IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHE : SMC : NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 4715/Del/2018
Assessment Year : 2008-09
APC AIR SYSTEMS P. LTD., Vs. ITO, WARD-3(1),
1/7236, EAST GORAKH PARK, NEW DELHI
BEHIND HANUMAN MANDIR,
SHAHDARA,
NEW DELHI 110 032
(PAN: AAECA7472P)
(Appellant) (Respondent)
Assessee by : Mrs. Sonia Rani, CA
Department by : Sh. Pradeep Singh Gautam, Sr. DR.
ORDER
This appeal filed by the assessee is directed against the order passed
by the Ld. CIT(A)-I, New Delhi on 08.05.2018 in relation to the assessment
year 2008-09 on the following grounds:-
1. That the Ld. CIT(A) erred in law and facts of the case while not
considering that the Ld. AO has erred in concluding the
assessment u/s. 144 of the Act without providing sufficient
opportunity of being heard to the assessee before resorting the
case to the best judgement assessment. As such the
assessment order passed by the Ld. AO is arbitrary in nature and
against the principle of natural justice. Therefore, order may
please be quashed.
2. That the Ld. CIT(A) has failed to consider that the statutory
requirements of law u/s. 151 of the Income Tax Act, 1961 have
not been fulfilled as the approval granted by the Ld. Addl. CIT,
Range-3, New Delhi was accorded without independent
application of mind and in a mechanical manner. Hence, the
reopening of this case is not valid and untenable as per law. As
such, assessment is void-ab-initio and may please be quashed.
3. That the Ld. CIT(A) has erred in law and on facts while upholding
the decision of the AO of making additions of Rs. 15,37,500/- on
account of share capital received as camouflaged transaction
without appreciating the submissions filed by the assessee. As
such, the addition of Rs. 15,37,500.00 may please be deleted.
4. That the Ld. CIT(A) erred in law and facts of the case while not
appreciating that the addition made by the AO is merely on the
basis of conjecture and surmises without bringing on record any
specific cogent material against the assessee. As such, the
addition of Rs. 15,00,000/- may please be deleted.
5. That the Ld. CIT(A) has failed to appreciate while upholding the
addition of Rs. 37,500/- on account of commission, being estimated
@2.5% by the AO merely on the basis of presumption without
even providing any opportunity to the assessee to provide
explanation for the same. As such, the addition of Rs. 37,500/- may
please be deleted.
6. That the Ld. CIT(A) has erred in law and on facts while confirming
the decision of the Ld. AO without appreciating that the alleged
evidenced wherein name of the assessee has been mentioned, were
never confronted to assessee during the assessment proceedings,
on the basis of which the AO has alleged that the share capital
received by the assessee is non-genuine. As such, reassessment
proceedings are void as per law. Therefore, order may please be
quashed.
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7. That the AO has failed to make cognizance of our appearance
before him on every dates as and when fix and moreover, Rs. 15.00
lacs which was received by account payee cheque, is alleged as
accommodation entry only on the baiss of statement of Mr. Tarun
Goel without providing any opportunity of being heard to assessee
for cross examination. Thus, the assessment was made by AO
without given any information and opportunity and therefore, may
please be quashed.
8. That the assessee crave to add, alter, delete and modify any of the
ground of appeal at the time of hearing.
2. At the time of hearing, Ld. Counsel for the assessee argued only
ground no. 2 which is legal in nature and drew my attention towards page
no. 48-53 of the Paper Book which is a copy of reasons recorded u/s. 148 of
the Act alonwith copy of approval granted by the Addl. CIT, Range-3,
New Delhi for issuance of notice u/s. 148 of the Act and stated that 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-3, New
Delhi 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 shows that Addl. CIT, Range-3, New Delhi has not recorded proper
satisfaction and without application of mind gave the approval in a
mechanical manner. She further stated that this legal/jurisdictional ground
no. 2 is squarely covered by the decision of the ITAT, SMC, Bench, New
Delhi dated 01.03.2018 in the case of Tara Alloys Ltd. vs. ITO Ward 25(1),
New Delhi decided in ITA No. 2421/Del/2017 relevant to assessment year
2005-06 and therefore, she requested that the same ratio may be followed
in the present case and appeal of the assessee may be allowed accordingly
by quashing the reassessment proceedings.
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3. On the contrary, Ld. Sr. DR relied upon the orders of the authorities
below and stated that the reasons recorded and satisfaction / approval
accorded is within the meaning of section 151 of the Act and need not to be
quashed. He stated that apart from relying on the order of the Ld. CIT(A),
the following cases laws may kindly be considered with regard to reopening
of cases u/s. 147 of the I.T. Act:-
1. Sonia Gandhi vs. ACIT (Delhi High Court) 29018) 97
taxmann.com 150 (Delhi).
i) 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.
ii) Relying on PCIT vs. Meenakshi Overseas Pvt. Ltd.
ITA No. 651/Del/2016 dated 11.1.2016 (Hon'ble
Delhi High Court) approval u/s. 151 upheld.
2. Raymond Woollen Mills Ltd. v. ITO And Others [236
ITR 341 (Copy Enclosed) where 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.
2.1 Yuvraj v. Union of India Bombay High Court [20091
315 ITR 84 (Bombay)/[2009] 225 CTR 283
(Bombay) Points not decided while passing
assessment order under section 143(3) not a case of
change of opinion. Assessment reopened validly.
3. Devi Electronics Pvt Ltd Vs ITO Bombay High Court
2017-TIQL-92-HC-MUM- IT
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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..
4. Acorus Unitech Wireless (P.) Ltd. Vs ACIT Delhi High
Court T20141 43 taxmann.com 62 (Delhi)/[2014]
223 Taxman 181 (Delhi)(MAG)/[2014] 362 ITR 417
(Delhi)
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.
5. PCIT, Vs Paramount Communication (P.) Ltd. Delhi
High Court [2017] 79 taxmann.com 409
(Delhi)/[2017] 392 ITR 444 (Delhi)
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.
6. Paramount Communication (P.) Ltd. Vs PCIT
Supreme Court 2017-TIQL-253- SC-IT
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.
7. Amit Polyprints (P.) Ltd. Vs PCIT Gujarat High Court
[2018] 94 taxmann.com 393 (Gujarat)
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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.
8. Aaspas Multimedia Ltd. Vs PCIT Gujarat High Court
[2017] 83 taxmann.com 82 (Gujarat)
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.
9. Murlibhai Fatandas Sawlani Vs ITO Gujarat High Court
2016-TIQL-370-HC- AHM-IT
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.
10. Ankit Aqrochem (P.) Ltd. Vs JCIT Rajasthan High
Court [2018] 89 taxmann.com 45 (Rajasthan)
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.
11. Rakesh Gupta Vs CIT P&H High Court f20181
93 taxmann.com 271 (Punjab & Haryana)
Where Assessing Officer received information from
Principle Director of Income Tax (Investigation) that
assessee had received bogus loss from his broker by
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client code modification, reassessment on basis of
said information was justified.
12. Home Finders Housing Ltd. Vs. ITO (2018) 94
taxmann.com 84 (SC).
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.
13. Baldevbahi Bhikhabhai Patel vs. DCIT (Gujarat
High Court) (2018) 94 Taxmann.co,
428(Gujarat)
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."
4. I have heard both the parties and carefully considered the case laws
and the relevant documents available on record especially the assessment
order, impugned order, reasons/satisfaction/approval recorded for issue of
notice u/s. 148 of the Act placed at page no. 48-53 of the Paper Book,
which is a copy of performa for recording the reasons for initiating
proceedings u/s. 148 for obtaining approval of Addl. CIT, Range-3, New
Delhi who has granted the approval in a mechanical manner for issuing
notice u/s. 148 of the Income Tax Act, 1961 by mentioning as under:-
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"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."
4.1 After perusing the aforesaid remarks of the Addl. CIT, Range-3, New
Delhi, I find that the approval granted by the Addl. CIT, Range-3, New
Delhi is a mechanical and without application of mind, which is not valid for
initiating the reassessment proceedings, because from the aforesaid
remarks, it is not coming out as to which material; information; documents
and which other aspects have been gone through and examined by the Addl.
CIT, Range-3, New Delhi for reaching to the satisfaction for granting
approval. Thereafter, the AO has mechanically issued notice u/s. 148 of the
Act. The judicial decisions relied upon by the Ld. Sr. DR, have been duly
considered. In my considered view, I do 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, I am 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. I find considerable cogency in the
contention of the Ld. Counsel for the assessee that the issue no. 2 raised
in this appeal is squarely covered by the decision of the ITAT, SMC, Bench,
New Delhi dated 01.03.2018 in the case of Tara Alloys Ltd. vs. ITO Ward
25(1), New Delhi decided in ITA No. 2421/Del/2017 relevant to assessment
year 2005-06 wherein the Tribunal has quashed the assessment. My
aforesaid view is also fortified by the following decisions :-
A) United Electrical Company (P) Ltd. Vs. CIT & Ors. 258
ITR 317 (Del.) In this case, approval by the Addl. CIT u/s.
151 was given in the following terms:-
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"Yes, I am satisfied that it is a fit case for
issue of notice u/s. 148 of the Income
Tax Act."
Analyzing, the above satisfaction/approval, it has
been held that the CIT is required to apply his mind
to the proposal put up to him for approval in the
light to eh material relied upon by the AO. The said
power cannot be exercised casually and in a routine
manner. We are constrained to observe that in the
present case, there has been no application of mind
by the Addl. CIT before granting the approval. (Para
19).
(B) Hon'ble Supreme Court of India in the case of CIT vs.
S. Goyanka Lime & Chemical Ltd. reported in (2015) 64
taxmann.com 313 (SC) arising out of order of Hon'ble High
Court of Madhya Pradesh in CIT vs. S. Goyanka Lime &
Chemicals Ltd. (2015) 56 taxmann.com 390 (MP).
"Section 151, read with section 148 of 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 assessment was invalid
Whether Special Leave Petition filed against impugned
order was to be dismissed Held, Yes (in favour of the
Assessee)."
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4.2 In the background of the aforesaid discussions and respectfully
following the precedents, as aforesaid, I am of the considered view that
approval granted by the Addl. CIT, Range-3, New Delhi is a mechanical and
without application of mind, which is not valid for initiating the
reassessment proceedings issue of notice u/s. 148 of the I.T. Act, 1961 and
is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice
issued u/s. 148 of the Act is invalid and accordingly the reopening in this is
bad in law and therefore, the same is hereby quashed. Accordingly, the
legal ground no. 2 raised by the assessee is allowed. Since the other
grounds were not raised by the Assessee, the same are dismissed as such.
Accordingly, the assessee's appeal is partly allowed.
5. In the result, the Appeal filed by the Assessee stands partly allowed
Order pronounced on 01-01-2020.
Sd/-
[H.S. SIDHU]
JUDICIAL MEMBER
Dated: 01-01-2020.
SRB
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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