METRO PROJECT,KEONJHAR vs. ITO, KEONJHAR WARD, KEONJHAR

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ITA 227/CTK/2016Status: DisposedITAT Cuttack23 December 2019AY 2009-108 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the approval granted by the Joint Commissioner (JCIT) under Section 151 was invalid because the reasons for reopening were recorded after the approval was sought and granted. This indicated a lack of application of mind by the JCIT.

What were the facts?

The assessee challenged the reassessment proceedings initiated by the Assessing Officer (AO). The assessee argued that the approval for reopening the assessment under Section 151 of the Income Tax Act was invalid as it was granted without proper application of mind to the reasons recorded.

What were the issues?

Whether the reassessment proceedings were validly initiated when the approval under Section 151 was granted without considering the reasons for reopening, which were recorded subsequently.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151,Section 144

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK

Before: SHRI CHANDRA MOHAN GARG & LAXMI PRASAD SAHU

For Appellant: Shri P.C.Sethi, AR
For Respondent: Shri Subhendu Dutta, DR
Pronounced: 23/12

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No.227/CTK/2016 Assessment Year : 2009-2010

Metro Project, Main Road, Joda Vs. ITO, Keonjhar Ward, Keonjhar Market, At/PO: Joda, Keonjhar PAN/GIR No.AAPFM 4281 J (Appellant) .. ( Respondent)

Assessee by : Shri P.C.Sethi, AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 18 /12/ 2019 Date of Pronouncement : 23/12/ 2019

O R D E R Per C.M.Garg,JM This is an appeal filed by the assessee against the order of the

CIT(A), Cuttack dated 4.3.2016 for the assessment year 2009-2010.

2.

The assessee has raised the following grounds of appeal:

“ 1. That, the learned CIT (A) has committed serious error in not quashing the assessment order passed by the learned Assessing Officer which is per se illegal, unjust, without jurisdiction, arbitrary and contrary to the provisions of the Act and has been passed in gross violation to the principles of natural justice.

2.

That, the learned CIT (A) has committed serious error in not quashing the assessment order as the reopening assessment made by the learned Assessing Officer u/s 147 of the Income-tax Act, 1961 (Hereinafter referred as "the Act") is per se illegal, without jurisdiction as much as no sanction as required u/s 151 of the Act has been take in issuing notice u/s 148 of the Act.

P a g e 1 | 8

3.

That, the learned CIT (A) has committed serious error in not quashing the assessment order as the reason mentioned for reopening of assessment u/s 147 of the Act is not coming within the meaning of section u/s 147 of the Act and for which the notice u/s 148 of the Act is illegal and the assessment order should have been annulled by the learned CIT (A).

4.

That, the learned CIT (A) has committed a serious error in not deleting the addition made by the learned Assessing Officer u/s 40(a)(ia) of the Act made by the learned Assessing Officer and not deciding the issues correctly.

5.

That, the learned CIT (A) has committed a serious error in not deleting the addition of Rs. 1,92,000/- made by the learned Assessing Officer u/s 40(b) of the Act.

6.

That, the learned CIT (A) has committed a serious error in not deleting the addition of Rs. 1,59,82,228/- made by the learned Assessing Officer u/s 40(a)(ia) of the Act. 7. That, the learned CIT (A) has committed a serious error in not deleting the addition made by the learned Assessing Officer of Rs. 16,00,000/-which is contrary to the facts and circumstances of the case and for which same is liable to be deleted.

8.

That, the learned CIT(A) has erred both in law and in fact to disallow which has already been paid and nothing remains payable u/s 40(a)(ia) of the Act and for which the addition u/s 40a(ia) of the Act is liable to be deleted.

9.

That, the cost of appeal may be given to be appellant in accordance with the Rules.”

3.

As agreed by both the sides, first of all, we proceed to decide the

legal grounds taken in Ground Nos.2 to 3 of appeal of the assessee

challenging the validity of initiation of reassessment proceedings u/.s.147 of

the Act without approval for initiation of such proceedings u/s.151 of the

Act.

P a g e 2 | 8

4.

In the beginning of the arguments, ld DR submitted that he has

received relevant assessment records and he also submitted the copies of

the letter of the ld CIT, Sambalpur to Assessing Officer granting approval

u/s.151(1) of the Act dated 21.11.2013 forming of approval and copy of the

reasons recorded dated 10.12.2013. Copies of these documents were

provided to the ld counsel for the assessee.

5.

Ld counsel for the assessee submitted that the reopening of

assessment u/s.147 of the Act is perse illegal without jurisdiction as no valid

sanction for initiation of proceedings as required u/s.151 of the Act has

been taken by the AO prior to issuance of notice u/s.148 of the Act. Ld

counsel further submitted that the ld CIT(A) has erred in not quashing the

re-assessment order as the reasons mentioned for reopening of assessment

is not coming within the meaning of requirement of section 147 of the Act

and because of that the notice u/s.148 of the Act is also illegal and bad in

law and all the proceedings including orders of lower authorities should be

annulled on this count.

6.

Further drawing our attention towards copy of the letter dated

21.11.2013 written by ld JCIT, Range-1, Sambalpur to ITO, forming of

approval enclosed thereto and copy of the reasons recorded by the AO

dated 10.12.2013, ld counsel submitted that from the letter of ld JCIT,

Range-1, Sambalpur dated 21.11.2013, it is clear that the AO vide his letter

No.3034 dated 7.11.2013 requested the JCIT to grant approval u/s.151(1)

P a g e 3 | 8 of the Act in five cases and in turn, ld JCIT informed the Assessing Officer

that the records have been perused and accorded for issuance of notice

u/s.148 of the Act in five cases including the present assessee for

assessment year 2009-2010. Ld counsel for the assessee submitted tht

from the copies of the reasons submitted before the Bench by ld DR it is

also discernible that the reasons have been recorded subsequently on

10.12.2013. Therefore, it is amply clear that neither on 7.11.2013 nor

when the AO requested the ld JCIT to grant approval u/s.151 of the Act on

21.11.2013 on which dated ld JCIT granted so called approval u/s.151 of

the Act, no reasons were in existence and reasons have been recorded on

10.12.2013 i.e. after lapse of substantial time. Ld counsel vehemently

pointed out that these facts clearly indicate that when the AO sought

approval from ld JCIT and ld JCIT granted approval to the AO u/s.151 of the

Act on 21.11.2012, there was no reason on the record of the AO and thus,

the approval u/s.151 of the Act has been granted without perusing and

considering the reasons and without application of mind to the reasons

recorded by the AO. Ld counsel strenuously contended that on this ground,

initiation of reassessment proceedings, issuance of notice u/s.148 and

subsequent proceedings including impugned reassessment order passed

u/s.147 of the Act r.w.s. 144 of the Act and ld CIT(A) order have to be held

as bad in law and thus, same may kindly be quashed.

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7.

Replying to above, ld DR submitted that the scope of approval is

inter-departmental correspondence which could not be questioned by the

assessee before the Tribunal especially when he has participated in the

proceedings before the AO as well as ld CIT(A) without any objection.

8.

On careful consideration of the rival submissions, we are of the

considered view that prior to initiation of reassessment proceedings and

issuance of notice u/s.148 of the Act, it is the duty of the AO to obtain

approval u/s.151 of the Act from the competent authority, which was JCIT

in the present case. The purpose of section 151 of the Act is to introduce a

supervisory check over the work of the assessing officer, particularly, in the

context of reopening of assessment. The law expects the assessing officer

to exercise the power under section 147 of the Act to reopen an assessment

only after due application of mind. If for some reason, there is an error that

creeps into this exercise by the assessing officer, then the law expects the

superior officer to be able to correct that error. For obtaining approval, the

AO is required to send copy of the reasons alongwith assessment records

particularly in the prescribed form for grant of approval u/s.151 of the Act

and after perusing the entire material and due application of mind, the

competent authority i.e. JCIT is required to grant approval u/s.151 of the

Act. These provisions are mini-code of procedures for initiation of

reassessment proceedings in the case where the assessment has been

completed. Not following due procedure by the AO and approving authority

P a g e 5 | 8 makes the entire proceedings, reassessment order and ld CIT(A) order bad

in law. From the documents submitted by ld DR, we clearly gather that the

AO requested the ld JCIT vide letter dated 7.11.2013 and in turn ld JCIT

granted approval in five cases including the case of the assessee for

assessment year 2009-2010 informing the AO regarding grant of approval

dated 21.11.2013. However, from the copy of reasons submitted by ld DR,

extracting the assessment record, we clearly observe that the reasons have

been recorded on 10.12.2013 after completion of correspondence between

the AO and ld JCIT regarding approval u/s.151 of the Act. Therefore, we

safely presume that at the time of seeking approval from the ld JCIT on

7.11.2013 and also at the time of granting approval by ld JCIT u/s.151 of

the Act on 21.11.2013, no reasons for reopening of assessment u/s.147 of

the Act and issuing notice u/s.148 of the Act were in existence and reasons

have been recorded after lapse of substantial time period during the next

month i.e. on 10.12.2013. Thus, ld JCIT has granted approval without

perusing the reasons required to be recorded by the AO for reopening of

the assessment and issuing notice u/s.148 of the Act. It is well settled Law

that validity of re-assessment proceedings is to be examined with reference

to the reasons recorded for reopening of the assessment Consequently, we

hold that ld JCIT has granted approval u/s.151 of the Act without perusing

any reasons and without application of mind which is fatal to the initiation

of reassessment proceedings and issuing notice u/s.148 of the Act.

P a g e 6 | 8

9.

The Hon’ble Supreme Court approving the Judgment of Hon’ble

Madhya Pradesh High Court in the case of Commissioner of Income Tax,

Jabalpur (MP) vs., S. Goyanka Lime & Chemicals Ltd., [2015] 46

taxmann.com 313 held as under :

“SLP dismissed against High Court’s ruling 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.”

10.

Hon'ble High Court of Delhi dated 31.08.2017 in WP(C) No. 614/2014

in the case of Yum Restaurants Asia Pte Ltd. vs. DDIT held that the glaring

mistakes in the proforma for approval is the valid ground for quashing the

assessment on the premise of non-application of mind by all the authorities

involved in the process of recording reasons and providing satisfaction u/s.

151 of the Act.

11.

Hence, respectfully following the judgments cited supra, and in view

of the glaring facts on which the reassessment proceedings have been

initiated, we quash the reassessment order u/s.144/147 of the Act dated

3.7.2014 and allow the legal grounds of the assessee.

12.

As we have quashed the reassessment proceedings while

adjudicating the legal grounds, other grounds taken by the assessee have

become infructuous and same are not adjudicated upon.

P a g e 7 | 8

13.

In the result, appeal of the assessee is allowed.

Order pronounced on 23/12/2019.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 23/12/2019 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Metro Project, Main Road, Joda Market, At/PO: Joda, Keonjhar

2.

The Respondent. ITO, Keonjhar Ward, Keonjhar 3. The CIT(A)-, Cuttack 4. Pr.CIT- , Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

By order

Sr.Pvt.secretary ITAT, Cuttack

P a g e 8 | 8

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