Referred Sections:
Section 147
Section 148 of the IT Act.
Section 151,
Referred Cases / Judgments:
Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New Delhi decided in ITA No. 1375; 1721; 1722; 1523-1524/Del/2019
CIT vs. S. Goyanka Lime & Chemical Ltd. -(2015) 64 taxmann.com 313 (SC)
CIT vs. N.C. Cables Ltd. in ITA 335/2015 order dated 11.01.2017
SABH Infrastructure Ltd. vs. ACIT in WP (C) 1357/2016 order dated 25.09.2017
Chhugamal Rajpal vs. S.P. Chaliha & Ors (supra)
South Yarra Holdings vs. ITO, vide Writ Petition No.3398 of 2018,
PCIT vs. Meenakshi Overseas Pvt. Ltd., vide ITA 692/2016,
M/s SBS Realtors (P) Ltd. vs. ITO, vide ITA No.7791/Del/2018, order dated 1st April, 2019,
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : SMC : NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
I.T.A. No. 4624/Del/2014
Assessment Year: 2007-08
RAJENDRA AGRAWAL, vs. ITO, WARD-23(2),
56, FF, NRI COLONY, NEW DELHI
MANDAKINI,
GREATER KAILASH-IV,
NEW DELHI 110 048
(PAN: COWPS6505Q)
(ASSESSEE) (RESPONDENT
Assessee by : Shri Raj Kumar, CA & Sh. Sumit Goel, CA
Revenue by : Shri Pradeep Singh Gautam, Sr. DR.
ORDER
The Assessee has filed this appeal against the impugned order dated
26.5.2014 passed by the Ld. CIT(A)-XI, New Delhi on the following grounds:-
1. That the order of the Ld. CIT(A) is against law and facts.
2. That the Ld. CIT(A) erred in conforming the addition of Rs.
1035000/- made by the AO on account of cash deposit in
the bank account, by ignoring all the submissions and
documents filed by the appellant.
3. That the Ld. CIT(A) erred in enhancing the addition by
1224000 on account of cash deposit in the bank account of
the appellant.
4. That the AO erred in issuing the notice u/s. 148 of the Act to
the appellant, although there was no reason to believe for
him to issue notice to the appellant and thus the notice
issued is without jurisdiction.
5. That the AO never supplied the copy of reason recorded u/s.
148 of the Act to the appellant, which is in clear violation of
provisions of law and of various judicial pronouncements.
6. That the Ld. CIT(A) erred in not following the proper
procedure in enhancing the addition of the appellant.
7. That the appellant craves leave to add or alter any of the
grounds of appeal.
2. Later on, the assessee has filed the following additional grounds:-
"Gr. No. 4 of Form 36 (Additional Ground No. 1)
That the AO erred in issuing the notice u/s. 148 of the Act to
the appellant, although there was no reason to believe for him
to issue notice to the appellant and thus the notice issued is
without jusridcition.
Additional Ground No. 2
That the approval of the Additional CIT u/s. 151 of the I.T. Act
is not as per law and not competent so as to provide a legally
valid jurisdiction to AO to initiate the re-assessment
proceedings, more so the approval / satisfaction is
mechanical, without application of mind and in stereo typed
manner."
3. At the time of hearing, Ld. Counsel for the assessee only argued the
additional ground no. 2 and stated that the additional ground raised is pure
legal issue which goes to the root of the matter and all facts and material
required for this ground already available on record and therefore, the same
needs to be admitted, in view of the Hon'ble Supreme Court decision in the case
of NTPC 229 ITR 383 (SC). He further drew my attention towards Page No. 1
at Assessee's Paper Book which is a copy of reasons recorded by the AO and
approval granted by the Addl. CIT, Range-23, New Delhi wherein the AO has
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, Range-23, New Delhi
as "ON THE BASIS OF `A' ABOVE, I AM SATISFIED", which shows that Ld.
Addl. CIT has not recorded proper satisfaction and without application of mind
gave the approval in a mechanical manner. He further stated that this
legal/jurisdictional ground is squarely covered by the decision of the ITAT, SMC,
Bench, New Delhi dated 21.8.2019 in the case of Gopal Chand Manudhra and
Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal
Chand Mundhra vs. ITO, Wards 55(5), New Delhi decided in ITA No. 1375;
1721; 1722; 1523-1524/Del/2019 respectively relevant to assessment year
2011-12 and therefore, he requested that the same ratio may be followed in
2
the present case and appeal of the assessee may be allowed accordingly by
quashing the reassessment proceedings.
4. On the contrary, Ld. DR stated that since this additional ground was not
taken before the Ld. CIT(A), hence, the same may not be admitted and appeal
of the assessee may be dismissed. He further relied upon the orders of the
authorities below.
5. I have heard both the parties and perused the records, especially the
Additional grounds filed by the assessee and the case laws supporting the case
for admission of additional grounds on which the Ld. Sr. DR relied upon for not
admitting the additional grounds. In my considered view, the additional grounds
are in legal and jurisdictional nature and needs to be admitted in the interest of
justice. Hence, I admit the same and only deciding the additional ground no. 2
as argued by the ld. Counsel for the assessee. For the sake of convenience, the
additional ground no. 2 is again reproduced as under:-
Additional Ground No. 2
That the approval of the Additional CIT u/s. 151 of the I.T. Act
is not as per law and not competent so as to provide a legally
valid jurisdiction to AO to initiate the re-assessment
proceedings, more so the approval / satisfaction is
mechanical, without application of mind and in stereo typed
manner."
5.1 I have also perused the page no. 1 placed in Paper Book which is a copy
of RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 147 AND
FOR OBTAINING THE APPROVAL OF THE Addl. Commissioner of Income Tax,
Range-23, New Delhi wherein, the Ld. Addl. Commissioner of Income Tax,
Range-23, New Delhi while granting approval for issue of notice u/s. 148 of the
Act has only mentioned that "ON THE BASIS OF `A' ABOVE, I AM SATISFIED",,
which establish that the approving authority has given approval to the
reopening of assessment in a mechanical manner without due application of
mind and therefore, on this account the reassessment is not sustainable in the
eyes of law and needs to be quashed.
3
5.2 I have also perused the decision referred by the Ld. Counsel for the
assessee of the ITAT, SMC, Bench, New Delhi dated 21.8.2019 in the case of
Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra;
Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New
Delhi decided in ITA No. 1375; 1721; 1722; 1523-1524/Del/2019 respectively
relevant to assessment year 2011-12 wherein, the similar and identical legal/
jurisdictional issue has been adjudicated and decided in favour of the
assessee. For the sake of convenience, the relevant portion of the findings of
the Tribunal in the aforesaid case are reproduced as under:-
"18. I have considered the rival arguments made by
both the sides and perused the orders of the Assessing
Officer and CIT(A) and the paper book filed on behalf of
the assessee. I have also considered the various
decisions cited before me. I find the case of the
assessee was reopened u/s 147 by recording the
reasons and after obtaining approval from the JCIT and
the PCIT on the basis of the information received from
the Investigation Wing of the Department that the
assessee is a beneficiary of accommodation entry of
bogus long-term capital gain. The reasons so recorded
by the Assessing Officer has already been reproduced in
the preceding paragraphs and, therefore, the same is
not being reproduced here to avoid repetition.
However, a perusal of the column No.12 and 13 of the
form for recording the reasons for initiating the
proceedings u/s 147 and for obtaining the approval of
the Addl./Joint CIT, copy of which is placed at page 40
of the paper book, reveals that the JCIT while giving his
approval has mentioned as under:-
"Recommended for approval u/s 147 of the Act."
4
19. Similarly, the Pr. CIT, while giving his approval
has mentioned as under:-
"Yes. I am satisfied."
20. I find the coordinate Bench of the Tribunal in the
case of M/s Virat Credit & Holdings Pvt. Ltd. (supra)
while deciding an identical issue has quashed the
reassessment proceedings where the approving
authorities while giving approval has simply mentioned
"Yes. I am satisfied." The relevant observations of the
Tribunal from para 10 onwards read as under:-
"10. First of all, ld. AR for the assessee
company drew our attention towards sanction
accorded by the Addl.CIT for reopening of the
assessment obtained by moving an
application under Right to Information Act,
2005, available on file as Annexure 'A'.
Perusal of the sanction accorded by Addl. CIT
in the prescribed proforma shows that there is
a question no.13 viz. :
"13. Whether the Addl. CIT is
satisfied on the reasons recorded
under section 147 that it is a fit case
for issue of notice under section
148 of the IT Act.
11. In response to aforesaid question no.13 in
the prescribed proforma, Addl. CIT has
written "Yes. I am satisfied." No doubt,
columns of reasons recorded was there and it
5
is also mentioned in column no.12 that
reasons for belief that income has escaped
assessment are as per annexure enclosed but
such annexure has not been produced before
the Bench for perusal.
12. Apparently, from the approval recorded
and words used that "Yes. I am satisfied.", it
has proved on record that the sanction is
merely mechanical and Addl.CIT has not
applied independent mind while according
sanction as there is not an iota of material on
record as to what documents he had perused
and what were the reasons for his being
satisfied to accord the sanction to initiate the
reopening of assessment u/s 148 of the Act.
13. Even AO while recording the reasons for
initiating the reopening of assessment has not
applied his mind independently. When we
peruse the reasons recorded, available at
pages 31-32 of the paper book, the entire
reasons have been based on the statement of
one Shri P.K. Jindal, who has furnished the
list of companies stated to be not doing any
business activities but engaged in providing
accommodation entries. Before issuing the
notice AO appeared to have not examined the
profile of the said companies to arrive at a
logical conclusion so as to issue the notice u/s
148 of the Act. When this fact is examined in
the light of the completed assessment of the
6
assessee u/s 143 (3), all the documents
concerning share application money, now
available at pages 1 to 30 of the paper book,
were supplied to the AO. This fact has not
been taken into consideration by the AO
before initiating the proceedings u/s 147/148
of the Act. However, since reopening of
assessment in this case is otherwise not
sustainable, we are not entering into any
merits.
14. Hon'ble Supreme Court in case cited
as CIT vs. S. Goyanka Lime & Chemical Ltd. -
(2015) 64 taxmann.com 313 (SC) examined
the identical issue as to according the
sanction for reopening the assessment u/s
148 of the Act by merely recording "Yes. I am
satisfied." And held that reopening on the
basis of mechanical sanction is invalid by
returning following findings :-
" 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
7
assessment was invalid - Whether
Special Leave Petition filed against
impugned order was to be dismissed
- Held, yes [In favour of assessee]
Search and Seizure-Procedure for
black Assessment- Search was
conducted at residential and
business premises of Assessee and
notice for block assessment u/s.
158-BC was issued- For block
period, returns were filed that were
processed u/s. 143 (1)- However,
notice u/s. 148 was issued by AO,
on basis of certain reasons
recorded-Assessee objected to same
before AO, that was rejected and
assessment was completed u/ss.
143(3) and CO No.57/Del/2012 147-
CIT(A) found that reason recorded
by Joint Commissioner of Income
Tax, for according sanction, was
merely recording 'I am Satisfied'-
Action for sanction was alleged to be
without application of mind and to
be done in mechanical manner-Held,
while according sanction, Joint
Commissioner, Income Tax only
recorded "Yes, I am satisfied"-
Mechanical way of recording
satisfaction by Joint Commissioner,
that accorded sanction for issuing
notice u/s. 147, was clearly
8
unsustainable-On such·
consideration, both Appellate
authorities interfered into matter-
No error was committed warranting
reconsideration-As far as
explanation to S. 151, brought into
force by Finance Act, 2008 was
concerned, same only pertained to
issuance of notice and not with
regard to manner of recording
satisfaction-Amended provision did
not help Revenue-No question of law
involved in matter, that warranted
reconsideration-Revenue's Appeals
dismissed."
15. The Hon'ble Delhi High Court has also
decided this legal issue in case cited as Pr.
CIT vs. N.C. Cables Ltd. in ITA 335/2015
order dated 11.01.2017 by returning following
findings :-
" Reassessment-Issuance of Notice-
Sanction for issue of Notice-
Assessee had in its return for A Y
2001-02 claimed that sum of Rs. 1
Crore was received towards share
application amounts and a further
sum of Thirty Five Lakhs was
credited to it as an advance towards
loan-Original assessment was
completed u/s 143(3)-However,
9
pursuant to reassessment notice,
which was dropped due to technical
reasons, and later notice was issued
and assessments were taken up
afresh-After considering submissions
of assessee and documents
produced in reassessment
proceedings, AO added back a sum
of Rs.1,35,00,000-CIT(A) held
against assessee on legality of
reassessment notice but allowed
assessee's appeal on merits holding
that AO did not conduct appropriate
enquiry to conclude that share
inclusion and advances received
were from bogus entities-Tribunal
allowed assessee's appeal on merits-
Revenue appealed against appellate
order on merits-Assessee's cross
appeal was on correctness of
reopening of assessment- Tribunal
upheld assessee's cross-objections
and dismissed Revenue's appeal
holding that there was no proper
application of mind by concerned
sanctioning authority u/s Section
151 as a pre- condition for issuing
notice u/s 147/148-Held, Section
151 stipulates that CIT (A), who was
competent authority to authorize
reassessment notice, had to apply
his mind and form opinion- Mere
10
appending of expression 'approved'
says nothing-It was not as if CIT (A)
had to record elaborate reasons for
agreeing with noting put up-At same
time, satisfaction had to be recorded
of given case which could be
reflected in briefest possible
manner- In present case, exercise
appears to have been ritualistic and
formal rather than meaningful,
which was rationale for safeguard of
approval by higher ranking officer-
Revenue's appeal dismissed."
16. Furthermore, perusal of the noting sheet
dated 09.03.2010 to 30.12.2010 made
available to the Bench for perusal shows that
only AO has recorded that Addl.CIT has
considered the reasons recorded before
according the sanction, however even no
prima facie material is there, if Addl.CIT has
applied his mind by considering the reasons
recorded before according the sanction. We
are of the considered view that the AO who
has recorded the reasons cannot enter into
the mind of the sanctioning authority
(Addl.CIT) discharging the quasi-judicial
function for according valid sanction for
reopening the assessment.
17. Moreover, according sanction is not a
supervisory role rather it is a quasi-judicial
11
function to be performed by the Addl.CIT as
required u/s 151 of the Act. When the
Revenue Department is manned by highly
qualified officers they are to evolve legally
sustainable standard operating procedure for
discharging quasi- judicial function.
16. Hon'ble High Court of Delhi in case cited
as SABH Infrastructure Ltd. vs. ACIT in WP
(C) 1357/2016 order dated 25.09.2017 has
issued guidelines to the Revenue authorities
while deciding the issue of reopening u/s
147/148 of the Act. Operative part of which is
reproduced as under:-
"19. Before parting with the case,
the Court would like to observe that
on a routine basis, a large number
of writ petitions are filed challenging
the reopening of assessments by the
Revenue under Sections
147 and 148 of the Act and despite
numerous judgments on this issue,
the same errors are repeated by the
concerned Revenue authorities. In
this background, the Court would
like the Revenue to adhere to the
following guidelines in matters of
reopening of assessments:
(i) while communicating the reasons
for reopening the assessment, the
12
copy of the standard form used by
the AO for obtaining the approval of
the Superior Officer should itself be
provided to the Assessee. This would
contain the comment or
endorsement of the Superior Officer
with his name, designation and date.
In other words, merely stating the
reasons in a letter addressed by the
AO to the Assessee is to be avoided;
(ii) the reasons to believe ought to
spell out all the reasons and grounds
available with the AO for re- opening
the assessment - especially in those
cases where the first proviso
to Section 147 is attracted. The
reasons to believe ought to also
paraphrase any investigation report
which may form the basis of the
reasons and any enquiry conducted
by the AO on the same and if so, the
conclusions thereof;
(iii) where the reasons make a
reference to another document,
whether as a letter or report, such
document and/ or relevant portions
of such report should be enclosed
along with the reasons;
13
(iv) the exercise of considering the
Assessee's objections to the
reopening of assessment is not a
mechanical ritual. It is a quasi-
judicial function. The order disposing
of the objections should deal with
each objection and give proper
reasons for the conclusion. No
attempt should be made to add to
the reasons for reopening of the
assessment beyond what has
already been disclosed."
17. In view of what has been discussed
above, reassessment opened by the AO in
this case is not sustainable in the eyes of law,
hence hereby quashed. Consequently, cross
objection filed by the assessee company
stands allowed and the appeal filed by the
Revenue has become infructuous.
21. I find the Tribunal in the case of Raghav
Technology Pvt. Ltd. (supra) while deciding an identical
issue has also quashed the reassessment proceedings
under similar circumstances by observing as under:-
"8. I have considered the rival arguments
made by both the sides and perused the
material available on record. It is an
admitted fact that the case of the assessee
was reopened by the Assessing Officer after
14
recording reasons and issue of notice u/s 148
as per the provisions of section 147 and 148
of the Act on the basis of the information
received from the Investigation Wing that the
assessee is a beneficiary of accommodation
entry obtained from Surendra Kumar Jain
group of cases towards introduction of share
capital of Rs.35 lacs. I find, the assessee has
taken a specific ground before the CIT(A)
challenging the validity of reassessment
proceedings on the ground that approval u/s
151 of the Act of the superior authorities is
not in accordance with law. The relevant
ground of appeal No.2 taken before the
CIT(A) reads as under:-
"2. That under the facts and
circumstances, approval u/s 151 of
the superior authorities is not
accordance with law and otherwise
also mechanical and without
application of mind, making the re-
asstt. Proceedings unsustainable in
law."
9. I find the above ground has been
extracted by the CIT(A) in the body of the
order. She has also mentioned at para 3.2 of
the order that the assessee contended that
there was no proper compliance of the
provisions of section 151 of the IT Act, 1961.
However, her finding on this issue is missing
15
in the entire order. A perusal of the approval
given u/s 151, copy of which is placed at
pages 20 and 21 of the paper book shows
that the Pr. CIT while giving approval has
simply mentioned as under:-
"Yes. I am satisfied."
10. I find, the Hon'ble Delhi High Court in
the case of United Electrical Company Pvt.
Ltd. (supra) while deciding an identical issue
has held that the power vested in the
commissioner u/s 151 to grant or not to grant
approval to the Assessing Officer to reopen an
assessment is coupled with a duty. The
commissioner is required to apply his mind to
the proposal put up to him for approval in the
light of the material relied upon by the
Assessing Officer. That power cannot be
exercised casually and in a routine manner.
Accordingly, the Hon'ble High Court quashed
the notice, since there was no proper
application of mind by the Addl.CIT.
11. I find the Hon'ble Delhi High Court in
the case of Pr. CIT vs. N.C. Cables Ltd., while
deciding an identical issue has held that
section 151 of the Act clearly stipulates that
the CIT, who is the competent authority to
authorize the reassessment notice has to
apply his mind and form an opinion. Mere
appending of the expression `approved' says
16
nothing. It is not as if the commissioner has
to record elaborate reasons for agreeing with
the noting put up before him. At the same
time, satisfaction has to be recorded of the
given case which can be reflected in the
briefest possible manner. When such
exercise appears to have been ritualistic and
formal rather than meaningful which is the
rationale for the safeguard of an approval by
a higher ranking official, the finding of the
Tribunal quashing the reassessment
proceedings cannot be disturbed.
12. I find the Hon'ble Supreme Court in
the case of Chhugamal Rajpal vs. S.P. Chaliha
& Ors (supra) has held that where the
commissioner had mechanically recorded
permission and the important safeguards
provided in the section 147 and 151 were
lightly treated by the officer and the
commissioner, the notice issued u/s 148 was
held as invalid. The various other decisions
relied on by the ld. counsel for the assessee
in the paper book also support his case.
Since, in the instant case, admittedly, the ld.
PCIT while granting approval has simply
mentioned `Yes. I am satisfied' therefore,
following the decisions of the jurisdictional
High Court (cited supra) on this issue which
are binding on the Tribunal, the reassessment
proceedings are to be treated as not in
accordance with the law since the approval
has been given in a mechanical manner
17
without due application of mind by the
approving authority. I, therefore, allow
ground of appeal No.2 by the assessee
challenging the validity of reassessment
proceedings. Since the assessee succeeds on
this legal ground, the various other grounds
raised by the assessee are not being
adjudicated being academic in nature."
22. Since, in the instant case, both the approving
authorities have given approval in a mechanical manner
without due application of mind, therefore, such
reassessment proceedings have to be treated as not in
accordance with law and has to be quashed.
23. Even otherwise also, a perusal of the reasons
recorded show that the notice has been issued in a
mechanical manner without independent application of
mind by the Assessing Officer and the satisfaction by
the Assessing Officer is based on borrowed satisfaction
of the Investigation Wing. The Assessing Officer,
without applying his mind, has simply, on the basis of
the information of the Investigation Wing, jumped to
the conclusion that there is escapement of income. The
reasons so recorded do not show that there is any
application of mind by the Assessing Officer for reaching
the conclusion that there was escapement of income
except the information from the Investigation Wing.
The Hon'ble Delhi High Court in a number of decisions
has held that reopening of assessment on the basis of
report of the Investigation Wing without independent
application of mind by the Assessing Officer is not in
accordance with law and accordingly the reassessment
proceedings have been quashed. The Hon'ble Delhi High
18
Court recently in the case of South Yarra Holdings vs.
ITO, vide Writ Petition No.3398 of 2018, order dated 1st
March, 2019, at para 7 of the order has observed as
under:-
"7. It is a settled position in law that re-
opening of an assessment has to be done by
an Assessing Officer on his own satisfaction.
It is not open to an Assessing Officer issue a
reopening notice at the dictate and/or
satisfaction of some other authority.
Therefore, on receipt of any information
which suggests escapement of income, the
Assessing Officer must examine the
information in the context of the facts of the
case and only on satisfaction leading to a
reasonable belief that income chargeable to
tax has escaped assessment, that re-opening
notice is to be issued."
24. The Hon'ble High Court in the case of PCIT vs.
Meenakshi Overseas Pvt. Ltd., vide ITA 692/2016, order
dated 26th May, 2017, has observed as under:-
"19. A perusal of the reasons as recorded by
the AO reveals that there are three parts to it.
In the first part, the AO has reproduced the
precise information he has received from the
Investigation Wing of the Revenue. This
information is in the form of details of the
amount of credit received, the payer, the
payee, their respective banks, and the cheque
number. This information by itself cannot be
said to be tangible material.
19
20. Coming to the second part, this tells us
what the AO did with the information so
received. He says: "The information so
received has been gone through." One would
have expected him to point out what he found
when he went through the information. In
other words, what in such information led him
to form the belief that income escaped
assessment. But this is absent. He
straightaway records the conclusion that "the
abovesaid instruments are in the nature of
accommodation entry which the Assessee had
taken after paying unaccounted cash to the
accommodation entry given (sic giver)". The
AO adds that the said accommodation was "a
known entry operator" the source being "the
report of the Investigation Wing".
21. The third and last part contains the
conclusion drawn by the AO that in view of
these facts, "the alleged transaction is not the
bonafide one. Therefore, I have reason to be
believe that an income of Rs. 5,00,000 has
escaped assessment in the AY 2004-05 due to
the failure on the part of the Assessee to
disclose fully and truly all material facts
necessary for its assessment... "
22. As rightly pointed out by the ITAT, the
'reasons to believe' are not in fact reasons but
only conclusions, one after the other. The
expression 'accommodation entry' is used to
20
describe the information set out without
explaining the basis for arriving at such a
conclusion. The statement that the said entry
was given to the Assessee on his paying
"unaccounted cash" is another conclusion the
basis for which is not disclosed. Who is the
accommodation entry giver is not mentioned.
How he can be said to be "a known entry
operator" is even more mysterious. Clearly
the source for all these conclusions, one after
the other, is the Investigation report of the
DIT. Nothing from that report is set out to
enable the reader to appreciate how the
conclusions flow therefrom.
23. Thus, the crucial link between the
information made available to the AO and the
formation of belief is absent. The reasons
must be self evident, they must speak for
themselves. The tangible material which
forms the basis for the belief that income has
escaped assessment must be evident from
a reading of the reasons. The entire material
need not be set out. However, something
therein which is critical to the formation of the
belief must be referred to. Otherwise the link
goes missing.
24. The reopening of assessment
under Section 147 is a potent power not to be
lightly exercised. It certainly cannot be
invoked casually or mechanically. The heart of
21
the provision is the formation of belief by the
AO that income has escaped assessment. The
reasons so recorded have to be based on
some tangible material and that should be
evident from reading the reasons. It cannot
be supplied subsequently either during the
proceedings when objections to the reopening
are considered or even during the assessment
proceedings that follow. This is the bare
minimum mandatory requirement of the first
part of Section 147 (1) of the Act."
25. I find the coordinate Bench of the Tribunal in the
case of M/s SBS Realtors (P) Ltd. vs. ITO, vide ITA
No.7791/Del/2018, order dated 1st April, 2019, has also
quashed the reassessment proceedings based on the
information provided by the Investigation Wing without
any independent application of mind. It was held that
there was no tangible material which formed the basis
for the belief that income has escaped assessment. The
various other decisions relied by the ld. counsel also
supports his case. Since, in the instant case, the
reopening of the assessment has been made on the
basis of information received from the Investigation
Wing and there is no independent application of mind by
the Assessing Officer and such reopening is made on the
basis of borrowed satisfaction, therefore, such
reopening is not in accordance with law and ha to be
quashed. Accordingly, such reassessment proceedings
have to be treated as not in accordance with law and
has to be quashed.
22
26. Since the assessee succeeds on this legal ground
challenging the validity of reassessment proceedings,
the addition on merit is not being adjudicated being
academic in nature. The appeal filed by the assessee is
accordingly allowed.
ITA Nos. 1375/Del/2019 (Gopal Chand Mundhra and
Sons); 1721/Del/2019 (Damyanti Mundhra);
1722/Del/2019 (Ramdev Mundhra); 1524/Del/2019
(Gopal Chand Mundhra).
27. In these appeals also identical grounds have been
taken by the respective assessees and in all these cases
the approving authorities have given approval to the
reopening of assessment in a mechanical manner
without due application of mind. Therefore, following
the reasons given in the preceding paragraphs, the
reassessment proceedings initiated in the case of these
assessees are also held to be not in accordance with the
law and are accordingly quashed.
28. In the result, all the five appeals filed by the
respective assesses are allowed."
5.3 Since in the present case the approving authority has given approval to
the reopening of assessment in a mechanical manner without due application of
mind by mentioning only that "ON THE BASIS OF `A' ABOVE, I AM SATISFIED",
in the Reasons for Initiating Proceedings u/s. 147 and For obtaining the
Approval of the Addl. Commissioner of Income Tax, Range-23, New Delhi, a
copy thereof is placed at page no. 1 of the Paper Book, and therefore, the legal
issue in dispute is squarely covered by the aforesaid finding of the Tribunal,
hence, respectfully following the aforesaid precedent i.e. ITAT, SMC, Bench,
New Delhi decision dated 21.8.2019 in the case of Gopal Chand Manudhra and
Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal
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Chand Mundhra vs. ITO, Wards 55(5), New Delhi decided in ITA No. 1375;
1721; 1722; 1523-1524/Del/2019 respectively relevant to assessment year
2011-12, the reassessment is hereby quashed and accordingly the additional
ground no. 2 is allowed. Since the assessee succeeds on this legal ground
challenging the validity of reassessment proceedings, the addition on merit is
not being adjudicated being academic in nature. The appeal filed by the
assessee is accordingly allowed.
6. In the result, the appeal filed by the assessee stands allowed.
Order pronounced on 02/12/2019.
Sd/-
[H.S. SIDHU]
JUDICIAL MEMBER
Date 02/12/2019
"SRB"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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