RAMAN CHAWLA,DELHI V. ACIT, CIRCLE- 61(1), DELHI), NEW DELHI

ITA 1597/DEL/2024

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126228 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: SALIL KAPOOR
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Reopening of assessment; Principle of natural justice; Assessment record; Competent authority; Reason to believe; Borrowed satisfaction; Grounds of appeal; Principal; Satisfaction; Dismissed; National Faceless Appeal; Mechanical; Judgment; HRA; Commissioner; Commissioner of Income Tax; AMP; Barred by time; Reassessment under Section 148; Deleted; Covered matter; Affirmed; Section 68 of the Act; Hospital; Legal and bad in law
• Section: 147; 148; 142(1); 68; 13

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITA No.1597Del/2024 Assessment Year: 2016-17 Raman Chawla, C-4/66, Safdarjung Development Area, New Delhi-110016 PAN No.AAMPC4618G Vs. ACIT Circle – 61 (1) Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. Salil Kapoor, Advocate Sh. Sumit Lalchandani, Advocate Sh. Shivam Yadav, Advocate Ms. Ananya Kapoor, Sh. Tarun Chanana, Advocate Respondent by Ms. Suman Malik, CIT DR Date of hearing: 21/04/2025 Date of Pronouncement: 23/04/2025 ORDER PER SUDHIR KUMAR, JM: The assessee has filed the present appeal against the order of National Faceless Appeal Centre, Delhi (hereinafter referred 2 as “NFAC) vide order dated 09.02.2024 passed against the assessment order dated 30.03.2022 under Section 147read with section 144B of the Income Tax Act, 1961 (herein referred as ‘the Act’)pertaining to the Assessment year (“AY”) 2016-17. 2. The assessee has raised following grounds of appeal: 1. That, in view of the facts and circumstances of the case and in law, the notice issued under section 148 of the Income Tax Act, 1961 ('the Act') on 30.03.2021 and the Assessment Order passed under section 147 r.w.s. 1448 of the Act on 30.03.2022 are illegal, bad in law, without jurisdiction and barred by time limitation. 2. That in view of the facts and circumstances of the case and in law the notice dated 30.03.2021 issued under section 148 of the Act is illegal, bad in law and without jurisdiction as there are no valid reasons to believe that income has escaped assessment in the case of the Appellant. The purported reasons are recorded without any independent application of mind by the Assessing Officer (AO') and are based on borrowed satisfaction. Hence, the proceedings under section 148 of the Act are illegal, bad in law, without jurisdiction and liable to be quashed. 3 3. That in view of the facts and circumstances of the case and in law, the reasons recorded are not in consonance with the procedure laid down by the Hon'ble Supreme Court and the Central Board of Direct Taxes and such the notice dated 30.03.2021 issued under section 148 of the Act on the basis of such reasons is illegal, bad in law and liable to be quashed. 4. That in view of the facts and circumstances of the case and in law the notice dated 30.03.2021 issued under section 148 of the Act is illegal, bad in law and without jurisdiction as the sanction under section 151 of the Act is illegal, bad in law and not sustainable in law as there is no application of mind while granting the approval and the same has been accorded in a mechanical manner. 5. The alleged sanction under section 151 of the Act is is illegal, bad in law and without jurisdiction as the same has been issued in violation of the Central Board of Direct Taxes (CBDT) Circular No. 19 of 2019 dated 14.08.2019. Hence, the notice and the consequential reassessment proceedings are liable to be quashed. 6. That in view of the facts and circumstances of the case and in law, the AO has grossly erred in not adhering to the binding instructions issued by the Central Board of Direct 4 Taxes vide Instruction No. 225/40/2021/ITA-11, dated 12.03.2021 and as such the proceedings under section 148/147 of the Act initiated via notice dated 30.03.2021 as well as the Assessment Order dated 30.03.2022 are illegal, bad in law, and liable to be set aside. 7. That in view of the facts and circumstances of the case and in law, the AO has grossly erred in proceeding with the case of the Appellant in contradiction to the law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (india) Ltd. v. ITO 259 ITR 19] and as such the proceedings under section 148/147 of the Act initiated via notice dated 30.03.2021 as well as the Assessment Order dated 30.03.2022 are illegal. had in law and liable to be set aside. 8. That in view of the facts and circumstances of the case and in law, the order dated 10.03.2022 passed by the AO disposing of objections is perfunctory, illegal and bad in law because no objections to 'reason to believe were filed by the Appellant till that time as the AO failed to provide a copy of 'reason to believe as well the underlying material based on which such belief was formed. 9. That in view of the facts and the circumstances of the case, order dated 30.03.2022 passed under section 147 5 r.w.s. 144B is passed in contravention to the provisions of section 144B of the Act and as such the said order is illegal, bad in law and liable to be quashed. 10. That in view of the facts and the circumstances of the case the order dated 30.03.2022 passed under section 147 r.w.s. 144B is passed in gross violation of the principles of natural justice as the material based on which the impugned additions are made as well as reasonable opportunity of being heard was not provided to the Appellant. The Appellant was also precluded from cross examining the statement of Sh. Bajrang Lal Periwal which purportedly suggests that income in the case of the Appellant has escaped assessment. Hence proceedings under section 148/147 of the Act initiated via notice dated 30.03.2021 as well as the Assessment Order dated 30.03.2022 ought to be vitiated on this ground alone. 11. That in view of the facts and circumstances and in law, the additions made by the AO vide order dated 30.03.2022 as upheld by the NFAC/CIT(A) vide its order dated 09.02.2024 are illegal, bad in law and liable to be deleted. 12. That, in view of the facts and circumstances of the case, the AO as well as NFAC/CIT(A) failed to appreciate 6 that the provisions of Section 68 of the Act are not applicable and have been illegally and wrongly invoked in the instant case. 13. Without prejudice to the above, in view of the facts and circumstances of the case, the AO as well as NFAC/CIT(A) have grossly erred in stating that the Appellant has taken a loan to the tune of Rs. 1,78,49,356/- whereas, during the FY 2015-16 relevant to instant AY, the Appellant received a sum of Rs. 1,60,00,000/- from BKR Capital Pvt. Ltd. and paid an amount to the tune of Rs. 18,49,356/- on account of interest paid towards the loan taken from BKR Capital Pvt. Ltd., and therefore the addition of Rs 1,78,49,356/-is without any basis, uncalled for and liable to be deleted. 3. The brief facts of the case are that the assessee filed its return of income on 17-10-2016 declaring total income of Rs. 1,56,26,410/- From insight portal which was uploaded by the Investigation unit being the outset of search action in the case of BKR Capital Ltd. having partner/director Shri Bajrang Lal Periwal wherein it was revealed that the assessee is one of the majorbeneficiarywho had taken loan to the tune of Rs.1,78,49,356/- during the financial year 2015-16 relevant to A.Y. 2016-17. 7 4. Upon analysis of the available record in the assessee’s case with that of the findings in this matter, the assessing officer had reason to believed that income chargeable to tax to the tune of Rs.1,78,49,356/- has escaped assessment by the reasons of the failure on the part of the assessee to disclose truly and fully all material facts necessary for the relevant assessment year. Hence, reassessment proceeding was initiated by issue of notice u/s. 148 of the IT Act on 30.03.2021 after obtaining the satisfaction and sanction of the appropriate approving authority as per the provisions of the Act. Notice u/s. 142(1) of the Act was issued and served upon the assessee on 18.11.2021. In the compliance of the notice the assessee filed the reply stating that he has taken the genuine interest, bearing loan from the BKR Capital P. Ltd. After considering the submission filed by the assessee the AO completed the assessment after making the addition of Rs 1,78,49,356/- u/s 68 of the Act as unexplained income. 5. Aggrieved the order of the AO the assessee has filed the appeal before the Ld. NFAC/ (CIT(A), who vide his order dated 09-02-2024 dismissed the appeal against which the assessee is in appeal before the Tribunal. 6. At the time of hearing, the Ld. Counsel for the assessee only pressed the legal ground that approval granted by the ACIT is mechanical and without application of mind. It was submitted that in the case of the assessee, the AO/ACIT, Range-61 New Delhi sent a 8 common letter for 30 cases dated 26/27-03-2021 for approval u/s 151 of the Act for the assessment year 2013-14 to 2015-16 to ACIT on 26/27-03-2021; the ACIT also granted approval for all the assessment years from A.Y. 2013-14 to 2015-16 by a common letter dated 28-03-2021. It is further submitted that the approval granted by the ACIT by the common order without application of mind and mechanical in nature. The ACIT in its approval has failed to mention the assessment year wise income returned and assessed by the AO. It is further submitted that it is clearly establish the approval has been granted mechanical manner without verifying the assessment record. It is also submitted that multiple approval has been granted by a single order. In support of his contention, Ld AR for the assessee has relied upon the following cases:- 1. Vinod Kumar Solanki Vs. Assistant Commissioner of IT Circle -61-1, Delhi & Ors. 2. PCIT-7, Vs. Pioneer Town Planners Pvt. Ltd. 3. PCIT, Central Circle -02 vs MDLR Hospitals Pvt. Ltd. 4. Haryana Acrylic Manufacturing Co. Vs. Commissioner of Income Tax 5. Sherry Clothing & Designs Pvt. Ltd. Vs. National Faceless Assessment Centre, Delhi & Ors. 6. 7. In view of the above, it is prayed that in the absence of the valid approval the assessment order passed by the assessing officer is liable to be quashed. 7. 8. 8. The Ld. DR relied upon the orders of the authorities below. 9 7. We have carefully considered the rival submission and perused the record. We find considerable cogency in the contention of the Ld. AR for the assessee that in this case the approval is invalid as it is a consolidation approval for various years and cases, however, the said approval was required to be given for each year, We, also observed that the AO sent a common letter for approval on 26/27- 03-2021 and approval were granted on the next day by a common order. It is evident that the approval dated 28-03-2021 is in respect of 111 cases of reassessment. It is a general order of approval for all the cases. The ACIT in its approval has failed to mention the assessment year wise income returned and assessed by the AO. It is established from the record that the approval was granted mechanical manner without applying the mind and verifying the record. The requirement of approval cannot be treated as mere formality and the mandate of the Act that the Approving authority has to act in a judicious manner by due application of mind in a manner of a quasi- judicial authority. Ld. AR of the assessee submitted that this a covered matter and relied the judgment of the Hon’ble High Court Vinod Kumar Solanki vs Assistant Commissioner IT Circle -61-1 Delhi & others. In this Case the Hon’ble High Court held as under : “17. It is evident that the approval dated 28.03.2021 is in respect of 111 cases of reassessment. It is a general order of approval for all the 111 cases. There is not even a whisper as to what material had weighed in the grant of approval in the 10 present case. While the PCIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The sanction order does not refer to the material of any of the 111 cases. The grant of approval in such a manner does not fulfil the requirement of section 151 of the Act. 18. We note that dealing with an identical challenge of approval having been accorded mechanically and without due application of mind had arisen for our consideration in the case of The Principal Commissioner of Income Tax-7 vs. Pioneer Town Planners Pvt. Ltd. (2024) SCC OnLine Del 1685, wherein, we had held as follows:- “13. The primary grievance raised in the instant appeal relates to the manner of recording the approval granted by the prescribed authority under Section 151 of the Act for reopening of assessment proceedings as per Section 148 of the Act. xxxx xxxxx xxxx xxxxx xxxxx 17. Thus, the incidental question which emanates at this juncture is whether simply penning down “Yes” would suffice requisite satisfaction as per Section 151 of the Act. Reference can be drawn from the decision of this Court in N. C. Cables Ltd., wherein, the usage of the expression “approved” was considered to be merely ritualistic and formal rather than meaningful. The relevant paragraph of the said decision reads as under:- “11. Section 151 of the Act clearly stipulates that the Commissioner of Income-tax (Appeals), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the 11 expression \"approved\" says nothing. It is not as if the Commissioner of Income-tax (Appeals) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the court is satisfied that the findings by the Income-tax Appellate Tribunal cannot be disturbed.” 18. Further, this Court in the case of Central India Electric Supply Co. Ltd. v. ITO [2011 SCC OnLine Del 472] has taken a view that merely rubber stamping of “Yes” would suggest that the decision was taken in a mechanical manner. Paragraph 19 of the said decision is reproduced as under: - “19. In respect of the first plea, if the judgments in Chhugamal Rajpal (1971) 79 ITR 603 (SC), Chanchal Kumar Chatterjee (1974) 93 ITR 130 (Cal) and Govinda Choudhury and Sons case (1977) 109 ITR 370 (Orissa) are examined, the absence of reasons by the Assessing Officer does not exist. This is so as along with the proforma, reasons set out by the Assessing Officer were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by an Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly 12 a process which can get the imprimatur of this court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the Income-tax Officer was to be agreed upon, the least which is expected is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex court in Union of India v. M. L. Capoor, AIR 1974 SC 87, 97 wherein it was observed as under: \" 27.. .. We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. 28…. If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded 13 be shown to be manifestly just and reasonable.\"(emphasis supplied).” 19. In the case of Chhugamal Rajpal, the Hon‟ble Supreme Court refused to consider the affixing of signature alongwith the noting “Yes” as valid approval and had held as under:- “5. --- Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads “whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section 148”, he just noted the word “yes” and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance.” 20. This Court, while following Chhugamal Rajpal in the case of Ess Adv. (Mauritius) S. N. C. Et Compagnie v. ACIT [2021 SCC OnLine Del 3613], wherein, while granting the approval, the ACIT has written“This is fit case for issue of notice under 14 section 148 of the Income- tax Act, 1961. Approved”, had held that the said approval would only amount to endorsement of language used in Section 151 of the Act and would not reflect any independent application of mind. Thus, the same was considered to be flawed in law. 21. The salient aspect which emerges out of the foregoing discussion is that the satisfaction arrived at by the prescribed authority under Section 151 of the Act must be clearly discernible from the expression used at the time of affixing its signature while according approval for reassessment under Section 148 of the Act. The said approval cannot be granted in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase “Yes” does not appropriately align with the mandate of Section 151 of the Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. 22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas Pvt. Ltd. is concerned, the same was a case where the satisfaction was specifically appended in the proforma in terms of the phrase“Yes, I am satisfied”. Moreover, paragraph 16 of the said decision distinguishes the approval granted using the expression “Yes” by citing Central India Electric Supply, which has already been discussed above. The decision in the case of Experion Developers P. Ltd. would also not come to the rescue of the Revenue as the same does not deal with the expression used in the instant appeal at the time of granting of approval. 15 23. Therefore, it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression “Yes” could be considered to be a valid approval. In fact, the approval in the instant case is apparently akin to the rubber stamping of “Yes” in the case of Central India Electric Supply.” 19. The decision in “Pioneer” case was followed by us in the case of Principal Commissioner of Income Tax, Central Circle- 02 vs. M/s. MDLR Hotels Pvt. Ltd. [ITA 593/2023], wherein, the Competent Authority had granted approval in terms of Section 153-D of the Act to as many as 246 proposed assessments by way of a single letter of approval and we had affirmed the finding of the ITAT that such approval has been granted mechanically without application of mind. 20. As noticed aforesaid, we are of the firm opinion that the PCIT W.P.(C) 4196/2022 Page 10 of 10 has failed to satisfactorily record its concurrence and by no stretch of imagination, the approval granted by common order, could be considered to be a valid approval. 21. Hence for the reasons stated above, we are of the view that the approval granted by PCIT for action under Section 147/148 of the Act is not valid. Consequently, the impugned notice issued by respondent No. 1 under Section 148 of the Act for the AY 2015-16 and the proceedings emanating therefrom are set aside and quashed. 22. The writ petition along with pending applications stand disposed of accordingly. 16 8. In the back ground of the aforesaid discussion and respectfully following the aforesaid binding precedent, we hold that the approval dated 28-03-2021 granted by the Joint Commissioner of Income Central Range 61 New Delhi is not valid. Accordingly, we quashed the assessment order. Since we quashed the assessment on the legal ground the other grounds, have become academic, hence need not to be adjudicated upon. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 23.04.2025. Sd/- Sd/- (SHAMIM YAHYA) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:-23.04.2025 *NEHA, Sr. PS* Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(Appeals) ` 5.DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "