NIRMAL HANDLOOM HOUSE (P) LTD.,NEW DELHI vs. ITO, NEW DELHI

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ITA 804/DEL/2015Status: DisposedITAT Delhi21 September 2016AY 2006-074 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the initiation of reassessment proceedings was bad in law because the sanction for issuing the notice u/s 148 was granted by the CIT, who was not the competent authority as per Section 151(2) of the Act. The High Court ruling in CIT vs. SPL’s Sidhartha Ltd. was followed.

What were the facts?

The assessee received share application money of Rs. 7,50,000 from a listed public limited company. The Assessing Officer treated this as income, and the CIT(A) upheld the addition. The assessee challenged the validity of reassessment proceedings.

What were the issues?

The primary issue was the validity of the reassessment proceedings initiated due to improper sanction from the competent authority. The secondary issue concerned the addition of share application money as income.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151,Section 151(2)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-3’, NEW DELHI

For Appellant: Shri Udaibir Singh Kochar, C.A

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC-3’, NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER Nirmal Handloom House (P) Ltd. vs. ITO, Ward 18(3) ¾, Furniture block New Delhi Kirti Nagar New Delhi 110 015 PAN: AAACN 06781 (Appellant) (Respondent) Appellant by : Shri Udaibir Singh Kochar, C.A. Respondent by : Sh. Anil Sharma, Sr.D.R. O R D E R

This is an appeal filed by the assessee directed against the order of the Ld.CIT(A)-6, Delhi dated 19.11.2014 pertaining to the Assessment Year (A.Y.) 2006-07. The assessee took the following additional grounds of appeal which is a legal ground. “1. That the ld.CIT(A) erred in law in upholding the validity of initiation of proceedings u/s 147 of the Income Tax Act, 1961 (the Act) as the reasons recorded u/s 148 of the Act were factually wrong and there was no application of mind by the AO while recording ‘reason to believe’ of any income of the assessee escaping assessment.

2. That the ld.CIT(A) erred in law in upholding the validity of initiation of proceedings u/s 147 of the Act when no satisfaction was recorded by the Addl.CIT before giving approval u/s 15(2) of the Act. The approval has been given without application of mind by the Addl.CIT.

Grounds on Merits 3. That the Ld.CIT(A) erred in upholding the order of the AO in treating the share application money of Rs.7,50,000/-, received from a Public Limited Company listed on stock exchange, as income of the assessee, when the initial onus placed on the assessee in proving the cash credits had been duly and fully discharged by it.

4. That the Ld.CIT(A) erred in confirming the addition of Rs.7,50,000/- to the income of the assessee made by the AO without disputing or rebutting the evidence brought on record by the assessee, to prove the genuineness of the same.

5.

That the Ld.CIT(A) erred in confirming the addition of Rs.7,50,000/- to the income of the assessee made by the AO without making any enquiries from the share applicant company at the new address provided by the assessee as the company had shifted its office.”

Additional ground: “That the initiation of reassessment proceedings u/s 147 of the Act was bad in law as the sanction u/s 151 of the Act was admittedly granted by CIT, Delhi-V, who was not the authority competent to grant such sanction.”

2.

After hearing rival contentions I find that the Assessing Officer has recorded at page 1 of his order that approval of the Ld.CIT-V, Delhi has been taken in this case. As the return filed by the assessee on 29.11.2006 was processed u/s 143(1) of the Act as four years have elapsed by the time notice u/s 148 of the Act was issued, as per the provisions of S.151(2) of the Act, the competent authority to grant sanction to issue notice u/s 148 of the Act was JCIT and not CIT.

3.

The Jurisdictional High Court in the case of CIT vs. SPL’s Sidhartha Ltd. (2012) 345 ITR 223 (Delhi) has held as follows.

Held, that under section 151 of the Act, it was only the Joint Commissioner or Additional Commissioner, who could grant the approval for issue of notice under section 148. The approval was not granted by the Joint Commissioner. Instead, it was taken from the Commissioner of Income Tax. This was not an irregularity curable under section 292B. The notice was not valid.

3.1. Respectfully following the binding decision I hold that the reopening of assessment is bad in law.

4.

In the result the appeal is allowed.

Order pronounced in the Open Court on 21st September, 2016.

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