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B.P.MUNDRA

Mundra House, 822-A, Shivaju Nagar, Civil Lines, jaipur-302006 9314501680, 9314501791


Approval / sanction by merely writing “Approved” to reopen the case u/s 147 is not sustainable

B.P.Mundra > Income Tax > Cases Income tax > 143(3) > Approval / sanction by merely writing “Approved” to reopen the case u/s 147 is not sustainable

admin November 15, 2019

143(3), 147, 151, 68, Satisfaction

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Friends on June 13, 2018 it has been held that Reopening u/s 147/148 was not justified ‎where reasons were recorded merely on the basis of information received from ‎investigation using and without independent application of mind by the AO. The Hon’ble ‎Court held that it was indeed a “borrowed satisfaction” and reopening was not justified
If the Commissioner acted 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” OR WROTE AS “Approved” 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. As approval/sanction given by CIT was without recording ‎satisfaction, reopening was not sustainable—Assessee’s appeal ‎allowed.‎
GORIKA INVESTMENT AND EXPORT (P) LTD. vs. INCOME TAX ‎OFFICER
DELHI TRIBUNAL N. K. SAINI, AM.‎
ITA No. 3396/Del/2018‎ Jun 13, 2018‎ ‎(2018) 53 CCH 0168 DelTrib‎
Legislation Referred to Section 147, 143(3), 68‎
Case pertains to Asst. Year 2009-10‎
Decision in favour of:‎ Held
In the case of Pr. CIT Vs N.C. Cables Ltd. (supra) held as under: “11. Section ‎‎151 of the Act clearly stipulates that the CIT(A), who is the competent ‎authority to authorize the reassessment notice, has to apply his mind and form ‎an opinion. The mere appending of the expression ‘approved’ says nothing. It ‎is not as if the CIT(A) has to record elaborate reasons for agreeing with the ‎nothing 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 ITAT ‎cannot be disturbed.” Pr. CIT Vs N.C. Cables Ltd. (Followed)‎
‎(Para 11)‎
It is not in dispute that the AO initiated the proceedings u/s 147 r.w.s. 148 of ‎the Act on the basis of information furnished by the Directorate of ‎Investigation Unit, which is evident from the aforesaid referred to nothings ‎‎(copy of which is placed at page no. 27 of the assessee’s paper book) and the ‎Pr. CIT gave the approval without applying his mind in a slip-shod manner. ‎Therefore, by respectfully following the judicial pronouncements in the ‎aforesaid referred to orders and by keeping in view that the approval/sanction ‎given by the Pr. CIT without recording satisfaction, I am of the view that the ‎reopening in the present case is not sustainable. Therefore, the reopening u/s 1 ‎‎47 of the Act by issuing the notice u/s 1 48 of the Act on the basis of ‎mechanical approval by the Pr. CIT without recording satisfaction on the ‎objective material is quashed.‎
‎(Para 13)‎
Cases Referred to
‎1.‎ Zurassic Properties (P) Ltd. Vs ITO in ITA No. 6398/Del/2016 order dated 28. 04. 2017 ‎
‎2.‎ M/s Layak Fabrics (P) Ltd. Vs ITO in ITA No. 491/Del/2016 order dated 15. 07. 2016‎
‎3.‎ Pragati Vanijya Ltd. Vs ACIT in ITA No. 5096/Del/2014 order dated 31.07.2017‎
‎4.‎ Rajiv Aggarwal Vs ACIT 395 ITR 255 (Del. )‎
‎5.‎ CIT Vs Batra Bhatta & CO. 321 ITR 526 (Del.)‎
‎6.‎ Ashok Kumar Sen Vs ITO 132 ITR 707 (Del. )‎
‎7.‎ Sabh Infrastructure Ltd. Vs ACIT 398 ITR 198 (Del.)‎
‎8.‎ CIT Vs G&G Pharma India Ltd. 384 ITR 147 (Del.)‎
‎9.‎ Unique Metal Industries Vs ITO in ITA No. 1372/Del/2015 order dated 28. 10. 2015‎
‎10.‎ Punjab Metal Store Vs ITO in ITA No. 512/Del/2015 order dated 02.12.2015‎
‎11.‎ Jiten Gurnani Vs ITO in ITA No. 4908/Del/2012 order dated 31. 03. 2015‎
‎12.‎ Banke Bihari Properties (P) Ltd. Vs ITO in ITA No. 5128/Del/2015 order dated 22. 04. 2016‎
‎13.‎ R. K. Garg Developers (P) Ltd. Vs ITO in ITA No. 6558/Del/2014 order dated 31. 08. 2016‎
‎14.‎ Amsa India (P) Ltd. Vs CIT 393 ITR 157 (Del.)‎
‎15.‎ Pr. CIT Vs Meenakshi Overseas (P) Ltd. Vs ITO 395 ITR 677 (Del.)‎
‎16.‎ CIT Vs RMG Plyvinyl (I) Ltd. 396 ITR 5 (Del.)‎
‎17.‎ R. P. Foam Home (P) Ltd. Vs ITO in WP(C) 7601/2017 dated 29. 08. 2017‎
‎18.‎ CIT Vs M/s Jet Speed Audio (P) Ltd. 372 ITR 762 (Bom.)‎
‎19.‎ M/s M. S. Software (P) Ltd. Vs ITO in ITA No. 2708/Del/2016‎
‎20.‎ Basesar Properties (P) Ltd. Vs ITO in ITA Nos. 5750 & 5751/Del/2016 order dated 18. 08. 2017‎
‎21.‎ Zikarpur Estate (P) Ltd. Vs ITO in ITA No. 6546/Del/2016‎
‎22.‎ Chuugmal Rajpal Vs S. P. Chaliha reporte in 79 ITR 603 (SC)‎
‎23.‎ Pr. CIT Vs N. C. Cables Ltd. in ITA No. 335/2015 order dated11. 01. 2017‎
‎24.‎ M/s Meta Plast Engineering (P) Ltd. Vs ITO in ITA No. 5780/Del/2014 order dated 06. 04. 2018‎
‎25.‎ M/s Dhanuka Agritech Ltd. Vs ACIT in ITA No. 1003/Del/2014 order dated 11. 05. 2016‎
‎26.‎ Sunil Agarwal Vs ITO in ITA No. 988/Del/2018 order dated 24. 05. 2018‎
‎27.‎ Metro Decorative (P) Ltd. Vs ITO in ITA No. 450/Del/2014 order dated 24. 10. 2017‎
Counsel appeared:‎
Gautam Jain, Adv., Piyush Kumar Kamal, Adv., & Lalit Mohan, CA for the ‎Assessee.: B. R. Mishra, Sr. DR for the Revenue
ORDER
‎1. This is an appeal by the assessee against the order dated 15.02.2018 of ld. ‎CIT(A)-35, New Delhi.‎
‎2. Following grounds have been raised in this appeal:‎
‎“1 That the learned Commissioner of Income Tax (Appeals)-35, New Delhi ‎has grossly erred both in law and on facts in upholding the initiation of ‎proceedings under section 147 of the Act and, completion of assessment under ‎section 147/143(3) of the Act without appreciating that the same were without ‎jurisdiction and hence deserved to be quashed as such.‎
‎1.1 That the learned Commissioner of Income Tax (Appeals) has failed to ‎appreciate that there was no specific relevant, reliable and tangible material on ‎record to form a “reason to believe'” that income of the appellant had escaped ‎assessment and in view thereof the proceedings initiated are illegal, untenable ‎and therefore unsustainable.‎
‎1.2 That the learned Commissioner of Income Tax (Appeals) has failed to ‎appreciate that reasons recorded mechanically without application of mind do ‎not constitute valid reasons to believe for assumption of jurisdiction u/s 147 of ‎the Act.‎
‎2 That the learned Commissioner of Income Tax (Appeals) has erred both in ‎law and on facts in sustaining an addition made by learned Income Tax Officer ‎of Rs. 15,00,000/- representing sum received from M/s Shalini Holdings Ltd. ‎as share capital and erroneously held as unexplained cash credit under section ‎‎68 of the Act.‎
‎2.1 That while sustaining the aforesaid addition the learned Commissioner of ‎Income Tax (Appeals) has completely overlooked that there was no adverse ‎material brought on record by the learned Assessing Officer to assume that ‎credits by way of share capital represents unexplained cash credit and. burden ‎which lay upon the assessee in terms of section 68 of the Act had not been ‎discharged.‎
‎2.2 That the learned Commissioner of Income Tax (Appeals) has failed to ‎appreciate that once the aforesaid shareholder had duly confirmed the ‎investment made, he could not have upheld the addition on arbitrary grounds ‎and that too without bringing any evidence or even alleging that aforesaid ‎credit by way of share capital emanated from the source of funds provided by ‎the appellant company.‎
‎2.3 That the learned Commissioner of Income Tax (Appeals) has failed to ‎appreciate that the shareholder was a corporate entity, duly assessed to tax and, ‎had subscribed to share-capital through banking channels and supported by ‎necessary documents and therefore, once such shareholder was identifiable ‎company, share capital received could not in law or on fact be brought to tax ‎u/s 68 of the Act.‎
‎2.4 That the learned Commissioner of Income Tax (Appeals) has also failed to ‎appreciate that appellant had placed on record voluminous evidences in the ‎shape of audited financial statement, annual returns, order of assessment of the ‎share applicant to discharge the burden with regard to both genuineness of the ‎transactions and creditworthiness of the share applicant and therefore, there in ‎absence of any whisper to rebut the said evidence, the credit could not ‎arbitrarily be regarded as unexplained cash credit under section 68 of the Act.‎
‎2.5 That further more the learned Commissioner of Income Tax (Appeals) has ‎proceeded to confirm the addition on mere speculation, generalized statements, ‎theoretical assumptions and allegations and assertions, without there being any ‎supporting evidence and is therefore not in accordance with law.‎
‎2.6 That the learned Commissioner of Income Tax (Appeals) has failed to ‎appreciate that alleged evidence gathered in the course of search of one Shri S. ‎K. Jain without confronting the same to the appellant and, without affording ‎any opportunity of cross-examination could not be made a basis to make an ‎addition; particularly when even no nexus is established with the share capital ‎subscribed by the shareholder in the appellant company.‎
‎3 That the learned Commissioner of Income Tax (Appeals) has erred both in ‎law and on facts in upholding an addition of Rs. 30,000/- on account of ‎alleged commission paid to the entry provider in cash for obtaining ‎accommodation entries and held as unexplained expenditure u/s 69C of the ‎Act.‎
‎4 That the learned Commissioner of Income Tax (Appeals) has erred both in ‎law and on facts in upholding the levy of interest of Rs. 38,861/- u/s 234A of ‎the Act and. interest of Rs. 4,51,791/- u/s 234B of the Act which are not ‎leviable on the facts and circumstances of the case of the appellant company.‎
It is therefore, prayed that, it be held that assessment made by the learned ‎Assessing Officer and sustained by the learned Commissioner of Income Tax ‎‎(Appeals) deserves to be quashed as such. It be further held that additions ‎made and sustained by the learned Commissioner of Income Tax (Appeals) ‎alongwith interest levied be deleted and appeal of the appellant company be ‎allowed.”‎
‎3. The main grievance of the assessee vide ground nos. 1 to 1 .2 relates to the ‎validity of the proceedings initiated by the AO u/s 1 47 of the Income Tax ‎Act, 1 961 (hereinafter referred to as the Act).‎
‎4. Facts of the case in brief are that the assessee filed the return of income on ‎‎27.09.2009 declaring an income of Rs.42,156/- which was processed u/s ‎‎143(1) of the Act. Subsequently, the AO issued notice u/s 148 of the Act on ‎‎21.03.201 6 after recording the reasons. The AO framed the assessment u/s ‎‎143(3) r.w.s. 147 of the Act by making an addition of Rs.15,30,000/- and ‎assessed the income at Rs.15,72,156/-.‎
‎5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and ‎challenged the validity of the assessment completed u/s 147/143(3) of the Act ‎and submitted that the AO did not have tangible material on record to form a ‎reason to believe that the income had escaped assessment and that the AO had ‎initiated the proceedings mechanically without application of mind.‎
‎6. The ld. CIT(A), however, did not find merit in the submission of the ‎assessee by observing that the Investigation Department is an integral part of ‎the Income Tax Department and that in a systemic organization, the operations ‎carried on by one limb of the organization are co-related to the functioning of ‎the other limbs of the same organization. He further observed that the ‎information given by the Investigation Department was forwarded to the ‎assessment wings and that the AO decided to issue a notice after receiving such ‎information lying before him. Accordingly, the action of the AO in initiating ‎the proceedings u/s 148 of the Act was upheld.‎
‎7. Now the assessee is in appeal. The ld. Counsel for the assessee drew our ‎attention towards page no. 27 of the assessee’s paper book which is the copy ‎of the proposal after the reasons recorded u/s 148 of the Act for reopening the ‎assessment and noting for getting the approval from Pr. CIT. It was submitted ‎that the said proposal revealed that the AO sought the approval from the Pr. ‎CIT for initiating the proceedings. The ld. Counsel for the assessee submitted ‎that the Pr. CIT did not apply his mind and only approved in mechanical ‎manner. It was further submitted that while giving the approval for initiating ‎the proceedings u/s 147 of the Act, there was no application of mind by the Pr. ‎CIT. Therefore, the reopening was not valid. The reliance was placed on the ‎following case laws:‎
Zurassic Properties (P) Ltd. Vs ITO in ITA No. 6398/Del/2016 order dated ‎‎28. 04. 2017‎
M/s Layak Fabrics (P) Ltd. Vs ITO in ITA No. 491/Del/2014 order dated 15. ‎‎07. 2016‎
Pragati Vanijya Ltd. Vs ACIT in ITA No. 5096/Del/2014 order dated ‎‎31.07.2017‎
Rajiv Aggarwal Vs ACIT 395 ITR 255 (Del. )‎
CIT Vs Batra Bhatta & CO. 321 ITR 526 (Del.)‎
Ashok Kumar Sen Vs ITO 132 ITR 707 (Del. )‎
Sabh Infrastructure Ltd. Vs ACIT 398 ITR 198 (Del.)‎
CIT Vs G&G Pharma India Ltd. 384 ITR 147 (Del.)‎
Unique Metal Industries Vs ITO in ITA No. 1372/Del/2015 order dated 28. ‎‎10. 2015‎
Punjab Metal Store Vs ITO in ITA No. 512/Del/2015 order dated 02.12.2015‎
Jiten Gurnani Vs ITO in ITA No. 4908/Del/2012 order dated 31. 03. 2015‎
Banke Bihari Properties (P) Ltd. Vs ITO in ITA No. 5128/Del/2015 order ‎dated 22. 04. 2016‎
R. K. Garg Developers (P) Ltd. Vs ITO in ITA No. 6558/Del/2014 order ‎dated 31. 08. 2016‎
Amsa India (P) Ltd. Vs CIT 393 ITR 157 (Del.)‎
Pr. CIT Vs Meenakshi Overseas (P) Ltd. Vs ITO 395 ITR 677 (Del.)‎
CIT Vs RMG Plyvinyl (I) Ltd. 396 ITR 5 (Del.)‎
R. P. Foam Home (P) Ltd. Vs ITO in WP(C) 7601/2017 dated 29. 08. 2017‎
Sabh Infrastructure Ltd. Vs ACIT 398 ITR 198‎
CIT Vs M/s Jet Speed Audio (P) Ltd. 372 ITR 762 (Bom.)‎
M/s M. S. Software (P) Ltd. Vs ITO in ITA No. 2708/Del/2016‎
Basesar Properties (P) Ltd. Vs ITO in ITA Nos. 5750 & 5751/Del/2016 order ‎dated 18. 08. 2017‎
Zikarpur Estate (P) Ltd. Vs ITO in ITA No. 6546/Del/2016‎
Chuugmal Rajpal Vs S. P. Chaliha reporte in 79 ITR 603 (SC)‎
Pr. CIT Vs N. C. Cables Ltd. in ITA No. 335/2015 order dated11. 01. 2017‎
M/s Meta Plast Engineering (P) Ltd. Vs ITO in ITA No. 5780/Del/2014 order ‎dated 06. 04. 2018‎
M/s Dhanuka Agritech Ltd. Vs ACIT in ITA No. 1003/Del/2014 order dated ‎‎11. 05. 2016‎
Sunil Agarwal Vs ITO in ITA No. 988/Del/2018 order dated 24. 05. 2018‎
Metro Decorative (P) Ltd. Vs ITO in ITA No. 450/Del/2014 order dated 24. ‎‎10. 2017‎
‎8. In his rival submissions, the ld. Sr. DR strongly supported the orders of the ‎authorities below.‎
‎9. I have considered the submissions of both the parties and carefully gone ‎through the material available on the record. In the present case, it is noticed ‎that the approval of Pr. CIT was sought before initiating the proceedings u/s 1 ‎‎47 of the Act, copy of proposal is placed at page no. 27 of the assessee’s paper ‎book and read as under:‎
‎“Proposal u/s 148 of IT Act, 1961 in the case of M/s Gorika Investments ‎& Exports Pvt. Ltd., AY- 2009-10‎
On the basis of information received from Investigation Wing, Assessing ‎Officer has submitted that a search was conducted in S. K. Jain Group of cases ‎‎(entry operator) and accommodation entries amounting Rs. 15,00,000/- have ‎been provided to the assessee company during FY 2008-09 relevant to AY ‎‎2009-10. It is further submitted that the transaction amount of Rs. 15,00,000/- ‎received as discussed above leads to a credible question on the genuineness of ‎share capital/share application money received etc. during the year within the ‎meaning of section 68 of the IT Act, 1961, on the basis of the facts discussed ‎above relating to the so called subscribers. It is evident from the perusal of the ‎return that assessee has not disclosed its income to the tune of Rs. 15,00,000/-.‎
ITO, Ward-10(2) has sent the proposal with requisite Performa for initiating ‎the proceedings u/s 147/148 through Addl. CIT, Range-10, Delhi. ‎Reasons/satisfaction are properly recorded by ITO, Ward-10(2) and Addl. ‎CIT, Range-10, Delhi on Performa citing that income of Rs.15,00,000/- has ‎escaped assessment and it appears that it is a fit case for initiating proceedings ‎u/s 148 of the IT Act, 1961. If approved, permission may be granted for ‎initiating the proceedings.”‎
‎10. It is noticed that on the aforesaid proposal, the Pr. CIT-4, New Delhi gave ‎the approval on 21.03.2016 by writing the word “approved”. He has not ‎mentioned how and in what manner he was satisfied. In other words, it cannot ‎be said that the Pr. CIT applied his mind while giving the approval for ‎reopening the assessment or he was satisfied that it is a proper case where the ‎proceedings u/s 147 may be initiated.‎
‎11. On a similar issue, the Hon’ble Delhi High Court in the case of Pr. CIT Vs ‎N.C. Cables Ltd. (supra) held as under:‎
‎“11. Section 151 of the Act clearly stipulates that the CIT(A), who is the ‎competent authority to authorize the reassessment notice, has to apply his mind ‎and form an opinion. The mere appending of the expression ‘approved’ says ‎nothing. It is not as if the CIT(A) has to record elaborate reasons for agreeing ‎with the nothing 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 ‎ITAT cannot be disturbed.”‎
‎12. Similarly, the ITAT Delhi Bench ‘E’, New Delhi in ITA No. ‎‎450/Del/2014 for the assessment year 2004-05 in the case of Metro Decorative ‎Pvt. Ltd. Vs ITO, Ward-6(4), New Delhi (supra) vide order dated 24.10.2017 ‎held as under:‎
‎“6. We have carefully gone through the record, the documents and decisions ‎relied upon by either side. In so far as the challenge of the assessee as to the ‎legality and validity of the reopening is concerned, assessee is placing reliance ‎on the decisions reported in G&G Pharma India Ltd. (Del. High Court) ‎‎(supra), N.C. Cables Ltd. (supra) and Meenakshi Overseas Pvt. Ltd. (supra). ‎He also placed reliance on the decisions reported in Signature Hotels Pvt. Ltd. ‎vs. ITO 338 ITR 51 (Del), Sarthak Securities Co. Pvt. Ltd. vs. ITO (2010) ‎‎195 Taxman 262 (Del), CIT vs. Kamdhenu Steels & Alloys Ltd. (2012) 119 ‎Taxmann.com 26 (Del.). As could be seen from these decisions, it is ‎consistently held that the reopening based on the information furnished by the ‎Directorate of Investigation and the AO without making any further ‎Investigation on his own, recording the reasons to believe that income escaped ‎assessment are bad. In fact in Pr. CIT vs. M/s N.C. Cables Ltd. (supra) above ‎vide paragraph no. 10 the Hon’ble High Court extracted the reasons which are ‎as follows:‎
‎“10. As far as the first issue with respect to the approval granted to reopen the ‎assessment under Section 147/148 of the Act is concerned, the relevant noting ‎is as follows:-‎
‎”Reasons for issuing notice u/s 148 of the Act in the case of M/s N. C. Cables ‎Limited, for the A. Y. 2001-02-reg.‎
Information has been received from the Investigation Wing of the Income Tax ‎Department that the above named assessee is a beneficiary of accommodation ‎entries received from certain established entry operators identified by the Wing ‎during the period laundering for the beneficiaries and on the basis of ‎investigation carried out and evidences collected, a report has been forwarded. ‎I have perused the information contained in the report and the evidences ‎gathered. The report provides details of the modus oparandi of the ‘money ‎laundering scam’ and explain how the unaccounted money of the beneficiaries ‎are ploughed back in its books of account in the form of bogus share ‎capital/capital gains etc. after routing the same through the bank account (s) of ‎the entry operators. Entry operators were identified after thorough investigation ‎on the basis of definitive analysis of their identity, creditworthiness and the ‎source of the money ultimately received by the beneficiaries. These entry ‎operators are found to be mostly absconding after the unearthing of the ‎‎’Money Laundering Scam’ leaving the said money at the disposal of the ‎beneficiaries without any associated cost or liability. In the instant case, the ‎assessee is found to be the beneficiary of accommodation entry from such ‎entry operators as per the following specific details of transaction:-‎
Entry Operator Beneficiary’sBank Amount Rs.‎ Instrument No. ‎by which entry ‎taken and date Entry giving bank Account ‎no. from ‎which ‎entry ‎wasgiven
Mahesh Garg ‎-‎ ‎800480‎ ‎30.11.2000‎ SBP-DG ‎4507‎
PerformanceTrading ‎& Inv.‎ ‎ ‎ ‎700420‎ ‎13.11.2000‎ SBP-DG ‎4281‎
ChintpurniCredits ‎-‎ ‎900540‎ ‎22.11.2000‎ SBP-DG ‎50058‎
SubhashChanderSinghal ‎ ‎ ‎500300‎ ‎23.11.2000‎ SBP-DG ‎4544‎
KuldeepTextiles P. ltd.‎ ‎ ‎ ‎500500‎ ‎2154624.03.200‎‎1‎ InnovativeWazipur ‎239‎
Sweta Stone P. Ltd.‎ ‎-‎ ‎500500‎ ‎2351024.03.200‎‎1‎ ‎-do-‎ ‎1200259‎‎- CA
DivisionTrading P. Ltd.‎ ‎ ‎ ‎500500‎ ‎3361224.3.2001‎ ‎-do-‎ ‎225‎
During the course of the proceedings u/s 148 for the same assessment year, ‎which Was dropped on the technical ground that proper sanction was not ‎obtained, it was noticed that there are other receipts also from the identified ‎entry operators. Information about those entries was not available in the data ‎received from the Investigation Wing.‎
Nevertheless they also fall within the ambit of section 68 of the Act. The ‎assessee has received unexplained sums from the entry operators as per the ‎above details as per information available with the undersigned. As explained ‎above the identity, creditworthiness and genuineness of transactions with the ‎persons found to be entry operators cannot be established. I therefore have ‎reasons to believe that on account of failure on the part of the assessee to ‎disclose truly and fully all material facts necessary for assessment for above AY ‎the income chargeable to tax to the extent of accommodation entry mentioned ‎above, has escaped assessment within the meaning of S.147 of the Act.‎
Since four years has been expired from the end of the relevant year, and ‎assessment u/s 143(3) of the Act was made in the case of the assessee for the ‎said A ~ the reasons recorded above for the purpose of reopening of ‎assessment is put up for kind satisfaction of the CIT, Delhi t1, New Delhi in ‎terms of the Proviso to Section 151 of the Act.‎
Sd/- (ITO) Ward 13(1).‎
The ACIT, Range 13, New Delhi For kind approval of CIT-V, New Delhi ‎CIT-V, Delhi:‎
‎”Approved” Sd/-“‎
‎7. In the case on hand also the contention of the Revenue is that the assessee ‎issued cash and received cheques from one Sh. Tarun Goyal, an entry ‎operator. It is only on the basis of information furnished by the Directorate of ‎Investigation Unit AO found the satisfaction that the income of Rs. ‎‎20,40,000/- had escaped the assessment due to the reason of failure on the part ‎of the assessee to prove not only the identity of share applicants but also the ‎capacity of such applicants and the genuineness of the transaction. The ‎Hon’ble Jurisdictional High Court in Sarthak Securities Pvt. Ltd. vs. ITO ‎‎(2010) 195 Taxman 262 (Del), Signature Hotels Pvt. Ltd. vs. ITO 338 ITR 51 ‎‎(Del), CIT vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del), Pr. CIT ‎vs. G&G Pharma India Ltd. (ITA No. 545/D/2015) (Delhi High Court), ITO ‎vs. N.C. Cables Ltd. (Delhi ITAT) – Judgment dated 22.10.2014 and Pr. CIT ‎vs. Meenakshi Overseas Pvt. Ltd. (2017) (S) TMI 1428 held that the ‎reopening of the assessment without the AO independently undertaking the ‎exercise of examination of facts is bad under law.‎
‎8. The Jurisdiction Delhi High Court in the case of Pr. CIT vs. Meenakshi ‎Overseas Pvt. Ltd. (2017)(S) TMI 1428 has held that reopening u/s 147/148 ‎was not justified where reasons were recorded merely on the basis of ‎information received from investigation using and without independent ‎application of mind by the AO. The Hon’ble Court held that it was indeed a ‎‎“borrowed satisfaction” and reopening was not justified.‎
‎9. Now coming to the second limb of challenge made by the assessee to the ‎effect that the reassessment proceedings initiated are bad in as much as the ‎approval/sanction by Addl. CIT is without recording satisfaction and the same ‎is not in accordance with the requirements of Section 151 of the Act, Ld. AR ‎brought it to our notice that vide sl. no. 11 the Addl. CIT, Range 6, New ‎Delhi recorded that “Yes, I am satisfied”.‎
On this aspect Ld. AR placed reliance on the decisions reported in Chhugamal ‎Rajpal vs. S.P. Chaliha (1971) 79 ITR 602 (SC), Central India Electric Supply ‎Co. Ltd. vs. ITO (2011) 10 taxmann.com 169 (Delhi), ITO vs. N.C. Cables ‎Ltd. (Delhi ITAT) – Judgment dated 22.10.2014, ITO vs. M.B. Jewellers (P) ‎Ltd. (Delhi ITAT) judgment dated 14.11.2014, Amar Lal Bajaj vs. ACIT ‎‎(2013) 37 Taxmann.com 7 (Mum) (Trib), CIT vs. M/s S. Goyanka Lime and ‎Chemicals Ltd. 2015 (5) TMI 217 and Pr. Commissioner of Income Tax vs. ‎N.C. Cables Ltd. (ITA No. 335/2015), for the principle that where the ‎authority to grant/sanction merely recorded “Yes, I am satisfied”, such an ‎approval/sanction is not sustainable.‎
‎10. We have gone through the decisions relied upon by the Ld. AR. In the ‎decision reported in CIT vs. M/s S. Goyanka Lime and Chemicals Ltd. (supra) ‎it is held by the Hon’ble Madhya Pradesh High Court as follows:‎
‎“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.”‎
‎11. This decision of the Madhya Pradesh High Court was challenged by the ‎Revenue before the Hon’ble Supreme Court by way of the Special Leave ‎Petition and the Hon’ble Supreme Court was pleased to dismiss the Special ‎Leave Petition vide order reported in (2015) 64 taxmann.com 313 (SC). “‎
‎13. In the present case also, it is not in dispute that the AO initiated the ‎proceedings u/s 147 r.w.s. 148 of the Act on the basis of information ‎furnished by the Directorate of Investigation Unit, which is evident from the ‎aforesaid referred to nothings (copy of which is placed at page no. 27 of the ‎assessee’s paper book) and the Pr. CIT gave the approval without applying his ‎mind in a slip-shod manner. Therefore, by respectfully following the judicial ‎pronouncements in the aforesaid referred to orders and by keeping in view that ‎the approval/sanction given by the Pr. CIT without recording satisfaction, I am ‎of the view that the reopening in the present case is not sustainable. Therefore, ‎the reopening u/s 1 47 of the Act by issuing the notice u/s 148 of the Act on ‎the basis of mechanical approval by the Pr. CIT without recording satisfaction ‎on the objective material is quashed.‎
‎14. In the result, appeal of the assessee is allowed.‎
‎(Order Pronounced in the Court on 13/06/2018)‎

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