CIT need not to given separate reasons for his satisfaction in giving approval u/s 151 for reopening of assessment if reasons recorded by AO have a direct nexus with the information and formation of belief of income escapement.
ABCAUS Case Law Citation
ABCAUS 3388 (2020) (09) ITAT
Important case law relied upon by the parties:
Pr. CIT Vs N.C. Cables Ltd. (2017) 98 CCH 0010 (Del HC)
CIT vs S. Goyanka Lime & Chemicals Ltd. (2015) 231 Taxman 0073 (MP)
Kanubhai M Patel (HUF) Vs Hiren Bhatt & ors. 334 ITR 25 (Guj)
Vinayak Builders Vs B.D. Garsar
Gorika Investment & Export P Ltd. Vs ITO (2018) 53 CCH 0168 (Del)(Trib)
Tara Alloys Ltd. Vs ITO (2018) 63 ITR (Trib) 0484 (Del)
Prem Chand Shaw (Jaiswal) v. Assistant Commissioner 67 taxmann.com 339
Commissioner of Income-tax v. Uttam Chand Nahar 295 ITR 403
Lalita Ashwin Jain v. Income Tax Officer 45 taxmann.com 404
In the instant case, the assessee had challenged the order passed by the CIT(A) rising from the assessment order passed u/s 147 r.w.s 143(3) of the Income Tax Act, 1961 (the Act).
The assessee had contested the validity of reopening of the assessment and particularly the issuance of notice u/s 148 of the Act.
The assessee was an individual and had not filed return of income u/s 139 of the Act. The AO received information from AIR/Investigation revealing that the assessee had made large cash deposit in his savings bank account.
The AO, accordingly, issued notice u/s 148 of the Act after recording the reasons which were approved by the competent authority u/s 151 of the Act.
In response to the notice U/s 148 of the Act, the assessee filed his return of income declaring total income below the threshold limit of tax slab.
The AO completed the assessment u/s 143(3) r.w.s 147 of the Act making an addition on account of unexplained source of cash deposit in the bank account of the assessee.
The assessee challenged the action of the AO before the CIT(A) and also raised objection against reopening of the assessment. However, the ld. CIT(A) has rejected the objection and upheld the validity of reopening of the assessment.
Before the Tribunal the assessee submitted that the AO issued notice u/s 148 after expiry of limitation period. He also raised objection against the approval granted by the Pr.CIT u/s 151 of the Act without application of mind.
It was submitted that the Pr. CIT had simply written “YES” against the column in the performa without recording the briefest possible manner of satisfaction.
The assessee relied upon a number of judgments in contending that the approval granted by the CIT(A) was a mechanical and without application of mind.
The Department contended that the reasons recorded by the AO manifests the application of mind on the part of the AO and therefore, it is a good prima facie case to forming the belief that the income chargeable to tax has escaped assessment. It was submitted that the Pr.CIT had approved the reasons recorded by the AO which were part and parcel of the performa which was sent by the AO for approval/sanction.
Thus, it was stated that the sanction granted by the Pr.CIT was based on the reasons recorded by the AO and not merely on the proposal sent by the Assessing Officer (AO).
As regards the limitation of the notice issued u/s 148 of the Act, the Revenue relied upon the decision of Hon’ble High Court wherein the Hon’ble High Court had analysed the expresses used in Section 149 of the Act as to issue in the context of issuance of notice and held that limitation of six years from the end of the relevant assessment year provided u/s 149 of the Act expires only after 31st March of the corresponding 6th year from the end of the assessment year.
The Tribunal stated that the imitation provided u/s 149(1) is six years from the end of the relevant assessment year and the notice shall be issued within the period of six years from the end of the relevant assessment year.
The Tribunal noted that the assessee had not disputed the issuance of notice by the A.O. on 31st March by Speed Post thereby the notice had gone out of control of the AO once it was dispatched through Speed Post being one of the modes prescribed u/s 282 of the Act.
The Tribunal held that the notice was issued within the period of limitation and was also duly served upon the assessee on the very next day, therefore, the question of limitation did not arise.
Regarding the mechanical approval granted by the Pr. CIT, the Tribunal noted that the AO had sent the proposal in the performa for approval/sanction of the Pr. CIT which contained the details including the reasons recorded by the AO.
The Tribunal opined that once the reasons recorded by the AO are found to be having a direct nexus with the information and formation of belief that the income assessable to tax has escaped assessment then the Pr.CIT need not to given separate reasons for his satisfaction.
The Tribunal observed that in this case, the assessee had not filed any return of income U/s 139 of the Act and the AO received information from the DIT(Inv.) regarding the deposit of large amount of cash in the bank account of the assessee that too after an enquiry conducted by the Investigation Wing regarding the source of the said deposit and only when the reply of the assessee was not found to be satisfactory the said information was sent to the AO for appropriate steps.
In view of the facts as well as the decisions relied upon by the Revenue the Tribunal opined that when the reasons recorded by the AO prima facie lead to the formation of belief that the income assessable to tax has escaped assessment then the Pr.CIT is not required to record separate satisfaction as the reasons itself reveal the satisfaction of the AO.
Accordingly, the ground taken by the assessee was rejected.
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