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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG, & SHRI L.P. SAHU,
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
The above two appeals by the Revenue and their cross objections by the assessee are directed against the separate orders of the CIT(A)-XVI, New Delhi, dated 02/01/2009 for A.Ys 2000-01 and 2002-03 respectively.
Briefly stated, the facts of the case are that original return of income was filed on 28.11.2000 and 3.10.2002 for respective A.Ys 2000-01 and 2002-03. Subsequently, on the basis of information received from the Investigation Directorate about the bogus accommodation entries, the case was reopened for both the years u/s 147 of the Income tax Act, 1961 [for short, 'the Act'] and notice was u/s 148 of the Act were issued on 27.2.2006. In response to the said notices, the assessee filed return of income on 18.9.2006 declaring the same income as was declared in the original return of income for both the years. Finally, in the assessment order passed u/s 143(3) r.w.s. 147 of the Act, an amount of Rs. 31,55,000/- and Rs. 23 lakhs was added u/s 68 of the Act in both the A.Ys under consideration as unexplained cash credits in the hands of the assessee. Aggrieved, the assessee carried the matter before the first appellate authority who dismissed the challenge of the assessee to the initiation of proceedings and issuance of notices u/s 147/148 of the Act. However, the ld. CIT(A) granted relief to the assessee on merits and directed the AO to delete the additions of RS. 24,75,000/- and Rs. 2,50,000/- and Rs. 4,30,000 for A.Y 2000-01 and also directed the AO to delete the entire addition of Rs. 23 lakhs for A.Y 202-03 which were made u/s 68 of the Act. Now the aggrieved Revenue is before this Tribunal challenging the said deletion made by the first appellate authority and the assessee has also filed the cross objection challenging the conclusion of the ld. CIT(A) wherein the legal objection of the assessee regarding initiation of proceedings and issuance of notice u/s 147/148 of the Act was dismissed.
As requested by both the rival representatives, first of all we take up the cross objections being legal in nature. The assessee has raised similarly worded cross objections in both the A.Ys which read as under:
“1. That having regard to the facts and circumstances of the case the ld. CIT(A) erred in law and on facts in not quashing the impugned assessment order on the ground that the AO has erred in assuming jurisdiction u/s 147 that too without complying with the mandatory requirements as prescribed u/s 147 to 151. 2. That in any case and in any view of the matter the impugned assessment order is illegal and void ab initio and therefore, the CIT should have quashed the same as such.”
4. We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. The ld. AR drew our attention towards the reasons recorded by the AO for both the years on 27.2.2006 and submitted that in the reasons recorded for A.Y 2000-01, the ACIT, Range XIII, New Delhi has put his signature alongwith date 27.2.2006 which clearly shows that the permission has been granted without perusal of record and without application of mind mechanically which cannot be held as valid permission for initiation of legal sustainable proceedings and notice u/s 147/148 of the Act. Placing reliance on the decision of the Hon'ble Jurisdictional High Court dated 20.7.20106 in the case of CIT Vs. Amar Khosla in , the ld. AR vehemently contended that when the ld. CIT(A) has merely affixed his signature on the note of the AO forwarded to him, then certainly this was not in confirmatory with the legal requirement explained by the Hon'ble Jurisdictional High Court of Delhi in various decisions including the decision in the case of United Electrical Co. Vs. CIT [2002] 258 ITR 317 [Del]. The ld. Counsel also placed copy of reasons recorded by the AO for A.Y 2002-03 submitted that in the reasons recorded or this year, the AO has not obtained any sanction for initiation of proceedings and issuance of notice u/s 147/148 of the Act. Therefore, the proceedings and notice deserve to be quashed and the ld. CIT(A) has grossly erred on facts and in the circumstances in not quashing the impugned assessment order on the ground that the AO had not assumed valid jurisdiction u/s 147/148 of the Act without complying with the mandatory requirements as prescribed in the provisions of section 147 to 151 of the Act.
Replying to the above, the ld. DR strongly supported the action of the AO as well as the conclusion of the ld. CIT(A) dismissing the legal objection of the AO against the valid assumption of jurisdiction u/s 147/148 of the Act and submitted that after the perusal of the entire note and record, if sanctioning authority has put his signature alongwith date then the same is suffice to show application of mind and hence legal objection of the assessee was rightly dismissed by the ld. CIT(A).
The ld. AR also placed rejoined to the above submissions of the ld. DR and placed his reliance on the decision of the ITAT ‘H’ Bench, New Delhi in the case of ITO Vs. Amar Khosla dated 26.8.2012 in which has been upheld by the Hon'ble Jurisdictional High Court vide order dated 20.7.2015 [supra]. He drew our attention towards para 19 to 21 of the Tribunal order and submitted that non mentioning of any word by the ld. CIT(A) or approval granting authority while affixing signature cannot be presumed that the ld. CIT(A) has approved the reasons recorded by the AO with application of mind and consciously reading not put up before him. Therefore, in the present case, when the AO has not applied his mind while granting approval for A.Y 2002-03 and there is no signature on the approval for A.Y 2002-03, then initiation of proceedings, issuance of notice and reassessment orders passed in pursuance thereto u/s 147/148 r.w.s 143(3) of the Act has to be quashed.
We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. At the outset, from the order of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Amar Khosla [supra] we note that their Lordships laid down the following propositions qua validity of sanction by the ld. CIT/competent authority for initiation of proceedings and issuance of notice u/s 147/148 of the Act which is respectfully being reproduced hereinbelow:
“3. Mr. Sahni the ld. Counsel for the appellant, could not dispute that factually the ld. CIT had merely affixed his signature on the note of the ACIT forwarded to him. Certainly, this was not in conformity with the mandatory legal requirement explained by this court in several decisions including United Electrical Co. (P) Ltd. Vs. CIT [2002] 258 ITR 317.
Consequently, notwithstanding that the Respondent’s father-in-law Tej Mohan Sachdeva whose appeal was also considered by the common order of the ITAT is to be listed before the court, the court is not persuaded to take up this case at such time the said appeal is taken up. On facts, the court is satisfied that the decision of the ITAT qua the respondent assessee is consistent with the settled legal position and no substantial question of law arises for determination by the court.”
At this juncture, it would be necessary and appropriate to reproduce the operative part of the Tribunal order in the case of Amar Khosla [supra] which reads as under: “19. We have already extracted the reasons recorded and the approval of the Ld. Commissioner of Income Tax (Appeals)-XI, New Delhi at page 2 and 3 of this order. The Ld. Commissioner of Income Tax (Appeals) has countersigned below the noting of the Addl.CIT without writing anything. Now the issue is whether such affixing of a mere signature with nothing else can be termed as mechanical action without application of mind. 20. In the case of Central India Electric Supply Co. Ltd. vs ITO, 333 ITR 237 (Del), the Jurisdictional High Court held as follows. “Held, allowing the appeal, (i) that reasons are the link between material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. It was a case where literally a mere stamp was affixed and was signed by an Under Secretary underneath a stamped “yes” against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material suggested that the decision was taken in a mechanical manner. Thus, a proper application of mind had not taken place”. 20.1. Even if the reasons set out by ITO were to be agreed upon, the least which is expected is that the appropriate authority as to the grant of approval by saying “yes” or any such word.
20.2. In the case of United Electric Co.P.Ltd. vs CIT and others, 258 ITR 317, the Hon’ble High Court at page 323 pagination G & H held as follows. “What disturbs us more is that even the Additional Commissioner has accorded his approval for action u/s 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said V.K.Jain, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub section (1) of section 151 of the Act as the action u/s 147 was being initiated after the expiry of four years from the end of the relevant Assessment Year. As highlighted above, the Legislature has provided certain safeguards to prevent arbitrary exercise of powers by an Assessing Officer, particularly after a lapse of substantial time from completion of assessment. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval. For the foregoing reasons, we allow the petition and quash the impugned notice dt. April 30, 2002. The rule is made absolute with no order as to costs.” (Emphasis ours)
20.2. This is a case where the ACIT has accorded approval as follows: “Yes, I am satisfied that it is a fit case for issue of notice u/s 148 of the Act”. The Hon’ble High Court in this case has came to a conclusion that there was information on record, which could provide a foundation to the Assessing Officer, that the petitioners transaction with Visa Fincap Ltd. was not genuine and that its income had escaped assessment on that count. The approval of the ADIT, in the context of this finding of the High Court on the reasons recorded, was held to be mechanical exercise without proper application of mind. To this extent the arguments of the Ld.DR that the judgement of the High Court has to be read with the context that no information was available on record have to be upheld. Nevertheless a perusal of the file shows that the CIT has simply signed against the column in which his designation is mentioned, without mentioning anything. Thus in our view, these arguments of the Ld.D.R. that the Ld.CIT has applied his mind by merely signing is devoid of merit. 20.3. In the case of CIT vs. SPL’s Sidhartha Ltd. 345 ITR 223 (Del) it is observed at page 227 as follows: “It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not except its being done in some other manner. It was so held in the following decisions :
(i) CIT vs. Naveen Khanna (dt. Nov.18,2009 in ITA 21/Del/2009;
(ii) State of Bihar vs JAC 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 condition, the expression of that condition excludes the doing of the Act authorized under other circumstances than those as defined. It is also established 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 recorded should be “independent” and not “borrowed” or “dictated” satisfaction. Law in this regard is now well settled. In Sheo Narain Jaiswal vs ITO (1989) 176 ITR 352(Patna), it was held” “Where the Assessing Officer does not himself exercise his jurisdiction u/s 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 Karansinhji 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 judgements including that of the Supreme Court.”
Applying the propositions laid down in these cases to the facts of this case, we hold that the Non mentioning of any word by the CIT, New Delhi XI while affixing his signature, in our view, cannot be presumed that the CIT has approved the reasons recorded with application of mind. 21.1. Though we appreciate the concern expressed by the Ld. D.R. in his written submissions, the statutory requirements cannot be given a go-by.”
In view of the above, the proposition laid down by the Hon'ble High Court of Delhi when we logically analyse the facts and circumstances of the case, it is amply clear that while granting sanction u/s 151 of the Act for issuance of notice u/s 148 of the Act. The Additional CIT, Range 13, New Delhi only put his signature alongwith date 27.02.2006 which is not suffice to show application of mind by sanctioning authority. Furthermore, from the copy of reasons recorded by the AO for A.Y 2002-03, we are unable to see any sanction as required u/s 151 of the Act prior to issuance of notice showing the initiation of reassessment proceedings u/s 147 of the Act. In view of the above, we have no hesitation to hold that in the present case, mandatory sanction u/s 151 of the Act for issuance of notice has not been granted by the competent authority with full application of mind and thus, the AO could not assume valid jurisdiction for issuance of notice u/s 148 of the Act and initiation of proceedings and passing impugned order in pursuance thereto and hence, notice u/s 148 of the Act and re assessment orders u/s 143(3) r.w.s 147 of the Act cannot be held as valid and sustainable and we quash the same. Our view also gets fortified by the order of the decision of the Hon'ble High Court of Madhya Pradesh in dated 14.10.2014 in the case of CIT Vs. S. Goenka Lime and Chemical Ltd wherein it was held that when the sanctioning authority only recorded so “Yes. I am satisfied”, then sanction has to be held as mechanical way of recording satisfaction which accords a sanction clearly unsustainable and hence the order of the Tribunal quashing the reassessment and notice u/s 148 of the Act was upheld. Accordingly, in the light of the foregoing discussion, the action of the AO issuing notice u/s 148 of the Act and passing impugned reassessment order is held as invalid assumption of jurisdiction and thus we quash the same. Accordingly, cross objections 1 and 2 of the assessee in both the appeals are hereby allowed.
Since by the earlier part of this order we have quashed notice u/s 148 of the Act as well as reassessment orders passed in pursuant thereto in both the A.Ys, therefore, grounds raised by the Revenue in these appeals becomes academic and infructuous and we dismiss the same as having become infructuous.
In the result, both the appeals of the Revenue stand dismissed and cross objections of the assessee are allowed. The order is pronounced in the open court on 24.02.2016.