Writing “Yes, I am Satisfied” establishes non recording of proper satisfaction/approval before issue of notice u/s 148
No sooner than a week after, holding that merely writing “yes” or “approved” and affixing signature by CIT) was not the required satisfaction (ITA No. 5311/Del/2013 dated 07/04/2016), ITAT delhi Bench has again held that writing “Yes, I am Satisfied” by Addl. CIT establishes that he has not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act.
Case Law Details:
ITA No. 1596/Del/2014 Assessment Year: 2004-05
M/S RMG POLYVINYL (I) LTD. Vs. DCIT
Date of Order/Judgment: 12/04/2016
Brief Facts of the Case:
The assessee had filed return which was processed u/s. 143(1). Later, on the basis of information received from the Investigation Wing, New Delhi that the assessee was amongst the beneficiaries of bogus accommodation entries, the proceedings u/s. 147 of the Act were initiated and notice u/s. 148 was issued. The notice sent through speed post was received back unserved with the remarks ‘No such company of this name at the given address’. Thereafter on the basis of the bank details, information was sought u/s 133(6) from the bankers of the assessee which revealed that the name of the company had been changed to RMG Polyvinyl India Ltd. with its new address. The assessee filed objections to the reopening of the assessment proceedings, however , the AO treated the money received on account of share application as undisclosed income and completed the assessment u/s. 147/143(3).
CIT(A) dismissed the appeal of the Assessee.
The assessee approached the Tribunal and argued the legal ground challenging the validity of reopening u/s. 147 stating that action of the Assessing Officer is illegal, because no proper reasons were recorded; no nexus between the materials relied upon and the belief formed for escapement of income; no application of mind; no proper satisfaction was recorded before issue of notice u/s. 148; no independent conclusion that there was escapement of income and no proper satisfaction / approval has been obtained from the Addl. CIT.
ITAT quashed the reopening based on the following judgments:
ITA No. 3149/Del/2013 (AY 2003-04) in the case of G&G Pharma India Limited vs. ITO
ITA No. 545/2015 dated 8.10.2015 in the case of Pr. CIT vs. G&G Pharma India Ltd. in Delhi High Court
ITA No. 4122/Del/2009 (AY 2001-02) in the case of ITO vs. M/s NC Cables Ltd.
Cross Objection No. 388/Del/2009 in the matter of M/s NC Cables Ltd. vs. ITO
Excerpts from ITAT Judgment:
After going through the reasons recorded by the Assessing Officer/DCIT, Circle 14(2), New Delhi for reopening and the approval thereof by the Ld. Addl. CIT, Range-14, New Delhi, we are of the view that AO has 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. 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 for the asstt. Year in dispute is bad in law and deserves to be quashed.
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