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आदेश/Order
Per R.L. Negi, Judicial Member:
The assessee has preferred the present appeal against the order dated 26.11.2019 passed by Commissioner of Income Tax (Appeals), Patiala, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the assessment order passed u/s 144 r.w.s 147 of the Income Tax Act, 1961 [for short ’the Act’] for the assessment year 2011-12.
In this case the AO initiated proceedings u/s 147 after issuing notice u/s 148 of the Act. In response to the notice u/s 148 of the -Chd-2020- Sh Sapiner Singh, Rajpura 2 assessee filed his return of income for the assessment year under consideration declaring income of Rs. 1,57,860/- and agricultural income of Rs. 2,66,800/- Accordingly, AO issued notices u/s 142(1) and 143(2) of the Act along with questionnaire. Since, the assessee or his authorized representative failed to appear before the AO on the dates fixed for hearing, AO decided to proceed u/s 144 of the Act. As
per the information received, the assessee had deposited Rs.
25,00,000/- in his account on 01.11.2010. During verification, the assessee had contended that he along with his brother entered into an agreement to sell their land to Sh. Vikrant Sandal and received advance payment of Rs. 50,00,000/-. Since the deal could not be finalized, they forfeited the entire amount received from Sh. Vikrant Sandal and he deposited his share of Rs. 25,00,000/- in his bank account. During assessment proceedings, the AO verified the aforesaid facts and on the basis of the reply received from Sh. Vikrant Sandal AO made addition of the said amount to the income of the assessee as unexplained credit and determined the total income of the assessee at Rs. 26,57,860/- besides the agricultural income of Rs. 02,66,800/-. In the first appeal, the ld. CIT(A) upheld the assessment order and confirmed the addition made by AO. The assessee is in appeal against the said findings of the ld. CIT(A).
3. The assessee has challenged the impugned order by raising the following grounds: - -
Chd-2020- Sh Sapiner Singh, Rajpura 3
1. That the applicant provided source of cash deposit of Rs. 25,00,000/- with details of the persons from whom it was received and was duly returned through bank, the applicant has explained the source of cash and have discharged his primary onus to explain the source of cash with details.
I pray to see the two aspects to this transaction one is cash received and second is the same amount transferred back the same person from whom it was received through bank account. It is highly inappropriate to consider the money transferred though bank as an advance to the same person. “
During pendency of the said appeal, the ld. counsel moved an application for allowing the assessee to raise additional ground of appeal challenging the validity of reopening of assessment u/s 147 read with section 148 of the Act. The additional ground of appeal reads as under: -
“That the Ld. Assessing Officer has erred in reopening the case u/s 147 read with notice u/s 148 as there was neither any reason to believe and also there has been mechanical satisfaction of the PCIT and as such the assessment as reopened deserves to be quashed.”
During the course of arguments, the ld. counsel submitted before us that the assessee wants to challenge the reassessment proceedings and findings of the ld. CIT(A) in appellate proceedings on legal ground after seeking permission to raise additional ground.
The ld. counsel further submitted that the assessee has moved application dated 24.08.2021 for admission of additional ground. The -Chd-2020- Sh Sapiner Singh, Rajpura 4 ld. counsel placing reliance on the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Corporation vs. CIT 229 ITR 383, submitted that since the assessee has raised the legal ground which does not require enquiry/verification of facts, the application for permission to raise additional ground may be allowed and the assessee may be permitted to argue the case on legal ground as well.
On the other hand, the ld. DR. the ld. departmental representative (DR) opposed the application on the ground that the assessee has not raised the said ground before the ld. CIT(A).
We have considered the rival submissions and perused the material on record. As pointed out by the ld. counsel the additional ground raised by the assessee is a legal ground which does not require any inquiry or verification. In our considered view, the legal ground raised by the assessee goes to the root of this appeal. Hence, following the ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Corporation vs. CIT (supra), we allowed the application of the assessee and permitted the ld. counsel to argue the appeal on the legal ground as well.
The Ld. counsel submitted that the Ld. CIT(A) has erred in confirming the action of the AO in initiating re-assessment proceedings on the basis of approval granted by the Ld. Pr. CIT in a mechanical manner. The Ld. pointed out that in the present case since the AO initiated reassessment beyond the period of 4 years, -Chd-2020- Sh Sapiner Singh, Rajpura 5 the competent authority was required to accord valid sanction after recording his satisfaction on the basis of the reasons recorded by the AO. The ld. counsel further submitted that since the ld. Pr. CIT accorded sanction for initiating proceedings u/s 147 of the Act against the assessee in a mechanical manner without application of mind, the assessment order passed by the AO and the appellate order passed by the ld. CIT(A) are void and liable to be quashed.
The Ld. Counsel invited our attention to page 3 of the paper book, which is the copy of sanction accorded by the ld. Pr. CIT for initiating proceedings u/s 147 read with section 148 of the Act and pointed out that the ld. Pr. CIT has merely endorsed the proposal by writing ‘yes I am satisfied’ The Ld. counsel further submitted that the action of the Ld. CIT(A) is not in consonance with the ratio laid down by the Hon'ble Madhya Pradesh High Court in CIT Vs S. Gayanka Lime & Chemicals Ltd. [2015] 56 taxman.com 390(MP) wherein the Hon'ble Court has declared the reopening invalid on the ground that the competent authority has accorded sanction for issuing notice u/s 148 in a mechanical manner without application of mind. The Ld. counsel further pointed out that this Bench of the Tribunal has decided the identical issue in favour of the assessee and set aside the order passed by the Ld. CIT(A) in the case of Charanjit Kaur v ITO, on the identical ground. In view of the aforesaid facts and circumstances -Chd-2020- Sh Sapiner Singh, Rajpura 6 of the case and the law laid down by the Hon'ble High Court, the ld. counsel submitted that the impugned order may be set aside.
8. On the other hand, the Ld. DR supporting the order passed by the ld. CIT(A) submitted that since the assessee had failed to disclose the source of credit in his bank account, the Ld. CIT(A) has rightly made confirmed the addition made by the AO. On the issue of application of mind by the ld. Pr. CIT, the ld. DR submitted that the ld. Pr. CIT has accorded the sanction for issuing notice u/s 148 of the Act on the basis of the reasons recorded by the AO therefore, there is no infirmity in the order passed by the Ld. CIT(A).
We have heard the rival submissions of the parties and perused the material on record including the cases relied upon by the ld. counsel for the assessee. As pointed out by the ld. counsel, in the case of CIT Vs S. Gayanka Lime & Chemicals Ltd. (supra), the Hon'ble Madhya Pradesh High Court has quashed the re- assessment proceedings for the reasons that the PCIT has recorded his satisfaction by writing “yes, satisfied, it is a fit case for issue of notice u/s 148”. In the present case also the ld. Pr. CIT has accorded sanction by writing “reasons seen. yes, I am satisfied” which shows that the Ld. Pr. CIT did not apply his mind while granting sanction. As per the ratio laid down by the Hon’ble Madhya Pradesh High Court in the aforesaid case, satisfaction has -Chd-2020- Sh Sapiner Singh, Rajpura 7 to be recorded objectivity on objective material. Further, this Bench of the Tribunal has already decided the identical issue in favour of the assessee in the case of Smt. Charajit Kaur vs ITO (supra) by following the ratio laid down by the Hon'ble Madhya Pradesh High Court in the case of CIT vs S. Gayanka Lime & Chemicals Ltd. wherein the Hon'ble High Court has held as under:-
“7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax only recorded so “Yes, I am satisfied” which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.
If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration.”
Hence, consistent with our findings in the case of Smt.
Charanjit Kaur vs ITO (supra), we hold that in the present case, the ld. Pr. CIT has accorded the sanction for issuing notice u/s 148 of the Act, in a mechanical manner without application of mind.
Therefore, the ld. CIT(A) has wrongly confirmed the reassessment -Chd-2020- Sh Sapiner Singh, Rajpura 8 order passed by the AO. Accordingly, we set aside the impugned order passed by the ld. CIT(A) and direct the AO to delete the addition.
Since we have decided the legal issue in favour of the assessee, we do not deem it necessary to decide the grounds raised by the assessee on merits.
In the result, the appeal of the assessee is allowed.
Order pronounced on 31.08.2021