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Income Tax Appellate Tribunal, “SMC” “A” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM]
For the Appellant: S/ Shri A. K. Chakraborty & P. S. Gupta, Advocates For the Respondent: Shri Tanuj Niyogi, JCIT, Sr. DR ORDER ITA Nos. 613 & 614/K/2014 filed by assessee is arising out of separate orders of CIT(A)-XXXVI, Kolkata vide Appeal Nos. 569/CIT(A)-XXXVI/Kol/Wd-3,MSD/2008- 09 and No. 562/CIT(A)-XXXVI/Kol/Ward-3,MSD/2009-10 both dated 31.01.2014. & 616/K/2014 filed by assessee is arising out of separate orders of CIT(A)-XXXVI, Kolkata vide Appeal Nos. 568/CIT(A)-XXXVI/Kol/ITO/Wd- 3,MSD/2008-09 and No. 567/CIT(A)-XXXVI/Kol/ITO,Ward-3,MSD/2009-10 both dated 31.01.2014 Assessments were framed by ITO, Ward-3, Murshidabad u/s. 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Years 2003-04 and 2004-05 vide his separate orders all dated 31.12.2008.
The only common issue in all these four appeals of assessee is as regards to assumption of jurisdiction by the AO for reopening of assessment u/s. 147 r.w.s.148 of the Act.
Briefly stated facts are that the assessee filed his return of income for AY 2003- 04. The AO subsequently issued notice u/s. 148 of the Act for the reason that the assessee has received gift of Rs.2.15 lacs during the year under consideration and according to him, this is a bogus gift. For this, he recorded reasons for issuance of notice u/s. 148 of the Act on 26.03.2008 and the relevant reason reads as under:
2 to 616/K/2014 Sri Ashok Kr. Das & Fuleswari Das AY 2003-04 & 2004-05 “26.3.08. Seen Ld. CIT-XXI, Kol’s Review order placed in records. The Ld. CIT-XXI, after reviewing the records directed the AO to reopen the assessment as the assessee has received gifts of Rs.3,15,000/- during the year under consideration. I have therefore reasons to believe that the assessee has escaped gift during the F.Y. 2002-03. Issue notice u/s. 148.” The AO after reopening of the assessment framed assessment and assessed the receipt of gift of Rs.3.15 lacs as unexplained u/s. 68 of the Act. The CIT(A) also confirmed the action of AO and also upheld the reopening of assessment u/s. 148 of the act. Aggrieved, now assessee has challenged the reopening before the Tribunal.
I have heard rival submissions and gone through facts and circumstances of the case. At the outset, I have noticed that the reasons recorded by AO are merely on the directions of the CIT-XXI, Kolkata, which is not application of mind by the AO. The CIT(A) in his order at page 4 reproduced the reasons, which in turn, are reproduced above at para 3 and also comments of CIT at page 4 of CIT(A) at para 2.2. From the above reasons recorded by the AO for issuance of notice u/s. 148 of the Act, it is clear that these are merely directions of CIT(A) and not reasons independently. The AO has not applied his mind for recording of reasons. I am of the view that the AO should have applied his own mind to the materials lying before him and he should have formed a belief regarding escapement of income. The belief must be from by him at his own and not at the dictation of any superior authority. He should have formed his own belief and not as such the reasons to believe on the part of the AO as dictated by CIT concerned. The reasons to believe on the part of the AO are purely subjective satisfaction on his part before issuing notice u/s. 148 of the Act. This issue is covered by the decision of Hon’ble Patna High Court in the case of Sheo Narain Jaiswal V ITO (1989) 176 ITR 352 at page 369 held as under:-
“22. Learned counsel for the respondents vehemently urged that there is nothing in law which prevents a higher authority from giving instructions and advice from time to time to subordinate authorities. Such instructions cannot vitiate the judgment of the subordinate authorities. He submitted that very often Income-tax Officers, when they are in doubt, seek advice of a higher authority, such as the Commissioner of Income-tax, and they are guided by such advice and instructions as they receive from them. In the instant case, however, I find that this is not a case where the Income-tax Officer was seeking any clarification or advice in regard to a matter where he had doubts. The Income-tax Officer concerned as well as his predecessor had clearly expressed the view that there did not appear to be any reason to initiate proceedings under Section 147 of the Act, but finding that the Commissioner of Income-tax was of the opposite view, he sought instructions in the matter. Pursuant thereto, by letter dated July 13, 1972, the Commissioner of Income-tax directed him to submit a proposal under Section 147 of the Act. Learned counsel submitted that the Commissioner did not suggest the reasons which have been recorded for the proposal made by the Income-tax Officer. That, to my mind, is not of much consequence. The 3 to 616/K/2014 Sri Ashok Kr. Das & Fuleswari Das AY 2003-04 & 2004-05 Income-tax Officer, contrary to his own belief, felt compelled to submit a proposal for initiation of proceedings under Section 147 of the Act. The Commissioner of Income-tax and the Additional Commissioner of Income-tax always held a view to the contrary, and, therefore, the Income-tax Officer had no difficulty in following the line of reasoning advanced by them. He, therefore, recorded reasons in support of the proposal, even though he himself did not believe that those reasons justified the initiation of proceedings under Section 147 of the Act. The requisite belief under Section 147 of the Act must be that of the Income-tax Officer concerned and not of any other officer. If the Income-tax Officer does not form his own belief, but merely acts at the behest of any superior authority, it must be held that the assumption of jurisdiction under Section 148 of the Act was bad for non- satisfaction of the conditions precedent.
I am, therefore, of the view that the proceedings initiated pursuant to the proposals submitted by the Income-tax Officer dated December 4, 1971, and March 15, 1972, are bad in law. The notices issued under Section 148 of the Act on March 27, 1972, are, for the same reason, bad in law and the proceedings taken pursuant thereto, are invalid and of no consequence. The notices dated March 27, 1972 (annexures-8 to 8-F), as also proceedings taken pursuant thereto are hereby quashed.”
Similarly, in the case of CIT Vs. T. R. Rajakumari (1974) 96 ITR 78 (Mad) has laid down the same proposition by observing as under:
The other reason given by the Tribunal for upholding the order of the Appellate Assistant Commissioner annulling the reassessment proceedings under section 147(a), however, appears to us to be sound. The condition precedent for initiating proceedings under the said sub-section is the issue of a notice under section 148. Section 148(2) specifically provides that the Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. There cannot be any dispute that the provisions of section 148 is mandatory. In this case, apart from the communication which the Income-tax Officer wrote to the Commissioner requiring sanction under section 151, there is no separate record where the Income-tax Officer has set out his reasons for initiating proceedings under section 147(a). In the said communication the only reason given for inciting proceedings under section 147(a) is the direction of the Commissioner; and there is no indication that the Income-tax Officer had entertained any belief that by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts, the income chargeable to tax has escaped assessment. In this communication the Income-tax Officer has only stated that he is initiating proceedings under section 147(a) in view of the direction of the Commissioners He has nowhere stated that he has entertained a belief that income has escaped assessment due to the non-disclosure by the assessee of material facts for the assessment year 1955-56. We are not inclined to agree with the contention of the learned counsel for the revenue that the recording of reasons contemplated by section 148(2) and section 151 need not related to the matters set out in section 147(a) and that the Income-tax Officer having given the direction of the Commissioner as a reason for initiating the proceedings it should be taken to be a sufficient compliance with the provisions of sections 148(2) and 151. The learned counsel for the revenue is right when he says that the sufficiency of the reasons recorded by the Income-taxOfficer is not a matter for the court to consider. But whether the reasons given were relevant to sustain a belief that income has escaped assessment as a result of the non-disclosure of income by the assessee has to be considered by the court when the jurisdiction of the Income-tax Officer to initiate proceedings under section 147 is questioned. The revenue wants us to construe the words record his reasons for doing so" occurring in section 148(2) as requiring the recording of reasons for issuing the notice as such and without reference to the matter set out in section 147(a). We are of the view that having regard to the setting in which these words occur and the significance of the opening words in section 148(1), they have to be understood only as requiring the recording of reasons 4 to 616/K/2014 Sri Ashok Kr. Das & Fuleswari Das AY 2003-04 & 2004-05 for initiating the proceedings under section 147. If it is otherwise, we cannot contemplate as to what are the reasons which could be given by the Income-tax Officer for issuing the notice as such, without reference to the ingredients referred to in section 147(a). Admittedly, the only reason recorded for issuing the notice is the direction of the Commissioner to reopen the assessment. Therefore, it has to be taken that the only reason recorded by the Income-tax Officer for issuing the notice as well as for annotating proceedings under section 147(a) is the direction of the Commissioner and not a reasonable belief entertained by the Income-tax Officer that income has escaped assessment as a result of the non-disclosure of material facts by the assessee.
In view of the above reproduced reasons which clearly speaks of recording on the basis of directions of CIT by the AO and principles laid down by Hon’ble Patna High Court and Hon’ble Madras High Court in the cases, cited supra, I am of the view that where the AO does not himself exercised his jurisdiction u/s. 147 read with section 148 of the Act but merely acts at the behest of any superior authority, the assumption of jurisdiction is bad in law for non satisfaction of the conditions precedent. In the present case, at the same time, the initiation by the AO at the direction of the CIT, without satisfaction on the part of the AO himself, is invalid. Accordingly, the reopening is held to be invalid in all the four appeals and accordingly, the appeals of the assessees are allowed.
In the result, all the appeals of assessees are allowed.
Order is pronounced in the open court on 11.12.2015 Sd/- (Mahavir Singh) Judicial Member
Dated : 11th December, 2015 Jd.(Sr.P.S.) Copy of the order forwarded to: