the names of the companies were available with the authority and their existence was not disputed. The assessee in its objections had stated that the companies had bank accounts and payments were made to the assessee through banking channel. The identity of the companies was not disputed. Under these circumstances, the initiation of proceedings under section 147 and issuance of notice under section 148 of the Act were to be quashed. - Decided in favour of assessee. - ITA No.4259/M/2012, ITA No.4260/M/2012 - - - Dated:- 8-1-2016 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Dr. P. Daniel, A.R. For The Revenue : Shri H.M. Wanare, D.R. ORDER Per Sanjay Garg, Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to his HUF. The Tribunal, considering the facts and circumstances of the case, has held the reopening was bad in law. 5. We have gone through the said decision. It is pertinent to mention here that the reopening in the case of assessee was done on the identical information and in respect of the same list of beneficiaries wherein the name of the assessee as well as name of Mr. Hirachand Kanuga appeared as beneficiaries. Even we find that the Tribunal has discussed about the satisfaction recorded by the Additional Commissioner of Income Tax on the reasons recorded by the AO wherein the Tribunal has reproduced the letter dated 26.03.10 of the Additional Commissioner of Income Tax showing that the permission was granted by the Additional Commissioner in respect of 22 assessees wherein the name of the assessee and his HUF appeared at Sl. Nos.1 2 in the said list and whereas the name of Hirachand Kanuga HUF and Mr. Hirachand Kanuga in individual capacity appeared at Sl. Nos.3 4. The Tribunal has given a categorical finding that the Additional Commissioner has simply sanctioned the proposal of initiating the proceedings under section 147 and he has nowhere recorded his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the reopening was without any sanction. Thirdly the DR stated that the assessee dragged the assessment proceedings to the fag-end of the period of limitation and therefore the AO cannot be blamed for passing the assessment order in has te. The Ld. DR concluded by saying that the reas ses sment proceedings were valid and the Ld. CIT(A) has rightly upheld the findings of the AO. 8. We have given a thoughtful consideration to the rival submissions. We have carefully perused the orders of the authorities below and the relevant documentary evidences brought on record. Let us first see the reasons for reopening the case u/s. 147 which read as under: 1. The assessee had filed return of income for A.Y. 2003-04 on 16.10.2003 declaring total income of ₹ 5,95,080/- 2. A search action was conducted in the case of MIs . Mahasagar Securities Pvt. Ltd (now Alag Securities Pvt. Ltd.) on 25.11.2009 by the DDJT (Inv) Unit-1(4), Mumbai. 3. Dur ing the course of search i t was found that MIs . Mahasagar Securities Pvt. Ltd., and its group concerns were engaged in fraudulent billing activities and in the business of providing bogus speculation profits or loss on commodity tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The reasons to believe were required to be recorded by the Assessing Officer. Once the ingredients of section 147 were fulfilled, the Assessing Officer was competent in law to initiate the proceedings under section 147. The Assessing Officer was aware of the existence of the four companies with whom the ass essee had entered into transaction. Both the orders showed that the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that these companies were fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind. Though conclusive proof was not germane at this stage the formation of belief must be on the base or foundation or platform of prudence which a reasonable person was required to apply. From the perusal of the reasons recorded and the order of rejection of objections, the names of the companies were available with the authority and their existence was not disputed. The assessee in its objections had stated that the companies had bank accounts and payments were made to the assessee through banking channel. The identity of the companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INS) Addl. Commissioner of Income Tax, Range 1, Kalyan. 8.4. Let us first consider the relevant part of the provisions of Sec. 151 of the Act. (1)1n a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 [by an Assessing Officer, who is below the rank of Assistant Commissioner [or Deputy Commissioner], unless the [Joint] Commissioner is satisfied on the reasons recorded 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 frilling under sub-section ( I ), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of [Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the [Joint] Commissioner is satisfied, on the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the perusal of the order sheet which is on record, the Commissioner has simply put approved and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. 12. Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. Vs CIT 258 ITR 317 has held that the proviso to sub-section (1) of section 151 of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Conmiissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-bui lts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment . The Hon'ble High Court further observed that what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng observations: It is axiomatic that the law declared by the High court is binding on all authorities functioning within the jurisdiction of the Court. It is not open to the AO to feign ignorance of the law declared by the court and pass orders in def iance of it. The Bombay High Court in Asian Paints Vs DCIT (2008) 296 ITR 90 (Born) has clearly laid (town that when an assessment is sought to be reopened u/s. 148 of the Act and the objections of the assessee have been overruled by the AO, then in such a case the AO will not proceed further in the matter for a period of four weeks from the date of receipt of the order rejecting the objections of the assessee. 16. The AO has undoubtedly flaunted the procedure laid down by the Hon'ble Jurisdictional High Court thereby making the issuance of notice u/s. 148 of the Act bad in law. 16.1. Having said all that considering the facts of the case from any angles in the light of our detailed discussion hereinabove, in our considered opinion, the reassessment proceedings based on the notice issued u/s. 148 is bad in law. We, therefore, set aside the findings of the Ld. CIT(A) and quash the reassessment order made u/s. 143(3) r.w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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