GOEL WAX (P) LTD.,NEW DELHI vs. ITO, NEW DELHI

I heard rival contentions with respect to ground no.2. A copy of the approval in question, is placed at page 51 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. 2.1. The issues before me is whether: (a) The assessee can take this ground no.2, for the first time before the ITAT and (b) 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.

On the first issue, as the facts are on record and the issue being a jurisdictional issue, I find that the Tribunal can admit this ground for the first time and adjudicate the same. As regards the second issue 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. “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 Goel Wax P.Ltd., New Delhi 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 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.”

In the result the appeal of the assessee is allowed.