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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI H.S. SIDHU
the impugned order dated 5/9/2016 passed by the Ld. Commissioner of Income Tax (Appeals-5), Delhi on the following grounds:-
That the notice issued u/s 148 and the Assessment Order passed u/s 147/143(3) on 28.02.2014 of the Income Tax Act, 1961 are illegal, bad in law, without jurisdiction and barred by time limitation.
2. That the proceedings initiated under section 147/148 of the Act are invalid for want of jurisdiction as the pre-
conditions for initiation of the said proceedings as stipulated in section 147 of the Act are not satisfied.
3. That on the facts and circumstances CIT(A) has erred in upholding the reopening of Assessment u/s 148 which was framed under 143(3) as there was neither any fresh material /tangible material nor any application of mind by Assessing Officer in forming the belief for reopening of assessment u/s. 147 of the Act.
4. That the original assessment was completed u/s. 143(3) and the notice issued u/s 148 is beyond four years. Hence, the same is illegal, bad in law, without jurisdiction and bared by time as there is no failure on part of Assessee to produce relevant facts fully and truly.
5. That on the facts and circumstances of the case, there is no allegation as to any failure on the part of Assessee to produce material facts truly and as such notice issued after four years from the end of relevant assessment year is illegal, bad in law and without jurisdiction.
That the notice u/s 148 is issued only on the basis of report received from Directorate of Income Tax (Inv.) without any independent application of mind. The reasons have been recorded are in routine and casual manner.
That the notice u/s 148 has been issued for verification and examination which is not permitted by law therefore the notice issued u/ s 148 is illegal and bad in law.
8. Without prejudice, no approval has been obtained from the component authority as required u/s 151. Hence the notice issued is illegal, bad in law and without jurisdiction.
9. That the alleged approval from ACIT is illegal, bad in law as same is given without application of mind.
That the additions made are illegal and bad in law.
That the addition of Rs. 48,04,000/- on account of share application money has been wrongly made by the AO and wrongly upheld by CIT(A).
That the addition of Rs. 96,080 on account of alleged expenditure to arrange the share application money is illegal and bad in law and is wrongly upheld by CIT(A).
That on the facts and in the circumstances of the case, CIT(A) has erred in ignoring all the conformations along with copy of bank statement and Income tax return filed during the course of Assessment proceeding.
That the evidence filed and materials available on record have not been properly construed and judiciously interpreted, hence the addition/ disallowance made are uncalled for.
That the observation and the additions made are unjust, illegal, arbitrary, bad in law, highly excessive and based on surmise conjecture.
That interest U / s 234A, 2348 and 234C of the Income Tax Act, 1961 has been wrongly and illegally charged and has been wrongly worked out.
That the applicant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing.
The brief facts of the case are that the assessee company had filed a return at Rs. Nil on 29.11.2006. The assessment u/s 143(3) of the I.T.
Act, 1961 was concluded at Nil income in order dated 24.12.2008.
However, on the basis of search in the Surendra Kumar Jain group of cases (entry operator) and further inquiries, it was found by the AO that Shri Surendra Kumar Jain provided accommodation entries to various beneficiaries with the help of several bank accounts opened in the name of several proprietary concerns and companies in which either he himself or his employees were directors or proprietors, which information the AO received vide letter F.No. DIT(Inv)-II/U/s 148/2012- 13/197 dated 12.03.2013 of the Directorate of Income Tax (Inv.)-II enclosing therewith letter of the DIT(Inv.), Unit-VI(2), New Delhi F.No. DDIT(lnv)/U- VI(2)/Information Sharing/2012-2013/256 dated 12.03.2013 wherein it was suggested that notice u/s 148 was required to be issued to bring the tax the undisclosed income regarding the accommodation entries obtained by beneficiaries. Accordingly, the notice u/s.148 of the I.T. Act, 1961 was issued on 21.3.2013 after obtaining approval u/s.151(2) by the Addl. CIT, Range-5, New Delhi who has given her approval vide her letter dated 21.3.2013. In response to the same, nobody attended nor any return was filed. Notice u/s. 142(1) dated 25.11.2013 was issued fixing the date of hearing on 4.12.2013. And again in response to the further notice dated 17.12.2013 the AR of the assessee attended the proceedings and filed a letter dated 17.12.2013 requesting therein that the return filed u/s. 139 may be treated as filed in response of notice issued u/s. 148 of the I.T. Act, 1961 and also submitted copy of assessment order dated 24.12.2008 passed u/s. 143(3) of the I.T. Act for the assessment year 2006-07. Thereafter, the AO completed the assessment u/s. 147/143(3) of the I.T. Act, 1961 vide his order dated 28.2.2014 at Rs. 49,00,080/- and made the addition of Rs. 48,04,000/- u/s.68 being bogus accommodation entries and Rs. 96,080/- u/s 69C being expenditure incurred to arrange accommodation entry.
Against the above order dated 28.2.2014, assessee filed an appeal before the Ld. CIT(A), who vide impugned order dated 05.9.2016 by upholding the reopening has partly allowed the appeal of the assessee.
Aggrieved with the order dated 28.2.2014, assessee is in appeal before the Tribunal.
Ld. Counsel of the assessee has raised as many as 17 grounds, but pressed only ground no. 8 challenging the approval obtained from the Competent Authority as required u/s. 151 of the I.T. Act, 1961 and stated that the notice issued is illegal, bad in law and without jurisdiction, because the necessary approval obtained u/s. 151 of the I.T. Act, 1961 was not obtained by the Competent Authority, hence, the notice issued u/s. 148 is not valid and therefore, the same may be cancelled and accordingly the reassessment needs to be quashed. To support his contention, he relied upon the order of the Hon’ble Delhi High Court in the case of CIT vs. SPL’s Siddhartha Ltd. passed in of 2011 dated 14.9.2011 wherein on exactly similar and identical facts and circumstances of the case, the appeal of the Revenue was dismissed.
6. Ld. DR relied upon the order of the authorities below and reiterated the view adopted by the Ld. CIT(A) in his impugned order and stated that in reopening was perfectly justified and there is no infirmity in this case.
7. I have heard both the parties and perused the records and the case law relied upon by the Ld. Counsel of the assessee. Since the Ld. Counsel of the assessee has not raised the ground nos. 1 to 7 & 9 to 17, therefore, the same are dismissed as not pressed. Accordingly, I am adjudicating upon only the ground no. 8 which is purely legal. I find that the assessee company had filed a return at Rs. Nil on 29.11.2006. The assessment u/s 143(3) of the I.T. Act, 1961 was concluded at Nil income in order dated 24.12.2008. However, on the basis of search in the Surendra Kumar Jain group of cases (entry operator) and further inquiries, it was found by the AO that Shri Surendra Kumar Jain provided accommodation entries to various beneficiaries with the help of several bank accounts opened in the name of several proprietary concerns and companies in which either he himself or his employees were directors or proprietors, which information the AO received vide letter F.No. DIT(Inv)- II/U/s 148/2012- 13/197 dated 12.03.2013 of the Directorate of Income Tax (Inv.)-II enclosing therewith letter of the DIT(Inv.), Unit-VI(2), New Delhi F.No. DDIT(lnv)/U-VI(2)/Information Sharing/2012-2013/256 dated 12.03.2013 wherein it was suggested that notice u/s 148 was required to be issued to bring the tax the undisclosed income regarding the accommodation entries obtained by beneficiaries. Accordingly, the notice 6 u/s.148 of the I.T. Act, 1961 was issued on 21.3.2013 after obtaining approval u/s.151(2) by the Addl. CIT, Range-5, New Delhi who has given her approval vide her letter dated 21.3.2013. In response to the same, nobody attended nor any return was filed. Notice u/s. 142(1) dated 25.11.2013 was issued fixing the date of hearing on 4.12.2013. And again in response to the further notice dated 17.12.2013 the AR of the assessee attended the proceedings and filed a letter dated 17.12.2013 requesting therein that the return filed u/s. 139 may be treated as filed in response of notice issued u/s. 148 of the I.T. Act, 1961 and also submitted copy of assessment order dated 24.12.2008 passed u/s. 143(3) of the I.T. Act for the assessment year 2006-07. Thereafter, the AO completed the assessment u/s. 147/143(3) of the I.T. Act, 1961 vide his order dated 28.2.2014 at Rs. 49,00,080/- and made the addition of Rs. 48,04,000/- u/s.68 being bogus accommodation entries and Rs. 96,080/- u/s 69C being expenditure incurred to arrange accommodation entry and in appeal Ld. CIT(A) upheld the action of the AO. I further find the original assessment was completed u/s.143(3) on 24.12.2008 and the notice issued on 21.3.2013 u/s. 148 of the Act which is beyond four years after obtaining approval u/s. 151(2) of the Act and reassessment completed on 28.2.2014, therefore, the approval u/s. 151(2) has not been obtained from the Competent Authority and the satisfaction for reopening the assessment after completion of original assessment u/s 143(3) has been obtained from the Additional Commissioner of Income tax in contravention to the provisions of section 151. The section 151 reads as under:
"151. Sanction for issue of notice.
(1) In a case where an assessment under sub-section
(3) of section 143 or section 147 has been made for the relevant assessment year/ no notice shall be issued under section 148 by an Assessing Officer/ who is below the rank of Assistant Commissioner or Deputy
Commissioner/ unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing
Officer that it is a fit case for the issue of such notice:
Provided that/ after the expiry of four years from the end of the relevant assessment year/ no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied/ on the reasons recorded by the Assessing Officer aforesaid/ that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section
(1)/ no notice shall be issued under section 148 by an Assessing Officer/ who is below the rank of Joint
Commissioner/ after the expiry of four years from the end of the relevant assessment year/ unless the Joint
Commissioner is satisfied/ on the reasons recorded by 8 such Assessing Officer/ that it is a fit case for the issue of such notice. "
7.1 After perusing the aforesaid provisions, I am of the considered view that approval should be taken u/s. 151(1) and according to Section 151(1) of the I.T. Act, after the expiry of the 4 years from the end of the relevant assessment year, no notice u/s. 148 of the I.T. Act shall be issued unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the AO that is fit case for the issue of such notice.
In my view the case of the Assessee is fall under section 151(1) of the I.T. Act and not u/s. 151(2) of the I.T. Act, because according to section 151(2) in the cases other than the case fallen under sub-section (1) of Section 151, no notice shall be issued u/s. 148 by the AO, who is below the rank of JCIT, unless the JCIT is satisfied on the reasons recorded by such AO, that is a fit case for the issuance of such notices. Keeping in view of the facts and circumstances explained above, I am of the view that the case is fallen u/s. 151(1) of the I.T. Act. In the present case, the case of the assessee has been reopened the assessment after the expiry of 4 years and in the present case of assessee the approval/satisfaction should be from the Chief Commissioner or Commissioner only. However, the case of the assessee has been reopened and notice u/s. 148 has been issued with the approval of the Addl. CIT, therefore, the notice u/s. 148 is bad in law and is quashed.
My aforesaid view is fortified by the Hon’ble Delhi High Court decision in the case of CIT vs. SPL’s Sidharth Limited Division Bench 345 ITR 223 wherein it has been observed and held as under:-
“6. It is relevant to point out that sub-section (1) and sub-section (2) of section 151 of the Act are two independent provisions. The definition of Joint
Commissioner is contained in section 2(28C) and the definition of Commissioner given in section 2(16), which are as under:-
“Joint Commissioner' means a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income tax under sub- section (1) of section 117. 'Commissioner' means a person appointed to be a Commissioner of Income-tax under sub-section (1) of section 117."
Section 116 of the Act also defines the income tax authorities as different authorities. Such different and distinct authorities have to exercise in accordance with law as per the powers given to them in specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing.
Satisfaction of one authority cannot be substituted by the satisfaction of "authority. It is trite that when a state requires, a thing to be done in a certain manner, it shall be done in that manner alone and the court would not expect its being done in some other manner. It was so held in the following decisions:
(i) C.I. T. v. Naveen Khanna (dated November 18, 2009 in I. T. A. No. 21 of 2009 (Delhi); (ii) "State of Bihar v. J. A. C. Saldanha, AIR 1980 SC 326; and (iii) State of Gujarat vs Shantilal Mangaldas, AIR 1969 SC 634.
Thus, if authority is given expressly by affirmative words upon a defined the expression of that condition excludes the doing of the Act under other circumstances than those as defined. It is also principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction 11 recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now well- settled. In Sheo Narain Jaiswal v IT0 (1989) 176 ITR
352 (Patna), it was held:
"Where the Assessing Officer does not himself exercise his jurisdiction u/e 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was. bad for non-satisfaction of the condition precedent. "
The apex court in the case of Anirudhsinhji
Karanshinhji Jadeja vs. State of Gujarat (1995) 5 SCC
302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether.
We are, therefore, of the opinion that the Tribunal has rightly decided the legal aspect, keeping in view well established principles of law laid down in a catena of judgments including that of the Supreme Court.”
In the background of the aforesaid discussions and respectfully following the precedent of the Hon’ble High Court of Delhi in the case of CIT vs. SPL’s Siddartha ltd. (Supra), I allow the legal ground no. 8 raised by the assessee.
In the result, the Appeal filed by the Assessee stands partly allowed in the aforesaid manner.
Order pronounced in the Open Court on 21/03/2017.