Income Tax Appellate Tribunal

Digvijay Advisor Pvt. Ltd. vs. Income Tax Officer, New Delhi

MANU/ID/0326/2021

16.04.2021

Direct Taxation

When Joint Commissioner recorded satisfaction in a mechanical manner to accord sanction for issuing notice under section 148 of IT Act, reopening of assessment was invalid

The assessee is a private limited company and filed its return of income, declaring income of Rs.42,396. In present case, information was received from the Investigation Wing that, the assessee has obtained accommodation entries of Rs.30 lakhs on account of share capital. The Assessing Officer, thereafter initiated reassessment proceedings under Section 147 of the Income Tax Act, 1961 (IT Act) after recording the reasons and with the approval of the competent authority. The reasons so recorded were provided to the assessee and the objections to the reopening filed by the assessee were disposed of by the Assessing Officer.

Subsequently, during the course of assessment proceedings, the Assessing Officer asked the assessee to explain the identity and creditworthiness of the loan creditor and genuineness of the transaction. Rejecting the various explanation given by the assessee and rejecting the objections of the assessee to such reopening of assessment for non-issue of notice under Section 148 of IT Act, the Assessing Officer completed the assessment under Section 147/143(3) of the IT Act, determining the total income of the assessee at Rs.31,02,400, wherein, he made addition of Rs.30 lakhs under Section 68 of the Act and further an amount of Rs.60,000 being unexplained expenditure incurred for obtaining the accommodation entries under Section 69C of the Act.

Before the learned CIT(A), the assessee apart from challenging the addition on merit, challenged the validity of reopening of assessment. However, the learned CIT(A) was also not satisfied with the arguments advanced by the assessee and upheld the validity of reopening of assessment proceedings as well as on the merit. Aggrieved with such order of the learned CIT(A), the assessee is in appeal before the Tribunal.

The Hon'ble Madhya Pradesh High Court in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. has held that, where the Joint Commissioner recorded satisfaction in a mechanical manner and without application of mind to accord sanction for issuing notice under Section 148 of the IT Act, reopening of assessment was invalid. Similar view has been taken by the Hon'ble Delhi High Court in the case of Yum Restaurant Asia Pte Ltd. vs DCIT. Since, the Additional CIT in the instant case has given approval in a mechanical manner without independent application of mind, therefore, such approval given under Section 151(1) of the Act being not in accordance with law, the reassessment proceedings has to be quashed.

There is merit in the arguments of the learned counsel for the assessee that, no notice under Section 148 of the IT Act was ever served to the assessee and even if it is accepted that such a notice is served through affixture even then also the same is not valid service being served after office hours and the notice so affixed does not bear the name of any witness of the localities other than the Ward Inspector who accompanied the notice server.

The chronology of events that has taken place clearly shows that no notice under Section 148 of the IT Act was ever served upon the assessee before 31st March, 2015. Since no notice under Section 148 of the IT Act was served on the assessee before 31st March, 2015, therefore, such reassessment proceedings are not in accordance with law. The appeal of the assessee is allowed.

Tags : Additions Assessment Legality

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