Bansal Rice Traders, Sangrur V. ITO-Ward, Sangrur

ITA 90/CHANDI/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9539 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of being heard; Additional evidence; Question of law; Reason to believe; TDS; FORM 26AS
• Section: 68; 148; 144; 133(6); 143(1); 2(A); 194A

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एस.एम.सी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH (VIRTUAL COURT) ी एन.के .सैनी, उपा य! BEFORE: SHRI. N.K.SAINI, VICE PRESIDENT ITA No. 90 /Chd/2020 Assessment Year : 2010-11 Bansal Rice Traders C/o Manish Bansal, Advocate, Esskay Bansal Associates, Purani Mandi Gali, Sangrur-148001-Punjab The ITO Ward- Samana at Patiala Sangrur-Punjab PAN NO: AAAFB7928G Appellant Respondent ! " Assessee by : Shri Sudhir Sehgal, Advocate # ! " Revenue by : Dr. Ranjit Kaur, Sr. DR $ % ! & Date of Hearing : 18/11/2021 '()* ! & Date of Pronouncement : 31/01/2022 आदेश/Order PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Assessee against the order dt. 10/12/2019 of Ld. CIT(A)Patiala. 2. Following grounds have been raised in this appeal: 1. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in reopening the case u/s 148. 2. That the CIT(A) has failed to appreciate that as per copy of the reasons recorded by the Assessing Officer, it has been mentioned that the assessee is non-filer and whereas, the assessee have been filing the returns regularly for the past many years and, thus, the reasons itself being not in order and there being no reason to believe and, as such, confirmation of ground with regarding to the reopening by the CIT(A) is against the facts and circumstances of the case. 3. Notwithstanding the above said ground of appeal, the Ld. CIT(A) has erred in confirming the addition of Rs. 10,38,753/-, ignoring the opening cash in hand available with the assessee as on 01.04.2009 as per return of income for Asstt. Year 2009-10. 2 4. That the Ld. CIT has grossly erred in ignoring the documentary evidence of return for Asstt. Year 2009-10, which was produced before him and wherein, the cash in hand as on 31.03.2009 has been reflected in the relevant column of return of income, filed in time for that year 5. That the Ld. CIT(A) has failed to appreciate the fact that the partnership firm is maintaining regular books of accounts and on the basis of which, the return has been filed for Asstt. Year 2009-10 and the rejection of bonafide explanation is only on account of conjectures and surmises. 6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 3. Vide Ground No. 1 & 2 the grievance of the assessee relates to the confirmation of action of the A.O. in reopening the case under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). 4. Facts of the case in brief are that the A.O. issued notice under section 148 of the Act dt. 27/03/2017 to the assessee to file the Income Tax Return for the assessment year under consideration i.e; A.Y 2010-11. Since the assessee did not file any return in response to the said notice, the A.O. framed the assessment under section 144 r.w.s 147 of the Act and assessed the income at Rs. 17,23,120/- by making the addition of Rs. 2,23,119/- on account of contract receipt and Rs. 15,00,000/- on account of cash deposit in the bank. 5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under: Brief facts of the appeal are that M/s Bansal Rice Traders, Balial Road, Bhawanigarh was a partnership firm by status. Originally return of income in this case was filed on 13/07/2010 vide Acknowledgment No.4901020928 with ITO, Sangrur. Notice u/s 148 was issued on 27/03/2017, which was never served upon the assessee because main partner who carries on day to day activities of the Sheller was unfortunately left for his heavenly abode in 2014 and the business was closed down. Secondly family of the deceased partner shifted to Panchkula in 2016. On account of partner's death, partner's son being about 20 years old doesn't know about the business and tax matter. Matter being old one and he does not have any knowledge on the same and about the documents or even he came to know in the second week of month of December 2017 that the case of his father's firm is fixed before Income Tax Department. Time was so short and he could not able to collect and submit the relevant documents before the Ld. AO. In the meantime Ld. AO had passed the order u/s 144/147 of the Act ibid. Ld. Assessing Officer issued the notice u/s 148 without going through the facts of the case that whether the appellant is assessed to tax or not. When the LD. AO 3 has not applied his mind that whether firm is assessed to tax or not, he issued the notice by recording reason that the assessee has not filed its return of income hence the income is escaped from assessment, which is wrong on the facts and circumstance of the case. Even he has not taken the income filed with the original return while framing the assessment. It is pertinent to mention here that he did not even bother to check from the system of Income Tax Department that whether the appellant had filed its return of income for the year under consideration or not as the PAN of the appellant is already available with the Ld. AO. It is also a matter of record when the Ld. AO check the form 26AS from the Income Tax Department System and made addition of the income as reflected in form 26AS, then why he can't check from the system whether the Return of income for the year under consideration was filed or not. Therefor the assessment framed by the Ld. AO is bad in the eye of law and the assessment framed is void ab-initio. Ld. AO has made addition of Rs. 15,00,000/- on account of cash deposit in bank. It is stated that this amount was not deposit in one stroke but at the regular intervals during the year under consideration i.e. from the business activities. Ld. AO has also made an addition of Rs.223119/- on account of contract receipt. LD. AO has not verified the facts that whether appellant is filling the return or not. This receipts was already declared in the return of income filed. Now the ground wise submission is as under: Appellate has taken seven grounds of appeal., out of that ground No.l and 7 are general in nature. Ground No.2 relates to that, the LD. AO erred in law by not serving the notice u/s 148 of the Act on the assessee hence the assessment framed u/s 144/147 is void. Notice u/s 148 was issued on 27/03/2017, which was never served upon the assessee because main partner who carries on day to day activities of the Sheller was unfortunately left for his heavenly abode in 2014 and the business was closed down. Secondly family of the deceased partner shifted to Panchkula in 2016. Moreover Ld. AO while recorded the reasons has not applied his own mind that whether the appellant is filling the return of income or not. It is also pertinent to mention here that LD. AO while framing the assessment has not considered the returned income of the appellant. Therefore the reason recorded is based on suspicion and not on the reason to believe. It is submitted in view of the above it is opined that the Ld. Assessing Officer wrongly recorded reasons u/s 147(2)(a) and issue notice u/s 148 of the Income Tax Act. It proves that the Assessing officer has not applied his mind, whereas while recording the reasons Assessing Officer has to apply own mind and reasons to believe not reasons to suspect. In the instant case the Ld. Assessing Officer has wavering mind with regard to the fact that appellant is assessed to tax or not. It is submitted that once the Ld. AO had stated that the appellant is not assessed to tax, then he had to record his reasons within the meaning of explanation 2(a) of the section 147 of the Act ibid whereas when the appellant had already filed its return the reasons should be recorded in explanation 2(b) of section 147 of the Act and as such the reasons recorded itself is defective as such the assessment based on the defective reason is not sustainable in eye of law. Your kind attention is invited to the judgment in the case of Jt. CIT vs. George Williamsons (Assam) Ltd. (2003) 258 ITR 126 in which it was held that "Assessing Officer must make independent enquiries for arriving at the prime face conclusion that income of the assessee had escaped assessment. The assessing officer acted merely on the basis of information received from another officer by result of a survey conducted by such officer. The assessing officer without forming 4 any opinion/belief of his own and without gathering any further material or enquiry, initiated proceedings for reopening. It was held that assessing officer had not made an independent enquiry for arriving at the prime face conclusion that income of the assessee escaped assessment and therefore the proceedings u/s 148 were not valid." In the case of appellant, the Ld. AO has not made any enquiry before recording the reasons, therefore the proceedings are not valid in the eye of law. 1. Ground No.3 stands withdrawn 2. Ground No.4 relates to that, the LD. AO erred in law by making an addition of Rs. 15,00,000/- being cash deposited in bank. It is submitted that the amount of Rs. 15,00,000/- was not deposited in one go but i.e. from business transaction and was deposited on various dates. By one or other reason appellant could not produce the relevant papers and the same are now produced in the shape of Balance Sheet cum Profit and Loss Account, copy of bank statement along with bank account from the books of accounts of the appellant and cash book. The same justifies the cash deposit of Rs. 15 lac in the bank. 3. Ground No.5 relates to that, Ld. AO erred in law by making addition of Rs.223119/- on account of contract receipts. It is stated that this entry relates to milling charges paid by Punjab Agro Food Corporation. Originally as per 26AS contracts receipts were shown at Rs.223119/-, which was later on rectified by Punjab Agro Food Grain Corporation to Rs.78466/-, which was duly declared by the appellant in his return of income. Copy of Profit and Loss account was filed as in Ground No.4. a duly rectified 26AS form is also enclosed. No addition is called for on this ground. 4. Ground No.6 relates to that, "Ld. AO erred in law by wrong charging of interest u/s 234A. it is stated that appellant had originally filed the return on 13/07/2010 vide acknowledgment No.4901020928 with ITO Ward-1 Sangrur. The return was filed in time therefore the charging of interest u/s 234A should not be levied. Therefore there is calculation mistake of charging of interest u/s 234A. In view of the above it is prayed that appeal of the appellant may kindly be accepted and oblige." 5.1 The assessee also submitted an application under Rule 46A of the Income Tax Rules 1962 for admission of the additional evidence which read as under: “Sub:- Application for admission of additional evidence under Rule 46A of the Income Tax Rules In the Appeal of Bansal Rice Traders, Balial Road, Bhawanigarh for the Assessment Year 2010-11 in Appeal No. 10261/IT/CIT(A)/PTA/17-18 Assessment in the above captioned appeal is decided u/s 144/147 of the Income Tax Act vide order dated 18/12/2017. Appellant was prevented by sufficient cause not to file any document during the assessment proceedings on the ground that no notice had been served upon him. Following documents are enclosed in this case, which are very essential to decide the appeal: 1. Bank Account Statement. 2. Copy of Balance Sheet, Profit and Loss Account 3. Cash Book 4. Acknowledgment Slip 5. Computation Sheet 6. Rectified form 26AS 5 Reliance was placed on the following case laws : • Tek Ram (Dead) through LRs Vs. CIT 357 ITR 133 (SC) • CIT Vs. Mukta Metal Works 336 ITR 555 (P&H) • UOP LLC Vs. ADIT, ITAT, Delhi “F” Bench 108 ITD 186 • CIT Vs. Gani Bhai Wahab Bhai 232 ITR 900 (MP) • Electra (Jaipur)(P) Ltd. Vs. Inspecting Assistant Commissioner 26 ITD 236 (Del) • CIT vs. Parimal Kanti Chanda 291 ITR 77 (Gauhati) • Hingora Industries Ltd. Vs. ITO in ITA No. 2109/Ahd/2008 (Ahd Trib)) • DCIT Vs. Mukesh Kumar Aggarwal in ITA No. 374/Agra/2010 (Agra Trib) • DCIT vS. Rohini Builders 256 ITR 360 (Guj) 5.2 The Ld. CIT asked the comment of the A.O. on the above submissions of the assessee. In response the A.O. submitted the report which reads as under: "Sub :- Comments and additional evidence under Rule 46A in the case of M/s Bansal Rice Traders, Balial Road, Bhawanigarh, Sangrur for the assessment year 2010-11-regarding Kindly reference to your office letter No 10261-IT/CIT/(A)PTA/17-18 dated 27.12.2018 on the subject cited above. Brief Facts:- During the relevant assessment year 2010-11, the assessee had filed his return declaring an income at Rs. Nil. As per information available with this office that during the relevant assessment year the assessee had made certain cash transactions with Oriental Bank of Commerce. Apart from that, the assessee had received contractual receipts of Rs. 2,23,119/- from Punjab Agro Food Grain Corporation Ltd. But, the same had not shown in the return of his income filed for the assessment year 2010-11. The case was selected for scrutiny with the prior approval of the Pr. CIT Patiala. Notice u/s 148 of Income Tax Act, 1961 was issued on 27.03.2017. Statutory notice(s) as per the provisions of Income Tax Act, 1961 were issued on various date(s). In compliance to the notice, assessee neither assessee attended the office on the stipulated date nor filed any information/documents. Sufficient opportunities of being heard were provided to the assessee. The assessee had failed to comply with the terms of the notice issued on various dates. Assessment proceedings were completed by invoking the provisions of section 144 of Income Tax Act, 1961 on 18.12.2017 by making an addition of Rs. 17,23,119 ( Rs. 15,00,000/- unexplained cash and Rs. 2,223,119/- contractual receipt received at Rs. 17,23,120/-. During the course of assessment proceedings, sufficient opportunities of being heard were provided to the assessee and the assessee the assessee has not shown any interest to provide the same. Aggrieved assessee had not accepted the order passed u/s 144 of Income Tax Act, 1961 by the AO and filed an appeal against the order before Ld. CIT(A) Patiala. The assessee has filed additional evidence in the shape of request letter along with copy of Bank a/c statement, Copy of Balance Sheet, Profit & Loss Account. Cash Book, Acknowledgement slip, Computation Sheet and Rectified form 26AS with request to admit the additional evidence as the Same had not filed before the AO. 6 In this regard Rule 46 is reproduced below As per rule 46A(1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeal) or as the case may be, the Commissioner (Appeals) any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances namely :- a) Where the [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer]; or c) Where the appellant was prevented by sufficient cause from producing before the [ Assessing Officer] any evidence which is relevant to any ground of appeal ; or d) Where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. Perusal of the provisions of rule 46A(1) mentioned above clearly bars the production of any additional evidence till the above mentioned conditions are fulfilled. It is clear that only in case of any one of these four ground mentioned in sub-rule 1 of rule 46A, the production of additional evidence is permitted. The facts of this case are examined in the light of Rule 46. In this regard it is stated that: During the course of assessment proceedings, the Assessing Officer did not refuse to admit any evidence, which, ought to have been admitted and the assessee has sufficient time, to produce the evidence. In this case, Sufficient opportunities of being heard were provided to the' assessee as stated in the Para -1 and the assessee has failed to provide the same. From the perusal of history of the assessment proceedings for the assessment year under consideration, there is no instance on record or otherwise which proves that the assessee was prevented by sufficient cause for producing the evidence which was called upon to be produced by the Assessing Officer from time to time. During the appellate proceedings, the Ld. CIT(A) Patiala, remanded the case u/s 250(4) of the Income Tax Act 1961 to /TO, Sangrur for necessary verification of additional evidence submitted by the assessee were made In respect of Rs. 2,23,119A contractual receipts, assessee has submitted latest form 26AS before the Ld. C/T(A) Patiala. On perusal of form 26AS, two receipts were appear Le. Rs. 78,466A and Rs. 1,44,653/-. But, on the same date receipt of Rs. 1,44, 653/- was made contra (may be inadvertently credited). To verify the genuineness of these receipts, notice u/s 133(6) of the Income Tax Act, 1961 was issued to the Punjab Agro Food Grain Corporation Ltd, Sangrur. In compliance, the Punjab Food has verified that only one amount of Rs. 78, 466/- was credited in the account of Bansal Rice Traders, and Rs. 1569 TDS was deducted for this payment. Further, on perusal of the cash flow statement submitted before the Ld. C/T(A) Patiala, opening balance of cash was shown at Rs. 10, 38, 753/-. To verify the genuineness of the opening balance as shown in the cash statement, Balance Sheet of the previous year was called for. On perusal of previous year Balance 7 Sheet as well as cash shown as opening balance in the cash flow statement are the same. No adverse inference is drawn as all the transactions have been verified with cash book The contention of the assessee has not been accepted. At the time of drawing of cash flow statement, the assessee had smartly matched the same opening balance in the cash flow statement and in the balance sheet of the previous year .This statement is constructed after thought. But, the same constructed story could be produced before the AO during the assessment proceedings. Whereas the assessee has availed a sufficient opportunities of being heard. But, the assessee did (produced) nothing during assessment proceedings, in view of the facts discussed above, the additional evidence filed by the assessee before your good self may not be accepted and sustained the additions made by AO In view of the above, it is apparent that the assessee's claim for admitting additional evidence is contrary to the conditions /aid down under rule 46A of I. T. Rules, 1962. Keeping in view, the facts of the case and material available on record, it is requested that the application of the assessee for grant of permission to produce additional evidence be not admitted as it does not fulfill any of the conditions /aid down under Rule 46A of the income Rule 1962. It is, therefore, requested to confirm the additions made by then AO." 5.3 The Ld. CIT(A) forwarded the remand report of the A.O. to the assessee for the comments. In response, the assessee submitted as under: "Sub—Reply of remand report in the course of Appellate Proceedings in the case of M/s Bansal Rice Traders, Balial Road, Bhawanigarh, Sangrur for the assessment year 2010-11-regarding With regard to the captioned subject, I have filed detailed submissions along with the relevant documents as additional evidence before your good self- accompanied by request letter of admission of additional evidence under rule 46A. Then the case was sent to the jurisdictional assessing officer for the remand proceedings and now the learned assessing officer vide letter dated 06/03/2019 has furnished the remand report. The observations of the learned assessing officer in the remand report and our submission against the said observation are provided as under— Sufficient opportunity of being heard: At the outset, the learned assessing officer in his remand report has objected to the admission of additional evidence now furnished by the appellant by stating that opportunity was to the appellant and also on the following point. From the perusal of the history of the assessment proceedings for the assessment year under consideration there is no instance on record or otherwise which proves that the assessee was prevented by sufficient cause for producing the evidence which was called upon to be produced by the AO time to time. With regard to cash flow statement Ld. Assessing Officer stated that the contention of the assessee has not been accepted. At the time of drawing of cash flow statement, the assessee had smartly matched the same opening balance in cash flow statement and in the balance sheet of the previous year. 8 This statement is constructed after thought. In view of the facts discussed above the additional evidence filed by the assessee before your goodself may not be accepted and sustained the addition made by the AO. Your Honour, remand report furnished by the Ld. AO should not be accepted on the following grounds: 1. Notice u/s 148 was issued on 27/03/2017, which was never served upon the assessee because main partner who carries on day to day activities of the Sheller was unfortunately left for his heavenly abode in 2014 and the business was closed down. Secondly family of the deceased partner shifted to Panchkula in 2016. On account of partner's death, partner's son being about 20 years old doesn't know about the business and tax matter. Matter being old one and he does not have any knowledge on the same and about the documents or even he came to know in the second week of month of December 2017 that the case of his father's firm is fixed before Income Tax Department. Time was so short and he could not able to collect and submit the relevant documents before the Ld. AO. In the meantime Ld. AO had passed the order u/s 144/147 of the Act ibid. 2. That the Ld. Assessing Officer has not disputed about Ground No.2, the same should be accepted. 3. With regard to cash deposited in the bank, Ld. Assessing Officer has verified all the facts from all the corners, nothing adverse was found but states only mere to say that it is an constructed after thought story just to justify his action without any basis. Whereas partner of the appellant firm was died and his son is a small chap who don't know about the business activities and only came to know about the case in the last month and he was unable to collect the information at that time. Your Honour, When the little chap doesn't know about the business activities how he can match the entries. In view of the above additional evidences filed by the appellant in this regard be accepted and further Ld. Assessing Officer has states in remand report that no adverse inference is drawn as all the transactions have been verified with the cash book. 4. The Ld. Assessing Officer has also accepted the Ground No.5 relates to addition of Rs.223119/-, the same is verified by her after issuing notice u/s 133(6) of the Income Tax Act, 1961, to the Punjab Agro Grain Corporation, Sangrur and the Punjab Agro has verified that the only one amount of Rs.78466/- was credited in the account of appellant firm and Rs. 1569/- TDS was deducted for this payment. The same may kindly be accepted. The reliance was placed on the following case laws: • ITO Vs. Kuber Chand Sharma in ITA No. 3982/Del/2009 (ITAT Del) • Jute Corporation of India Ltd. Vs. CIT 1991 AIR 241 1990 SCR Supl. (1) 340 the Hon'ble Supreme Court • Avan Gidwani Vs. ACIT in ITA No. 5138/Mum/2015 (Mum Trib) • Khemabhai Patel, Vs. ITO in ITA No. 2131/Mum/2009(Mum Trib) • Abhay Kumar Shroff Vs. ITO 63 ITR 144 (Pat) • Smt. Prabhavati S. Shah Vs. CIT, 231 ITR 278 • Collector Land Katji, 167 ITR 471 (SC) 9 5.4 The Ld.CIT(A) after considering the submissions of the assessee and the remand report of the A.O. observed that the A.O. issued the notice under section 148 of the Act for filing the return of income but no return of income was filed, therefore, the A.O. was left no option but to complete the assessment exparte under section 144 of the Act. 6. Now the assessee is in appeal. 7. The Ld. Counsel for the assessee drew our attention towards page no. 4 of the assessee’s paper book which is the copy of the reason recorded by the A.O. for issuing the notice under section 148 of the Act and read as under: Reasons for issue notice u/s 148 of Income Tax Act. 1961 As per Information available with this office M/s Bansal Rice Traders, Balial Road, Bhawanigarh has maintained bank account with Oriental Bank of Commerce, Sangrur. During F.Y. 2009-10 relevant to A.Y. 2010-11 M/s Bansal Rice Traders has deposited Rs.15,00,000/- in Oriental Bank of Commerce. Perusal of records of this office showed that M/s Bansal Rice Traders has not filed its return of income for the A.Y. 2010-11. The amount deposited in the bank account to the tune of Rs. 15,00,000/- during F.Y. 2009-10 relevant to AY. 2010-11 is unexplained cash (credits) as per the provisions of section 68 of the Income Tax Act, 1961. During the F.Y. 2009-10 the assessee has also received income from Contract u/s 194A of the Income Tax Act, 1961 amounting to Rs.2,23,119/- (Punjab Agro Food Grain Corporation Ltd.). In view of above I have reasons to believe that the income chargeable to tax to the extent of Rs. 17,23,119/-(Rs. 15,00,000 + Rs.2,23,119) is escaped assessment for the A. Y. 2010-11 within the meaning of explanation 2(a) of section 147 of the Income Tax, 1961. Therefore, Notice u/s 148 of Income Tax Act, 1961 for the A. Y. 2010-11 is being issued to the assessee. The notice u/s 148 has been issued after obtaining necessary approval of the Pr. Commissioner of Income Tax, Patiala. Dated: 17/03/2017 Sd/- (BALBIR SINGH) Income Tax Officer, Ward, Sangrur 7.1 Ld. Counsel for the Assessee stated that the aforesaid reasons recorded clearly shows that the A.O. issued the notice under section 148 of the Act by mentioning that the assessee had not filed any return of income, on the contrary 10 the assessee was regularly filing the return of income, copies of which are placed at page no. 18 to 37 of the assessee’s paper book therefore the reasons recorded for reopening the assessment by the A.O. were factually wrong. It was further submitted that the Ld. PCIT also gave approval in mechanical manner without applying his mind and simply had written “Yes” for giving the approval therefore the reopening itself was bad in law. The reliance was placed on the following case laws: • Commissioner of Income Tax V/s Chetan Gupta 62 taxmann.com 249 DEL-HC • Shri Rathi Steel Ltd. V/s Assistant Commissioner of Income Tax 104 taxmann.com 400 DEL- TRIB • Charan Singh V/s Income Tax Officer ITA NO.906/ASR/2018 ASR-TRIB • Commissioner of Income Tax V/s Naveen Chander 323 ITR 49 P&H-HC • Monika Rani V/s The Income Tax Officer ITA NO.582/CHD/2019 CHD-TRIB • Gaurav Joshi V/s The Income Tax Officer 55 CCH 83 JAL-TRIB • Commissioner of Income Tax V/s Atlas Cycle Industries 180 ITR 319 P&H-HC • Sagar Enterprises V/s Assistant Commissioner of Income Tax 257 ITR 335 GUJ-HC • Prabha Goyal V/s The Income Tax Officer ITA NO.1139/CHD/2017 CHD-TRIB • Amrik Singh V/s Income Tax Officer 142 DTR 6 ASR-TRIB-SMC • Smt. Charanjit Kaur Vs ITO as reported in [2021] 88 ITR (Trib.) 41 • Sh. Jaspal Singh Vs ITO as reported in [2021] 88 ITR (Trib.) 407. • Sh. Satnam Singh in ITA No. 579/Asr/2019 for A.Y. 2013-14 vide order, dated 29.06.2021 8. In his rival submissions the Ld. DR strongly supported the impugned order passed by the Ld. CIT(A) and further submitted that the contention of the assessee that the return of income was filed was wrong, since the return was not filed in time and it was belated. It was further submitted that the A.O. issued the notice under section 148 on last address of the assessee known to the Department but the assessee did not respond, therefore, the reopening by issuing the notice under section 148 of the Act was in accordance with law and the Ld. CIT(A) rightly approved the action of the A.O. 9. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the A.O. 11 issued the notice under section 148 of the Act for the reasons that the assessee had not filed any return of income. On the contrary the assessee was regularly filing the return of income, copies of the Income Tax Returns are placed at page no. 14 to 37 of the assessee’s paper book, therefore, the reasons recorded by the A.O. were without verifying the facts available on his records. Copy of the acknowledgement of filing the return of income for the year under consideration is placed at page no. 14 to 17 of the assessee’s paper book. The said return of income was filed with the ITO Ward-1, Sangrur, therefore, the reasons recorded by the A.O. were without verifying the records available with him, so it cannot be said that the A.O. applied his mind and verified the record while issuing notice under section 148 of the Act to the assessee. 9.1 On a similar issue the ITAT Chandigarh Bench ‘SMC’ in the case of Monika Rani Vs. The ITO in ITA No. 582/Chd/2019 for the A.Y. 2010-11 order dt. 28/02/2020 held as under: 10.1 From the aforesaid reasons it is clear that the A.O. issued the notice under section 148 of the Act, for the reasons that the assessee had not filed her return of income and that the assessee had purchased a property amounting to Rs. 1,49,02,500/- during the F.Y. 2009-10. However, the said reasons given by the A.O. for reopening the assessment are not correct since the assessee had filed the return of income on 30/03/2011, copy of which is placed at page no. 1 of the assessee’s compilation. The assessee had also shown the investment in agricultural land amounting to Rs. 52,20,000/- in her Balance Sheet as on 31/03/2010, copy of which is placed at page no. 2 of the assessee’s compilation therefore both the reasons given by the A.O. i.e; the assesse had not filed the return of income and invested in the property amounting to Rs. 1,49,02,500/- were wrong. 10.2 On a similar issue the Hon'ble Gujarat High Court in the case of Sagar Enterprises Vs. ACIT (supra) held as under: “ that it was apparent that the fact of non-filing of the return for the assessment year 1991-92 had weighted with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income. However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which fact would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover the Income-tax Officer had stated that the payment which was stated to be undisclosed income relevant for the assessment year 1991-92 could have been made during the financial year 1990-91 relevant to the assessment year 1991-92 and hence, “to cover up that probability, protective addition was made in the assessment year 1992-93.” The 12 first appellate authority decided the appeal for the assessment year 1992-93 on January, 1996, and the reason had been recorded thereafter on August 18, 1997. The notice of reassessment was not valid and was liable to be quashed.” 10.3 A similar view has been taken by the ITAT, Chandigarh ‘SMC’ Bench in the case of Baba Kartar Singh Dukki Educational Trust Vs. ITO (supra) wherein it has been held as under: HEAD NOTE: “ Where Assessing Officer processed under section 143(1) returns of income filed by assessee for assessment years 2001-02 to 2003-04 and subsequently he reopened said assessments on sole basis that assessee had not filed returns for years preceding to assessment year 2004-05 and, therefore, its income having escaped assessment, reopening of assessment was on basis of suspicion and non- existent and incorrect facts and it was invalid” 10.4 Similarly the ITAT “L” Bench, Mumbai quashed the reopening of the assessment which was based on incorrect facts vide order dt. 28/02/2018 in the case of Van Oord Dredging and Marine Contractors BV vs. ADIT (supra) by observing as under: “ In AY 2005-06, the A.O. has reopened the assessment on incorrect facts and further the assessing officer has failed to demonstrate that there was failure on the part of ht assessee to disclose fully and truly all material facts during the course of original assessment proceedings. Hence the reopening of assessment of AY 2005-06 is liable to be quashed on these two grounds also. Accordingly we set aside the order passed by Ld. CIT(A) on this issue and hold that the reopening of assessments of both the years are not in accordance with the law and accordingly quash the assessment orders passed for both the years under consideration.” 10.5 Similar view has been taken by the ITAT Jaipur Bench in case of Shri Ram Mohan Rawat Vs. ITO(supra) vide order dt. 10/10/2019 the relevant findings given therein read as under: “Thus the reasons recorded by the AO for formation of belief that income assessable to tax has escaped assessment are based on two counts. One, the assessee has made bogus purchases and the second, that the purchases are not verifiable as the assessee has not filed the return of income. Thus the formation of belief is based on these two factual aspects that the assessee has made bogus purchases which are not verifiable as assessee has not filed the return of income. The reasons for nonverifiable of the purchases made by the assessee due to non filing of the return of income as stated by the AO is absolutely incorrect and wrong and contrary to the record when the assessee has filed the return of income electronically on 29.10.2007. This fact was also subsequently accepted by the AO that the assessee filed the return of income under section 139(1). The second aspect of the reasons that the assessee has made bogus purchases is also not based on any enquiry or verification of record by the AO but this is simply reproduction of information received from the Investigation Wing. The said information is also incomplete as regards the details of the purchases and the parties from whom such purchases were made by the assessee. Thus the reasons recorded by the AO manifest that there is no application of mind and the averments as recorded in the reasons are very vague and general and rather inconsistent with the facts available on record so far as the filing of return of 13 income by the assessee. The formation of belief on such incorrect and vague reasons would lead the reopening of the assessment as invalid.” 10.6 In the present case also the A.O. reopened the assessment on the basis of wrong facts, so respectfully following the ratio laid down in the aforesaid referred to cases, I am of the view that the reopening of the assessment in the present case was not valid, accordingly, the same is quashed. Since the appeal of the assessee is decided on the legal issue, therefore no findings are being given on the merit of the case relating to the quantum of addition. In the present case also the A.O. reopened the assessment on the basis of wrong facts, therefore by respectfully following the aforesaid referred to order the reopening of the assessment in the present case was not valid. 9.2 In the present case it is also noticed that the Ld. Pr. CIT accorded the approval to the A.O. for reopening the assessment in mechanical manner as is evident from page no. 6 of the assessee’s paper book which is the copy of the form for granting the approval to issue the notice under section 148 r.w.s 147 of the Act. In Column No. 12 of the said Form the Ld. PCIT on the issue as to whether the Ld. PCIT is satisfied of the reason recorded by the A.O. that it is a fit case for issue of notice under section 148 of the Act, has simply written “Yes”. 9.3 On a similar issue the ITAT Chandigarh Bench in the case of Smt. Charanjit Kaur Vs. ITO as reported in [2021] 88 ITR (Trib) 414 held as under: 14 As pointed out by the learned counsel for the assessee, 'the hon'ble Madhya Pradesh High Court has held in the case of CIT v.iS. Goyanka Lime and Chemicals Ltd. (supra) that where Joint Commissioner recorded satisfaction in a mechanical manner and without application of mind to accord sanction for issuing notice under section 148 of the Act, the reopening of the assessment was invalid. The observations of the hon'ble court are as under : "We have considered the rival contentions and we find that while according sanction; the Joint Commissioner, Income-tax only recorded so 'Yes ; I am satisfied' which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting recon- sideration." 14 15. In the present case, the Principal Commissioner of Income-tax has recorded his satisfaction by writing 'yes, satisfied/it is a fit case for issue notice under section 148 on the format. In bur considered view, the satisfaction recorded in the present case is similar to the satisfaction recorded in the case discussed above. 9.4 A similar view has been taken by the ITAT Amritsar Bench in the case of Satnam Singh Vs. ITO in ITA No. 579/Asr/2019 for the A.Y. 2013-14 order dt. 29/06/2021 wherein it has been observed as under: 14. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the A.O. obtained the approval of the JCIT before issuing the notice under section 148 of the Act, performa copy of which is placed at page no. 1 of the assessee’s paper book, in the said Performa for recording the reasons for initiating the proceedings under section 147 / 148 of the Act and for obtaining the approval of the Ld. JCIT, it has been mentioned in column no. 11 as under: “ Yes it is approved for 148 action “ SD/- (Umesh Takyar) Joint Commissioner of Income Tax Range-1, Jalandhar From the aforesaid approval it is clear that the JCIT, Range-1, Jalandhar recorded the satisfaction in a mechanical manner without application of mind. He accorded the sanction for issuing notice under section 148 of the Act in a mechanical manner. 14.1 On a similar issue the Hon'ble Guwahati High Court in the case of Ladhuram Laxmi narayan Vs. ITO, Additional 102 ITR 595 (supra) held as under: 22. Sub-section (2) of Section 151 requires that before issuing a notice under Section 148, the Commissioner must be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The submission of the learned counsel is that in the instant case there was no real satisfaction of the Commissioner or in other words there could not be satisfaction of the Commissioner as contemplated under Subsection (2) in the facts and circumstances of the case. In the column of the report whether the Commissioner was satisfied, the Additional Commissioner said " Yes ". 23. We have already found that the first ground given by the Income-tax Officer in his report praying for sanction for acting under Section 148 is admittedly a mistaken ground and, therefore, non-existent. That being so, the satisfaction of the Additional Commissioner in the instant case, so far as the first ground is concerned, is wholly mechanical without applying his mind. It has further been held 24. Regarding the second ground, we find that the satisfaction could in law be only with respect to Clause (b) of Section 147 and that being so the notice issued on March 10, 1971, would be clearly barred under Section 149 of the Act. 25. In the result, in any view of the matter, we find that the impugned notice under Section 148 in the instant ease is bad in law and without jurisdiction. Accordingly, we quash the impugned notice dated March 10, 1.971, under Section 148 of the Act. 15 14.2 A similar view has been taken by the Hon'ble Andhra Pradesh High Court in the case of P. Munirathnam Chetty And P. Vs. ITO, C-Ward 101 ITR 385 (supra)wherein it has been held as under: The form like the one which is being used containing an endorsement merely saying "Yes" would justifiably cause apprehension that the act of the Commissioner is a mechanical act. In order to obviate this impression and to infuse more confidence in the assessee, it would be proper if the Commissioner also briefly slates why he has given his sanction to the proceedings under Section 147, thus avoiding all arguments in courts of law whether he applied his mind or he would have been satisfied in the circumstances of the case or not. 14.3 On an identical issue the ITAT Chandigarh Bench “B” Chandigarh vide order dt. 15/03/2021 in ITA No. 215/Chd/2020 for the A.Y. 2009-10 in the case of Shri Tek Chand Vs ITO, Ward-2, Kaithal held as under: 14.1 The A.O. obtained the approval of the PR. CIT before issuing the notice under section 148 of the Act. The proposal dt. 11/03/2016 seeking the approval for issuance of notice under section 148 of the Act, by the A.O. is placed at page no. 2 & 3 of the assessee’s paper book. While giving the approval the Ld. PR. CIT, Karnal recorded as under: “ Yes, satisfied, it is a fit case for issue of notice under section 148 “ Sd/- Pr. CIT, Karnal 14.2 From the aforesaid approval, it is clear that the Ld. Pr. CIT recorded satisfaction in the mechanical manner, without application of mind to accord sanction for issuing notice under section 148 of the Act. On an identical issue the Hon'ble M.P. High Court in the case of CIT Jabalpur Vs. S. Goyanka Lime & Chemical Ltd. reported at (2015) 56 Taxmann.com 390 by following its own decision in the case of Arjun Singh Vs. ADIT (2000) 246 ITR 363 (M.P) held as under: 7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles arc laid down:— 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, 1 am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.' 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9. As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue. 10. In view of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration. 14.3 Against the said order, the Hon'ble Apex Court dismissed the SLP filed by the Department and affirmed the order of the Hon'ble M.P. High Court in the case of CIT Vs. S. Goyanka Lime & Chemicals Ltd. (supra) held as under: “ 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.” 15. We therefore by following the ratio laid down by the Hon'ble Apex Court in the aforesaid referred to case, are of the view that the reopening under section 148 of the Act on the basis of mechanical approval without applying the mind by the Ld. Pr.CIT was not valid. Therefore, in the present case, the reopening of the assessment on the basis of notice under section 148 of the Act is quashed. 16 14.4 In the present case also since the A.O. reopened the assessment under section 147 of the Act by issuing the notice under section 148 of the Act, on the basis of mechanical approval, without applying his mind, therefore the said approval was not valid and consequently the reopening of the assessment on the basis of said approval was not valid. We therefore quash the same. Since, we have decided the legal issue in favour of the assessee therefore no finding is given on the other grounds raised by the assessee on merit. 9.5 In the present case the A.O. reopened the assessment on the basis of wrong facts and the Ld. PCIT gave the approval in mechanical manner therefore by respectfully following the aforesaid referred to order of the Coordinate Bench of the ITAT, the assessment framed by the A.O. after issuing the notice dated 27/03/2017 under section 148 of the Act is quashed. Since we have quashed the reassessment framed by the A.O. while deciding the legal issue, therefore, no findings are being given on the other issues raised by the assessee on merit. 10. In the result, appeal of the assessee is allowed. (Order pronounced in the open Court on 31/01/2022) Sd/- एन.के .सैनी, ( N.K. SAINI) उपा य! / VICE PRESIDENT AG Date: 31/01/2022 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File