M/s. Palan Real Estate Developers Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-3(1)(1), Ahmedabad

ITA 827/AHD/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3765 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-02-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority
• Section: 147; 68; 148; 132; 15; 143(3); 201; 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I. T. A. No . 827/Ahd/20 23 ( नधा रण वष / As sess ment Year : 2010 -1 1) M/ s . Pa la n Re al E s ta t e D e ve l op e r s Pv t . L t d. I - 2 08 , Pa r s hw an ath To w n s h ip , B /h . K ri s h n a n a ga r , N a va N ar od a, A h m ed ab a d G uj ar a t , 38 2 3 30 बनाम/ Vs . T h e I n c o me T ax O f f ic er W ar d- 3( 1) ( 1 ) , A h m ed a b a d थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A D C P 3 3 8 6 N (Appellant) . . (Respondent) अपीलाथ ओर से /Appellant by : Shri Mahesh Chhajed, A.R. यथ क ओर से/Respondent by : Shri V. K. Mangla, Sr. DR D a t e o f H e a r i ng 12/02/2024 D a t e o f P r o n o u nc e me n t 21/02/2024 O R D E R PER Ms. MADHUMITA ROY - JM: Th e instan t app eal filed at th e instan ce of the asse ss ee is directed against the order dated 20. 09. 2023 passed by the National Faceles s App eal Centre (NFAC), Delhi, arising out of the order dated 19. 04. 201 8 passed by the ITO, Ward -3 (1 )(2), Ah medabad, under Section 143 (3 ) r. w. s. 147 of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assess ment Year 201 0-11. ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 2 – 2. Th e ap pellant before u s h as taken out an application fo r addition al grounds u nder Rule 3 5A o f the In co me Tax Rules, 1963, to this effect that, as no proper sanctio n as requ ired u nder Section 15 1 of the Act i s obtained fro m th e PCIT, reopen in g o f asses s men t is bad and illegal, therefore, liab le to be quashed. 3. Th e brief fact s lea ding to this case is this th at the appellant’s case wa s reop ened o n th e basis of th e in fo rmation received fro m th e ACIT, Cen tral Circle-1(2), Ahmedabad on the basis of se arch pro ceeding in itiated un der Section 132 o f the Act cond ucted in the Barter Group on 04. 12 .2014. The as se ss ment proc eeding under Section 14 3(3 ) r.w. s. 14 7 o f the Act was finalized upon making addition o f R s. 3 2,43, 750/- u nder Section 68 o f the Act on account of unex plained credit claimed a s source for investment, which was, in tu rn , confir med by th e First Appellate Authority. Hen ce, th e instant appeal before u s. 4. At the ti me o f h earing o f the in stant ap peal, Ld. Counsel appearing for th e appellant submitted b efore u s that th e app ellant mad e an ap plicatio n under RTI on 2 5. 10.2 023 requ estin g fo r reasons reco rd ed for r eo penin g of asses sment and the ap proval granted und er Section 151 of the Act whereup on th e RTI order dated 24 .11.2023 h as been provided copy whereo f h as al so been annexed to the paper bo ok ap pearing at Pag e Nos. 1 5 & 16 th erein, where fro m, it ap p ears that PCIT has merely stated ‘Yes I am satis fied’ while granting sanction un der S ection 151 of th e Act. Th e co ntention made b y the Ld. AR has been v erified by us. ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 3 – Sanctio n given by the PCIT is a nnexed to th e paper boo k is reproduced as un der: ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 4 – 5. Th e case o f th e appellant is, therefore, that the ob serv ation mad e by the PCIT is not su fficie nt enough to prov ide san ction which renders the reopening of ass es sment void. Such o bserv ation does not establish the fact o f app lication of mi nd an d d ue dilig ence before creating sanction to the reason s reco rd ed by the Ld . AO by the PCIT. This is no thing but mak in g approval in a mechan ical manne r and not v alid in the eyes of law. In supp ort o f th e sa me, he furt her relied upon the ju dgment pas sed b y th e Co- ord inate Bench in the case o f M/ s. Kedar Cotton In dustries vs. DCIT in ITA No. 53 1/Ahd/2019, a co py whereof, is also annex ed with th e p aper book filed before us wh ich has du ly been ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 5 – considered by us. On th e co ntrary, the Ld. DR failed to controvert th e ab ove contentions made by th e Ld. AR. 6. We fin d that while d ealing with identical issue, the Co - ord inate Bench h as been pleased to ob serv e as follows : “5. In Ground Nos. 2 & 3 as originally raised in this appeal as well as in the additional ground raised during the course of appellate proceedings before the Tribunal, the assessee has challenged the validity of the reopening of the assessment by the Assessing Officer on various grounds. One of the grounds raised by the assessee is that the approval to reopen the assessment and issue notice under Section 148 of the Act was given to the Assessing Officer by the Principal Commissioner of Income-tax in a mechanical manner and without application of mind. In this regard, the learned Counsel for the assessee has invited our attention to the copy of the approval given by the learned Principal Commissioner of Income-tax placed at page No. 42 to point out that the proposal submitted by the Assessing Officer to reopen the assessment and issue notice under Section 148 of the Act to the assessee was approved by the learned Principal Commissioner of Income-tax by recording only one word “yes”. He contended that similar approval was accorded by the learned Joint Commissioner of Income-tax in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd, reported in [2015] 56 taxmann.com 390 (MP), by recording “Yes, I am satisfied” and the same was held to be unsustainable by the Hon’ble Madhya Pradesh High Court holding that the requisite satisfaction was recorded by the Joint Commissioner of Income-tax in mechanical manner and without application of mind. He contended that the assumption of jurisdiction to reopen the assessment thus was held to be invalid and the assessment completed in pursuance of the same was quashed. He submitted that the decision of Hon’ble Madhya Pradesh High Court in the case of S. Goyanka Lime & Chemicals Ltd (supra) was challenged by the Revenue in an SLP before the Hon’ble Supreme Court which was dismissed by the Hon’ble Apex Court vide order dated 08.07.2015 in SLP No.11916 of 2015, [2015] 64 taxmann.com 313 (SC). The learned Counsel for the assessee has also relied upon the decision of Hon’ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd Vs. CIT, reported in 258 ITR 317 (Delhi HC) in support of assessee’s claim on this issue. 6. The learned DR, on the other hand, submitted that the Assessing Officer, along with the proposal submitted to the learned Principal Commissioner of Income-tax for approval, had enclosed the reasons recorded by him for reopening the assessment on the basis of which notice under Section 148 was to be issued. He contended that the approval thus was accorded by the learned Principal Commissioner of Income-tax after going through the reasons recorded by the Assessing Officer and after having satisfied that it was a fit case to reopen the assessment and issue notice under Section 148 of the Act. He contended that the approval accorded by the learned Principal Commissioner of Income-tax by recording “Yes” cannot be read in isolation and the same has to be read along with reasons recorded by the Assessing Officer which were seen and ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 6 – considered by the learned Principal Commissioner of Income-tax for arriving at his satisfaction. He contended that the approval for reopening the assessment and issuing notice under Section 148 of the Act thus was accorded by the learned Principal Commissioner of Income-tax to the Assessing Officer by applying his mind and it cannot be said that it was done in a mechanical manner. 7. We have heard the rival submissions on this preliminary legal issue raised by the assessee and also perused the relevant material available on record including the judicial pronouncements cited by the learned Counsel for the assessee. It is observed from the copy of the relevant document placed at page no.42 of the paper-book that the approval to reopen the assessment in the present case and issue notice under Section148 of the Act to the assessee was accorded by the learned Principal Commissioner of Income-tax by recording his satisfaction in one word “Yes” and even the learned DR has not disputed this position. He, however, has contended that the approval accorded by the learned Principal Commissioner of Income-tax cannot be read in isolation and the same has to be read with reasons recorded by the Assessing Officer for reopening the assessment which were available before the learned Principal Commissioner of Income-tax and which were duly taken into consideration while according the approval. We are unable to accept this contention of the learned DR keeping in view the legal position emanating from the judicial pronouncements cited by the learned Counsel for the assessee. While seeking approval to reopen the assessment and issue notice under Section 148 of the Act, the Assessing Officer is required to submit the reasons recorded by him to the competent authority and merely because such reasons recorded by the Assessing Officer are available before the competent authority while according the approval, it cannot be said that the application of mind by the competent authority is presumed and there is no requirement for him to record the proper satisfaction and it is sufficient for him to say only “Yes”. In the case of S. Goyanka Lime & Chemicals Ltd (supra) cited by the learned Counsel for the assessee, the satisfaction was recorded by the Joint Commissioner of Income-tax by saying “Yes, I am satisfied” and still the same was found to be recorded in a mechanical manner and without application of mind by the Hon’ble Madhya Pradesh High Court. While arriving at this conclusion, the Hon’ble Madhya Pradesh High Court relied on its earlier decision in the case of Arjun Singh Vs. Asstt. DIT, [2000] 246 ITR 363 (MP), wherein it was held that the Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format “Yes, I am satisfied” which indicates as if he was to sign only on the dotted line. As submitted by the learned Counsel for the assessee, the SLP filed by the Department against the decision of Hon’ble Madhya Pradesh High Court in the case of S. Goyanka Lime & Chemicals Ltd (supra) has already been dismissed by the Hon’ble Supreme Court. 8. In the case of United Electrical Co. Pvt. Ltd (supra) relied upon by the learned Counsel for the assessee, the Hon’ble Delhi High Court held that the requirement of approval by the higher authority to reopen the assessment and issue notice under Section 148 of the Act by the Assessing Officer is a safeguard to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment. It was held that the Commissioner 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 Assessing Officer and the said power cannot be exercised casually and in a routine manner. In the said case, ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 7 – the Commissioner had simply mentioned “approved” while according sanction to the Assessing Officer to reopen the assessment and issue notice under Section 148 of the Act and the same was held to be without any application of mind by the Hon’ble Delhi High Court. Respectfully following the ratio laid down in the case of S. Goyanka Lime & Chemicals (supra) by the Hon’ble Madhya Pradesh High Court and in the case of United Electrical Co. Pvt. Ltd (supra) by the Hon’ble Delhi High Court, we hold that the assumption of jurisdiction to reopen the assessment was bad in law and the assessment completed by the Assessing Officer under Section 143(3) r.w.s. 148 of the Act in pursuance thereof is void ab initio which is liable to be cancelled. 9. Keeping in view the decision rendered by us as above cancelling the assessment made by the Assessing Officer under Section 143(3) r.w.s. 148 of the Act, we do not consider it necessary or expedient to adjudicate upon other legal and factual issues raised by the assessee in this appeal as the same are rendered only academic in nature.” 7. It is evident th at the judgmen t passed by the Co-ordin ate Bench considered Hon ’ble Madh ya Pradesh High Cou rt in the case of Arjun Singh vs. A sstt. DIT, reported in [2000] 246 ITR 363 (MP), the Hon’ble Madhy a Pradesh High Court observed that while recording satis faction as the Co mmis sioner merely wrote on th e for mat ‘yes I a m satisfied ’ ind icates as if, he wa s to sig n only on the dotted line, n o application of mind to th e proposal put up before hi m fo r ap proval in the lig ht of th e material re lied upon by th e Ld. AO is fou n d to h ave been made. The fact in the case o f United Electrical Co. Pvt. Ltd. (su pra) as also relied up on by the Co-ordinate Bench is also identical to th at o f the fact present in th e ap peal before u s. 8. Th e power con fer red up on th e PCIT is not expected to be exercised casually an d in a routine mann er i s al so ev ident in the in stant case befor e us; the same is also found to be with out any application of min d. Thus, respectfully relying upon th e judgment passed by the Co-ordinate Bench, we do not hesitate to q uash the ITA No. 827/Ahd/2023 (M/s. Palan Real Estate Developers Pvt. Ltd. vs. ITO) A.Y.– 2010-11 - 8 – pro ceeding as the approval is found to h ave n o merit, witho ut any legs to stand upon an d product of non-ap plicatio n of mind. Hen ce, th e en tire proceeding is quash ed. 9. In th e result, the appeal preferred b y the assessee is allowed. This Order pronounced on 21/02/2024 Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 21/02/2024 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. "वभागीय &त&न ध, आयकर अपील)य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड/ फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad