HIRACHAND KANUGA, BHIWANDI V. DCIT CIR 1, KALYAN

ITA 4261/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88506 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 03-12-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 20-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: DR P DANIEL; M P MAKHIJA
• Keywords: Reopening of assessment; Period of limitation; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 131; 148; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BE NCH, MUMBAI , !'# , $ % BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NOS. 4261 & 4262/MUM/2012 ( & & & & / ASSESSMENT YEAR: 2003-04 SHRI HIRACHAND KANUGA, HOUSE NO. 403, SANKESHWAR CHS, 4 TH FLOOR, GOKULNAGAR,KASARALI, BHIWANDI / VS. THE DCIT, CIRCLE-1, 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN (W), ' $ ./ ( ./ PAN/GIR NO. :ABGPK 2084H ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , / APPELLANT BY: DR. P. DANIEL & SHRI M.P, MAKHIJA *+') - , / RESPONDENT BY: SHRI VIJAY KUMAR BORA - ./$ / DATE OF HEARING :18.02.2015 01& - ./$ / DATE OF PRONOUNCEMENT :27.02.2015 2 / O R D E R PER N.K. BILLAIYA, AM: THESE ARE APPEALS BY THE ASSESSEE AS AN INDIVIDUAL AND AS HUF PREFERRED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A)-1, THANE DT. 9.3.2012 PERTAINING TO ASSESSMENT YEAR 2003-04. AS THE FACT S IN THE CASE OF INDIVIDUAL AND THE HUF ARE IDENTICAL, THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. WE ITA NOS. 4261 & 4262/M/12 2 ARE PROCEEDING WITH THE FACTS IN THE CASE OF INDIVI DUAL IN ITA NO. 4261/M/12. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO OF INI TIATING REASSESSMENT PROCEEDINGS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ORIGINAL RETURN OF INCOME WAS FILED ON 16.10.2003 DECLARING TOTAL INCO ME AT RS. 5,95,075/-. THE ASSESSEE RETURNED INCOME UNDER THE HEAD BUSINE SS INCOME AND INCOME FROM OTHER SOURCES. IN THE COMPUTATION OF INCOME LONG TERM CAPITAL GAIN HAS BEEN WORKED AT RS. 63,52,972/- WH ICH INCLUDED SHORT TERM CAPITAL GAIN EARNED BY THE MINOR CHILDREN OF T HE ASSESSEE AND CLUBBED WITH THE INCOME OF THE ASSESSEE U/S. 64 OF THE ACT. 3.1. THE CASE WAS REOPENED BY INVOKING THE PROVISIO NS OF SEC. 147 OF THE ACT. ACCORDINGLY NOTICE U/S. 148 WAS ISSUED ON 26.3.2010 FOR WHICH THE ASSESSEE STATED THAT RETURN FILED ON 16.10.2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U/S. 148. T HE ASSESSEE ALSO ASKED FOR THE REASONS. THE REASONS WERE SUPPLIED TO THE ASSE SSEE. THE MAIN REASON FOR THE REOPENING OF THE ASSESSMENT WAS SPECIFIC IN FORMATION WAS RECEIVED FROM THE DY. DIRECTOR (INV.) MUMBAI THAT A SEARCH ACTION U/S. 132 OF THE I.T. ACT WAS CARRIED OUT IN THE CASE OF M/S. MAHANAGAR SECURITIES PVT. LTD. AND ITS GROUP CONCERNS ON 25.1 1.2009. DURING THE COURSE OF SEARCH ACTION, IT WAS FOUND THAT M/S. MAH ANAGAR SECURITIES PVT. LTD. AND ITS GROUP CONCERN WERE ENGAGED IN FRAUDULE NT BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/LOSS, SHORT TERM /LONG TERM CAPITAL GAIN/LOSS, COMMODITIES PROFIT/LO SS ON COMMODITY TRADING AND HAD BEEN CONTINUING THIS BUSINESS FOR MANY YEARS. THERE WAS NO GENUINE BUSINESS BEING CARRIED ON BY ANY OF THE SE CONCERNS. THE LIST ITA NOS. 4261 & 4262/M/12 3 OF PERSONS SEEKING ENTRIES FOR BOGUS PROFIT/LOSS I. E. BENEFICIARIES DISCLOSED. THE NAME OF THE ASSESSEE ALONGWITH HIS MINOR DAUGHTERS & SON, THE TRANSACTION AMOUNT INVOLVED IS AT RS. 63,5 2,972/-. ON THE BASIS OF THIS INFORMATION, ASSESSEES ASSESSMENT WAS REOP ENED. 3.2. DURING THE COURSE OF THE REASSESSMENT PROCEEDI NGS, THE ASSESSEE STRONGLY OBJECTED THE REOPENING OF THE ASSESSMENT. THE AO FOUND NO MERIT IN THE CONTENTION OF THE ASSESSEE. THE AO WA S OF THE FIRM BELIEF THAT IN THIS CASE FOR THE ASSESSMENT YEAR UNDER CON SIDERATION, THE ASSESSMENT WAS MADE U/S. 143(1) OF THE ACT AND THER EFORE INTIMATION ISSUED U/S. 143(1) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THEREFORE, THERE IS NO APPLICATION OF MIND BY ANY A SSESSING OFFICER INVOLVED IN PROCESSING OF RETURN. THE AO FURTHER O BSERVED THAT THE INFORMATION FROM THE INVESTIGATION WING WAS A DEFIN ITE INFORMATION ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED. TH E AO PROCEEDED BY COMPLETING THE ASSESSMENT BY TREATING THE ENTIRE SA LE CONSIDERATION OF SHARES AS INCOME FROM OTHER SOURCES. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER BEFORE TH E LD. CIT(A) AND STRONGLY OBJECTED TO THE REOPENING OF THE ASSESSMEN T. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS C ONVINCED THAT THERE IS NO MERIT IN ASSESSEES CONTENTION AND UPHELD THE RE OPENING OF THE ASSESSMENT. ON MERIT OF THE CASE, THE LD. CIT(A) O BSERVED THAT THE PURCHASE AND SALE TRANSACTION OF THE SHARES CARRIED OUT BY THE ASSESSEE WAS BOGUS AND ENTIRE RECEIPTS RECEIVED BY THE ASSESSEE ON SALE OF SUCH BOGUS SHARES AT RS. 64,42,266/- IS INCOME FROM UNDISCLOSE D SOURCE AND HENCE THE SAME HAS BEEN RIGHTLY ASSESSED BY THE AO AS INC OME FROM OTHER SOURCES. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. ITA NOS. 4261 & 4262/M/12 4 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ONCE AGAIN STRONGLY CHALLENGED THE VALIDITY OF THE REASSESSMENT PROCEED INGS. THE FIRST PROPOSITION OF THE LD. COUNSEL WAS THAT THE REASONS RECORDED BY THE AO ARE WITHOUT APPLICATION OF MIND. IT IS THE SAY OF THE LD. COUNSEL THAT THE REOPENING IS BASED ON THE REPORT RECEIVED FROM THE INVESTIGATION WING AND THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SARTHAK SEC URITIES CO. P. LTD. 329 ITR 110. 6.1. THE SECOND PROPOSITION PUT FORTH BY THE LD. CO UNSEL IS THAT THERE IS NO PROPER SANCTION/APPROVAL AS PER THE PROVISIONS O F SEC. 151(2) OF THE ACT. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS P LACED ON THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE OF SHRI AMAR LAL BAJAJ IN ITA NO. 611/M/04. 6.2. THE LAST PROPOSITION MADE BY THE LD. COUNSEL I S THAT THE ASSESSMENT HAS BEEN FRAMED IN HASTE WITHOUT ALLOWIN G THE TIME AFTER REJECTION OF OBJECTION. IT IS THE SAY OF THE LD. C OUNSEL THAT ONCE THE AO REJECTS THE OBJECTION FILED BY THE ASSESSEE, THEN I N SUCH A CASE THE AO SHOULD NOT PROCEED FURTHER IN THE MATTER FOR A PERI OD OF 4 WEEKS. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF ASIAN PAINTS LTD. 296 ITR 90 AND ARONI COMMERCIALS LTD. 362 ITR 403. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT IS THE SAY OF THE LD. DR THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF TANGIBLE MA TERIAL EVIDENCE IN THE FORM OF REPORT RECEIVED FROM THE INVESTIGATION WING , MUMBAI AND ITA NOS. 4261 & 4262/M/12 5 THEREFORE IT CANNOT BE SAID THAT THERE IS NO APPLIC ATION OF MIND. THE LD. DR CONTINUED BY STATING THAT PROPER APPROVAL WAS GI VEN BY THE JOINT CIT/ADDL. CIT AND THEREFORE IT IS INCORRECT TO SAY THAT THE REOPENING WAS WITHOUT ANY SANCTION. THIRDLY THE DR STATED THAT T HE ASSESSEE DRAGGED THE ASSESSMENT PROCEEDINGS TO THE FAG-END OF THE PERIOD OF LIMITATION AND THEREFORE THE AO CANNOT BE BLAMED FOR PASSING THE A SSESSMENT ORDER IN HASTE. THE LD. DR CONCLUDED BY SAYING THAT THE RE ASSESSMENT PROCEEDINGS WERE VALID AND THE LD. CIT(A) HAS RIGHT LY UPHELD THE FINDINGS OF THE AO. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD. LET US FIRST SEE THE REASONS FOR REOPENING THE CASE U/S. 147 WHICH READ AS UNDER: 1. THE ASSESSEE HAD FILED RETURN OF INCOME FOR A.Y . 2003-04 ON 16.10.2003 DECLARING TOTAL INCOME OF RS. 5,95,080/- . 2. A SEARCH ACTION WAS CONDUCTED IN THE CASE OF M/S . MAHASAGAR SECURITIES PVT. LTD (NOW ALAG SECURITIES PVT. LTD.) ON 25.11.2009 BY THE DDIT (INV) UNIT-1(4), MUMBAI. 3. DURING THE COURSE OF SEARCH IT WAS FOUND THAT M/ S. MAHASAGAR SECURITIES PVT. LTD., AND ITS GROUP CONCE RNS WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFITS OR LOSS ON COMM ODITY TRADING, LONG TERM AND SHORT TERM GAINS OR/LOSS INTRODUCING SHARE APPLICATION MONEY. 4. DURING THE COURSE OF SEARCH FROM THE SEIZED COMP UTER DATA, A LIST OF CLIENTS/BENEFICIARIES WHO HAVE TAKEN ENTR IES FROM THE ABOVE COMPANY HAVE BEEN EXTRACTED. 5. THE NAME OF THE ASSESSEE IS FOUND TO BE APPEARIN G IN THE SAID TRANSACTIONS IN THE LIST MENTIONED IN THE COMPUTER DATA EXTRACTED FROM THE ABOVE COMPANY DURING SEARCH. ITA NOS. 4261 & 4262/M/12 6 6. IN VIEW OF THE ABOVE AND CONSIDERING THE FINDING S AND MODUS OPERANDI FOUND DURING SEARCH OPERATION, THERE IS A REASON TO BELIEVE THAT THE INCOME TO THE EXTENT AS RELEVANT T O BE WORKED OUT HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 1 47 OF THE I.T. ACT, 1961 AND HENCE A NOTICE U/S. 148 OF THE I.T. A CT, 1961 IS ISSUED. 8.1. A PERUSAL OF THE REASONS MENTIONED HEREINABOVE CLEARLY SUGGEST THAT THERE IS NO APPLICATION OF MIND. IN OUR CONSI DERED OPINION, FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT IS A C ONDITION PRECEDENT. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE IDEN TICAL TO THE FACTS OF THE CASE DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. P. LTD (SUPRA) WHEREIN ALSO THE ORIG INAL RETURN WAS PROCESSED AND INTIMATION WAS SENT U/S. 143(1) OF TH E ACT ACCEPTING THE RETURN. THE NOTICE U/S. 148 OF THE ACT WAS ISSUED BY THE AO ALLEGING THAT HE HAS REASON TO BELIEVE INCOME CHARGEABLE TO TAX FOR THE ASSESSMENT WAS 2003-04 HAS ESCAPED ASSESSMENT WITHIN THE MEANING O F SEC. 147 OF THE ACT AND ACCORDINGLY REQUIRED THE ASSESSEE TO FILE T HE RETURN FOR THE ASSESSMENT YEAR IN CONSIDERATION. THE ASSESSEE SUB MITTED THE RETURN OF INCOME AS FILED EARLIER SHOULD BE TREATED AS THE RE TURN IN COMPLIANCE WITH THE NOTICE UNDER REFERENCE. THE ASSESSEE ALSO REQU ESTED TO PROVIDE A COPY OF THE REASONS RECORDED U/S. 148(2) AND THE APPROVA L FOR ISSUANCE OF NOTICE. WHILE FURNISHING THE REASONS, THE ITO ALSO INITIATED REASSESSMENT PROCEEDINGS BY ISSUING FORMAL NOTICE. ON A WRIT PE TITION, THE HONBLE HIGH COURT HELD AS UNDER: HELD, ALLOWING THE PETITION, THAT THE FORMATION O F BELIEF WAS A CONDITION PRECEDENT AS REGARDS THE ESCAPEMENT OF THE TAX PERTAINING TO THE ASSESSMENT YEAR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS REQUIRED TO FORM AN OPINION B EFORE HE PROCEEDED TO ISSUE A NOTICE. THE VALIDITY OF REASON S, WHICH WERE SUPPOSED TO SUSTAIN THE FORMATION OF AN OPINION, WA S CHALLENGEABLE. THE REASONS TO BELIEVE WERE REQUIRED TO BE RECORDED ITA NOS. 4261 & 4262/M/12 7 BY THE ASSESSING OFFICER. ONCE THE INGREDIENTS OF SECTION 147 WERE FULFILLED, THE ASSESSING OFFICER WAS COMPETENT IN L AW TO INITIATE THE PROCEEDINGS UNDER SECTION 147. THE ASSESSING OFFICE R WAS AWARE OF THE EXISTENCE OF THE FOUR COMPANIES WITH WHOM TH E ASSESSEE HAD ENTERED INTO TRANSACTION. BOTH THE ORDERS SHOWED TH AT THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION BY THE INVE STIGATION WING AND THERE WAS NO MENTION THAT THESE COMPANIES WERE FICTITIOUS COMPANIES. NEITHER THE REASONS IN THE INITIAL NOTI CE NOR THE COMMUNICATION PROVIDING REASONS REMOTELY INDICATED INDEPENDENT APPLICATION OF MIND. THOUGH CONCLUSIVE PROOF WAS N OT GERMANE AT THIS STAGE THE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUNDATION OR PLATFORM OF PRUDENCE WHICH A REASONABLE PERSON WAS REQUIRED TO APPLY. FROM THE PERUSAL OF THE REASONS RECORDED AND THE ORDER OF REJECTION OF OBJECTIONS, THE NAMES OF THE COMPAN IES WERE AVAILABLE WITH THE AUTHORITY AND THEIR EXISTENCE WA S NOT DISPUTED. THE ASSESSEE IN ITS OBJECTIONS HAD STATED THAT THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSE E THROUGH BANKING CHANNEL. THE IDENTITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTANCES, THE INITIATION OF PROCEE DINGS UNDER SECTION 147 AND ISSUANCE OF NOTICE UNDER SECTION 14 8 OF THE ACT WERE TO BE QUASHED. 8.2. AS MENTIONED ELSEWHERE, THE FACTS OF THE CASE IN HAND SO FAR AS THE ISSUE OF NOTICE AND THE REASONS FOR THE ISSUE OF NO TICE U/S. 148 ARE CONCERNED ARE IDENTICAL TO THE FACTS OF SARTHAK SEC URITIES (SUPRA), THEREFORE, IN THE LIGHT OF THE JUDICIAL DECISION DI SCUSSED HEREINABOVE, THE ISSUANCE OF NOTICE U/S. 148 OF THE ACT HAS TO BE QU ASHED. 8.3. PROCEEDING FURTHER IN SO FAR AS APPROVAL U/S. 151(2) OF THE ACT IS CONCERNED, FOLLOWING HAS BEEN PLACED BEFORE US WHIC H NEEDS TO BE MENTIONED SPECIFICALLY. OFFICE OF THE ADDL. COMMISSIONER OF INCOME- TAX RANI MANSION, 2 ND FLOOR, MURBAD ROAD, KALYAN (W) NO.KYN/ADDL.CIT/147/APPROVAL/2009-10/2233 DATE: 26 /03/2010 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1,KALYAN ITA NOS. 4261 & 4262/M/12 8 SUB : PROPOSAL FOR INITIATING PROCEEDINGS U/S 147 I N GROUP CASES OF BENEFICIARIES OF MAHASAGAR SECURITIES PVT. LTD. (NOW ALAG SECURITIES PVT. LTD.) SHARE SCAM REG. REF: STATEMENT DATED 11/12/2009 U/S 131 OF SHRI M. C. CHOWKSI BY DDIT, MUMBAI. --------------- --------------------------------------------------- -------- PLEASE REFER TO THE ABOVE. ON PERUSAL OF THE PROPOSALS FOR INITIATING PROCEEDI NGS U/S 147, YOU ARE HEREBY DIRECTED TO ISSUE NOTICE U/ 148. THE PRO POSALS IN THE FOLLOWING CASES ARE APPROVED: (1) MR. GATAMCHAND M. KANUNGA (2) MR. GAUTAMCHAND M. KANUNGA (HUF) (3) MR. HIRACHAND M. KANUNGA (HUF) (4) MR. HIRACHAND M. KANUNGA (5) MISS SONAM G. KANUNGA (MINOR) THROUGH SHRI GAUT AMCHAND M. KANUNGA (6) MISS LAVINA V. KANUNGA (MINOR) THROUGH SHRI VIM ALCHAND M. KANUNGA (7) MASTER KENIL G. KANUNGA (MINOR) THROUGH SHRI GA UTAMCHAND M. KANUNGA (8) MASTER NILESH H. KANUNGA (MINOR) THROUGH SHRI HIRACHAND M. JKANUNGA (9) SMT. MANJULA H. KANUNGA (10) MISS. DEEPIKA H. KANUNGA (MINOR) THROUGH SHRI HIRACHAND M. KANUNGA (11) MISS. SIMRAN H. KANUNGA (MINOR) THROUGH SHRI H IRACHAND M.KANUNGA (12) SMT DAMAYANTI RAMESH GADA (13) SHRI. RAMESH PREMCHAND GADA (14) SHRI. ALHAD P. KASHIKAR (15) SMT. NILIMA A. KASHIKAR (16) SHRI ABHAY P. KASHIKAR (17) SMT. GEETA A. KASHIKAR (18) SMT. NEELAM M. GOYAL (19) VIMAL JAIN (20) NARESH JAIN (21) MILAN SALOT (22) MILAN SALOT (HUF) ITA NOS. 4261 & 4262/M/12 9 SD/- (SUBHASH BAINS) ADDL. COMMISSIONER OF INCOME TAX, RANGE 1, KALYAN. 8.4. LET US FIRST CONSIDER THE RELEVANT PART OF THE PROVISIONS OF SEC. 151 OF THE ACT. (1) IN A CASE WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR SECTION 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO NOTICE SHALL BE ISSUED UNDER SECTION 148 [BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF ASSISTANT COMMISSIONER [OR DEPUTY COMMI SSIONER], UNLESS THE [JOINT] COMMISSIONER IS SATISFIED ON THE REASON S RECORDED BY SUCH ASSESSING OFFICER THAT IT IS A FIT CASE FOR THE ISS UE OF SUCH NOTICE] : PROVIDED THAT, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH NOTICE SHALL BE I SSUED UNLESS THE CHIEF COMMISSIONER OR COMMISSIONER IS SATISFIED, ON THE R EASONS RECORDED BY THE ASSESSING OFFICER AFORESAID, THAT IT IS A FIT C ASE FOR THE ISSUE OF SUCH NOTICE. (2) IN A CASE OTHER THAN A CASE FALLING UNDER S UB-SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF [JOINT] COMMISSIONER, AFTER THE E XPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S THE [JOINT] COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR THE ISSUE OF SUC H NOTICE.] [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT THE JOINT COMMISSIONER, THE COMMISSIONER OR THE CHI EF COMMISSIONER, AS THE CASE MAY BE, BEING SATISFIED ON THE REASONS RECORDED BY THE ASSESSING OFFICER ABOUT FITNESS OF A CASE FOR THE I SSUE OF NOTICE UNDER SECTION 148 , NEED NOT ISSUE SUCH NOTICE HIMSELF.] 9. A SIMPLE READING OF THE PROVISIONS OF SEC. 151(1 ) WITH THE PROVISO CLEARLY SHOW THAT NO SUCH NOTICE SHALL BE ISSUED UN LESS THE ADDL. COMMISSIONER IS SATISFIED ON THE REASONS RECO RDED BY THE AO THAT IT IS A FIT CASE FOR THE ISSUE OF NOTICE WHICH MEANS T HAT THE SATISFACTION OF THE COMMISSIONER IS PARAMOUNT FOR WHICH THE LEAST THAT IS EXPECTED FROM THE ITA NOS. 4261 & 4262/M/12 10 COMMISSIONER IS APPLICATION OF MIND AND DUE DILIGEN CE BEFORE ACCORDING SANCTION TO THE REASONS RECORDED BY THE AO. 10. IN THE PRESENT CASE THE LETTER WHICH IS PLACED ON RECORD SHOWS THAT THE ADDL. COMMISSIONER HAS SIMPLY SANCTIONED THE PR OPOSAL FOR INITIATING PROCEEDINGS U/S. 147 IN GROUP CASES OF BENEFICIARIE S OF MAHASAGAR SECURITIES P. LTD. NOWHERE THE ADDL. CIT HAS RECORD ED HIS DISSATISFACTION. THE HONBLE SUPREME COURT IN THE CASE OF CHHUGAMAL RAJPAL VS S.P. CHALIHA & OTHERS 79 ITR 603 OBSERVED THAT THE IMPOR TANT SAFEGUARDS PROVIDED IN SEC. 147 AND 151 WERE LIGHTLY TREATED B Y THE INCOME-TAX OFFICER AS WELL AS THE COMMISSIONER. 11. IN THE LIGHT OF THE ABOVE MENTIONED REASONS, IN OUR CONSIDERATE VIEW, SECTION 147 AND 148 ARE CHARTER TO THE REVENU E TO REOPEN EARLIER ASSESSMENTS AND ARE, THEREFORE PROTECTED BY SAFEGUA RDS AGAINST UNNECESSARY HARASSMENT OF THE ASSESSEE. THEY ARE S WORD FOR THE REVENUE AND SHIELD FOR THE ASSESSEE. SECTION 151 GUARDS TH AT THE SWORD OF SEC. 147 MAY NOT BE USED UNLESS A SUPERIOR OFFICER IS SATISF IED THAT THE AO HAS GOOD AND ADEQUATE REASONS TO INVOKE THE PROVISIONS OF SE C. 147. THE SUPERIOR AUTHORITY HAS TO EXAMINE THE REASONS, MATERIAL OR G ROUNDS AND TO JUDGE WHETHER THEY ARE SUFFICIENT AND ADEQUATE TO THE FOR MATION OF THE NECESSARY BELIEF ON THE PART OF THE ASSESSING OFFICER. IF, A FTER APPLYING HIS MIND AND ALSO RECORDING HIS REASONS, HOWSOEVER BRIEFLY, THE COMMISSIONER IS OF THE OPINION THAT THE AOS BELIEF IS WELL REASONED A ND BONAFIDE, HE IS TO ACCORD HIS SANCTION TO THE ISSUE OF NOTICE U/S. 148 OF THE ACT. IN THE INSTANT CASE, WE FIND FROM THE PERUSAL OF THE ORDER SHEET WHICH IS ON RECORD, THE COMMISSIONER HAS SIMPLY PUT APPROVED AND SIGNED THE REPORT THEREBY GIVING SANCTION TO THE AO. NOWHERE THE COMMISSIONER HAS RECORDED A SATISFACTION NOTE NOT EVEN IN BRIEF. THEREFORE, IT CANNOT BE ITA NOS. 4261 & 4262/M/12 11 SAID THAT THE COMMISSIONER HAS ACCORDED SANCTION AF TER APPLYING HIS MIND AND AFTER RECORDING HIS SATISFACTION. 12. HONBLE DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL CO. PVT. LTD. VS CIT 258 ITR 317 HAS HELD THAT THE PROVISO TO SUB-SECTION (1) OF SECTION151OF THE ACT PROVIDES THAT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NOTICE UNDER S ECTION 148 SHALL NOT BE ISSUED UNLESS THE CHIEF COMMISSIONER OR THE COMMISS IONER, AS THE CASE MAY BE, IS SATISFIED, ON THE REASONS RECORDED BY TH E ASSESSING OFFICER CONCERNED, THAT IT IS A FIT CASE FOR THE ISSUE OF S UCH NOTICE. THESE ARE SOME IN-BUILTS SAFEGUARDS TO PREVENT ARBITRARY EXERCISE OF POWER BY AN ASSESSING OFFICER TO FIDDLE WITH THE COMPLETED ASSE SSMENT. THE HONBLE HIGH COURT FURTHER OBSERVED THAT WHAT DISTURBS US MORE IS THAT EVEN THE ADDITIONAL COMMISSIONER HAS ACCORDED HIS APPROVAL F OR ACTION UNDER SECTION 147 MECHANICALLY. WE FEEL THAT IF THE ADDI TIONAL COMMISSIONER HAD CARED TO GO THROUGH THE STATEMENT OF THE SAID P ARTIES, PERHAPS HE WOULD NOT HAVE GRANTED HIS APPROVAL, WHICH WAS MAND ATORY IN TERMS OF THE PROVISO TO SUB-SECTION (1) OF SECTION 151 OF TH E ACT AS THE ACTION UNDER SECTION 147 WAS BEING INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE POWER VESTED IN THE COMMISSIONER TO GRANT OR NOT TO GRANT APPROVAL IS COUPLED WITH A DUTY. THE COMMISSIONER IS REQUIRED TO APPLY HIS MIND TO THE P ROPOSAL PUT UP TO HIM FOR APPROVAL IN THE LIGHT OF THE MATERIAL RELIED UP ON BY THE ASSESSING OFFICER. THE SAID POWER CANNOT BE EXERCISED CASUALL Y AND IN A ROUTINE MANNER. WE ARE CONSTRAINED TO OBSERVE THAT IN THE P RESENT CASE THERE HAS BEEN NO APPLICATION OF MIND BY THE ADDITIONAL COMMI SSIONER BEFORE GRANTING THE APPROVAL. ITA NOS. 4261 & 4262/M/12 12 13. THE OBSERVATIONS OF THE HONBLE HIGH COURT ARE VERY MUCH RELEVANT IN THE INSTANT CASE AS IN THE PRESENT CASE ALSO THE COMMISSIONER HAS SIMPLY MENTIONED APPROVED TO THE REPORT SUBMI TTED BY THE CONCERNED AO. IN THE LIGHT OF THE RATIOS/OBSERVATI ONS OF THE HONBLE HIGH COURT MENTIONED HEREINABOVE, WE HAVE NO HESITATION TO HOLD THAT THE REOPENING PROCEEDINGS VIS--VIS PROVISIONS OF SEC. 151 ARE BAD IN LAW AND THE ASSESSMENT HAS TO BE DECLARED AS VOID AB INITIO . 14. PROCEEDING FURTHER, A PERUSAL OF THE ASSESSMENT ORDER SHOW THAT THE AO HAS SUPPLIED THE REASONS RECORDED ON 15.11.2010. THE ASSESSEE FILED HIS OBJECTION ON 25.11.2010. THE OBJECTIONS FILED BY THE ASSESSEE WERE REJECTED ON 14.12.2010 AND THE ASSESSMENT ORDER WAS MADE ON 24.12.2010. THUS THE AO DID NOT WAIT FOR FOUR WEEK S FROM THE DATE OF THE REJECTION OF THE OBJECTIONS AND THEREBY VIOLATED TH E PRINCIPLES ENUNCIATED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF ASIAN PAINT LTD. (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS OBSERVED AS UNDER: REASSESSMENT-NOTICE U/S. 148- OBJECTIONS BY ASSESS EE-IF THE AO DOES NOT ACCEPT THE OBJECTIONS FILED BY THE ASSESSEE AGAINST REOPENING OF ASSESSMENT, HE IS NOT TO PROCEED FURTH ER IN THE MATTER FOR A PERIOD OF FOUR WEEKS FROM THE DATE OF SERVICE OF ORDER REJECTING THE OBJECTIONS ON THE ASSESSEE ABOVE PRO CEDURE IS TO BE FOLLOWED STRICTLY IN ALL SUCH CASES OF REOPENING OF ASSESSMENT. 15. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF ARONI COMMERCIALS LTD. (SUPRA) HAS MADE THE FOLLOWING OB SERVATIONS: IT IS AXIOMATIC THAT THE LAW DECLARED BY THE HIGH COURT IS BINDING ON ALL AUTHORITIES FUNCTIONING WITHIN THE JURISDICTION OF THE COURT. IT IS NOT OPEN TO THE AO TO FEIGN IGNORAN CE OF THE LAW DECLARED BY THE COURT AND PASS ORDERS IN DEFIANCE OF IT. THE BOMBAY HIGH COURT IN ASIAN PAINTS VS DCIT (2008) 29 6 ITR 90 (BOM) HAS CLEARLY LAID DOWN THAT WHEN AN ASSESSMEN T IS SOUGHT TO BE REOPENED U/S. 148 OF THE ACT AND THE OBJECTIONS OF THE ASSESSEE ITA NOS. 4261 & 4262/M/12 13 HAVE BEEN OVERRULED BY THE AO, THEN IN SUCH A CASE THE AO WILL NOT PROCEED FURTHER IN THE MATTER FOR A PERIOD OF F OUR WEEKS FROM THE DATE OF RECEIPT OF THE ORDER REJECTING THE OBJE CTIONS OF THE ASSESSEE. 16. THE AO HAS UNDOUBTEDLY FLAUNTED THE PROCEDURE L AID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT THEREBY MAKING TH E ISSUANCE OF NOTICE U/S. 148 OF THE ACT BAD IN LAW. 16.1. HAVING SAID ALL THAT CONSIDERING THE FACTS OF THE CASE FROM ANY ANGLES IN THE LIGHT OF OUR DETAILED DISCUSSION HERE INABOVE, IN OUR CONSIDERED OPINION, THE REASSESSMENT PROCEEDINGS BA SED ON THE NOTICE ISSUED U/S. 148 IS BAD IN LAW. WE, THEREFORE, SET A SIDE THE FINDINGS OF THE LD. CIT(A) AND QUASH THE REASSESSMENT ORDER MADE U/ S. 143(3) R.W. SEC. 147 OF THE ACT. 16.2. AS WE HAVE QUASHED THE REASSESSMENT ORDER, WE DO NOT FIND IT NECESSARY TO GO INTO THE MERIT OF THE CASE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2015 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 3 DATED : 27 TH FEBRUARY, 2015 . . ./ RJ , SR. PS ITA NOS. 4261 & 4262/M/12 14 2 2 2 2 - -- - *. *. *. *. 4&. 4&. 4&. 4&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 67 *. , , / DR, ITAT, MUMBAI 6. 78 9 / GUARD FILE. 2 2 2 2 / BY ORDER, +. *. //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI