EMM AAR TOURISM PVT LTD ,NEW DELHI vs. ITO WARD - 8(2), NEW DELHI

1. 1. That on the facts and circumstances of the case, the ld CIT(A) erred in confirming the action of ld. AO for initiation of reassessment proceedings u/s. 147/148 of the Income Tax Act.

Replying to the above, the ld. Sr. DR strongly opposed to the above noted legal contentions of the assessee and submitted that there is not defect or discrepancy in the approval granted by the ld. PCIT u/s. 151 of the Act. However, he did not controvert that the facts and circumstances of present case are quite similar and identical to the facts and circumstances in the case of Eminent Computers P. Ltd. vs. ITO (supra) wherein the Tribunal has accepted similar legal contention of the assessee and have quashed entire proceedings including reassessment order.

On careful consideration of above submission at the very outset, from the order of coordinate bench of Delhi in the case Eminent Computers P. Ltd. (supra), we note that the Tribunal under identical facts and circumstances quashed the reassessment order and entire reassessment proceedings with following observation and findings:- 14-25 14. First of all, ld. AR for the assessee drew our attention towards the sanction accorded by the ld. Principal CIT for reopening the assessment which is available at pages 14 & 15 of the paper book. On perusal of the sanction accorded by the ld. Principal CIT in the prescribed proforma goes to show that there is a question no.13 viz.: “Whether the Pr. Commissioner of Income Tax is satisfied on the reasons recorded by the A.O. that it is a fit case for issue of notice u/s 148 of the I.T. Act, 1961.”

In response to the aforesaid question no.13 in the prescribed proforma for according sanction, ld. Principal CIT has written “Yes, I am satisfied.”

No doubt, column of “reasons recorded” are there in the prescribed proforma shown as Annexure A, available at page 14 of the paper book, and it is mentioned in Column No.11 that “reasons for the belief that income has escaped assessment”. In response to the said question as contained in Column No.11, it is mentioned by the AO that “as per Annexure A”. But no such Annexure ‘A’ has been brought on record before the Bench for perusal. In these circumstances, it is difficult to make out as to what were the “reasons for belief that income has escaped assessment” with the AO on the basis of which Principal CIT has accorded sanction by merely writing “I am satisfied.”

Apparently, from the approval recorded and words used that "Yes. I am satisfied.", it is proved on record that the sanction is accorded in mechanical manner and Pr.CIT has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/ss 147/148 of the Act. 18. Even the AO has not applied his judicial mind independently while recording the reasons for initiating proceedings u/s 147/148 of the Act. Bare perusal of the reasons recorded shows that the entire emphasis is placed on the report of the Investigation Wing, which has otherwise been based upon the statements of Pradeep Kumar Jindal, Shri Subodh Kumar Khandelwal, Ms. Seema Khandelwal & Ms. Meera Mishra who have furnished the list of companies stated to be not doing any business but engaged in providing accommodation entries. Before issuing the notice, the AO has not examined the profile of the said companies to arrive at the logical conclusion so as to issue notice u/s 148 of the Act. 19. Bare perusal of the “reasons recorded” further shows that the reopening has been made on the allegation that the accommodation entry to the tune of Rs.30,00,000/- have been provided by M/s. Juneja Nagpal Construction Pvt. Ltd. and M/s. Lustre Finlease & Investment Ltd., however after initiating the reassessment proceedings u/s 147/148 of the Act, AO roped in one M/s. Hajima Resorts Ltd. for providing accommodation entry to the tune of Rs.15,00,000/- to the assessee and proceeded to make addition of Rs.45,00,000/-. 20. Neither any reason has been recorded which is sufficient to believe that income to the tune of Rs.15,00,000/- received from M/s. Hajima Resorts Ltd. has escaped assessment nor any such notice has been given to the assessee. All these facts goes to prove that the AO has not applied his judicial mind before recording the “reasons to believe” that such and such income has escaped assessment rather proceeded to initiate the proceedings u/s 147/148 of the Act by blindly following the report of the Investigation Wing. Before according approval, ld. Principal CIT has also not examined all these facts rather accorded the approval in a mechanical manner. 21. Coordinate Bench of the Tribunal in case cited as ITO, Ward 17 (4), New Delhi vs. M/s. Virat Credit & Holdings Pvt. Ltd. in & M/s. Virat Credit & Holdings Pvt. Ltd. vs. ITO, Ward 17 (4), New Delhi in CO No.57/Del/2012 order dated 09.02.2018 dealt with the identical issue arising out of the search and seizure operation conducted by the Investigation Wing on 18.11.2015 on Pradeep Kumar Jindal Group of companies who were allegedly engaged into providing accommodation entries, quashed the reassessment on the ground that AO has not applied his judicial mind independently [4] and that ld. Principal CIT has accorded mechanical approval by merely writing words that “Yes, I am satisfied.” without applying his judicial mind by returning following findings :- “10. First of all, ld. AR for the assessee company drew our attention towards sanction accorded by the Addl.CIT for reopening of the assessment obtained by moving an application under Right to Information Act, 2005, available on file as Annexure 'A'. Perusal of the sanction accorded by Addl. CIT in the prescribed proforma shows that there is a question no.13 viz : "13. Whether the Addl. CIT is satisfied on the reasons recorded under section 147 that it is a fit case for issue of notice under section 148 of the IT Act.

In response to aforesaid question no.13 in the prescribed proforma, Addl. CIT has written "Yes. I am satisfied." No doubt, columns of reasons recorded was there and it is also mentioned in column no.12 that reasons for belief that income has escaped assessment are as per annexure enclosed but such annexure has not been produced before the Bench for perusal.

Apparently, from the approval recorded and words used that "Yes. I am satisfied.", it has proved on record that the sanction is merely mechanical and Addl.CIT has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/s 148 of the Act.

Even AO while recording the reasons for initiating the reopening of assessment has not applied his mind independently. When we peruse the reasons recorded, available at pages 31-32 of the paper book, the entire reasons have been based on the statement of one Shri P.K. Jindal, who has furnished the list of companies stated to be not doing any business activities but engaged in providing accommodation entries. Before issuing the notice AO appeared to have not examined the profile of the said companies to arrive at a logical conclusion so as to issue the notice u/s 148 of the CO No.57/Del/2012 Act. When this fact is examined in the light of the completed assessment of the assessee u/s 143 (3), all the documents concerning share application money, now available at pages 1 to 30 of the paper book, were supplied to the AO. This fact has not been taken into consideration by the AO before initiating the proceedings u/s 147/148 of the Act. However, since reopening of assessment in this case is otherwise not sustainable, we are not entering into any merits.

Hon'ble Supreme Court in case cited as CIT vs. S. Goyanka Lime & Chemical Ltd. - (2015) 64 taxmann.com 313 (SC) examined the identical issue as to according the sanction for reopening the assessment u/s 148 of the Act by merely recording "Yes. I am satisfied." And held that reopening on the basis of mechanical sanction is invalid by returning following findings :- " Section 151, read with section 148 of the Incometax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint [5] Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under. section 148, reopening of assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [In favour of assessee] Search and Seizure-Procedure for black Assessment- Search was conducted at residential and business premises of Assessee and notice for block assessment u/s. 158-BC was issued- For block period, returns were filed that were processed u/s. 143 (1)- However, notice u/s. 148 was issued by AO, on basis of certain reasons recorded-Assessee objected to same before AO, that was rejected and assessment was completed u/ss. 143(3) and CO No.57/Del/2012 147-CIT(A) found that reason recorded by Joint Commissioner of Income Tax, for according sanction, was merely recording 'I am Satisfied'-Action for sanction was alleged to be without application of mind and to be done in mechanical manner-Held, while according sanction, Joint Commissioner, Income Tax only recorded "Yes, I am satisfied"-Mechanical way of recording satisfaction by Joint Commissioner, that accorded sanction for issuing notice u/s. 147, was clearly unsustainable-On such• consideration, both Appellate authorities interfered into matter- No error was committed warranting reconsideration-As far as explanation to S. 151, brought into force by Finance Act, 2008 was concerned, same only pertained to issuance of notice and not with regard to manner of recording satisfaction-Amended provision did not help Revenue-No question of law involved in matter, that warranted reconsideration-Revenue's Appeals dismissed."

In view of what has been discussed above, we are of the considered view that according sanction is not a supervisory role rather it is a quasi-judicial function to be performed by the Principal CIT/CIT, as the case may be, as required u/s 151 of the Act. We fail to understand that when the Revenue Department is manned by highly qualified officers having experience of at least 20 years till reaching in the rank of Principal CIT, they are required to evolve legally sustainable “standard operating procedure” containing “self-speaking reasons” for according sanction while discharging such quasi- judicial function.

Hon'ble High Court of Delhi in case cited as SABH Infrastructure Ltd. vs. ACIT in WP (C) 1357/2016 order dated 25.09.2017 has issued guidelines to the Revenue authorities while CO No.57/Del/2012 deciding the issue of reopening u/s 147/148 of the Act. Operative part of which is reproduced as under:- "19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re- opening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons; [7] (iv) the exercise of considering the Assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasijudicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for CO No.57/Del/2012 reopening of the assessment beyond what has already been disclosed."

Perusal of the written submissions filed by the ld. DR for the Revenue goes to prove that he has relied upon the order passed by the AO as well as ld. CIT (A). Case law relied upon by the ld. DR is touching the merits of the case. Since the very initiation of proceedings u/s 147/148 of the Act is not sustainable in the eyes of law, we are not inclined to enter into the merits of the additions, so case law relied upon by the ld. DR is not applicable to the facts and circumstances of the case.

In view of what has been discussed above, we are of the considered view that reassessment opened by the AO and sustained by the ld. CIT (A) in this case is not sustainable in the eyes of law, hence hereby quashed. Consequently, appeal filed by the assessee is hereby allowed.

In view of above, we note that the Tribunal under identical facts and circumstances and considering the case laws cited by the both the parties and after considering the totality of the process adopted by the Assessing Officer for initiation of reassessment proceedings and by the ld. PCIT while granting approval u/s. 151 of the Act and by referring to the judgment of Hon’ble Supreme Court in the case of CIT vs Goyanka Lime & Chemical Ltd. (supra) and Hon’ble jurisdictional High Court of Delhi in the case of PCIT vs. N.C Cables Ltd. (supra) and in the case of SABH Infrastructure Ltd. vs ACIT (supra) held that while according approval u/s. 151 of the Act the ld. PCIT only writes that “ I am satisfied” then the approval has to be held as mechanical which is invalid and hence the coordinate bench quash entire action of initiation of reassessment proceedings and consequent order including reassessment order under challenge. The ld. Sr. DR has not placed on record any contrary judgment or order in favour of the revenue which could lead us to take a different or deviated view in favour of the revenue under the facts and circumstances of the present case particularly the manner in which approval u/s. 151 of the Act has been granted by the ld. PCIT.

Undisputedly rather admittedly facts and circumstances of present case are quite similar and identical to the case of Eminent Computers P. Ltd. (supra) and hence, respectfully following the said order of the Tribunal dated 24.11.2020 the ground no. 1 of assessee is allowed. Consequently, initiation of reassessment proceedings u/s. 147 of the Act, notice u/s. 148 of the Act and all consequent proceedings and orders including reassessment order dated 14.12.2017 u/s. 143(3)/147 of the Act for AY 2010-11 are quashed.

The ld. representatives of both the side have not placed any submissions on the other grounds of assessee on merits therefore we don’t deem it fit to adjudicate the same in absence of any submissions and therefore the same are not being adjudicated and are left open.

In the result, the appeal of the assessee partly allowed.