TMI Blog2018 (8) TMI 2035X X X X Extracts X X X X X X X X Extracts X X X X ..... with the mandate of provisions of sec. 151 - AO had not quantified the income that is claimed to have escaped the assessment. CIT has not applied his mind on this crucial aspect - in the case of Dulraj U Jain [ 2018 (7) TMI 2180 - BOMBAY HIGH COURT] while examining the validity of reopening of assessment has, inter alia, noted that the AO has not quantified the tax which has escaped assessment. Accordingly the Hon ble Bombay High Court took the view that the reasons recorded do not indicate reasonable belief of Assessing Officer himself to issue notice u/s 148 of the Act. This aspect alone shows that the AO as well as Ld CIT has not applied their mind on the reasons recorded. In the reasons for reopening, the AO has referred to the affidavit filed by a person by mentioning wrong name. While the afffidavit was given by Shri Vinod Shenoy, the AO referred it as given by Shri Vijay Shenoy. This aspect would have come to the notice of Ld CIT, had he examined the reasons for the purpose of arriving at his satisfaction. As noticed that the Ld CIT(A) has simply written Yes I am satisfied against the question Whether the Commissioner of Income tax2, is satisfied on the reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal: 1. The Income-tax Officer - 9(1 )(4), Mumbai (hereinafter referred to as the Assessing Officer) erred in issuing notice dated 16.06.2014 under section 143(2) prior to the date on which the return of income in response to notice issued under section 148 reached him, thereby rendering the entire assessment proceedings null and void. The appellants contend that on the facts and in the circumstances of the case and in law, the notice under section 143(2) of the Act is issued prior to the date on which the return of income in response to notice issued under section 148 reached the Assessing Officer and hence, the entire assessment is bad in law and thus, the assessment order needs to be quashed. 2. The Assessing Officer erred in issuing notice under section 148 of the Act without obtaining appropriate approval from the Commissioner of Income-tax- 2, Mumbai (CIT) and hence the assessment is bad in law, thereby rendering the entire assessment proceedings null and void. The appellants contend that the prior approval obtained by the Assessing Officer of the CIT as envisaged in section 151 of the Act is a mechanical approval inasmuch as column no 13 requiring recordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prior to the date of receipt of return of income filed by the assessee in response to the notice issued u/s 148 of the Act. 5. The ld A.R submitted that the assessee filed a letter in response to the notice received u/s 148 of the Act on 06-06-2014. In the said letter, the assessee has requested the AO to treat the original return filed on 30-10-2006 as the return filed in response to the notice issued u/s 148 of the Act. Hence the above said letter is considered to be the return of income. The above said letter was filed in the ASK (Aaykar Seva Kendra) counter by the assessee on 06-06-2014, vide ASK acknowledgement number.: 079060614012283. Subsequently, the AO issued notice u/s 143(2) of the Act on 16-06-2014, wherein he asked for various details. 6. It is the submission of the assessee that the return of income filed on 0606-2014 by way of letter has reached the hands of the assessing officer only on 17-06-2014. This is evidenced by the seal affixed in the office of the assessing officer on the letter filed by the assessee. The said seal bears the date of 1706-2014, where as the AO has issued notice u/s 143(2) of the Act on 16-062014, i.e., one day prior to the date of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Accordingly there is merit in the contentions of Ld D.R that the notice u/s 143(2) of the Act has been issued in accordance with the provisions of that section. 9. The ld A.R placed emphasis on the seal affixed upon the letter filed by the assessee. As submitted by Ld D.R, it is an internal matter and hence without ascertaining the internal procedures adopted in this regard by the Income tax department, it may not be possible to draw any inferences. The assessee has not brought on record any material to show that the date of filing of return should not be considered to be the date on which the letter was filed with ASK counter or date of filing of return should be the date on which the same was received by AO in his hands. In this era of e-filing also, the date of filing of return of income is taken as the date on which the return of income is uploaded into the computer system of the department. In this view of the matter, we are of the view that the AO has issued notice u/s 143(2) of the Act after furnishing of return of income by the assessee. Accordingly we reject this ground of the assessee. 10. The next legal issue urged by the assessee is that the approval obtained b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 313)(SC) 13. The Ld A.R invited our attention to the internal processing sheet titled as Form for recording the reasons for initiating proceedings u/s 147 and or obtaining the approval of the Commissioner of Income tax-2, Mumbai . The above said processing sheet is used by the assessing officer to obtain approval as contemplated u/s 151 of the Act. The Ld A.R submitted that the Ld CIT has mechanically granted approval and did not show that he was satisfied that it is a fit case for issuing notice u/s 148 of the Act, which is evident from the following facts:- (a) Item No. 6 of the sheet contains the question The quantum of income which has escaped assessment . The AO has given answer as To be quantified Above ₹ 1 lakh . (b) Item No.13 of the sheet contains the question Whether the Commissioner of Income tax-2, is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of notice u/s 148 . The Ld Commissioner of Income tax has stated Yes I am satisfied . The Ld A.R submitted that the income escaping assessment should be quantified properly and further mere writing of Yes I am satisfied is considered as mechanical appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT, being not the prescribed authority, would vitiate the proceedings. The ITAT, Ahmedabad, however, expressed the view that the satisfaction of Addl. CIT as required u/s 151 of the Act is available and he was the competent authority in the case before the Ahmedabad bench. This view of the Tribunal was also upheld by Hon ble Gujarat High Court in the same case reported in (2018)(93 taxmann.com 220) with the following observations:- 10. The legal proposition is that when the statute casts a duty on a certain administrative officer, the same must be performed by him and satisfaction arrived at even by the higher authority would not be sufficient. However, in the present case, there was no lack of satisfaction or exercise of power by the Joint Commissioner. He, in clear terms, expressed his satisfaction that on the basis of the reasons recorded by the Assessing Officer, it was a fit case for issuance of notice under section 148 of the Act. Merely because the papers were thereafter for some erroneous reason also placed before the Commissioner who also recorded his similar satisfaction would not take away anything from the previous conclusion. The Ld A.R submitted that, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material. 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9. As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue. 10- In view of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration. It is pertinent to note that the SLP filed by the revenue against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation money, now available at pages 1 to 30 of the paper book, were supplied to the AO. This fact has not been taken into consideration by the AO before initiating the proceedings u/s 147/148 of the Act. However, since reopening of assessment in this case is otherwise not sustainable, we are not entering into any merits. 14. Hon'ble Supreme Court in case cited as CIT vs. S. Goyanka Lime Chemical Ltd. - (2015) 64 taxmann.com 313 (SC) examined the identical issue as to according the sanction for reopening the assessment u/s 148 of the Act by merely recording Yes. I am satisfied. And held that reopening on the basis of mechanical sanction is invalid by returning following findings :- Section 151, read with section 148 of the Income-tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under. section 148, reopening of assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [In favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vances received were from bogus entities-Tribunal allowed assessee's appeal on meritsRevenue appealed against appellate order on merits-Assessee's cross appeal was on correctness of reopening of assessment- Tribunal upheld assessee's cross-objections and dismissed Revenue's appeal holding that there was no proper application of mind by concerned sanctioning authority u/s Section 151 as a pre- condition for issuing notice u/s 147/148-Held, Section 151 stipulates that CIT (A), who was competent authority to authorize reassessment notice, had to apply his mind and form opinion- Mere appending of expression 'approved' says nothing-It was not as if CIT (A) had to record elaborate reasons for agreeing with noting put up-At same time, satisfaction had to be recorded of CO No.57/Del/2012 given case which could be reflected in briefest possible manner- In present case, exercise appears to have been ritualistic and formal rather than meaningful, which was rationale for safeguard of approval by higher ranking officerRevenue's appeal dismissed. 16. Furthermore, perusal of the noting sheet dated 09.03.2010 to 30.12.2010 made available to the Bench for perusal sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons; (iv) the exercise of considering the Assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasijudicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for CO No.57/Del/2012 reopening of the assessment beyond what has already been disclosed. 17. In view of what has been discussed above, reassessment opened by the AO in this case is not sustainable in the eyes of law, hence hereby quashed. Consequently, cross objection filed by the assessee company stands allowed and the appeal filed by the Revenue has become infructuous. 19. In the case of RMG Polyvinyl (I) Ltd (supra), the Delhi bench of Tribunal has considered an identical issue. One of the reasons for quashing the reopening of assessment is that the Ld CIT has mechanically approved the reopening with the endorse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the provisions of No section 150(1) are applicable, if the reply is in the affirmative, the relevant facts may be stated against item no. 11 and it may also be brought out that the provision of section 150(2) would not stand in the way of initiating proceedings u/s. 147. NA 11 Reasons for the belief that income has escaped assessment. Information has been received from Investigation Wing of the Income-tax assessment. Department that M/s Pine View Construction Traders Pvt. Ltd. is a beneficiary of accommodation entries received from certain established entry operators identified by the Investigation Wing during the period relevant to A.Y. 2004-05. A comprehensive investigation was carried out by the Investigation Wing for identification of entry operators engaged in the business of money laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a detailed report has been forwarded. In the instant case, the assessee is found to be the beneficiary of accommodation entry from such entry operators as per the transaction mentioned in the enclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Even otherwise, a perusal of the above demonstrates that the Addl. CIT has written Yes, I am Satisfied which establishes that he has not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted from the Commissioner is application of mind and due diligence before according sanction to the reasons recorded by the AO. In the present case, the order sheet which is placed on record show that the Commissioner has simply affixed approved at the bottom of the note sheet prepared by the ITO technical. Nowhere the CIT has recorded his satisfaction. In the case before the Hon'ble Supreme Court (supra) that on AO's report the Commissioner against the question whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148 merely noted Yes and affixed his signature there under. On these facts, the Hon'ble Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s. 148 of the Act. In the instant case, we find 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. 8. 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 section151of 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 Commissioner 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-builts 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 appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by a 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 imprematur 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 v. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presence of the Assessing Officer, the Commissioner of Income tax granted approval. As a matter of fact, while granting approval it was obligatory on his part to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen is being invoked within a period of 4 years from the end of the assessment year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind . In the above view of the matter, the impugned notices and consequently the order justifying reasons recorded are unsustainable. The same are liable to be quashed and set aside. 23. The Ld D.R placed his reliance on the decision rendered by Ahmedabad bench of Tribunal in the case of Mayurbhai Mangaldas Patel (supra). The facts prevailing in that case are different and the same has been rightly explained by the Ld A.R during the course of his rejoinder, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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