AI Insights
The case involves an appeal by Tej Singh Sinsinwar against the order of the CIT (Appeals), which confirmed the AO's decision to reopen the assessment for the year 2011-12 under sections 147 and 148 of the Income Tax Act, 1961. The AO had treated a time deposit of Rs. 10,17,980 as income from other sources due to non-filing of income tax return by the appellant. The Tribunal examined the validity of the reopening and found procedural lapses in the recording of reasons by the AO and the mechanical approval by the PCIT. The Tribunal's decision emphasized the need for detailed and specific reasons for reopening an assessment and the necessity of a reasoned approval by the PCIT.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 523391 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-01-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2011-2012
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 1100/JPR/2024 fu/kZkj.k o\"kZ@Assessment Year :2011-12. Tej Singh Sinsinwar Sector 2, Vidhyadhar Nagar, Jaipur. (Rajasthan) cuke Vs. The Income Tax Officer, Ward 1(2) Alwar. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No. ARKPS 5099 L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assesseeby :Shri Vinod Kumar Gupta, CA jktLo dh vksj ls@Revenue by :Shri Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@Date of Hearing: 06/01/2025 ?kks\"k.kk dh rkjh[k@Date of Pronouncement: 21/01/2025 vkns'k@ORDER PER DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT (Appeals), National Faceless Appeal Centre (NFAC) Delhi dated 25.07.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2011-12. The assessee has raised the following grounds of appeal :- 1. Under the facts and circumstances of the case and in law, the ld. CIT (A) has erred by confirming the action of ld. A.O. of initiating proceedings u/s 147 r.w.s. 148 and passing order u/s 147/144 of the Income Tax Act, 1961 being without jurisdiction and 2 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. against the statutory provisions. Thus, the resultant order is against the law and deserves to be quashed. 2. Under the facts and circumstances of the case and in law, the ld. CIT (A) has erred by confirming the action of ld. A.O. of initiating proceedings u/s 147 r.w.s. 148 and passing order u/s 147/144 of the Income Tax Act, 1961 without application of mind. Thus, the resultant order is against the law and deserves to be quashed. 3. Under the facts and circumstances of the case and in law, the ld. CIT (A) has erred in confirming the invocation of section 147 r.w.s. 148 of Income Tax Act for making addition of Rs. 10,17,980/- on account of time deposit without considering the facts in right perspective. Thus, the action is bad in law, thus order deserves to be quashed. 4. Under the facts and circumstances of the case and in law, the ld. CIT (A) has erred in confirming addition of Rs. 10,17,980/- without appreciating the facts of the case. Thus, the addition is contrary to the provisions of law, unjustified or excessive. 5. The appellant craves your Honor’s indulgence to add, amend or alter all or any grounds of appeal before o at the time of hearing. 2. The brief facts of the case are that the assessee is an Individual. The assessee has not filed his return of income for the year under consideration as he was not having taxable income. The AO received information that the assessee has made time deposit of Rs. 10,17,980/- in his bank account during FY 2010-11 relevant to AY 2011-12 but failed to file return of income as required under section 139(1) of the IT Act, 1961. Therefore, notice under section 148 of the IT Act, 1961 dated 28.03.2018 was issued to the assessee with the prior approval of Pr. Commissioner of Income-tax, Alwar which was duly served upon the assessee. The assessee has not complied with the said notice and no return of income was filed. Thereafter, notice under section 142(1) along with query letter was issued on 3 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. 27.07.2018 was issued fixing the date of hearing on13.08.2018. No response was made by the assessee to this notice. Another notice under section 142(1) along with query was issued on 01.11.2018 fixing the date of hearing on 08.11.2018, but again neither compliance was made by the assessee nor furnished details requisitioned by the AO vide above referred notices. Finally, a show cause notice was issued to the assessee on 22.11.2018 fixing the date of hearing on 28.11.2018. To this notice also, the assessee has not responded or furnished any document as required by the AO. The AO finally completed the assessment vide his order dated 30.11.2018 under section 144/147 of the IT Act, 1961 by treating the time deposit in bank of Rs. 10,17,980/- as income from other sources and added to the total income of the assessee. 3. Being aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) considered the submissions of the assessee but found the same not acceptable, accordingly he dismissed the appeal of the assessee. 4. Being aggrieved by the order of the CIT(A), the assessee preferred appeal before the Ld. us. 3.At the time of hearing before us, the ld. A/R of the assessee reiterated his submissions as made before the ld. CIT (A). The ld. A/R further submitted ground-wise written submissions which are reproduced as under :- Ground No. 1 &2 : 4 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. “A. Non-Application of Mind by AO at the time of recording of Reasons: 1. Reasons Recorded (PBP: 1 – 2): “On the basis of information in my possession revealed that the assessee has made time deposit of Rs. 10,17,980/- in his bank account during F.Y. 2010-11 relevant to A.Y. 2011-12 but failed to file return of income for the year under consideration as required u/s 139(1) of the Act, 1961whereas he is having income chargeable to tax. Hence, source of time deposit is not verifiable. In view of the above facts, I have reason to believe that income to the tune of Rs.10,17,980/- has escaped assessment for the A.Y.2011-12 within the meaning of section 147 of the I.T Act, 1961. Therefore it is a fit case for issuance of notice u/s 148 of I.T. Act, 1961”. 2. The appellant, during the appellate proceedings, had raised his objection to the reason recordedby the Ld. AO and contended that the reasonsrecorded are vagueand suffer from following infirmities: a. Reasons recorded does not contain date; b. neither the bank name nor the bank account number in which such amount was deposited is mentioned; c. nature of time deposit and its bifurcation into principal amount and interest amount is missing; d. source of time deposit is missing; e. the Ld. AO has not recorded anything with regard to the material on the basis of which the reasons and conclusion was formed; 3. However, the Ld. CIT(A) dismissed the contention of the appellant by observing that the Ld. AO had sufficient information and draw reference from the remand report (remand report is produced at 18, 19 and 20 of the Ld. CIT(A) order),dated 07.11.2019, to support his claim. 4. Here, it is apposite to mention that (i) can the content of the remand report, dated 07.11.2019, be called reason recorded or part of reasons recorded and (ii) can the remand report substitutes the mandatory duty of an assessing officer to record reasons before initiating proceedings u/s 147 of the Act. 5. At the outset, it is pertinent to note that reference of remand report instead of reasons recorded, for addressing the ground of appeal of the appellant, itself shows that the reasons recorded indeed suffered from the infirmities highlighted by the appellant before the Ld. CIT(A) otherwise the Ld. CIT(A) would have referred the reasons rather than the remand report. 5 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. 6. Further, the remand report itself manifest that the current case has been opened without application of mind. In this regard, the appellant wants to highlight followings contents of the remand report: a. The remand report refers only one account i.e. Account number: 297500PR00034767 whereas the amount of Rs. 10,17,980/- pertains to 2 bank accounts(PBP: 3 – 4); b. As per the remand report, the appellant had deposited Rs. 2,97,500/- in Account number: 297500PR00034767 during the F.Y. 2010-11 which is factually incorrect since the appellant had transferred Rs. 5,00,000/- in that particular account (PBP: 4). Relevant para is produced for your reference: c. It is explicitly stated in the remand report that as per the information available on ITS received by bank, the assessee had deposited Rs. 5,17,980/- on 26.08.2010. Relevant para reads as under: 6 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. d. However, the finding of the assessing officer noted in the remand report [as stated in point (a to c) above] is contrary to the facts of the case which has been explained in the below table: S. No Findings noted in the Remand Report Actual Facts Remarks 1. Refer only 1 bank account of the appellant in the entire remand report. Amount of Rs. 10,17,980/- pertains to 2 bank accounts of the appellant. It shows that the AO was not in possession of any material on the basis of which reasons have been formed since the remand report is silent even in the remand report incomplete information is referred in the remand report and nothing has been mentioned with respect the other bank account of the appellant. Hence,the case has been reopened on suspicion only. 2. Appellant had deposited Rs. 2,97,500/- in ID No: Appellant had transferred Rs. 5,00,000/- in Account No. Even the remand report has contradictory 7 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. 297500PR00034767. 297500PR00034767. findings which proves that case was reopened without application of mind. 3. Appellant has deposited Rs. 5,17,980/- on 26.08.2010 Appellant had transferred Rs. 5,00,000/- on 26.02.2011 Remaining amount of Rs. 17,980/- pertains to interest and not deposits. Further, no transfer has been made on 26.08.2010. This also proves that case has been reopenedwithout application of mind. e. All those above infirmities in the remand report further contribute positively to the contention that the Ld. AO has not applied his mind before invoking section 147 of the Act in the current case. Further it also proves that the Ld. CIT(A) has also not applied his mind while addressing the ground of appeal of the appellant otherwise he would have examined the contents of the remand report to verify the claim of the appellant. 7. It is noteworthy that it is a settled position that reasons cannot be substituted and the reasons are required to be read as they were recorded by the AO. In the current case, firstly only information was available with the Ld. AO. Further, only information available with the Ld.AO at the time of recording reasons was that the appellant had deposited Rs. 10,17,980/-, however, no basis/ material viz bank name, bank account number, bifurcation of principal and interest amount etc., was referred in the said reasons recorded to determine as to how the Ld. AO reached to this conclusion that the said deposits represent income, alleged income is chargeable to tax and has escaped assessment. Further, the reasons recorded does not disclose the Ld. AOs mind as to what was the nature of alleged deposits and what was included in the alleged amount of Rs. 10,17,980/-. Furthermore, even the content of the remand report dated 07.11.2019 indicate that the Ld. AO did not verify the correctness of the information received by 8 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. him and did not record his satisfaction that a case can be made out for issuing notice u/s 148. Therefore, what has been recorded by the Ld. AO as ‘reasons to believe’ is nothing more than a vague information, further, the said reasons cannot be substituted subsequently by way of remand report. In this regard, we rely on the following case law: The Hon’ble Bombay High Court in the case of Hindustan Lever Ltd. Vs R.B. Wadkar reported in 268 ITR 332 (Bom) held as under: “21. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced”. 8. Your honor would appreciate that reasons are the foundation of making assessment u/s 147and such reasons must be self-evident and must speak for themselves and should not be vague or incomplete. The reasons should also contain all the necessary details/ informationfor arriving at the conclusion that the income has escaped assessment. Under the current case, the Ld. AO just completed his duty by simply stating that he has 9 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. ‘information in his possession’ without specifying the kind and nature of information. In the current case, the reasons recorded are unclear and lacks the essential ingredients to be classified as ‘reason to believe’ which indicates that the Ld. AO and the Ld. CIT(A) has just acted on borrowed information without any independent enquiry and application of mind. 9. Further, reasons are deduced from the material available on record and such material should have a direct link with the formation of the belief that income chargeable to tax has escaped assessment. In the current case the Ld. AO has neither provided any material nor referred any material on the basis of which the Ld. AO formed his reasons and came to the conclusion that there is escapement of income. In fact, the remand report also shows that the Ld. AO was having incomplete information. Therefore, there was no tangible material in possession of the Ld. AO leading to the belief that income has escaped assessment. In this sense, the Ld. AO failed to establish any live nexus between the information and formation of belief that the time deposit represents income of the appellant and such income has escaped assessment. 10. Further, without prejudice to anything stated above, merely time deposit in the bank itself would not lead to the conclusion or belief that the said amount is assessable as income and has escaped assessment. The Ld. AO has simply concluded that since the appellant made time deposit of Rs. 10,17,980/-, he has escaped income to the extent of Rs. 10,17,980/- within the meaning of section 148 of the Act. Under the present case, the amount of Rs. 10,17,980/-, alleged to be the income of the appellant, is the transfer of amount from bank account of the appellant to his Fixed Deposit (FD) Accounts(PBP: 3 – 4). Furthermore, the said amount also includes interest accrued on such FD amount. However, the Ld. AO have merely acted upon the AIR information without even verifying, by way of an independent enquiry, the source, nature and component of such time deposit. Further, the Ld. CIT(A) has also not verified the said fact before arriving at the conclusion. This approach shows that neither the mind was applied by the Ld. AO and the Ld. CIT(A) nor any efforts was made to verify the information received. 11. In regard to the submissions made hereinbefore, we rely on the following case laws: Nadeem Hasan vs. ITO, Ward-46(4), New Delhi in ITA No.445/Del/2020 dated 18.05.2022 ITAT, Delhi: 14. On going through the reasons recorded by the AO, I find that there is no nexus between the prima facie inferences arrived in the reasons recorded and the information. The information was restricted to cash deposit in bank account but there was no material much less tangible, cogent, credible and relevant material to form a reason to believe that cash deposits represented income of the assessee. The reasons recorded in the present case at best can be treated to be reasons to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The 10 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. requirement of application of mind is missing in the present ease on the face of it in the reasons recorded. ITAT Delhi in the case of Bir Bahadur Singh Sijwali Vs ITO, ITA No. 3814/Del/2011, held that “in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen as existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. To us, there cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment. On the basis of reasons as recorded in this case, such an inference about income escaping assessment, in our humble understanding, cannot be drawn” The Hon’ble Allahabad High Court in the case of Ganga Prasad Maheshwari 139 ITR 1043 dissected the phrase and made some noteworthy observations. It noted that Reason - means cause or justification, whereas Believe – means accept as true or to have faith in it must have justification. Belief may not be open to scrutiny of the courts. However, reason due to which decision is reached; can always be examine by the courts. Satisfaction cannot be challenged but satisfaction not based on any material or if it cannot withstand test of reason (which is integral part of it), it can be struck down. It is consistently held by the courts that reason giving rise to such belief is always open for examination. Therefore, if there is no rational connection for live link between the material available and reason recorded the reassessment proceedings can be considered illegal. Belief must not be based on mere suspicion. ITAT Delhi Bench in the case of Praveen Kumar Jain vs. ITO, ITA No. 1331/Del/2015, held that “9. As it is manifest from the reasons recorded by the AO that the AO proposed to reopen the assessment by issuing notice u/s 148 on the basis of information received that the assessee deposit cash amount of Rs.6 lac in the bank account. The AO has recorded in the reasons that the assessee has not filed return of income for the Assessment Year 2006-07. This fact recorded by the AO that the assessee has 11 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. not filed the return of income for the Assessment Year under consideration has turned out to be incorrect as the assessment order begins with the narration of fact that manual return declared Rs. 112030/- filed on 31.03.2007. Thus at the time of passing the assessment order the AO was aware that return for the year under consideration filed on 31st March,2007. Therefore, it is clear that the AO proceed to reopen assessment on the basis of incorrect assumption of the fact that the assessee has not filed any return income for the year under consideration. This wrong assumption of fact also lead to the consequential reopening by the AO without verifying the record available with the AO as filed by the assessee being return of income and the other details and record along with return of income. Thus, it is clear that the AO reopen the assessment under wrong presumption of fact and without verifying the material information already available with the AO in the shape of return of income filed by the assessee. This fact of filing of return was also recorded by the learned Commissioner of Income-tax (Appeals) at Page 3 of the impugned order. Further, the recourse of reopening u/s 148/147 is not to first issue the notice and then to proceed to investigate and find out if there was income assessable to tax which has escaped assessment rather it is pre requisite for issuing the notice u/s 148 that the AO on the basis of tangible material and information has legitimate reason to believe that income assessable to tax has escaped assessment. The belief must be based on a material which has direct nexus to the income assessable has escaped assessment and should not be guess work and to ascertain the same through the process of investigation. The provision of section 148/147 cannot be used such investigation to ascertain where income assessable to tax has escaped assessment. It is apparent that the reason for reopening was only on information of deposit of cash of Rs.6 lac in the bank account. Therefore the reason for reopening was for further investigation to find out the source of the cash deposit by the assessee as the AO has not recorded anything that this deposit of cash is from particular source which is not disclosed by the assessee in the books of account or in the return of income. The deposit of cash in the bank account of the assessee does not establish any live nexus between the information and formation of the believe that there was escapement of the income by the assessee. There may be end number of reasons and sources of deposit of cash in the bank which may not constitute the same as income of the assessee and therefore merely deposit of cash in bank itself would not lead to the conclusion or believe that the said amount is assessable income of the assessee and escapement of assessment. …… …… 12. Thus, it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the 12 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. income of the assessee escaped assessment was found to be missing when the AO proceed to reopen the assessment which is in nature of a post mortem exercise after the event of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as it does not satisfy the requirement of law that prior to the reopening of the assessment the AO has to apply his mind to the material and conclude that he has reason to believe that income of the assessee has escaped assessment. Applying the above proposition of law it leaves no doubt in the mind that in the case on hand the AO has reopened the assessment mechanically without application of mind to conclude that the said amount of Rs. 6 Lac deposit in the bank account of the assessee constitutes the income of the assessee and the same has escaped assessment. The decision relied upon by the ld DR is not applicable in the facts of the present case because in the said case not only the accommodation entry were found by the investigation wing but the modus operandi was also detected and therefore it was found that the AO was having the sufficient material and information to form the believe that the income assessable to tax has escaped assessment. In view of the facts and circumstances as well as the decisions relied upon by the AR, the reopening is in the case of the assessee is not valid and the same is quashed. Since the reopening of the assessment held to be invalid therefore other grounds of the appeal become infractuous.” ITAT Delhi, in the case of Harmeet Singh vs. ITO, ITA No. 1939/ Del/2016 held that: “8. After going through the reasons recorded by the ITO, Ward-36(1), New Delhi Rewari, I am of the view that there is no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the Asstt. Year in dispute is bad in law and deserves to be quashed.” 13 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. Hon’ble Gujarat High Court in the case of Jayesh Govindbhai Balar vs ITO in Special Civil Application No. 994 of 2016, held that:- “11. With respect to the assesee’s sale of land valued at Rs. 33.97 Lacs, it is true that the same was not disclosed in the returns filed. The assessee had, however, shown the sale in the earlier assessment year 2007-08. Such transaction was examined and duly taxed during such period. Apart from this, with respect to this transaction also the Assessing Officer has not recorded any reasons pointing out as to in what manner he formed a belief that the income chargeable to tax had escaped assessment. He merely stated that the assessee had indulged in transaction of sale of immovable property valued at Rs. 33.97 Lacs, but shown income only of Rs. 2.44 Lacs and, therefore, he had reason to believe that income concerning huge transaction cost had escaped assessment. Once again, the reasons are vague and imprecise and lack invalidity. If the Assessing Officer was prima−facie of the opinion that sale transaction invited capital gain which the assessee had avoided by non-disclosure, the same has not come on record in the reasons. 12. When notice for reopening for scrutinized assessment is issued beyond the period of four years, twin conditions to be satisfied are that the Assessing Officer has some tangible material to form a belief that income chargeable to tax has escaped assessment and further that such escapement was due to failure on part of the assessee to disclose truly and fully all material facts. When first of these conditions is not satisfied, merely because the assessee failed to disclose the sale transaction would not by itself give authority to Assessing Officer to reopen the assessment. 13. In the result, petition is allowed. Impugned notice dated 27.03.2015 is quashed. Petition is disposed of.” Under the facts and circumstances, conclusion of escapement of income has been drawn based on suspicion and without application of mind both by the Ld.AO and Ld. CIT(A)hence, initiation of re-opening proceeding deserved to be quashed. B. Mechanical Approval Granted by PCIT: 1. The Ld. CIT(A) dismissed the legal plea of the appellant that the approval was granted mechanically by Ld. PCIT by stating that “the date of approval is also categorically mentioned in the remand report”.Here also the Ld. CIT(A) has referred remand report instead of copy of approval which indicates that the whole case has been addressed by the Ld. CIT(A) without application of mind. 2. Further, section 151 of the Act contains certain safeguards to prevent arbitrary exercise of power by an assessing officer in assessing income of the assessee u/s 147 of the Ac and recording of satisfaction, by specified authority, with regard to the reasons 14 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. recorded by the assessing officer for issuance of notice u/s 148, is one of such safeguards. Accordingly, no notice u/s 148 shall be issued by the assessing officer unless the specified authority (PCIT in the current case), is satisfied, on the reasons recorded by the assessing officer concerned, that it is a fit case for the issue of notice. 3. Furthermore, the power vested with the PCIT to grant or not to grant approval comes with a duty which is to apply his/ her mind to the proposal put up to him/ her by the assessing officer before granting approval. In doing so, the Ld. PCIT has to deep dive into the facts of the case, analyses and evaluate the material available on record and then determine whether the case is fit for issuance of notice u/s 148 of not.The said power cannot be exercised casually and in a routine matter. 4. Attention of your honour is invited to point no. 13 of the copy of reason recorded(PBP: 2)wherein the Ld. PCIT has given the approval by simply stating ‘Approved’ which establishes that Ld. PCIT has not recorded proper satisfaction and the approval was granted in a mechanical manner without verifying / examining the materials relied upon by the Ld. A.O. for recording the purported reasons. 5. It is respectfully submitted that by merely stating \"Approved\" at the proposal prepared by A.O. cannot be termed as a sanction/ approval as required u/s 151 of Act and various Courts and Tribunal has held such kind of mechanical approval as ‘unsustainable’ under the Income Tax Act. 6. Here, the appellant wants to bring in your kind attention the case of ITO v. N.C. Cables Ltd. (Delhi ITAT) (Judgement dated 22.10.2014) wherein the commissioner gave the approval u/s 151 to the proposal u/s 148 by affixing \"Approved\" and putting his signature. The Jurisdictional Delhi Bench of ITAT quashed the reassessment proceedings holding that the reopening was bad-in-law for the reason that the commissioner has not recorded his satisfaction as contemplated u/s 151 of the Act. The said judgment of ITAT has been further affirmed by Hon'ble Delhi High Court vide its order dated 11.01.2017 (Pr. Commissioner of Income Tax v N.C. Cables Ltd. (ITA No. 335/2015). 7. Further, in the case of Amar Lal Bajaj v ACIT (2013) 37 Taxmann.com 7 (Mum) (Trib), the CIT accorded hisapproval by simply stating“Approved” and it was held that such approval cannot be construed as approval u/s 151 of the Act and reassessment proceedings were held to be bad-in-law. The Hon’ble ITAT held as under: “The observations of the Hon’ble High Court are very much relevant in the instant case as in the present case also the Commissioner has simply mentioned “approved” to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon’ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the 15 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. assessment has to be declared as void ab-initio. Ground No. 1 of assessee’s appeal is allowed” 8. In support of our contention, we further rely upon the following case laws: CIT Vs S Goyanka Lime & Chemical Ltd. (2015) 64 taxmann.com 313 (SC) “Section 151, read with section 148 of the Income-tax Act, 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 assessee] Hon’ble MP High Court in the case of CIT, Jabalpur V/s M/s Goyanka Lime and Chemicals Ltd. [ITA No. 82 of 2012] 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 are 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, 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.\" 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 16 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. 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”. Therefore, in view of the above facts and judicial precedents, the proceedings initiated vide notice u/s 148 is void-ab-initio since the Ld. PCIT, Alwar has not recorded proper satisfaction and gave approval without application of mind and in mechanical manner which is unjustified and bad-in-law.” 5. On the contrary, the ld. D/R supported the orders of the lower authorities. 6. We have heard the rival contentions and perused the material available on record and duly considered facts of the case in the light of the applicable legal position. There is no dispute that the assessee has not filed any return of income under section 139(1) and the AO has initiated the proceedings under section 148 on the basis of information in his possession that assessee has made time deposit of Rs. 10,17,980/- in his bank account during the assessment year 2011-12. The AO, therefore, on the basis above reason believed that there is an escapement of income to the extent of Rs. 10,17,980/- on the part of the assessee for the AY 2011- 12.From the reasons recorded by the AO, it is gathered that reasons recorded does not contain date, neither the bank name nor the bank account number in which such amount was deposited is mentioned, nature of time deposit and the source of time deposit. The AO has also not recorded anything with regard to the material on the basis of which the reasons and conclusion was formed and on the basis of 17 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. vaguereasons initiated proceedings under section 147 by issuing notice under section 148 of the Act. The objection of the assessee that the reasons recorded are vague and suffer from infirmities mentioned above and the ld. CIT (A) dismissed the objection observing that the AO had sufficient information and drawn reference from the remand report dated 07.11.2019, to support his claim. Here, the question arise for consideration is whether content of the remand report dated 07.11.2019 be called reason recorded or part of reasons recorded and whether the remand report substitutes the mandatory duty of an assessing officer to record reasons before initiating proceedings under section 147 of the IT Act.It is pertinent to note that reference of remand report instead of reasons recorded, for addressing the ground of appeal of the assessee, itself shows that the reasons recorded indeed suffered from the infirmities highlighted by the assessee before the ld. CIT (A) otherwise the ld. CIT (A) would have referred the reasons rather than the remand report.From the remand report it is manifest that the current case has been opened without application of mind, for the reason (1) that the remand report refers only one account i.e. Account number 297500PR00034767 whereas the amount of Rs. 10,17,980/- pertains to 2 bank accounts (PBP 3-4), (2) as per the remand report, the appellant had deposited Rs. 2,97,500/- in Account number 297500PR00034767 during the FY 2010-11 which is factually incorrect since the appellant had transferred Rs. 5,00,000/- in that particular account (PBP 4). These infirmities in 18 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. the remand report further contribute positively to the contention that the AO has not applied his mind before invoking section 147 of the Act in the current case. It also proves that the ld. CIT (A) has also not applied his mind while addressing the ground of appeal of the appellant otherwise he would have examined the contents of the remand report to verify the claim of the appellant. It is noteworthy that it is a settled position that reasons cannot be substituted and the reasons are required to be read as they were recorded by the AO. In the current case, firstly only information was available with the AO at the time of recording reasons was that the appellant had deposited Rs. 10,17,980/-, however, no basis/material viz. bank name, bank account number etc. was referred in the said reasons recorded to determine as to how the AO reached to this conclusion that the said deposits represent income, alleged income is chargeable to tax and has escaped assessment. Further, the reasons recorded does not disclose the AO’s mind as to what was the nature of alleged deposits and what was included in the alleged amount of Rs. 10,17,980/-. Furthermore, even the content of the remand report dated 07.11.2019 indicate that the AO did not verify the correctness of the information received by him and did not record his satisfaction that a case can be made out for issuing notice under section 148. Therefore, what has been recorded by the AO as ‘reasons to believe’ is nothing more than a vague information, further, the said reasons cannot be substituted subsequently by way of remand 19 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. report. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded. Hon’ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar (2004) 268 ITR 332 (Bom.) has, inter alia, observed in para 21 of its order as under :- “ 21. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and while. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer, The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced”. 20 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. Further, reasons are deduced from the material available on record and such material should have a direct link with the formation of the belief that income chargeable to tax has escaped assessment. In the current case the AO has neither provided any material nor referred any material on the basis of which the AO formed his reasons and came to the conclusion that there is escapement of income. In fact, the remand report also shows that the AO was having incomplete information. Therefore, there was no tangible material in possession of the AO leading to the belief that income has escaped assessment. The AO has failed to establish any live nexus between the information and formation of belief that the time deposit represents income of the appellant and such income has escaped assessment. Merely time deposit in the bank itself would not lead to the conclusion or belief that the said amount is assessable as income and has escaped assessment. The AO has simply concluded that since the appellant made time deposit of Rs. 10,17,980/-, he has escaped income to the extent of Rs. 10,17,980/- within the meaning of section 148 of the Act. In the present case, the amount of Rs. 10,17,980/- alleged to be the income of the appellant, is the transfer of amount from bank account of the appellant to his Fixed Deposit accounts (PBP 3-4). Furthermore, the said amount also includes interest accrued on such FD amount. 21 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. However, the AO have merely acted upon the AIR information without even verifying by way of an independent enquiry, the source, nature and component of such time deposit. The ld. CIT (A) has also not verified the said fact before arriving at the conclusion. This approach shows that neither the mind was applied by the AO and the ld. CIT (A) nor any efforts was made to verify the information received. In this regard, vide following judgments of the Hon’ble High Courts and the Tribunals have observed as under :- Hon’ble Allahabad High Court in the case of Ganga Prasad Maheshwari, 139 ITR 1943 (All.) has “dissected the phrase and made some noteworthy observations. It noted that Reason - means cause or justification, whereas Believe – means accept as true or to have faith in it must have justification. Belief may not be open to scrutiny of the courts. However, reason due to which decision is reached; can always be examine by the courts. Satisfaction cannot be challenged but satisfaction not based on any material or if it cannot withstand test of reason (which is integral part of it), it can be struck down. It is consistently held by the courts that reason giving rise to such belief is always open for examination. Therefore, if there is no rational connection for live link between the material available and reason recorded the reassessment proceedings can be considered illegal. Belief must not be based on mere suspicion. Hon’ble Gujarat High Court in the case of Jayesh Govindbhai Balar vs. ITO in Special Civil Application No. 994 of 2016, held that :- “11. With respect to the assesee’s sale of land valued at Rs. 33.97 Lacs, it is true that the same was not disclosed in the returns filed. The assessee had, however, shown the sale in the earlier assessment year 2007-08. Such transaction was examined and duly taxed during such period. Apart from this, with respect to this transaction also the Assessing Officer has not recorded any reasons pointing out as to in what manner he formed a belief that the income chargeable to tax had escaped assessment. He merely stated that the assessee had indulged in transaction of sale of immovable property valued at Rs. 33.97 Lacs, but shown income only of Rs. 2.44 Lacs and, therefore, he had reason to believe that income concerning huge transaction cost had escaped assessment. Once again, the reasons are vague and imprecise and lack invalidity. If the Assessing Officer was prima−facie of the opinion that sale transaction invited capital gain which the 22 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. assessee had avoided by non-disclosure, the same has not come on record in the reasons. 12. When notice for reopening for scrutinized assessment is issued beyond the period of four years, twin conditions to be satisfied are that the Assessing Officer has some tangible material to form a belief that income chargeable to tax has escaped assessment and further that such escapement was due to failure on part of the assessee to disclose truly and fully all material facts. When first of these conditions is not satisfied, merely because the assessee failed to disclose the sale transaction would not by itself give authority to Assessing Officer to reopen the assessment. 13. In the result, petition is allowed. Impugned notice dated 27.03.2015 is quashed. Petition is disposed of.” Nadeem Hasan vs. ITO, Ward-46(4), New Delhi in ITA No.445/Del/2020 dated 18.05.2022 ITAT, Delhi: 14. On going through the reasons recorded by the AO, I find that there is no nexus between the prima facie inferences arrived in the reasons recorded and the information. The information was restricted to cash deposit in bank account but there was no material much less tangible, cogent, credible and relevant material to form a reason to believe that cash deposits represented income of the assessee. The reasons recorded in the present case at best can be treated to be reasons to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The requirement of application of mind is missing in the present ease on the face of it in the reasons recorded. ITAT Delhi in the case of Bir Bahadur Singh Sijwali Vs ITO, ITA No. 3814/Del/2011, held that “in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen as existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. To us, there cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment. On the basis of reasons as recorded in this case, such an inference about income escaping assessment, in our humble understanding, cannot be drawn” 23 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. ITAT Delhi Bench in the case of Praveen Kumar Jain vs. ITO, ITA No. 1331/Del/2015, held that “9. As it is manifest from the reasons recorded by the AO that the AO proposed to reopen the assessment by issuing notice u/s 148 on the basis of information received that the assessee deposit cash amount of Rs.6 lac in the bank account. The AO has recorded in the reasons that the assessee has not filed return of income for the Assessment Year 2006-07. This fact recorded by the AO that the assessee has not filed the return of income for the Assessment Year under consideration has turned out to be incorrect as the assessment order begins with the narration of fact that manual return declared Rs. 112030/- filed on 31.03.2007. Thus at the time of passing the assessment order the AO was aware that return for the year under consideration filed on 31st March,2007. Therefore, it is clear that the AO proceed to reopen assessment on the basis of incorrect assumption of the fact that the assessee has not filed any return income for the year under consideration. This wrong assumption of fact also lead to the consequential reopening by the AO without verifying the record available with the AO as filed by the assessee being return of income and the other details and record along with return of income. Thus, it is clear that the AO reopen the assessment under wrong presumption of fact and without verifying the material information already available with the AO in the shape of return of income filed by the assessee. This fact of filing of return was also recorded by the learned Commissioner of Income-tax (Appeals) at Page 3 of the impugned order. Further, the recourse of reopening u/s 148/147 is not to first issue the notice and then to proceed to investigate and find out if there was income assessable to tax which has escaped assessment rather it is pre requisite for issuing the notice u/s 148 that the AO on the basis of tangible material and information has legitimate reason to believe that income assessable to tax has escaped assessment. The belief must be based on a material which has direct nexus to the income assessable has escaped assessment and should not be guess work and to ascertain the same through the process of investigation. The provision of section 148/147 cannot be used such investigation to ascertain where income assessable to tax has escaped assessment. It is apparent that the reason for reopening was only on information of deposit of cash of Rs.6 lac in the bank account. Therefore the reason for reopening was for further investigation to find out the source of the cash deposit by the assessee as the AO has not recorded anything that this deposit of cash is from particular source which is not disclosed by the assessee in the books of account or in the return of income. The deposit of cash in the bank account of the assessee does not establish any live nexus between the information and formation of the believe that there was escapement of the income by the assessee. There may be end number of reasons and sources of deposit of cash in the bank which may not constitute the same as income of the assessee and therefore merely deposit of cash in bank itself would not lead to the conclusion or believe that the said amount is assessable income of the assessee and escapement of assessment. …… …… 24 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. 12. Thus, it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment was found to be missing when the AO proceed to reopen the assessment which is in nature of a post mortem exercise after the event of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as it does not satisfy the requirement of law that prior to the reopening of the assessment the AO has to apply his mind to the material and conclude that he has reason to believe that income of the assessee has escaped assessment. Applying the above proposition of law it leaves no doubt in the mind that in the case on hand the AO has reopened the assessment mechanically without application of mind to conclude that the said amount of Rs. 6 Lac deposit in the bank account of the assessee constitutes the income of the assessee and the same has escaped assessment. The decision relied upon by the ld DR is not applicable in the facts of the present case because in the said case not only the accommodation entry were found by the investigation wing but the modus operandi was also detected and therefore it was found that the AO was having the sufficient material and information to form the believe that the income assessable to tax has escaped assessment. In view of the facts and circumstances as well as the decisions relied upon by the AR, the reopening is in the case of the assessee is not valid and the same is quashed. Since the reopening of the assessment held to be invalid therefore other grounds of the appeal become infractuous.” ITAT Delhi, in the case of Harmeet Singh vs. ITO, ITA No. 1939/ Del/2016 held that: “8. After going through the reasons recorded by the ITO, Ward-36(1), New Delhi Rewari, I am of the view that there is no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the Asstt. Year in dispute is bad in law and deserves to be quashed.” 25 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. The ld. A/R has also drawn our attention to point no. 13 of the copy of Reasons Recorded (PBP 2) wherein the ld. PCIT has given the approval by simply stating “Approved”. The ld. A/R contended that by simply writing “Approved” establishes that ld. PCIT has not recorded proper satisfaction and the approval was granted in a mechanical manner without verifying / examining the materials relied upon by the AO for recording the purported reasons, which is against the provisions of section 151(1) of the IT Act, 1961. For the sake of convenience, we reproduce the provisions of section 151(1) of Act as under :- “ 151 (1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. [Explanation, - For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner of the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.]” 26 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. A simple reading of the provisions of section 151(1) with the proviso clearly show that no such notice shall be issued unless the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice which means that the satisfaction of the Commissioner is paramount for which the least that is expected from the Commissioner is application of mind and due diligence before according sanction to the reasons recorded by the AO. In the present case, the “Performa for Recording Reasons” prepared by the AO, which is placed on record show that the Commissioner has simply affixed “Approved” at column no. 13.Nowhere the ld. PCIT has recorded his satisfaction. The reasons recorded in the “Performa for Recording Reasons” also bear no date. Therefore, merely stating “Approved” at the proposal prepared by AO cannot be termed as a sanction/approval as required under section151 of the IT Act. The Hon’ble Supreme Court, various High Courts and the Tribunals have held such kind of mechanical approval as ‘unsustainable’ under the Income Tax Act. In this regard, reliance is placed on the Coordinate Bench of the Tribunal,Delhi in the case of ITO vs. N.C. Cables Ltd. dated 22.10.2024 (Delhi ITAT)wherein the Commissioner gave the approval under section 151 to the proposal under section 148 by affixing “Approved” and putting his signature. The Jurisdictional Delhi Bench of ITAT quashed the reassessment proceedings holding that the reopening was bad in law for the reason that the Commissioner has not recorded his 27 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. satisfaction as contemplated under section 151 of the Act. The said judgment of ITAT has been further affirmed by Hon’ble Delhi High Court vide its order dated 11.01.2017 in case of Principal Commissioner of Income Tax vs. N.C. Cables Ltd. (ITA No. 335/2015). Further, in the case of Amar Lal Bajaj vs. ACIT (2013) 37 Taxmann.com 7 (Mum. Trib.) the CIT accorded his approval by simply stating “Approved” and it was held that such approval cannot be construed as approval under section 151 of the Act and reassessment proceedings were held to be bad inlaw. The Hon’ble ITAT held as under :- “ The observations of the Hon’ble High Court are very much relevant in the instant case as in the present case also the Commissioner has simply mentioned “approved” to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon’ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee’s appeal is allowed.” Reliance is placed on the following case laws :- 1) CIT vs. S. Goyanka Lime & Chemical Ltd. (2015) 64 taxmann.com 313 (SC) “ Section151, read with section 148 of the Income-tax Act,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 applicationof 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 assessee) 2) Hon’ble MP High Court in the case of CIT, Jabalpur vs. M/s. Goyanka Lime and Chemicals Ltd. (ITA No. 82 of2012) held as under : 28 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. “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 questionhas been considered by a Coordinate Bench of this Court and the following principles are 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, 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.” 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 Section151, 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.” Considering the facts and circumstances of the case and thereliance placed hereinabove, we find no merit in the conclusion drawn by the AO and the ld.CIT (A) which are based on suspicion and without application of mind. Thus, 29 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. considering the above facts and judicial precedents, the proceedings initiated vide notice under section 148 is void- ab-initio since the ld. PCIT, Alwar has not recorded proper satisfaction and gave approval without application of mind and in mechanical manner which is unjustified and bad-In-law. 6.1. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for initiatingthe assessment proceedings under section 147 read with section 148 of the IT Act, 1961. We, therefore, quash the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of addition, in the impugned assessment proceedings, is rendered academic and infructuous.However we are expressing over views on merits of the addition also. Ground No. 3 &4 : 7. In respect of these grounds, the brief facts of the case are that the assessee has made time deposit of Rs. 10,17,980/- in the bank account during the financial year 2010-11 relevant to assessment year 2011-12 but failed to furnish documentary evidence regarding time deposit made during the year under consideration. Hence, without evidence regarding source of time deposit, entire time deposit of Rs. 10,17,980/- treated as income from other sources and added in 30 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. the total income of the assessee. On appeal before the ld. CIT (A), he dismissed the appeal of the assessee by observing as under :- “ The appellant has not been able to give any documentary evidence regarding sources of agricultural income or other documentary evidence pertaining to relevant financial year which can establish the source of impugned time deposits. Therefore, the nature and source of the impugned time deposits have not been satisfactorily explained with any kind of documentary evidence for the relevant financial year before NFAC inspite of repeated opportunities. “ … The addition has been rightly made by the AO as the appellant had made time deposits in his bank account and has failed to explain the nature and source of the same satisfactorily.” 8. Before us, the ld. A/R of the assessee has submitted his written submissions as under : 1. “At the outset, the appellant wants to attract your honor attention to the assessment order and the appellate order where no reference of section under which addition has been made, under the current case, has been made. Hence, the addition deserves to be deleted on the mere ground of non-mentioning of specific section under the current case. In this regard, we rely on the following case laws: The Hon’ble ITAT, Jaipur Bench ‘SMC’, Jaipur in the case of Shri Ram Lal Vs ITO, Alwar [ITA No. 265/JP/2024] dated 08.08.2024 held that non- mentioning the precise provision of law makes theentire impugned addition bad in law. Relevant extracts are reproduced as under: “…However, the ld. AR of the assessee submitted before the Bench that the order of Authorities assessment as well as order of the ld. CIT(A) lacks clear reference to the specific sections under which the addition is made. After perusal of the record, the Bench also found that no specific section has anywhere been mentioned by the Revenue Authorities for making addition… … Therefore considering the above judgements and also considering the fact that no specific section has any where been mentioned for making impugned addition, the Bench is of the view that non-mentioning the precise provision of law makes the entire impugned addition bad in law. In this view of the matter, the appeal of the assessee is allowed”. 31 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. The Hon’ble Delhi ITAT in the case of Smt. Sudha Loyalka Vs ITO [ITA No. 399/Del/2017 held as under: “In our considered opinion, the sustaining of impugned addition is not justified due to the following reasons:- i). It has not been mentioned either by A.O. or by Ld. CIT(A) as to under which section of the Income Tax Act, these closing credit balances appearing as on 31.03.2012 could be added. Therefore, non-mentioning the precise provision of law makes the impugned addition bad in law”. 2. Without prejudice to anything stated in point no. 1 above, the main contention of the Ld. AO for making the addition and confirmation thereof by the Ld. CIT(A) is that the appellant had failed to furnish documentary evidence with regard to the time deposits of Rs. 10,17,980/-. In this reference, it is humbly submitted that the appellant had clearly stated, vide his response, dated 23.07.2023 [produced in page 2 and 3 of Ld. CIT(A) order], to the hearing notice u/s 250 of the Act, that he is the owner of 3.5825 hectare/ 30 bigha of farm land and generates around Rs. 5,00,000/- annually from such land. 3. Further, in support of ownership of his land, the appellant submitted ‘jamabandi’(PBP: 5 – 7)and also submitted copies of sales invoices issued for sale of farm land produce(PBP: 8 – 10). In the said response, the appellant stated that the source of time deposit of Rs. 10,00,000/- is the agriculture income generated from such farm land. Here, it is pertinent to note thatneither the Ld. AO nor the Ld. CIT(A) has denied ownership of agriculture land and has also not brought anything on record to show that appellant was having any other source of income. 4. With regard to the claim of the Ld. CITA() that “whatever submission and evidence has been submitted by the appellant are for the current FY”, your honor would appreciate that it is a settled practice in the society of not maintaining invoices of sales since these agriculture incomes are exempt from income tax. Accordingly, it has been held by various court that in the absence of any evidence contrary, the agriculture income estimated and offered by assessee has to be accepted. In this regard, we rely on the following case laws: Hon’ble Gujarat High Court in the case of ITO Vs Ashwin D Metha (HUF) (2014) 12 TMI 1391 held as follows: “The Commissioner of income Tax (Appeals) has held that since the agricultural income has been accepted by the revenue and the Assessing Officer has not been able to prove any other source of income out of which the assesse could have earned this income, and the income declared by the assesse has to be accepted “. 32 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. Gujarat High Court in JK. Choksi Vs. ACIT (2015) (1) TMI 392; 5. Alternatively, various judicial forums have appreciated the fact that maintaining such kind of agriculture record is quite difficult and therefore, under such circumstances, income can be estimated based upon the land holding. In this regard, we place our reliance on following case law: The Hon’ble ITAT, Indore Bench, Indore in the case of ACIT Vs Shri Vinod Vaish [ ITA No. 189/Ind/2013] dated 04.06.2019 held as under: “17. From perusal of the above finding of the Ld. CIT(A) which goes uncontroverted by the ld. DR, we observe that the Revenue authorities have nowhere disputed that the assessee holds agricultural land measuring 10 acres since last many years. It is a known fact that regular maintenance of books of accounts and documentary evidences for each and every transactions entered into during the course of agricultural operations for buying the seeds, labour charges, sale of produced, purchase of fertilizers etc. cannot be fully documented for various practical reasons. The AO has also not placed any contrary material to support its finding. Only remedy is estimation of income per acre. In certain cases as referred in the finding of the Ld. CIT(A), the tribunal has estimated income per acre at Rs. 15000/- during A.Y. 1998-99 and Rs.25000/- during A.Y. 2005-06. 18. In these given facts and circumstances of the case, we are of the view that Ld. CIT(A) has rightly estimated the agricultural income of Rs.30000/- per acre for A.Y. 2009-10. No interference is therefore called for in the well reasoned finding of the Ld. CIT(A). We uphold the same and dismiss the revenue’s ground no.4”. 6. Without prejudice to anything stated hereinbefore, the appellant humbly submits that the appellantwas in service in the Indian Navy for 11 years (retired in 1988). Post retirement, the appellant was actively and exclusively engaged in farming and driving agriculture income therefrom. Hence in total the appellant was earning active income for 34 years till the F.Y. 2010-11. Therefore, it will not be abnormal to assume that the appellant had accumulated fund over the period of time since it is a general practice of a person to save money in bank. Further, the appellant had, in its very first reply dated 23.07.2023, submitted the he had savings from Indian Navy Service and the time deposit were made from the agriculture income gathered over the time. Therefore, the source of time deposit was very well explained by the appellant and neither the Ld. AO nor the Ld. CIT(A) had brought any record to suggest that the appellant was not serving in the Indian Navy or have any other source of income.Therefore, the addition deserves to be deleted since the 33 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. time deposit was made from the available fund out of past savings and the said factum cannot be ruled out in the current case. In this regard, we rely on the following case law: The Hon’ble ITAT, Jodhpur Bench, Jodhpur in the case of Ayodhya Jajra Vs CIT(A) [ITA No. 43/JODH/2022] dated 08.04.2024held as under: “We note from the copy of cash book filed by the assessee that the assessee has out of the earlier year saving has shown opening cash of Rs. 9,50,597/- which is also supported by the various year accumulated income shown by the assessee since 1998.The assessee is having 77 years age and looking to the old age holding the cash out of the accumulated saving to the extent of Rs. 9,50,597/- cannot be doubted. Thus, respectfully following that decision of the jurisdictional high court and considering that aspect of the matter when the assessee has demonstrated that she is regularly filling the income and having the income in cash and there by holding opening cash of Rs. 9,50,597 along with that the assessee has deposited cash into her bank account for an amount of Rs. 11,00,000/- cannot be added as unexplained income under section 68 of the Act for the year under consideration and therefore, we direct to delete the addition made in hands of the assessee. In terms of this observation the appeal of the assessee is allowed”. 9. On the other hand, the ld. D/R supported the order of the ld. CIT (A). 10. We have heard rival contentions, perused the orders of the lower authorities and also taken into consideration the written submissions filed by the assessee. It is noticed that the assessee is an Individual retired from Indian Navy and engaged in agricultural activities. The assessee has not filed his return of income as he was not having taxable income during the assessment year under consideration. However, the AO got information that the assessee had made time deposit of Rs. 10,17,980/- in the bank account during the year under consideration. Hence, the AO considered the said information as reason to believe that income of the assessee has escaped assessment. Thus, the AO initiated proceedings for reopening 34 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. of assessment and ultimately made addition on account of unexplained time deposit of Rs. 10,17,980/- in the bank account. From perusal of Assessment order, we note that the AO has failed to make any enquiry in respect of the time deposits in the bank account reflecting the name of the bank, account numbers, nature of time deposit, source of time deposit etc. and further we note that the AO has not brought on record any evidence on the basis of which the reasons and conclusion was drawn. We also note that both the assessment order and appellate order has made no reference of specific section under which the addition has been made which is very much required to be mentioned by the AO so as to enable the assessee to represent his case accordingly and effectively.Therefore, non- mentioning the precise provision of law makes the impugned addition bad in law. We note that the Coordinate Bench of the Tribunal, Jaipur in the case of Shri Ram Lal vs. ITO in ITA No. 265/JP/2024 dated 08.08.2024 held that non-mentioning the precise provision of law makes the entire impugned addition bad in law. Relevant extracts are reproduced as under :- “ …….However, the ld. A/R of the assessee submitted before the Bench that the order of Authorities assessment as well as order of the ld. CIT (A) lacks clear reference to the specific sections under which the addition is made. After perusal of the record, the Bench also found that no specific section has anywhere been mentioned by the Revenue Authorities for making addition……. …… Therefore, considering the above judgements and also considering the fact that no specific section has any where been mentioned for making impugned addition, the Bench is of the view that non-mentioning the precise provision of 35 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. law makes the entire impugned addition bad in law. In this view of the matter, the appeal of the assessee is allowed.” The Coordinate Bench of the Tribunal, Delhi in the case of Smt. Sudha Loyalka vs. ITO in ITA No. 399/Del/2017 held as under : “ In our considered opinion, the sustaining of impugned addition is not justified due to the following reasons :- i) It has not been mentioned either by A.O. or by ld. CIT (A) as to under which section of the Income Tax Act, these closing credit balances appearing as on 31.03.2012 could be added. Therefore, non-mentioning the precise provision of law makes the impugned addition bad in law.” Without prejudice to above, the assessee submitted that he was in service in the Indian Navy for 11 years (retired in 1988) Post retirement, he was actively and exclusively engaged in farming and driving agriculture income therefrom. Therefore, it will not be abnormal to assume that the appellant had accumulated fund over the period of time since it is a general practice of a person to save money in bank. Further, we note from the submission of Ld AR for the assesee that assessee in his first reply dated 23.07.2023, submitted that he had savings from Indian Navy Service and the time deposit were made from the agriculture income gathered over the time. Therefore, the source of time deposit was very well explained by the appellant that the time deposit was made from the available fund out of past savings andwe note that neither the AO nor the ld. CIT (A) had brought any record to suggest that the assessee was not serving in the Indian Navy or have any other source of income. We find that similar issue was decided by the 36 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. Coordinate Bench of Tribunal, Jodhpur in the case of Ayodhya Jajra vs. CIT (A) in ITA No. 43/Jodh/2022 dated 08.04.2024 wherein it has been held as under :- “We note from the copy of cash book filed by the assessee that the assessee has out of the earlier year saving has shown opening cash of Rs. 9,50,597/- which is also supported by the various year accumulated income shown by the assessee since 1998.The assessee is having 77 years age and looking to the old age holding the cash out of the accumulated saving to the extent of Rs. 9,50,597/- cannot be doubted. Thus, respectfully following that decision of the jurisdictional high court and considering that aspect of the matter when the assessee has demonstrated that she is regularly filling the income and having the income in cash and there by holding opening cash of Rs. 9,50,597/- along with that the assessee has deposited cash into her bank account for an amount of Rs. 11,00,000/- cannot be added as unexplained income under section 68 of the Act for the year under consideration and therefore, we direct to delete the addition made in hands of the assessee. In terms of this observation the appeal of the assessee is allowed.” Thus, in view of the detailed facts narrated above and respectfully following the judgments cited above of the Hon’ble High Courts and the orders of the Coordinate Benches of the Tribunal, the addition made by the lower authorities deserves to be deleted. 11. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 21 /01/2025. Sd/- Sd/- ( (Gagan Goyal ) (Dr. S. Seethalakshmi) Accountant Member Judicial Member Jaipur Dated:- 21/01/2025 37 ITA No. 1100/JPR/2024 Tej Singh Sinsinwar, JAIPUR. *Santosh Copy of the order forwarded to: 1. The Appellant- Sh. Tej Singh Sinsinwar, jaipur. r. 2. The Respondent- ITO, Ward-1(2), Jaipur. 3. The ld CIT 4. DR, ITAT, Jaipur 5. Guard File ITA No.1100/JPR/2024) By order, Asstt. Registrar "
Other Referred Cases
Hindustan Lever Ltd. Vs R.B. Wadkar, Nadeem Hasan vs. ITO, Ward-46(4), New Delhi, Bir Bahadur Singh Sijwali Vs ITO, Praveen Kumar Jain vs. ITO, Jayesh Govindbhai Balar vs ITO, Amar Lal Bajaj v ACIT, CIT vs S Goyanka Lime & Chemical Ltd., CIT, Jabalpur V/s M/s Goyanka Lime and Chemicals Ltd., Ayodhya Jajra Vs CIT(A)
Laws Referred To
Income Tax Act, 1961
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1:1 Consultation on Business Development
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Object Clause - Merchant Banking Business
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Early Retirement Letter
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