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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax [Appeals]-20, New Delhi dated 27.01.2016 pertaining to assessment year 2006-07. 2. The assessee in its various grounds of appeal has challenged the validity of proceedings u/s. 147 of the I.T. Act, 1961 and also challenged the order of the Ld. CIT(A) in confirming the addition of Rs.8,50,000/- u/s. 68 of the I.T. Act, 1961.
3. The brief facts of the case are that the assessee filed its return of income on 30.10.2006 declaring income at Rs. 1,41,65,491/-. The AO processed the return of income u/s. 143(1) of the Income Tax Act, 1961 (in short “Act”). Later, AO completed the assessment u/s. 143(3) of the Act at an income of Rs. 1,45,97,580/- on 26.5.2008. Again on the information received from the Joint Director of Income Tax (Inv.)(OSD), Unit-1, New Delhi on 02.5.2012 wherein it was stated that during the course of search/survey of M/s RS Bansal & Associates certain incriminating documents are found and seized / impounded and on perusal of documents, the AO found that M/s NG Construction (PAN AAAFN6072B) had taken accommodation entries in the form of unsecured loan. On receipt of this letter, a proposal for reopening of assessment u/s. 147 of the Act was sent to Ld. CIT-XII, New Delhi and AO issued notice u/s. 148 of the I.T. Act. AO also provided the reasons recorded to the assessee. In response to the notice, the AR of the assessee appeared and discussed the matter with the AO and filed the requisite details which was examined by the AO and who did not agree with the contention raised by the assessee and documentary evidences filed by the assessee. AO also issued notice u/s. 133(6) of the Act to the loan holder for proving the genuineness of the transaction in dispute which remained unverified and finally the AO completed the assessment of the assessee by making the addition of Rs. 8,50,000/- to the income of the assesee and assessed the income at Rs. 1,54,46,580/- u/s. 147/143(3) of the Act, vide order dated 31.01.2013. Against the assessment order dated 31.01.2013, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 27.01.2016 has dismissed the appeal on legal as well as on merit. Aggrieved with the impugned order dated 27.01.2016, assessee is in appeal before the Tribunal.
The Ld. Counsel for the assessee referring to page no. 7 of the Paper Book drew the attention of the Bench to the remarks of the CIT wherein he had simply mentioned “I am satisfied with the reasons recorded by the AO for reopening the AY 2006-07 u/s. 147.” Also referring to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. M/s N.C. Cables Limited reported in 391 ITR 11 and the decision of the 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 the order of the Hon’ble M.P. High Court in the case of CIT vs. S. Goenka Lime and Chemicals Limited reported in (2015) 56 taxman.com 390 including the decision of the ITAT, SMC Bench, New Delhi in the case of Blue Chip Developers (P) Ltd. vs. ITO in (AY 2009-10) vide order dated 02.12.2019 and ITAT, SMC Bench, New Delhi in the case of Umesh Kumar Tyagi vs. ITO in ITA No. 2978/Del/2019 (AY 2010-11) vide order dated 22.11.2019 and SMC Bench, New Delhi decision dated 07.10.2019 in the case of Mukesh Chand Garg. Vs. ITO decided in ITA No. 794/Del/2009 (AY 2009-10) and various other decisions filed in the Paper Book, he submitted that the Courts have held that the reopening is not sustainable where approval/sanction given by the authority is without recording satisfaction. Referring to various other decision he submitted that the Assessing Officer, not having jurisdiction over the assessee, cannot issue notice u/s. 148 of the I.T. Act, 1961. The Assessing Officer in the instant case has not applied his mind and initiated action u/s. 147 of the Act on the basis of the Report of the Investigation Wing. Therefore, the reassessment proceedings initiated by the Assessing Officer is not ustainable.
So far as the merit of the case is concerned, the Ld. Counsel for the assessee submitted that assessee had established the identity of the loan creditor by producing the ITRs and PAN details and the transaction was through regular banking channel by way of account payee cheques and were paid back through account payee cheques only; both the loan creditors have confirmed of having advanced the money and the reflected in their bank accounts. However, both the loan creditors are income tax assesses and therefore, no doubt can be raised about their creditworthiness. Hence, the assessee has discharged the initial onus cast on it and addition made u/s. 68 of the Act cannot be made in the hands of the assessee if the ingredients of the said action are not attracted and accordingly the addition in dispute may be deleted.
The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and Ld. CIT(A).
We have considered the rival arguments made by both the parties and perused the orders of the authorities below. We have also considered the various decisions cited before us. We find that AO, on the basis of Report of the Investigation Wing of the Department, reopened the assessment and made the addition of Rs. 8,50,000/- as unexplained income of the assessee which has been upheld by the Ld. CIT(A). It is the submission of the Ld. Counsel for the assessee that reopening was made in the mechanical manner without application of mind by the Assessing Officer and on borrowed satisfaction. Further the approving authorities have also given the approval in a mechanical manner.
7.1 On perusal of page no. 6-7 of the Paper Book, which is a copy of proforma for approval to issue of notice u/s. 148, copy of which is placed at page no. 7 of the paper book shows that the Ld. CIT while giving approval simply mentioned “I am satisfied with the reasons recorded by the AO for reopening the AY 2006-07 u/s. 147.” Similarly, as per column no. 12 at page no. 6 of the Paper Book, the ACIT, Circle 88(1), New Delhi has simply mentioned “For the reasons recorded by the AO, I am satisfied that it is a fit case for issue of notice u/s. 148 of the I.T. Act, 1961.”
7.2 The 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) has held as under:-
“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).” 7.3 The Hon’ble High Court of Delhi in the case of PCIT vs. NC Cables (Supra) has held as under:-
“11. Section 151 of the Act clearly stipulates that the CIT(A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved’ says nothing. It is not as if the CIT(A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded if the given case which can be reflected in the briefest possible manner. In the present case, the 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 officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed.” 7.4 Since in the instant case also both the approving authorities have given the approval in a mechanical manner, therefore, in light of the ratios as laid down by the Hon’ble Supreme Court of India and the Hon’ble Delhi High Court in the decisions cited above and the other decisions filed in the shape of Paper Book at page no. 1-36, the reassessment proceedings in our opinion are not in accordance with law. Therefore, the same is liable to be quashed. We, therefore, quash the reassessment proceedings. 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.
In the result, the appeal filed by the assessee stands allowed.
The order pronounced on 11.02.2020.