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Facts
The assessee, an individual, did not file his return for AY 2011-12. Information regarding cash deposits of Rs. 27,73,000/- was received. The assessee failed to explain the source, leading to a best judgment assessment u/s. 144/147 of the Act.
Held
The Tribunal held that the reopening of assessment was vitiated due to the Assessing Officer (AO) citing a non-existent provision (Section 147(a)) for seeking approval and the approval itself being mechanical, indicating a non-application of mind by both the AO and the sanctioning authorities.
Key Issues
Whether the reassessment proceedings were validly initiated based on the AO's reasons and the approval obtained from higher authorities, considering the citation of a defunct section of the Act.
Sections Cited
151, 147, 148, 142(1), 144, 147(a), 147(b)
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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI MAHAVIR SINGH
Appellant by : Shri Vaibhav Goel, CA Respondent by : Shri Manoj Kumar, Sr. DR. Date of hearing : 28.10.2025 Date of pronouncement : 28.10.2025 ORDER The Assessee has filed this Appeal against the Order of the National Faceless Appeal Centre (NFAC), Delhi dated 11.07.2025 relating to assessment year 2011-12 on as many as 7 grounds, however, he has argued only on the legal issues wherein he has raised Ground No. 5 to 5.1 which reads as under:- 5. That on facts and circumstances of the case and in law, the satisfaction recorded u/s. 151 of the Income Tax Act, 1961 by Addl. CIT, Range-3, Bulandshahr on 21.03.2018 and PCIT, Ghaziabad on 22.3.2018 is mechanical and without application of mind and such approval vitiates the assessment. Such mechanical sanction cannot be considered as sanction satisfying the mandatory requirements as prescribed under section 151 of the Act.
5.1 That the AO was seeking approval under old section 147(a) of the Income Tax Act, 1961 – which had been substituted w.e.f. 01.04.1989 by Direct Tax Laws (Amendment) Act, 1987 and superior authorities failed to ensure whether the AO had verified the AIR information before recording reasons.
Brief facts are that the assessee is an individual and did not file his return of income for the assessment year 2011-12. In this case, AIR information was received that the appellant has made cash deposits aggregating to Rs. 27,73,000/- in his saving bank account maintained with State Bank of India during the FY 2010-11 relevant to AY 2011-12. The assessee failed to explain the source of this cash deposits. Hence, notice u/s. 148 dated 27.3.2018 was issued to the appellant and properly served on him. However, he failed to comply with the notice. Thereafter, notices u/s. 142(1) was issued multiple times. The appellant remained non-compliant to the notices. A final opportunity was provided to the appellant by issuing notices u/s. 144. The appellant again failed to avail himself of these opportunities and did not comply with the notices. Hence, the case was completed exparte under best judgment assessment u/s. 144 of the Act on the basis of facts of the case and material available on records. In the absence of any substantial evidence regarding the source of cash deposit of Rs. 27,73,000/- during the relevant AY, the amount was treated as unexplained income of the appellant. As per bank statement, the appellant received interest during the year under consideration amounting to Rs. 1311/- which was also added to the income of the appellant under the head of income from other sources. The net taxable income assessed u/s. 144/147 of the I.T. Act stands at Rs. 27,74,311/-.
Against the aforesaid action of the AO, assessee preferred the appeal before the Ld. CIT(A). Ld. Upon assessee’s appeal, Ld. CIT(A) dismissed the appeal of the assessee on the jurisdictional as well as on merits of the case.
Aggrieved with the aforesaid action of the Ld. CIT(A)/NFAC, Delhi, Assessee is in appeal before me.
At the time of hearing, Ld. AR has reiterated the grounds of appeal no. 5 to 5.1 and also the submissions made before the authorities below, more particularly that invocation of reassessment proceedings based on non-existing provision of law and also errors in the performa for obtaining approval and mechanical approval by Pr. CIT.
5.1 Per contra, Ld. DR relied upon the order of the Ld. CIT(A)/NFAC and submitted that the same does not require any interference, hence, the same may be confirmed.
I have heard rival contentions and perused the relevant records.
6.1 It reveals from records that i.e. Page No. 1-2 of the paper book which is the Form for recording the reasons for initiating proceedings u/s. 148 and for obtaining approval of the Pr. CIT, Ghaziabad for reopening of assessment, in column 7 of the said Form the AO has stated that the provisions applicable for reopening of assessment is section 147(a) of the Act. The ld. Counsel for the assessee submits that the AO has quoted the non-existent provisions for reopening the assessment which shows that there is complete non-existent provision for reopening the assessment which shows that there is complete non application of mind. It is also noted that the provisions of section 147(a) /147(b) have ceased to be in the statute book from 01.04.1989 and mentioning of these incorrect and non-existing sections is clearly a case of non-application of mind by the AO and also by authorities providing sanction u/s. 151 of the Act. Further, it is noted that there is mechanical approval which is mentioned at page no. 2 of the Paper Book granted by the Pr. CIT. The approval granted by the Pr. CIT at page no. 2 of APB only mentioned the line “Yes, I am satisfied on the basis of reason recorded by the AO as at ‘A’ that it is a fit case for issue of notice u/s. 148 of I.T. Act.”
6.2 The aforesaid remarks coupled with mechanical approval shows non application of mind of the lower authorities.
6.3 I draw support from the decision of the of the Tribunal dated 18.12.2024 in the case of Amit Khatri vs. ITO decided in (AY 2012- 13) wherein, it has been held as under:-
“8. Heard rival submissions, perused the orders of the authorities below. Undisputedly in this case there is non- application of mind by the AO in taking approval from the appropriate authority u/s. 151 of the Act. Perusal of Form for recording the reasons for initiating proceedings u/s. 148 for obtaining approval of the Pr. CIT, Delhi -8, New Delhi which is placed at Paper Book page no. 38 suggests that the AO mentioned the provisions under which the assessment was reopened as 147(b) of the Act. It is observed that the provisions of section 147(a)/147(b) have seized to be in the statute book from 1.4.1989. Therefore, mentioning all these incorrect and non-existent sections for obtaining approval for recording the reasons for initiating proceedings u/s. 148 is a clear case of non-application of mind by the AO and also by the authorities providing satisfaction u/s. 151 of the Act.” We find that Full Bench of the Hon’ble Jurisdictional High Court in the case of C.I.T. vs. Kelvinator India Ltd. 256 ITR 1, has held that mere change of opinion would not confer jurisdiction upon the Assessing Officer to reopen proceedings without anything further. It was held that if the Assessing Officer is allowed to do so, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its wrong. Hence, it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. The above said decision was duly affirmed by the Hon’ble Apex Court in the case of C.I.T. vs. Kelvinator of India Ltd.. In this case the Hon’ble Apex Court has held that after 1st April, 1989 Assessing Officer has power to reopen the assessment u/s. 147 provided that Assessing Officer has reason to believe that income has escaped assessment and there is tangible material to come to the conclusion that there is escapement of income; mere change of opinion may not per se to be a reason for reopening. 9…………………….
Facts being identical. Respectfully following the said decision the reassessment order dated 09.12.2019 passed u/s. 147/143(3) of the Act for the AY 2012-13 is quashed and the additional ground nos. 1 to 3 are allowed.” 6.3 In the background of the aforesaid discussions and respectfully following the precedent, as aforesaid, in my considered opinion, the reassessment order dated 05.12.2018 passed u/s. 144/147 of the Act for the AY 2011-12 is quashed and accordingly, the ground nos. 5 to 5.1 raised by the assessee stand allowed. Since no other grounds have been argued before me, hence, the same have become academic.
In the result, the Assessee’s appeal is allowed in the aforesaid manner.