M/s. Ri-Kynjai Serenity By the Lake, Shillong V. Income Tax Officer, Ward -2, Shillong

ITA 473/GTY/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6360 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 22-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 148; 64

Judgement Text

1 ITA No. 473/Gau/2019 M/s. Ri-Kynjai Serenity By the Lake AY 2014-15 IN THE INCOME TAX APPELLATE TRIBUNAL GAUHATI BENCH, “VIRTUAL HEARING” AT KOLKATA (सम ) ी ऐ. ट . वक , यायीक सद य) [Before Shri A. T. Varkey, JM] I.T.A. No. 473/GAU/2019 Assessment Year: 2014-15 M/s. Ri-Kynjai Serenity By the Lake, Shillong (PAN: ACBFS 8181 P) Vs. ITO, Ward-2, Shillong Appellant Respondent Date of Hearing 07.10.2021 Date of Pronouncement 15.12.2021 For the Appellant Shri Sanjay Modi, FCA For the Respondent Shri Arup Chatterjee, Addl. CIT ORDER This is the appeal preferred by the assessee against order of Ld. CIT(A)- Shillong dated 24.09.2019 for assessment year 2014-15. 2. At the outset, the Ld. AR of the assessee Shri Sanjay Modi pointed out that the assessee has raised a legal issue which may be decided first. The Ld. D.R. of the revenue Shri Arup Chatterjee does not have any objection. Therefore, we are inclined to decide the legal issue first. 3. The assessee has raised seven (7) grounds of appeal, the assessee has raised the legal issue which is ground no. 3 which reads as under: “For that the learned CIT(A) ought to have held that in absence of proper sanction under section 151 of the Act having been obtained, the impugned order passed under section 147 is bad in law and without jurisdiction." 4. From the perusal of ground no. 3, it is noted that the assessee is challenging the action of the AO to have reopened the assessment u/s 147 of Income Tax Act, 1961 (hereinafter referred to as the Act) without getting proper sanction u/s 151 of the Act. In order to buttress this legal issue, the Ld. AR of the assessee, Shri 2 ITA No. 473/Gau/2019 M/s. Ri-Kynjai Serenity By the Lake AY 2014-15 Sanjay Modi drew our attention to the Paper Book filed along with the appeal. The Ld. AR drew our attention to the notice issued u/s 148 of the Act intimating the AO’s desire to re-open the assessment for A.Y. 2014-15 vide his notice dated 28.11.2017 (refer page no. 1 of Paper Book). Thereafter the Ld. AR drew out attention to page no. 2 of the Paper Book wherein the AO has put up a note (with the contents of the reason to reopen) before the Addl. CIT – Range Shillong for approval for issuance of notice u/s 148 of the Act dated 28.11.2017 and underneath the note the Addl. CIT – Range Shillong has written “approved” and has affixed his signature dated 28.11.2017. Therefore, according to Ld. AR, it is apparent that the Addl. CIT has not applied his mind to the reasons given by the AO to re-open the assessment because he has only written “approved” mechanically without giving any reason as to how he was satisfied with the reasons given by the AO to reopen the assessment of the assessee. According to Ld. AR, the approval u/s 151 of a superior officer is a valuable safeguard provided by the Parliament to check the arbitrary exercise of power by the AO while exercising his power to re-open an assessment. So according to the Ld. AR the power of giving approval had to be carried out carefully and the grant of sanction should not be ritualistic or mechanical. According to him, brief reason has to be given by the approving authority to show application of mind of the Ld. Addl. CIT which is absent in this case. Therefore, according to the Ld. AR, this action of the Ld. Addl. CIT giving approval for reopening of the assessment without assigning any reason at all is invalid and cannot be termed as a proper approval and is bad in law for non-application of mind and for this legal proposition, he relied on the following case laws: “A. United Electrical Company (P) Ltd. Vs. CIT & Ors. 258 ITR 317 (Del). In this case, approval by the Addl. CIT u/s 151 was given in the following terms: “Yes, I am satisfied that it is a fit case for issue of notice u/s 148 of the Income Tax Act.” Analyzing, the above satisfaction/approval, it has been held that the 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 AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. (para 19). 3 ITA No. 473/Gau/2019 M/s. Ri-Kynjai Serenity By the Lake AY 2014-15 B. Hon’ble Supreme Court of India in the case of CIT vs S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) arising out of order of Hon’ble High Court of Madhya Pradesh in CIT vs S. Goyanka Lime & Chemicals Ltd. (2015) 56 taxmann.com 390 (MP). “Section 151, read with section 148 of Income Tax, 1961 – Income escaping assessment – sanction for issue of notice (recording of satisfaction) – High Court by impugned order held that where Joint 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 the Assessee).” And relying of the aforesaid case laws, prayed that the AO’s action of reopening be held to be bad in law for want of proper approval u/s 151 of the Act. 5. Per contra, the Ld. The Ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. However, he vehemently opposed the contention of the assessee and submitted that the Addl. CIT has given approval digitally also wherein it has been written “I am satisfied with the reason, so approval given”. Therefore, according to the Ld. DR, it is not an approval simplicitor and, therefore, the case laws relied upon by the Ld. AR cannot come to the rescue of the assessee and, therefore, he does not want this Tribunal to interfere with the approval granted by the Ld. Addl. CIT. In his rejoinder, the Ld. AR submitted that there cannot be two approvals. One in the file and another digitally which is different from other. The Ld. AR submitted that even if for argument sake, it is accepted that the Addl. CIT has written “I am satisfied with the reason so approval given’, still according to him it does not satisfy the test as to whether the approving authority has applied his mind by objectively looking into reasons for reopening as recorded by AO on 28.11.2017. The Ld. AR pointed out that the AO has put up for approval proposal for reopening the assessment of the assessee to the Addl. CIT on 28.11.2017 and on the same day, that is on 28.11.2017, the approval was granted and thereafter the AO has issued notice u/s 148 of the Act also on the same date i.e. 28.11.2017. Therefore, according to the Ld. AR this action of the Addl. CIT cannot muster strength to qualify/satisfy as to application of mind by the Addl. CIT while granting approval for reopening of 4 ITA No. 473/Gau/2019 M/s. Ri-Kynjai Serenity By the Lake AY 2014-15 assessment. Therefore, he wanted the legal issue raised by the assessee to be allowed. 6. Having heard both the parties and perused the records. It is an admitted position that the AO had put up a note before Addl. CIT wherein he has put up a note along with the information as well as reason for forming his belief to re-open the assessment of the assessee for A.Y. 2014-15 on 28.11.2017 which action of AO required the approval of Addl./Joint CIT u/s 151 for issuance of notice u/s 148 of the Act. It is noted that the AO had put up the note for approval for reopening on 28.11.2017 and on the same day approval has been written by hand by the Addl. CIT and on the same date notice has been issued u/s 148 by the AO. Even though the Ld. DR stated that he has got online approval wherein the Ld. Addl. CIT has written “I am satisfied with the reason so approval granted” still according to me the action of the Addl. CIT cannot satisfy the requirement of law which is expected from an authority while exercising approval before issuance of notice for re-opening. It should be kept in mind that approval u/s 151 of the Act is a power given to the higher officer (Addl. CIT / Joint CIT) in certain cases like that of the assessee in this cases is for granting approval to re-open the assessment of the assessee which is a valuable safeguard to check against any arbitrary exercise of power by ITO/AO. This safeguard given by the Parliament to the higher officer cannot be granted mechanically or in a ritualistic manner. Merely by scribbling “approved” or for argument sake even if the Ld. Addl. CIT has written “I am satisfied with the reason so approval given”. This standard of approval cannot satisfy the test as to whether the Addl. CIT has applied his mind or not before approval was granted. It is noted that even this kind of approvals given by the higher authorities as contended by the Ld DR has been found not to satisfy the test as to whether the approving authority has applied its mind to the information received by the AO and to the reason recorded by the AO justifying the re-opening as held by the Hon’ble Delhi High Court and Madhya Pradesh High Court in the cases cited by the Ld. AR (supra). Therefore, in my opinion, approval granted by the Addl. CIT, Sillong Range has been done in a ritualistic manner mechanically without application of mind. Therefore, the approval granted by the Addl. CIT is 5 ITA No. 473/Gau/2019 M/s. Ri-Kynjai Serenity By the Lake AY 2014-15 bad in law for non-application of mind. Therefore, the issuance of notice u/s 148 of the Act by the AO without getting proper approval from the Addl. CIT as per section 151 of the Act being invalid, the action of the AO issuing notice u/s 148 of the Act is without jurisdiction and, therefore, consequently framing of assessment order dated 07.08.2018 is bad in law and accordingly quashed. 7. In the result, the appeal of assessee is allowed. Order is pronounced in the open court on 15 th December 2021 Sd/- (Aby. T. Varkey) Judicial Member Dated: 15.12.2021 SB, Sr. PS Copy of the order forwarded to: 1. Appellant – M/s Ri- Kynjai Serenity By the lake, C/o, M/s Hotel Centre Point, Police Bazar, Shillong-793001 2 Respondent – ITO,Ward-2, Shillong 3. 4. 5. CIT(A), Shillong CIT- DR, ITAT, Guwahati /True Copy, By order, Senior Private Secretary ITAT, Kolkata Benches, Kolkata