MONTREAUX RESORTS PVT. LTD.,,DELHI vs. ITO, WARD-17(1), DELHI

The learned DR for the Revenue, on the other hand, relied upon the action of the Assessing Officer and the CIT(A).

We have carefully considered the rival submissions. As noted above, the assessee has inter alia assailed the assumption of jurisdiction under Section 148 r.w.s 147 r.w.s 151 of the Act. It is contended on behalf of the assessee that entire action of the Assessing Officer and the competent authority under Section 151 of the Act smacks of gross lack of jurisdiction.

The approval granted by the Addl. CIT under Section 151 of the Act and reasons recorded by the AO under Section 148(2) of the Act seeking approval of the Addl. CIT is reproduced hereunder for immediate reference:-

The reasons recorded under Section 148(2) reads as under : “REASONS RECORDED IN WRITING FOR REOPENING THE CASE U/S 148 OF THE INCOME TAX ACT 1961, Monteaux Resorts Pvt. Ltd. Assessment Year 2007-08 Information received from DDIT (INV.) Shimla that the assessee company had purchased agriculture land measuring 6 Bighas 16 Biswas Khatra Khatauni No. 19/20 Khasara No. 1/2 Situated in Mauza Chattiyan, Pargana Dharti, Tehsil Kasauli, Distt, Solan from Sh Khayali Ram S/o Late Sh. Mahantu Ram R/o Lawrence School, Sanwar, P.O. Sanawar, Tehsil Kasauli for Rs. 30,00,000/-, However the agreement to sale of the land was registered on 01.05.2006 for Rs.15,00,000/- The difference of Rs. 15,00,000/- was paid through an accounted income/cash. I have reason to believe that income of the assessce company to the extent of Rs. 15,00,000/- the payment made in cash has escaped assessment for the A.Υ. 2007-08. The case of the assessee is covered under the provisos laid down u/s 149(1)(b) of the T.Act 1961 in view of the following reasons: 4 years have elapsed, but not more than 6 years have elapsed from the end of the relevant assessment year. The income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for the F.Y. relevant to A.Y. 2007-08 The proposal is forwarded for kind consideration and requisite approval for issue of notice u/s 148(i) as per the procedure laid down under the provisions of section 151, read with subsection (2) of the Income Tax Act. 1961. Sd/- Income Tax Officer Ward 5(4), New Delhi”

We have perused the reasons recorded under Section 148(2) of the Act and other material to invoke jurisdiction under Section 147 of the Act. The reasons recorded do not suggest at all that in pursuance of receipt information received from DDIT (Investigation), Shimla, whether the Assessing Officer had independently applied its mind to the information received or conducted some enquiry into the matter for the purpose of coming to conclusion that income assessable to tax had escaped assessment. It is further noticed that the AO while alleging escapement noted that the difference of Rs.15 lakhs in question was paid through “accounted income/cash”. Such observation itself contradicts the allegation towards escapement of income. The Addl. CIT while granting approval has simply observed that ‘it is a fit case for issue of notice under Section 148 of the Act’ disregarding such observations of the AO in the reasons recorded. Furthermore, the approval has been proposed by the AO with reference to Section 147(b) of the Act which provision is nonexistent for the purposes of proceedings under Section 147 of the Act. The Addl. CIT further granted approval ignoring this vital aspect as well. At this juncture, a reference may be made to the judgment delivered by the Hon’ble Bombay High Court in the case of Kalpana Shantilal Haria vs. ACIT WP(L) No.3063 of 2017 dated 22.12.2017 wherein it was held that approval of action with reference to Section 147(b) of the Act is marred by non-application of mind. The Co-ordinate Bench in the case of Bhaijee Commodities (P.) Ltd. vs. ACIT & 2353/Del/2024 7 Montreaux Resorts Pvt. Ltd. vs. ITO A.Y. 2007-08 (2023) 154 Taxmann.com 292 (Del) has observed that approval based on nonexistent provision of Section 147(b) of the Act is not sustainable in law. Besides, no minimal reasons were given regarding his satisfaction for such approval. The approval given is clearly mechanical, perfunctory and routine. Thus, neither the reasons recorded under Section 148 of the Act justify the allegation towards escapement of income nor the approval given by the Addl. CIT stands the test of judicial scrutiny. The transaction of land parcel is also found to be between Mr. Khayali Ram and Rajeev and not assessee. Thus, looking from any angle, the jurisdiction assumed under Section 147 of the Act is not sustainable in law.

For the reasons narrated above, it is evident that reasons recorded for exercising the jurisdiction is plagued with several defects of critical nature. Such defects are incurable under Section 292B of the Act. On the face of such lack of jurisdiction under Section 147 of the Act, the reassessment proceedings itself is bad in law.

The impugned reassessment order dated 27.03.2015 is thus bad in law and liable to be quashed.

In this view of the matter, we do not consider it expedient to examine the aspects of merit of additions under challenge. Resultantly, the impugned assessment order under Section 147 of the Act stands quashed.

In the result, appeal of the assessee in is allowed.

The captioned appeal is against the penalty imposed under Section 271(1)(c) of the Act flowing from the re-assessment order passed under Section 147 of the Act under challenge in (supra). The reassessment order having been quashed, the very foundation for imposition of penalty under Section 271(1)(c) of the Act is crumbled. Resultantly, penalty imposed from a non-est reassessment order automatically stands vacated.

Resultantly, both the captioned appeals of the assessee are allowed.