DESIGNARCH INFRASTURCTURE (P) LTD.,NEW DELHI V. ACIT, CIRCLE-7(1), NEW DELHI

ITA 529/DEL/2023

AI Insights

The case involves Designarch Infrastructure Pvt. Ltd, which appealed against the reassessment order for the assessment year 2011-12. The reassessment was initiated by the ACIT, Circle-7(1), New Delhi, based on information from a search operation on M/s Skylark Group of companies, which allegedly showed unaccounted receipt of Rs. 60,00,000 from KRAC Securities Pvt Ltd. The primary legal contention was the validity of the jurisdiction assumed by the ACIT and the mechanical approval for reopening the assessment under section 151 of the Act. The Tribunal, referencing decisions from the Madhya Pradesh High Court and the Delhi High Court, found the approval to be mechanical and without proper application of mind, leading to the quashing of the reassessment proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34783 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Other Referred Cases: CIT Vs. S. Goyenka Lime and Chemicals Ltd, PCIT Vs. NC Cables Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: RAJ KUMAR
• Keywords: Reassessment proceedings; TDS; Competent authority; Borrowed satisfaction; FORM 26AS
• Section: 147; 143(1); 64; 132; 68

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 529/Del/2023 (Assessment Year: 2011-12) Designarch Infrastructure Pvt. Ltd, DASNAC, Annexe-1, ECE House, 28A, Kasturba Gandhi Marg, New Delhi- 110001 Vs. ACIT, Circle-7(1), New Delhi (Appellant) (Respondent) PAN:AACCD3278Q Assessee by : Shri Raj Kumar, CA Shri Suraj, Adv Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 15/01/2025 Date of pronouncement 22/01/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.529/Del/2023 for AY 2011-12, arises out of the order of the Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10202/Del/2018-19 dated 06.02.2023 against the order of assessment passed u/s 147/143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 05.12.2018 by the Assessing Officer, ACIT, Circle- 7(1), New Delhi (hereinafter referred to as „ld. AO‟). 2. The assessee had raised the following grounds of appeal before us:- “1. That in the absence of mandatory order u/s.127 (1) and for failure of its communication to assessee for transferring of jurisdiction from ITO Ward-7 (1) New Delhi to ACIT, Circle-7 (1) New Delhi, the assumption of jurisdiction by ACIT Circle -7 (1) is illegal and unsustainable, making all ITA No. 529/Del/2023 Designarch Infrastructure Pvt. Ltd Page | 2 proceedings including impugned asstt. order is without jurisdiction, null and void, illegal and unsustainable. 2. That under the facts and circumstances, of the case the initiation of proceedings u/s.147 is without jurisdiction, without application of mind, mechanical, on borrowed satisfaction and unwarranted in law as well as on merits. 3. That under the facts and circumstances, the approval u/s.151 of Pr.CIT as \"Approved\" is mechanical, non speaking and without application of mind and on borrowed satisfaction, which approval cannot provide a valid jurisdiction to proceed u/s.147/148. 4. That under the facts and circumstances, no proper and reasonable opportunity of hearing has been allowed by the Ld. A.O. since the assessee vide letter Dtd.26.11.18 filed the part documents pertaining to receipt of share capital from KRAC Securities P Ltd and for balance documents requested to provide some time, however A.O did not provide any further opportunity, in spite of the fact that more than a month was remaining in the time barring of asst. 5. That under the facts and circumstances, addition of Rs.60 lacs u/s. 68 for alleged accommodation entry from M/s. KRAC Securities (P) Ltd. being receipt of share capital, is illegal, unjustified and unsustainable in law as well as on merits. 6. That the Ld. A.O. erred in not giving the correct/ full benefit of TDS, which is duly appearing in Form 26AS. 3. We deem it fit to address the ground raised on assumption of jurisdiction u/s 147 of the Act in Ground No.3. 4. We have heard the rival submissions and perused the material available on record. The assessee has filed its return of income on 30.09.2011 for AY 2011-12 declaring total income of Rs. 46,33,961/- which was duly processed u/s 143(1) of the Act and no scrutiny assessment was framed on the same. The assessee is engaged in the business of real estate development. The assessment was sought to be reopened u/s 147 of the Act on the basis of information received from DDIT (Inv.) , Unit III, Gurgaon during a search action u/s 132 of the Act carried out in M/s Skylark Group of companies which showed that Rs ITA No. 529/Del/2023 Designarch Infrastructure Pvt. Ltd Page | 3 60,00,000/- has been received by the assessee company from KRAC Securities Pvt Ltd during the year under consideration. Accordingly, notice u/s 148 of the Act stood issued to the assessee on 30.3.2018. The reasons recorded for reopening the assessment together with the approval granted by the learned Principal Commissioner of Income Tax (in short ld PCIT) in terms of section 151 of the Act are enclosed in pages 5 to 9 and page 18 of the Paper Book. On perusal of the approval papers u/s 151 of the Act, we find that the ld PCIT had merely stated that „Approved‟ according permission for reopening the case. This sort of approval granted u/s 151 of the Act was held to be approval granted without application of mind and construed as mechanical by the Hon‟ble Madhya Pradesh High Court in the case of CIT Vs. S. Goyenka Lime and Chemicals Ltd reported in 56 taxmann.com 390 (MP HC). The Special Leave Petition (SLP) filed by the revenue against this decision was dismissed by the Hon'ble Supreme Court reported in 64 taxmann.com 313. Further, we find that the Hon‟ble Jurisdictional High court in the case of PCIT Vs. NC Cables Ltd reported in 391 ITR 11 (Del) had also held the same, wherein, the approving authority had merely stated “approved” in the proforma while granting approval in terms of section 151 of the Act. This approval was held by the Hon‟ble Jurisdictional High court to be a mechanical approval. The relevant observation of the Hon‟ble Jurisdictional High Court in this regard are reproduced herein:- “11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking ITA No. 529/Del/2023 Designarch Infrastructure Pvt. Ltd Page | 4 officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed. 12. The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed.” 5. Respectfully following the aforesaid decisions, we hold that the reopening has been made in the instant case by not taking approval u/s 151 of the Act from the competent authority in the manner known to law. Accordingly, the entire reassessment proceedings are hereby quashed. Hence, one of the legal grounds challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above mentioned terms. Since the reassessment is quashed, the other legal grounds raised by the assessee as well as the grounds raised by the assessee on merits need not be adjudicated and they are left open. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22/01/2025. -Sd/- -Sd/- (YOGESH KUMAR U.S.) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:22/01/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "