Merely writing “yes” or “approved” and affixing signature by the Commissioner of Income Tax (CIT) was not the required/proper satisfied for a fit case for re-opening u/s 147 by the issue of notice under section 148-ITAT Delhi.
Case Law Details:
ITA No. 5311/Del/2013 and Cross Objection No. 42/Del/2014 Assessment Year: 2000-01
Income Tax Officer vs. M/s GA Buildcon Private Limited
Date of Order/Judgment: 07/04/2016
Brief Facts of the Case:
On the basis of information received from Investigation Wing of the Income Tax Department that the assessee company was involved in receiving accommodation entries and after analysis of the Bank Statement of the assessee obtained from the Corporation bank, the Assessing Officer (AO) recorded the reasons thereof and issued notice u/s. 148 of the I.T. Act to reopen the case. Thereafter, the AO after considering the submissions and material available on record made various additions and completed the assessment u/s. 143(3)/147.
CIT(A), on the appeal of the assessee challenging the validity of reassessment as well as the additions, partly allowed the appeal by deleting the additions in dispute.
Against CIT(A) order, both Revenue and the assessee approached the ITAT. Revenue was against the deletion of additions and Assessee filed Cross Objection challenging the legal issue of reopening of assessment.
ITAT relied on ITO vs. M/s NC Cables observed that:
That AO had not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. Reasons were vague and not based on any tangible material and not acceptable in the eyes of law.
That the Addl. CIT had written “As proposed Approved” only which established that he has not recorded proper satisfaction/approval, before issue of notice u/s. 148.
Excerpts from ITAT Judgment:
A simple reading of the provisions of Sec. 151(1) with the proviso clearly show that no such notice shall be issued unless the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice which means that the satisfaction of the Commissioner is paramount for which the least that is expected 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’bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner.
In the light of the above mentioned reasons, in our considerate view, Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO’s belief is well reasoned and bonafide, he is to accord his sanction to the issue of notice 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.