Notice u/s 148 approval recording satisfaction “Yes, I am satisfied on the reasons recorded by the AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act.” invalid
ABCAUS Case Law Citation:
ABCAUS 3228 (2020) (01) ITAT
Important case law relied upon by the parties:
Tara Alloys Ltd. vs. ITO
United Electrical Company (P) Ltd. Vs. CIT & Ors.
CIT vs. S. Goyanka Lime & Chemical Ltd.
In the instant case, appeal was filed by the assessee against the order of the CIT(A) in not appreciating in that the statutory requirements of law u/s 151 of the Income Tax Act, 1961 (the Act) had not been fulfilled as the approval granted by the Additional CIT was accorded without independent application of mind and in a mechanical manner.
Hence, the assessee demanded that reopening of this case was not valid and untenable as per law and the assessment made u/s 147 was void-ab-initio and be quashed.
The assessee drawn the attention of the Bench to the copy of reasons recorded u/s 148 of the Act alonwith copy of approval granted by the Addl. CIT for issuance of notice u/s. 148 of the Act and stated that the AO had erred in assumption of jurisdiction u/s. 147/148 of the Act on the basis of invalid and mechanical approval granted by the Addl. CIT wherein it was mentioned “Yes, I am satisfied on the reasons recorded by the AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act.”, which showed that Addl. CIT had not recorded proper satisfaction and without application of mind gave the approval in a mechanical manner.
The assessee further stated that this legal/jurisdictional ground was squarely covered by the decision of the Coordinate Bench of the ITAT.
On the contrary, the Revenue relied upon the orders of the authorities below and stated that the reasons recorded and satisfaction / approval accorded was within the meaning of section 151 of the Act and needed not to be quashed.
The Revenue also relied upon number of decisions of Hon’ble Supreme Court/ various High Courts with regard to reopening of cases u/s 147 of the Act.
|
Sonia Gandhi vs. ACIT |
Where Congress Party gave loan to AJL and assigned said loan to non-profit YI which subsequently issued shares to assesses at a price less than FMV, non-disclosure by assesses of allotment of shares in YI would be a reason to initiate reassessment proceedings. |
|
Raymond Woollen Mills Ltd. v. ITO And Others |
Hon’ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. |
|
Yuvraj v. Union of India |
Points not decided while passing assessment order under section 143(3) not a case of change of opinion |
|
Devi Electronics Pvt Ltd Vs ITO |
The likelihood of a different view when materials exist of forming a reasonable belief of escaped income, will not debar the AO from exercising his jurisdiction to assess the assessee on reopening notice |
|
Acorus Unitech Wireless (P.) Ltd. Vs ACIT |
In terms of section 148, law only requires that information or material on which Assessing Officer records his or her satisfaction has to be communicated to assessee, without mandating disclosure of any specific document. |
|
PCIT, Vs Paramount Communication (P.) Ltd |
Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was ‘tangible material outside record’ to initiate valid reassessment proceedings. |
|
Paramount Communication (P.) Ltd. |
SLP of assessee dismissed. Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was ’tangible material outside record’ to initiate valid reassessment proceedings. |
|
Amit Polyprints (P.) Ltd. Vs PCIT |
Where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, reassessment could not be held unjustified |
|
Aaspas Multimedia Ltd. Vs PCIT |
Where reassessment was made on basis of information received from Principal DIT (Investigation) that assessee was beneficiary of accommodation entries by way of share application provided by a third party, same was justified. |
|
Murlibhai Fatandas Sawlani Vs ITO |
It is not open to the assessee to object to the reopening by asking the AO to produce the source from where the AO has gathered the information for forming a belief that income chargeable to tax has escaped assessment |
|
Ankit Aqrochem (P.) Ltd. Vs JCIT |
Where DIT informed that assessee-company had received share application money from several entities which were only engaged in business of providing bogus accommodation entries to beneficiary concerns, reassessment on basis of said information was justified |
|
Rakesh Gupta Vs CIT |
Where Assessing Officer received information from Principle Director of Income Tax (Investigation) that assessee had received bogus loss from his broker by 7 client code modification, reassessment on basis of said information was justified. |
|
Home Finders Housing Ltd. Vs. ITO |
SLP dismissed against High Court’s order that non-compliance of direction of Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO (2002) 125 Taxman 963 that on receipt of objection given by assessee to notice under section 148, Assessing Officer is bound to dispose objections by passing a speaking order, would not make reassessment order void ab initio. |
|
Baldevbahi Bhikhabhai Patel vs. DCIT |
Where revenue produced bunch of documents to suggest that entire proposal of reopening of assessment alongwith reasons recorded by the Assessing Officer for same were placed before Additional Commissioner who, upon perusal of same, recorded his satisfaction that it was a fit case for issuance of notice for reopening assessment, reassessment notice issued against assessee was justified |
The Tribunal observed the approval given by the Addl. CIT by mentioning as under:
“Yes, I am satisfied on the reasons recorded by the AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act.”
The Tribunal found that the approval granted by the Addl. CIT was a mechanical and without application of mind, which was not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it was not coming out as to which material; information; documents and which other aspects had been gone through and examined by the Addl. CIT for reaching to the satisfaction for granting approval.
The Tribunal was of the view that therefore the AO had mechanically issued notice u/s. 148 of the Act.
With respect to the catena of judicial decisions relied upon by the Department, the Tribunal did not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand.
Keeping in view of the facts and circumstances of the present case and the case laws applicable in the case of the assessee, the Tribunal opined that the reopening in the case of the assessee for the assessment Year in dispute was bad in law and deserved to be quashed.
The Tribunal also found considerable cogency in the contention of the assessee that the issue raised in the appeal was squarely covered by the decision of the ITAT
Further the Tribunal observed that the Hon’ble Supreme Court had upheld the order of the Hon’ble High Court on the issue of Section 151, read with section 148 of Income Tax Act, 1961 regarding recording of satisfaction for sanction for issue of notice u/s 148. The High Court by impugned order had 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.
Thus, the Tribunal held that approval granted by the Addl. CIT was a mechanical and without application of mind, which was not valid for initiating the reassessment proceedings issue of notice u/s. 148 of the Act and is not in accordance with section 151 of the Act. Thus, the notice issued u/s. 148 of the Act was invalid and accordingly the reopening in this was bad in law.
Accordingly the notice u/s 148 was quashed.
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