The A.O. obtained the approval of the PR. CIT before issuing the notice under section 148 of the Act. The proposal dt. 11/03/2016 seeking the approval for issuance of notice under section 148 of the Act, by the A.O. is placed at page no. 2 & 3 of the assessee’s paper book. While giving the approval the Ld. PR. CIT, Karnal recorded as under:
“ Yes, satisfied, it is a fit case for issue of notice under section 148 “
Pr. CIT, Karnal
From the aforesaid approval, it is clear that the Ld. Pr. CIT recorded satisfaction in the mechanical manner, without application of mind to accord sanction for issuing notice under section 148 of the Act.
We are of the view that the reopening under section 148 of the Act on the basis of mechanical approval without applying the mind by the Ld. Pr.CIT was not valid. Therefore, in the present case, the reopening of the assessment on the basis of notice under section 148 of the Act is quashed.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal by the Assessee against the order dt. 28/01/2020 of Ld. CIT(A), Karnal.
2. The Registry has pointed out that the appeal of the assessee is barred by limitation by 35 days. The Assessee furnished an application for condonation of delay stating therein as under:
APPLICATION FOR CONDONATION OF DELAY IN FILLING APPEAL
Kindly refer to show cause Notice No. ITA No- 255/Chandigarh/2020 dated 03-062020 issued by Hon’ble ITAT.
Wherein I have been intimated that Appeal filed in the case is received in ITAT Office by post on 08-05-2020 late by 35 days.
It is humbly submitted :
That Order appealed against is received on 03-02-2020 and Appeal was to be filed on or before 02-04-2020.
That The Appellant prepared Appeal and deposited Appeal fee on 18-03-2020 as per challan of Appeal fee attached with Appeal form.
That Appeal could not be receipted in the office of ITAT due to COVID-19 LOCKDOWN as all the Govt, offices were closed.
That further appeal was sent by speed post on 18-04-2020 as per receipt reed, from Post Office, which is received in your office on 08-05-2020 due to COVID-19 LOCKDOWN.
That non-filling of present appeal in stipulated period is neither intentional nor-deliberate.
Keeping in view of above explained circumstances, it is humbly prayed that delay in filling of Appeal may kindly be condoned.
3. During the course of hearing the Ld. Counsel for the Assessee reiterated the contents of the aforesaid application and submitted that the delay in filing the appeal occurred due to COVID-19 Lockdown which was beyond the control of the assessee, he requested to condone the delay of 35 days.
4. In his rival submissions the Ld. DR although opposed the condonation of delay but could not controvert the aforesaid contention of the Ld. Counsel for the Assessee.
5. After considering the submissions of both the parties it appears that the delay in filing the appeal occurred due to COVID-19 Lockdown and all the Government Offices were closed at the relevant time therefore the delay of 35 days in filing the appeal by the assessee is condoned and the appeal is admitted.
6. Following grounds have been raised in this appeal :
1. The Appellant Sh. Tek Chand aged 70 year old is a Farmer and He and his Brother Sh. Ram Diya sold their Agri land of Rs. 60,22,000 on dated 05-11-2008 ( By Sh. Tek Chand Appellant ) and Rs. 49,65,000 on dated 22-05-2006 (By Sh. Ram Diya ) Non capital assets and being family matters it was mutually agreed that they will further purchase agri. Land in the name of any of family members and Sh. Ram Diya kept Funds at home in Tal Ghar a secure place till the new deal of Agri. Land which matured on 07-11-2008.
2. Statement of Sh. Ram Diya was recorded by Assessing Officer during original Assessment proceedings where Sh. Ram Diya stated to have given the said amount of 50 Lacs out of sale proceed of Agri. Land stated above with documantly proof of funds and sale proceed.
3. Assessing Officer and Id. CIT (A) rejected the plea of Sh. Ram Diya that why Sh. Ram Diya kept this money with him at home for two years, without quoting rules or directions of Hon ble courts whereas it is true that this amount was Kept at home in joint family for want of further making Biana for Purchase of suitable Agri. Land purposely and No Bank Branch was existing near by village of Sh. Ram Diya, therefore he could not deposit this amount in Bank.
6.1 The assessee also raised the additional grounds vide application dated 12/01/2021 which read as under:
Sub: Request for taking Revised / Additional Ground of Appeals in ITA No. 255/Chd/2020 for the Assessment Year 2009-10
We have to very humbly submit that we have fled the above said appeal before the Hon ble Bench, which has now been fixed for hearing on 12.01.2021. It is submitted that the grounds of appeal as taken are narrative in nature and also we wish to take additional ground of appeal and which has necessitated for filing the revised/additional grounds of appeal. The grounds of appeal with regard to reopening of the case u/s 148, which was taken before the Ld. CIT(A) have not been taken in the original grounds of appeal.
It is, therefore, requested that being the legal ground of appeal, the same may, lease, be allowed to be taken. Further, it is submitted that all the facts are borne out from the record of the Assessing Officer/CIT(A) and no fresh facts are likely to be investigated and, therefore, the same may, please, be allowed to be taken in view of the judgment of M/s National Thermal Plant Co. Ltd vs CIT as reported in 229 ITR 383 and oblige.
The Ld. Counsel for the assessee submitted that the additional grounds are purely legal grounds which go to the root of the matter, therefore the same may be admitted. The aforesaid additional grounds read as under:
1. “That the Ld. Assessing Officer has erred in assuming the jurisdiction u/s 148 as there was no reason to believe that the income of the assessee had escaped assessment and the Assessing Officer has not applied his own mind before issuance of notice u/s 148 and acted only on borrowed satisfaction, which is not permitted in view of the judgment of Hon ble Bench of the ITAT, Amritsar Bench in the case of Holyfaith International Pvt. Ltd., as reported in 69 ITR (Trib.) 687 and other case laws. “
2. That the Ld.CIT(A) has also erred in confirming the action with regard to reopening of the case without considering the fact that the Assessing Officer has not applied his mind and having no independent satisfaction and also, there was mechanical approval of the Pr. CIT with regard to reopening of the case u/s 148 and, as such, proceedings u/s 148 are liable to be quashed in view of the judgment of Hon’ble Apex Court in the case of S. Goyanka Lime and Chemical Ltd. as reported in 237 Taxman 0378 (SC).
3. That the Ld.CIT(A) has erred in confirming the addition of Rs. 64,78,000/-in respects of deposits in the bank account during the relevant Assessment Year.
4. That the Ld. CIT(A) has failed to appreciate the fact that the brother of Assessee, Sh. Ram Diya had given the amount to assessee out of sale of agricultural land and which he had confirmed during the course of recording of statement by the Assessing Officer alongwith documentary evidences during the remand proceedings.
5. That the Ld. CIT(A) has out to have given some benefit of agricultural Income and savings of the family and which has been ignored by her.
6. That the addition as confirmed by the CIT(A) in respect of deposits in the bank account is against the facts and circumstances of the case.
7. In his rival submissions the Ld. DR opposed the admission of the additional ground.
8. After considering the submissions of both the parties, it is noticed that the additional grounds raised by the assessee relating to the jurisdiction assumed by the A.O. under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) are purely legal grounds and go to the root of the matter, therefore the same are admitted in view of the ratio laid down by the Hon’ble Apex Court in the case of M/s National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383(supra) wherein it has been held as under:
“ The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal.”
It has further been held that :
Undoubtedly, the Tribunal has the discretion in allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.”
9. In the present case, the assessee vide additional grounds has challenged the jurisdiction of the A.O. assumed under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) and that the A.O. acted only on borrowed satisfaction and did not apply his own mind.
10. The facts related to the aforesaid legal issue, in brief are that the A.O. on the basis of the information that the assessee deposited cash amounting to Rs. 125,00,000/- in his saving bank account during the period relevant to the A.Y. under consideration, was of the view that the aforesaid amount escaped assessment within the meaning of Section 147 of the Act as the assessee had not filed his return of income. The A.O. after obtaining the approval of the Principal CIT, Karnal issued notice under section 148 of the Act. Since, the assessee had not filed the return of income, the A.O. made the addition of Rs. 125,00,000/-.
11. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and challenged the proceeding initiated by the A.O. under section 147 of the Act. The assessee submitted to the Ld. CIT(A)as under:
“Reason to believe cannot be a reason to suspect merely. ‘For investigation’ will not constitute a valid reason as it is vague and general in nature. Reasons recorded by the AO for reopening: mere cash deposits were treated to be equivalent to income escaping assessment. But there was no material much too much less tangible,’ credible, cogent and relevant material form a reason to believe that cash deposits represented income of the assessee.
Basic of reasons recorded under section 148 is AIR (annually information return) information stating cash deposits of Rs. 1,25,00,000/- as income from unexplained sources coupled with the fact that no response was given by the assessee to query put. And most importantly the copy of the bank account which is made as basis of reopening was never gone through by the assessing officer while recording the purported reasons to believe. Without going to the contents of the entries in the bank account concerned merely deposits cannot be treated as income escaping assessment within the meaning of section. It is cardinal principle of taxation that all receipts are not income and all income are not taxable income applies squarely to present facts.”
11.1 The Ld. CIT(A) however did not find merit in the submissions of the assessee by observing as under:
“In this case, reopening was done on the basis of information regarding cash deposits in the appellant’s bank account. The same needed to be examined and as held by the Hon’ble Supreme Court in Raymond Woolen Mills Ltd. vs. ITO and other (1999) 236 ITR 34, that in determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was, prima facie, some material on the basis of which the department could reopen the case. The sufficiency or covertness of the material is not a thing to be considered at this stage. This judgment is squarely applicable in this case.”
12. Being aggrieved the assessee is in appeal.
13. The Ld. Counsel for the Assessee reiterated the submissions made before the authorities below and further submitted that the Ld. PR. CIT had given a mechanical approval for reopening the assessment, he simply stated that he was satisfied, however no reasons were recorded for his satisfaction. Therefore, on the basis of mechanical approval of the Ld. Pr. CIT, the proceeding initiated by the A.O. under section 148 were not justified. The reliance was placed on the judgment of the Hon’ble Apex Court in the case of CIT Vs. S. Goyanka Lime & Chemical Ltd.  64 taxmann.com 313(SC), copy of the said order was furnished which is placed on record.
13.1 In his rival submission the Ld. DR reiterated the observations made by the Ld. CIT(A) and strongly supported the impugned order passed by him.
14. We have considered the submissions of both the parties and perused the material available on the record. In the present case the copy of reasons recorded by the A.O. are placed at page no. 1 of the assessee’s paper book which read as under:
“Reasons for belief under section 147 of the Income Tax Act, 1961 that the income has escaped assessment, recorded for issuing notice under section 148 of the Income Tax Act, 1961:
|Assessee’s name & address:||Sh. Tek Chand S/o Sh. Ram Ji Lal
Kushal Majra, Guhla
District: Kaithal. 136033
(All the sections/sub-sections and clauses of the Act mentioned hereinafter refer to those of the Income-tax Act, 1961 unless specified otherwise)
As per the information on record of this office, the above noted person has deposited cash aggregating to Rs. 1,25,00,000/- in his saving Bank A/c during the financial year 2008-09, which amount is much more than the maximum exempt limit of Rs. 1,50,000/- prescribed for the corresponding assessment year 2009-10.. However, as per the record of this office, the assessee has not filed his return of income.
I, therefore, have reason to believe that the assessee’s income corresponding to the afore-said cash deposit of Rs. 1,25,00,000/- has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. It is; therefore, proposed to issue a notice under section 148 of the Income-tax Act, 1961 for the assessment year 2009-10.”
14.1 The A.O. obtained the approval of the PR. CIT before issuing the notice under section 148 of the Act. The proposal dt. 11/03/2016 seeking the approval for issuance of notice under section 148 of the Act, by the A.O. is placed at page no. 2 & 3 of the assessee’s paper book. While giving the approval the Ld. PR. CIT, Karnal recorded as under:
“ Yes, satisfied, it is a fit case for issue of notice under section 148 “
Pr. CIT, Karnal
14.2 From the aforesaid approval, it is clear that the Ld. Pr. CIT recorded satisfaction in the mechanical manner, without application of mind to accord sanction for issuing notice under section 148 of the Act. On an identical issue the Hon’ble M.P. High Court in the case of CIT Jabalpur Vs. S. Goyanka Lime & Chemical Ltd. reported at (2015) 56 Taxmann.com 390 by following its own decision in the case of Arjun Singh Vs. ADIT (2000) 246 ITR 363 (M.P) held as under:
7.We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so “Yes, I am satisfied”. In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles arc laid down:—
The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format “Yes, 1 am satisfied” which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.’
8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration.
9. As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue.
10. In view of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration.
14.3 Against the said order, the Hon’ble Apex Court dismissed the SLP filed by the Department and affirmed the order of the Hon’ble M.P. High Court in the case of CIT Vs. S. Goyanka Lime & Chemicals Ltd. (supra) held as under:
“ that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid.”
15. We therefore by following the ratio laid down by the Hon’ble Apex Court in the aforesaid referred to case, are of the view that the reopening under section 148 of the Act on the basis of mechanical approval without applying the mind by the Ld. Pr.CIT was not valid. Therefore, in the present case, the reopening of the assessment on the basis of notice under section 148 of the Act is quashed.
15.1 Since we have decided the legal issue in favour of the assessee. Therefore, no finding is given on the another grounds raised by the assessee on merits.
In the result, appeal of the assessee is allowed.
(Order pronounced in the open Court on 15/03/2021)