Case Law Details
In our considerate view, Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee.
Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO’s belief is well reasoned and bonafide, he is to accord his sanction to the issue of notice u/s. 148 of the Act. In the instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put “approved” and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction.
Hon’ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. Vs CIT 258 ITR 317 has held that “the proviso to sub-section (1) of section 151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment”. The Hon’ble High Court further observed that “what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval”.
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.
INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI
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The question is Why tax authorities take the task in very easy going and casual manner. This is inspite of so many cases or proceedings initiated by revenue failing due to procedural lapses and casual approach taken by them.
The reason is that tax officers have considered the right to get set things in order by getting passed any amendments with retrospective effect of any longpast duration.
There must not be amendments (even prospective) to shield wrong doings, or omissions of tax officers.
There must be questioning on work done in wrong manner causing loss ot revenue as well as causing harrasment on tax payers.
Recent directions of Allahabad High Court (though need modification) in case of Commissioner Of Income Tax Vs. Intezar Ali [2013 (8) TMI 704 – ALLAHABAD HIGH COURT] is an eye opener. In this case the High Court has directed to make an enquiry of AO who made unjust addition. However, as opined by me in an article that direction need to be modified and to make enquiry of CIT(A) who confirmed addition, and of CIT and judicial team including counsels who filed appeal before High Court agaisnt order of ITAT.Read:
Directions of High Court to enquire about bonafide conduct only of Assessing Officer seems infructuous because addition made by AO was confirmed by CIT(A), it was deleted by Tribunal but revenue appealed before High court so other officers conduct should also be enquired.
Allahabad High Court Directions to Enquire Conduct of AO – need to be modified
Scope of this write-up:
This write-up is limited to the scope of covering implications of the directions of honorable High Court to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner (sic. Respondent before High Court).
Brief facts are as follows:
The assessee sold certain rural agricultural land, which is not capital asset and did not give rise to taxable capital gains.
The consideration received by assessee as per registered conveyance deed executed by assessee in favor of buyer was Rs. 20 lakh.
However, assessee deposited substantial amount in bank in cash on the day of registration of deed.
AO made addition of Rs. 77,80,000/- in respect of cash deposited during the year in bank account rejecting contentions and evidences of assessee that the amount was received in cash from buyer of land, and he produced evidences in form of (a) statement of witnesses to deed, (b) bank managers statement and affidavit that on request of assessee he kept bank branch open for extended hours and money was deposited by assessee which he received on the date of registration of deed (c) complaint made to registering authorities that actual consideration was higher but in deed it was shown at low amount and (d) that the area rate of land was much higher and that justified statement of cash received from the buyer.
The CIT(A) did not accept written submission and evidences and agreed with the AO and confirmed addition.
On appeal of assessee the Tribunal allowed appeal of assessee and held that sufficient evidences have been produced which lead to conclusion that the amount of cash deposit was part of sale consideration of land and not unexplained money.
The High Court confirmed decision of Tribunal and dismissed appeal of revenue.
Directions of the High court:
In paragraph 14 of the judgment the High Court has held as follows:
“14. We, therefore, find it appropriate to direct the Registrar General of the Court to forward a copy of this judgment to the Chairman of the Central Board of Direct Taxes to cause an enquiry into the conduct and motives of Shri Yaduvansh Yadav, Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner.
As per above directions the High Court has asked CBDT to cause an enquiry in conduct and motives of AO. As per information of the author such directions are rare if not totally unprecedented. Such directions can go a long way in reducing unjust orders being passed by AO and other authorities. If an officer is afraid of enquiry and punishment for his wrong deeds then era of high-pitched assessment orders will be over.
However, in this case, with due respect author feels that , unfortunately, seemingly an inadvertent error of the High Court has taken place. We find that in this case addition was made by the AO and the same were confirmed by the CIT(A). Therefore, so far AO is concerned, he is covered by order of CIT(A) which says AO is correct.
The Tribunal held in favor of assessee. Then CIT directed to file an appeal before High Court. Therefore, it can be said that CIT was also of view that addition was correctly made. Therefore, his action in filing of appeal before the High Court also supports the AO that AO was correct or he has acted in bonafide manner.
The honorable High Court has directed for an enquiry about conduct of the AO only. However, in the given circumstances action of CIT(A) could be enquired for the same reasons as considered by the honorable High court because the CIT(A) confirmed order of the AO.
Then the action of team of IT Department which dealt with scrutiny of order of Tribunal and counsels who recommended filing of appeal before the High Court can be subject matter of an enquiry. Why in the given facts and circumstances appeal was filed by revenue before the High court.
Filing of an appeal without proper ground and home work simply causes wastage of public money and valuable time of honorable Courts. This must come to an end.
The honorable Allahabad High court can pass an order modifying to enquire about conduct of AO, the CIT(A), CCIT and other officers and counsels who took decision to file an appeal before the High Court.
Why a petty AO who made addition to protect interest of revenue should suffer when other senior officers have supported his order by their actions in course of appeal and filing of appeal before High court.
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