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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI S. RIFAUR RAHMAN
Per : Kuldip Singh, Judicial Member:
The appellant, Mrs. Vrushali Sanjay Shinde (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 24.07.2020 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment year 2007-08 on the grounds inter-alia that :- “1. That assessment framed u/s 143(3) read with section 147 is bad in law and reopening of assessment on the basis of audit objection is bad in law because the assessee already furnished proper reply explaining the transaction and reopening u/s 147 was not justified because 2 Mrs. Vrushali Sanjay Shinde original assessment was auditor. Therefore reason to belief of A.O. is mealy change in opinion and C.I.T. (A) is in error to confirm the case.
2. That addition of Rs.13,57,103/- relates to bank entries of the assessee's bank already explained by the assessee during reassessment proceeding and bank account is also reflected in balance sheet and these transactions are nothing to do with assessment framed u/s 153C. Therefore, reopening on this ground was totally based upon in opinion, which is not permitted in law and C.I.T (A) is in error to come the addition of Rs.725214. 3. That the assessee has right to add, modify or delete any ground during the appeal proceedings.”
Briefly stated facts necessary for consideration and adjudication of the issues at hand are: original assessment in this case was completed under section 143(3) read with section 147 of the Income Tax Act,1961 (for short ‘the Act’) at the total income of Rs.23,21,730/- vide order dated 24.12.2009. Thereafter, this case was referred for special audit under section 142(2a) of the Act for A.Y. 2008-09 wherein it is stated by the auditor that the assessee has filed payment receipt No.00071482807 of ICICI Ltd. in favour of Rajesh S. Shetty of Rs.2,86,313/- dated 14.03.2007. The Assessing Officer (AO) prima-facie proceeded to hold that the assessee has made payment to ICICI Bank or Shri Rajesh S. Shetty on 14.03.2007 which proves that the assessee has purchased said vehicle from unexplained cash. In order to verify the aforesaid aspect and to re-compute the income of the assessee after obtaining approval from CIT(C), Pune notice under section 148 of the Act was issued on 14.03.2012 which was duly served on the assessee. The assessee in response to the notice under section 143(2) and 142(1) filed a reply.
Declining the contentions raised by the assessee the AO proceeded to hold that no documentary evidence has been 3 Mrs. Vrushali Sanjay Shinde submitted by the assessee to prove that the payment of Rs.2,86,313/- has been made by Shri Rajesh Shetty. The AO also not found satisfactory explanation made by the assessee regarding receipt of Rs.13,57,103/- from proprietary concern of assessee M/s. Trushna Enterprises and as such not found to be satisfactory. Consequently made addition thereof to the total income of the assessee by framing assessment under section 143(3) read with section 147 of the Act.
The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly “reasons recorded” in this case for reopening of the assessment are not on the file. It is not in dispute that original assessment in this case was completed under section 143(3) read with section 147 of the Act at the total income of Rs.23,21,730/-. It is also not in dispute that the case was reopened on the reference made of special auditor. It is also not in dispute that the alleged payment of Rs.2,86,313/- made to Shri Rajesh S. Shetty has been deleted by the Ld. CIT(A) while hearing the appeal against the assessment order under section 143(3) read with section 4 Mrs. Vrushali Sanjay Shinde 147 of the Act. In the backdrop of the aforesaid facts and circumstances of the case when we peruse the impugned order passed by the Ld. CIT(A) he has upheld the reopening of assessment under section 147/148 of the Act by returning following findings: “6. In the ground of appeal, the appellant has challenged the initiation of proceedings u/s 147 of the Act, based on an audit objection and the completion of the assessment proceedings u/s 147 of the Act despite submission of proper explanations on the reasons for initiation of proceedings u/s 148 of the Act. It is seen from the assessment order that the reason for reassessment u/s 147 of the Act was on account of fresh information as a result of the Special Audit Report for AY 2008-09 wherein the appellant herself filed payment receipt of Rs.2,86,316/- relating to the purchase of vehicle from Rajesh S. Shetty and also the revelation, as a result of the AO's perusal of the books of the appellant, of receipts of Rs.13,57,103/- by the proprietary concern of the appellant i.e. M/s. Trushna Enterprises which was not offered to tax in AY 2007-08. Thus, the reopening of the case and the subsequent order u/s 143(3) r.w.s. 147 of the Act was on the basis of information in possession of the AO subsequent to the completion of the proceedings u/s 143(3) r.w.s. 153C of the Act. Therefore, the re-opening of the case u/s 147 of the Act by the AO is upheld.”
7. Challenging the impugned order passed by the Ld. CIT(A) the Ld. A.R. for the assessee contended that he has raised specific ground that reopening of the assessment in this case is bad in law as neither the “reasons recorded” have come on record nor approval has been taken for reopening on the basis of audit objection from the competent authority rather reasons recorded by the AO for reopening only after obtaining approval from the Ld. CIT(A) and drew our attention towards para 4 of the assessment order.
In para 4 of the assessment order the AO has categorically recorded the fact that “in order to verify the facts as pointed out by special audit report after obtaining the approval of CIT(C), Pune vide letter dated 02.03.2012 notice under section 148 was issued in the case on 14.03.2012 which was served upon the assessee.” The 5 Mrs. Vrushali Sanjay Shinde AO first of all taken the approval from CIT(C) which is invalid on the face of it as the same was required to be taken from Joint Commissioner of Income Tax ( JCIT). Secondly after obtaining the approval the AO recorded the reasons which otherwise have not seen the light of the day and issued notice to the assessee for 14.03.2012. In compliance to the statute the AO was first required to record the reasons then to get the valid approval and only thereafter to issue the notice under section 148 of the Act to the assessee. So recording reasons after taking approval from CIT(C) the entire reopening proceedings stood vitiated.
Hon’ble Bombay High Court in case of Ghanshyam K. Khabrani vs. ACIT (2012) 20 taxmann.com 716 (Bom.) while dealing with the identical issue held that when under section 151(2) mandates satisfaction of the Joint Commissioner (JCIT) for issuance of notice under section 148 reopening of assessment with approval of Commissioner is unsustainable. In the instant case when undisputedly satisfaction has not been recorded by JCIT for issuance of notice under section 148 of the Act rather it was made by Commissioner the entire reopening assessment proceedings stood vitiated. When reopening itself is bad in law remaining issue raised by the assessee on merits has become academic.
Consequently the impugned order passed by the Ld. CIT(A) is set aside and appeal filed by the assessee is allowed. Order pronounced in the open court on 10.01.2023.