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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-2’, NEW DELHI
Before: SHRI J. SUDHAKAR REDDY
This is an appeal filed by the Assessee directed against the order dated 31.3.2015 of Ld.CIT(A), Faridabad pertaining to the Assessment Year (A.Y.) 2005-06 on the following grounds .
1. That under the facts and circumstances, Ld. AO erred in law as well as on merits in determining the assessable income at Rs. 9,37,190/- against declare at Rs. 1,48,880/- 2A. That under the facts and circumstances, the Ld. CIT (A) in not admitting the additional ground taken before him which is a pure legal ground. "That the whole re-asstt. proceedings including initiation is without jurisdiction in the absence of mandatory approval u/s. 151 (2) of the I T. Act and / or for purely mechanical approval without any application of mind by the Approving authority, in case, any such approval stands taken. " B. That without prejudice, as the approval U/s. 151 (2) is pure mechanical and without application of mind and not as in the manner envisaged in law, the assumption of jurisdiction u/s. 147 /148 is illegal and un - warranted.
3. That under the facts and circumstances, the proceedings u/s. 147/148 are illegal, un-warranted and un - sustainable in law as well as on merits. 4A. That under the facts and circumstances, both the lower authorities erred in not accepting the declared L TCG of Rs. 7 ,84,389/- on sale of STT Anjali Gupta, N.Delhi paid shares as exempted income u/s. 10 (38) of the I.T. Act and in taxing the same as income from other sources. B. That without prejudice, in the absence of confronting with the adverse material and without producing the persons for cross - examinations whose statements have been used against the assessee, no adverse view can be taken in respect of such persons and such un - confronted material. C. That without prejudice, even the material available do not give any inference of adverse view. D. That without prejudice, in view of explanation and documents furnished, the claim stands established.
That there is absolutely no logic, no justification and no material for addition of Rs.3,921/- as un - explained expenditure for alleged commission payable for procuring LTCG of Rs. 7,84,389/- resp .
I heard rival contentions with respect to ground no.2. A copy of the approval in question in proof is placed at page 56 of the assessee’s paper book. The Ld.ACIT has written ‘yes’ and signed in column no.12 in the form for recording the reasons for initiating proceedings u/s 148 of the Act and for obtaining the approval of the ACIT/CIT.
The additional ground was taken before the First Appellate Authority. The First Appellate Authority did not admit the same. In my view such action of the First Appellate Authority is bad in law. This is a jurisdictional issue and as the facts are on record, he should have admitted the same and decided the issue on merits. Nevertheless I admit this ground of the appeal.
The issue before me is whether: (a) whether the approval u/s 151 of the Income Tax Act 1961 (the Act) granted by the ACIT was without application of mind and in a mechanical manner and hence the re-opening is bad in law. 5. On considering the rival contentions I find that the ‘D’ Bench of the New Delhi Tribunal in the case of M/s Kansal Fincap Ltd. vs. ITO in and 2662/Del/2013 vide order dt. 31.8.2015 where at page 11 para 16 it was held as follows.
Anjali Gupta, N.Delhi “16. Having gone through the decisions relied upon by the Ld.A.R. we find that the ratios laid down therein supports the contentions of the Ld.A.R. that the approval as required u/s 151 of the Act was granted by the Ld.ACIT to initiate the proceedings without application of mind in a mechanical manner, the AO was supposed to dispose of the objections raised by the assessee against the reopening proceedings by passing a speaking order meeting out each and every objection raised therein by the assessee, and the Assessing Officer has initiated the reopening proceedings without examining even prima facie the correctness of information received from the Investigation Wing of the Department wherein it was informed that as per the statement of Shri Mahesh Garg recorded by them, there was escapement of assessable income in the hands of the assessee. In the cited decisions in the cases of United Electrical Co. (P) Ltd. vs. CIT ( supra) - Chhaganmal Rajpal Vs. S.P. Chaliha ( supra), 0 Central India Electric Supply Co. Ltd. vs. ITO (supra), the approval of the Addl. CIT/CIT/Board was. obtained under the remarks "Yes, I am satisfied that it is a fit case for issue of notice under sec. 148 of the Income-tax Act", "Yes", and "Yes" respectively. The Hon'ble Delhi High Court in the case of United Electrical Co. (P) Ltd. vs. CIT (supra) after analyzing the satisfaction/approval was pleased to hold that CIT 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 in a routine manner. Again the Hon'ble Supreme Court in the case of Chhugamal Rajpal Vs. S.P. Chaliha (supra) has been pleased to observe that Learned CIT did not himself record that he was satisfied that this was a fit case for the issue of a notice under sec. 148 of the Act. To question No. 8 in the report which reads "whether the CIT is satisfied that it is a fit case for the issue of notice under sec. 148", he just noted the word "yes" and affixed his signature there under. The Hon'ble Supreme Court was of the opinion that if only the CIT has read the report carefully, he could never have come to the conclusion on the material before him that it is a fit case to issue notice under sec.
The Hon'ble Supreme Court pleased to hold that the important safeguards provided under section 147 and 151 were lightly treated by the ITO-as well as by the CIT. Both of them appear to have taken the duty imposed on them under these provisions as of little importance. In the case of ITO vs. N.C. Cables Ltd. (supra) where also the approval under Sec. 151 was recorded as "approved" and there also the reopening proceedings were initiated en the basis of information received from the Investigation Wing of the Department and the same Mr. Mahesh Garg was involved, the issue raised before the Delhi Bench of the ITAT was as to whether such approval would meet the requirements prescribed under sec.151 of the Act. The ITA T after detailed deliberation en the issue came to the conclusion that the reopening was bad in law for the reasons that the Ld.CIT had not recorded his satisfaction as contemplated u/s 151 of the Act. Similar view has been expressed in the Anjali Gupta, N.Delhi remaining decisions cited by the Ld.A.R. Respectfully following the ratios laid down in the cited decisions, we hold that the reopening is bad in law for the reason that Ld.ACIT has not recorded his satisfaction as contemplated u/s 151 of the Act.”
5.1. Respectfully following the Coordinate Bench decision in the case of M/s Kansal Fincap Ltd. (supra), wherein the Hon’ble Jurisdictional High Court in case of United Electrical Co.P.Ltd. vs. CIT (2002) reported in 258 ITR 317 (Del) and the judgement of Hon’ble Supreme Court in the case of Chhugamal Rajpal vs. S.P.Chalina & Others reported in 79 ITR 603 (S.C.) have been applied, I hold that the reopening is bad in law, for the reason that the ACIT has granted approval with a simple mere “yes”. Such a remark cannot be considered as approval with application of mind. The reopening of assessment is bad in law.
In the result the appeal of the assessee is allowed.
Order pronounced in the Open Court on 06th November,2015.