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TMI Blog2025 (4) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... gs u/s 147 r.w.s. 148 and passing order u/s 147/144 of the Income Tax Act, 1961 without application of mind. Thus, the resultant order is against the law and deserves to be quashed. 3. Under the facts and circumstances of the case and in law, the ld. CIT (A) has erred in confirming the invocation of section 147 r.w.s. 148 of Income Tax Act for making addition of Rs. 10,17,980/- on account of time deposit without considering the facts in right perspective. Thus, the action is bad in law, thus order deserves to be quashed. 4. Under the facts and circumstances of the case and in law, the ld. CIT (A) has erred in confirming addition of Rs. 10,17,980/- without appreciating the facts of the case. Thus, the addition is contrary to the provisions of law, unjustified or excessive. 5. The appellant craves your Honor's indulgence to add, amend or alter all or any grounds of appeal before o at the time of hearing. 2. The brief facts of the case are that the assessee is an Individual. The assessee has not filed his return of income for the year under consideration as he was not having taxable income. The AO received information that the assessee has made time deposit of Rs. 10,17,980/- i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not verifiable. In view of the above facts, I have reason to believe that income to the tune of Rs.10,17,980/- has escaped assessment for the A.Y.2011-12 within the meaning of section 147 of the I.T Act, 1961. Therefore it is a fit case for issuance of notice u/s 148 of I.T. Act, 1961". 2. The appellant, during the appellate proceedings, had raised his objection to the reason recordedby the Ld. AO and contended that the reasonsrecorded are vagueand suffer from following infirmities: a. Reasons recorded does not contain date; b. neither the bank name nor the bank account number in which such amount was deposited is mentioned; c. nature of time deposit and its bifurcation into principal amount and interest amount is missing; d. source of time deposit is missing; e. the Ld. AO has not recorded anything with regard to the material on the basis of which the reasons and conclusion was formed; 3. However, the Ld. CIT(A) dismissed the contention of the appellant by observing that the Ld. AO had sufficient information and draw reference from the remand report (remand report is produced at 18, 19 and 20 of the Ld. CIT(A) order),dated 07.11.2019, to support his claim. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) dated 1.11.2018 hearing fixed on dated 8.11.2018 but no reply was filed against this notice, Final Show cause notice u/s 144 along with notice u/s 142(1) regarding to pass exparty assessment as material available a on record was issued on 22.11.2018 to explain the time deposit in saving account total Rs. 10,17,980/-,but no any compliance was made. Hence this was clear seems that the assessee was not interested to fumish any evidence/explaination in his defence against addition of Rs. 10,17,980/- in his total income of the assessee. It was clear attitutude of the assessee, that he was non cooperative with the department. The case was barred by limitation period and sufficient apportunities were provded to the assessee as per I.T.Act, but no option but to complete the assessmentas exparty u/s 144 of the IT Act. 1961 and order passed by the then AO and demand created of R.s. 4,59,7,20/- on 30.11.2018 and issued penalty u/s 271(1)C and 271(1)(b) and 271F for not filing of IT Return, which was served on the assessce by registered post. c. It is explicitly stated in the remand report that as per the information available on ITS received by bank, the assessee had deposited Rs. 5,17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contents of the remand report to verify the claim of the appellant. 7. It is noteworthy that it is a settled position that reasons cannot be substituted and the reasons are required to be read as they were recorded by the AO. In the current case, firstly only information was available with the Ld. AO. Further, only information available with the Ld.AO at the time of recording reasons was that the appellant had deposited Rs. 10,17,980/-, however, no basis/ material viz bank name, bank account number, bifurcation of principal and interest amount etc., was referred in the said reasons recorded to determine as to how the Ld. AO reached to this conclusion that the said deposits represent income, alleged income is chargeable to tax and has escaped assessment. Further, the reasons recorded does not disclose the Ld. AOs mind as to what was the nature of alleged deposits and what was included in the alleged amount of Rs. 10,17,980/-. Furthermore, even the content of the remand report dated 07.11.2019 indicate that the Ld. AO did not verify the correctness of the information received by him and did not record his satisfaction that a case can be made out for issuing notice u/s 148. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced". 8. Your honor would appreciate that reasons are the foundation of making assessment u/s 147and such reasons must be self-evident and must speak for themselves and should not be vague or incomplete. The reasons should also contain all the necessary details/ informationfor arriving at the conclusion that the income has escaped assessment. Under the current case, the Ld. AO just completed his duty by simply stating that he has 'information in his possession' without specifying the kind and nature of information. In the current case, the reasons recorded are unclear and lacks the essential ingredients to be classified as 'reason to believe' which indicates that the Ld. AO and the Ld. CIT(A) has just acted on borrowed information without any independent enquiry and application of mind. 9. Further, reasons are deduced from the material available on record and such material should have a direct link with the formation of the belief that income chargeable to tax has escaped assessment. In the current case the Ld. AO has neither provided any material nor referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent u/s 148 of the Act. The requirement of application of mind is missing in the present ease on the face of it in the reasons recorded. * ITAT Delhi in the case of Bir Bahadur Singh Sijwali Vs ITO, ITA No. 3814/Del/2011, held that "in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen as existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. To us, there cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment. On the basis of reasons as recorded in this case, such an inference about income escaping assessment, in our humble understanding, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in the shape of return of income filed by the assessee. This fact of filing of return was also recorded by the learned Commissioner of Income-tax (Appeals) at Page 3 of the impugned order. Further, the recourse of reopening u/s 148/147 is not to first issue the notice and then to proceed to investigate and find out if there was income assessable to tax which has escaped assessment rather it is pre requisite for issuing the notice u/s 148 that the AO on the basis of tangible material and information has legitimate reason to believe that income assessable to tax has escaped assessment. The belief must be based on a material which has direct nexus to the income assessable has escaped assessment and should not be guess work and to ascertain the same through the process of investigation. The provision of section 148/147 cannot be used such investigation to ascertain where income assessable to tax has escaped assessment. It is apparent that the reason for reopening was only on information of deposit of cash of Rs.6 lac in the bank account. Therefore the reason for reopening was for further investigation to find out the source of the cash deposit by the assessee as the AO has not rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi, in the case of Harmeet Singh vs. ITO, ITA No. 1939/ Del/2016 held that: "8. After going through the reasons recorded by the ITO, Ward-36(1), New Delhi Rewari, I am of the view that there is no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted mechanically by Ld. PCIT by stating that "the date of approval is also categorically mentioned in the remand report".Here also the Ld. CIT(A) has referred remand report instead of copy of approval which indicates that the whole case has been addressed by the Ld. CIT(A) without application of mind. 2. Further, section 151 of the Act contains certain safeguards to prevent arbitrary exercise of power by an assessing officer in assessing income of the assessee u/s 147 of the Ac and recording of satisfaction, by specified authority, with regard to the reasons recorded by the assessing officer for issuance of notice u/s 148, is one of such safeguards. Accordingly, no notice u/s 148 shall be issued by the assessing officer unless the specified authority (PCIT in the current case), is satisfied, on the reasons recorded by the assessing officer concerned, that it is a fit case for the issue of notice. 3. Furthermore, the power vested with the PCIT to grant or not to grant approval comes with a duty which is to apply his/ her mind to the proposal put up to him/ her by the assessing officer before granting approval. In doing so, the Ld. PCIT has to deep dive into the facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed" 8. In support of our contention, we further rely upon the following case laws: * CIT Vs S Goyanka Lime & Chemical Ltd. (2015) 64 taxmann.com 313 (SC) "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 assessee] * Hon'ble MP High Court in the case of CIT, Jabalpur V/s M/s Goyanka Lime and Chemicals Ltd. [ITA No. 82 of 2012] held as under: "7- We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- "The Commissioner acted, of course, mechanically in order to disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the reasons recorded by the AO, it is gathered that reasons recorded does not contain date, neither the bank name nor the bank account number in which such amount was deposited is mentioned, nature of time deposit and the source of time deposit. The AO has also not recorded anything with regard to the material on the basis of which the reasons and conclusion was formed and on the basis of vaguereasons initiated proceedings under section 147 by issuing notice under section 148 of the Act. The objection of the assessee that the reasons recorded are vague and suffer from infirmities mentioned above and the ld. CIT (A) dismissed the objection observing that the AO had sufficient information and drawn reference from the remand report dated 07.11.2019, to support his claim. Here, the question arise for consideration is whether content of the remand report dated 07.11.2019 be called reason recorded or part of reasons recorded and whether the remand report substitutes the mandatory duty of an assessing officer to record reasons before initiating proceedings under section 147 of the IT Act.It is pertinent to note that reference of remand report instead of reasons recorded, for addressing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded. Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar (2004) 268 ITR 332 (Bom.) has, inter alia, observed in para 21 of its order as under :- " 21. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to the extent of Rs. 10,17,980/- within the meaning of section 148 of the Act. In the present case, the amount of Rs. 10,17,980/- alleged to be the income of the appellant, is the transfer of amount from bank account of the appellant to his Fixed Deposit accounts (PBP 3-4). Furthermore, the said amount also includes interest accrued on such FD amount. However, the AO have merely acted upon the AIR information without even verifying by way of an independent enquiry, the source, nature and component of such time deposit. The ld. CIT (A) has also not verified the said fact before arriving at the conclusion. This approach shows that neither the mind was applied by the AO and the ld. CIT (A) nor any efforts was made to verify the information received. In this regard, vide following judgments of the Hon'ble High Courts and the Tribunals have observed as under :- Hon'ble Allahabad High Court in the case of Ganga Prasad Maheshwari, 139 ITR 1943 (All.) has "dissected the phrase and made some noteworthy observations. It noted that Reason - means cause or justification, whereas Believe - means accept as true or to have faith in it must have justification. Belief may not be open to scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed. Impugned notice dated 27.03.2015 is quashed. Petition is disposed of." Nadeem Hasan vs. ITO, Ward-46(4), New Delhi in ITA No.445/Del/2020 dated 18.05.2022 ITAT, Delhi: 14. On going through the reasons recorded by the AO, I find that there is no nexus between the prima facie inferences arrived in the reasons recorded and the information. The information was restricted to cash deposit in bank account but there was no material much less tangible, cogent, credible and relevant material to form a reason to believe that cash deposits represented income of the assessee. The reasons recorded in the present case at best can be treated to be reasons to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The requirement of application of mind is missing in the present ease on the face of it in the reasons recorded. ITAT Delhi in the case of Bir Bahadur Singh Sijwali Vs ITO, ITA No. 3814/Del/2011, held that "in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the recourse of reopening u/s 148/147 is not to first issue the notice and then to proceed to investigate and find out if there was income assessable to tax which has escaped assessment rather it is pre requisite for issuing the notice u/s 148 that the AO on the basis of tangible material and information has legitimate reason to believe that income assessable to tax has escaped assessment. The belief must be based on a material which has direct nexus to the income assessable has escaped assessment and should not be guess work and to ascertain the same through the process of investigation. The provision of section 148/147 cannot be used such investigation to ascertain where income assessable to tax has escaped assessment. It is apparent that the reason for reopening was only on information of deposit of cash of Rs.6 lac in the bank account. Therefore the reason for reopening was for further investigation to find out the source of the cash deposit by the assessee as the AO has not recorded anything that this deposit of cash is from particular source which is not disclosed by the assessee in the books of account or in the return of income. The deposit of cash in the bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am 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." The ld. A/R has also drawn our attention to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of mind and due diligence before according sanction to the reasons recorded by the AO. In the present case, the "Performa for Recording Reasons" prepared by the AO, which is placed on record show that the Commissioner has simply affixed "Approved" at column no. 13.Nowhere the ld. PCIT has recorded his satisfaction. The reasons recorded in the "Performa for Recording Reasons" also bear no date. Therefore, merely stating "Approved" at the proposal prepared by AO cannot be termed as a sanction/approval as required under section151 of the IT Act. The Hon'ble Supreme Court, various High Courts and the Tribunals have held such kind of mechanical approval as 'unsustainable' under the Income Tax Act. In this regard, reliance is placed on the Coordinate Bench of the Tribunal,Delhi in the case of ITO vs. N.C. Cables Ltd. dated 22.10.2024 (Delhi ITAT)wherein the Commissioner gave the approval under section 151 to the proposal under section 148 by affixing "Approved" and putting his signature. The Jurisdictional Delhi Bench of ITAT quashed the reassessment proceedings holding that the reopening was bad in law for the reason that the Commissioner has not recorded his satisfaction as conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was to sign only on the dotted line. Even otherwise also, the exercise is shown 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 Section151, 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orily." 8. Before us, the ld. A/R of the assessee has submitted his written submissions as under : 1. "At the outset, the appellant wants to attract your honor attention to the assessment order and the appellate order where no reference of section under which addition has been made, under the current case, has been made. Hence, the addition deserves to be deleted on the mere ground of non-mentioning of specific section under the current case. In this regard, we rely on the following case laws: * The Hon'ble ITAT, Jaipur Bench 'SMC', Jaipur in the case of Shri Ram Lal Vs ITO, Alwar [ITA No. 265/JP/2024] dated 08.08.2024 held that nonmentioning the precise provision of law makes theentire impugned addition bad in law. Relevant extracts are reproduced as under: "...However, the ld. AR of the assessee submitted before the Bench that the order of Authorities assessment as well as order of the ld. CIT(A) lacks clear reference to the specific sections under which the addition is made. After perusal of the record, the Bench also found that no specific section has anywhere been mentioned by the Revenue Authorities for making addition... ... Therefore considering the above judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agriculture income estimated and offered by assessee has to be accepted. In this regard, we rely on the following case laws: Hon'ble Gujarat High Court in the case of ITO Vs Ashwin D Metha (HUF) (2014) 12 TMI 1391 held as follows: "The Commissioner of income Tax (Appeals) has held that since the agricultural income has been accepted by the revenue and the Assessing Officer has not been able to prove any other source of income out of which the assesse could have earned this income, and the income declared by the assesse has to be accepted ". Gujarat High Court in JK. Choksi Vs. ACIT (2015) (1) TMI 392; 5. Alternatively, various judicial forums have appreciated the fact that maintaining such kind of agriculture record is quite difficult and therefore, under such circumstances, income can be estimated based upon the land holding. In this regard, we place our reliance on following case law: The Hon'ble ITAT, Indore Bench, Indore in the case of ACIT Vs Shri Vinod Vaish [ ITA No. 189/Ind/2013] dated 04.06.2019 held as under: "17. From perusal of the above finding of the Ld. CIT(A) which goes uncontroverted by the ld. DR, we observe that the Revenue authorities have now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.04.2024 held as under: "We note from the copy of cash book filed by the assessee that the assessee has out of the earlier year saving has shown opening cash of Rs. 9,50,597/- which is also supported by the various year accumulated income shown by the assessee since 1998.The assessee is having 77 years age and looking to the old age holding the cash out of the accumulated saving to the extent of Rs. 9,50,597/- cannot be doubted. Thus, respectfully following that decision of the jurisdictional high court and considering that aspect of the matter when the assessee has demonstrated that she is regularly filling the income and having the income in cash and there by holding opening cash of Rs. 9,50,597 along with that the assessee has deposited cash into her bank account for an amount of Rs. 11,00,000/- cannot be added as unexplained income under section 68 of the Act for the year under consideration and therefore, we direct to delete the addition made in hands of the assessee. In terms of this observation the appeal of the assessee is allowed". 9. On the other hand, the ld. D/R supported the order of the ld. CIT (A). 10. We have heard rival contentions, perused the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioning the precise provision of law makes the entire impugned addition bad in law. In this view of the matter, the appeal of the assessee is allowed." The Coordinate Bench of the Tribunal, Delhi in the case of Smt. Sudha Loyalka vs. ITO in ITA No. 399/Del/2017 held as under : " In our considered opinion, the sustaining of impugned addition is not justified due to the following reasons :- i) It has not been mentioned either by A.O. or by ld. CIT (A) as to under which section of the Income Tax Act, these closing credit balances appearing as on 31.03.2012 could be added. Therefore, non-mentioning the precise provision of law makes the impugned addition bad in law." Without prejudice to above, the assessee submitted that he was in service in the Indian Navy for 11 years (retired in 1988) Post retirement, he was actively and exclusively engaged in farming and driving agriculture income therefrom. Therefore, it will not be abnormal to assume that the appellant had accumulated fund over the period of time since it is a general practice of a person to save money in bank. Further, we note from the submission of Ld AR for the assesee that assessee in his first reply dated 23.07.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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