Income Tax Appellate Tribunal - Ahmedabad
Shri Bharat Ramjibhai Patel,, Mehsana vs The Income Tax Officer, Ward-1,, ... on 4 September, 2017
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'ए', 'बी', 'सी', 'डी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL " SMC " BENCH, AHMEDABAD सव ी राजपाल यादव, या यक सद य एवं द प कुमार के डया, लेखा सद य के सम ।
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER &
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.229/Ahd/2015
( नधा रण वष / Assessment Year : 2005-06)
Bharat Ramjibhai Patel बनाम/ The
3, Prakash Society Vs. ITO
Radhanpur Char Rasta Ward Ward-1
Highway Road Mehsana
Mehsana - 384 002
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : ABIPP 6693 F (अपीलाथ% /Appellant) .. ( &यथ% / Respondent) अपीलाथ% ओर से /Appellant by : Ms. Grishma Soni, AR &यथ% क( ओर से/Respondent by : Shri Deepak Sutaria, Sr.DR ु वाई क( तार ख / सन Date of Hearing 23/08/2017 घोषणा क( तार ख /Date of Pronounce ment 04/09/2017 आदे श / O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-Gandhinagar, [CIT(A) in short] dated 01/10/2014 for the Assessment Year (AY) 2005-06 arising as a result of assessment order under s.143(3) of the ITA No. 229/Ahd/2015 Bharat Ramjibhai Patel vs. ITO Asst.Year - 2005-06 -2- Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 29/12/2011.
2. The assessee has filed grounds of appeal wherein the assessee has inter-alia challenged the assumption of jurisdiction under s.147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") without applying with the provisions of section 147 r.w.s.151 of the Act.
3. The Ld.AR for the assessee Ms.Grishma Soni to begin with, has vehemently challenged the jurisdiction assumed by the Assessing Officer (AO) under s.147 of the Act. The Ld.AR for the assessee contended that in this case the assessment was completed under s.143(1) of the Act. Thereafter, the case was reopened under s.147 by issuance of notice under s.148 of the Act dated 20/03/2011. Consequently, the assessment was completed under s.143(3) r.w.s.147 of the Act vide order dated 29/12/2011. As per the aforesaid assessment, the total income declared by the assessee at Rs.95,640/- was substituted by assessed income of Rs.5,19,540/- by making an addition of Rs.4,23,900/- on account of long term capital gains treated as income from other sources. The Ld.AR adverted our attention to the reasons recorded under s.148(2) and submitted that the reasons so recorded smacks of empty formality and without application of mind, apparently presuming that an assessment under s.143(3) of the Act was carried out earlier. The Ld.AR thereafter referred to reason recorded and reassessment order to demonstrate for ITA No. 229/Ahd/2015 Bharat Ramjibhai Patel vs. ITO Asst.Year - 2005-06 -3- approval from the competent authority of his action and submitted that the approval under s.151 of the Act, in the instant case, has been taken from the Commissioner who is not the competent authority for granting approval as the assessment was not earlier carried out under s.143(3) of the Act. Although the notice under s.148 has been issued after the expiry of a period of four years from the end of the relevant AY 2005-06, the competent authority for obtaining such approval is Jt.CIT/Addl.CIT in distinction to the Commissioner even while he commands superior authority. Thus, in view of the wrong approval, the notice under s.148 of the Act is vitiated and consequently the entire re-assessment order is null and void.
4.1. The Ld.AR submitted that the accord of wrong approval will vitiate the assumption of jurisdiction under s.147 of the Act notwithstanding the fact that authorities superior to the competent authority designated for such approval has actually endorsed the action of the AO. It was stated that the identical issue has been dealt with in favour of assessee by the decision of the Coordinate Bench rendered in the case of Arvindbhai Ramjibhai Patel (HUF) vs. ITO in ITA No.3448/Ahd/2014 for AY 2005-06 dated 12/06/2017.
5. The Ld.DR for the Revenue, Mr.Deepak Sutaria could not controvert the claim of the assessee that approval has been obtained from ITA No. 229/Ahd/2015 Bharat Ramjibhai Patel vs. ITO Asst.Year - 2005-06 -4- Addl.Commissioner and not the Commissioner concerned. The Ld.DR however relied upon the order of the CIT(A).
6. We have carefully perused the orders of the authorities below. The objection on the assumption of the jurisdiction has been dealt with in great length by the Coordinate Bench in Arvindbhai Ramjibhai Patel (supra) where one of us is a party to the decision. The relevant para of the order of the ITAT in the aforesaid case is reproduced hereunder:-
"5. As the objection of the assessee goes to the root of the matter, we consider it appropriate to examine the preliminary issue of lack of jurisdiction under s.147 of the Act first. The reasons recorded under s.147/148 would be pertinent to adjudicate the issue and therefore reproduced hereunder:-
"REASON RECORDED FOR REOPENING ASSESSMENT IN THE CASE OF SHRI PATEL ARVINDBHAI RAMJIBHAI, HUF, PROP: AUTO ENTERPRISE, PAN: AADHP 1984 M - A.Y. 2005-06 In the case of Shri Patel Arvindbhai Ramjibhai (HUF), Prop: of Auto Enterprise, it is found that he has filed return of income filed on 28 /10/2005 declaring total income at Rs.1,88,970/-. The assessee has also shown agricultural. income of Rs. 46,950/- which is claimed to be exempted from Income-tax. The return of income filed has been processed u/s. 143(1) of the I.T. Act on 29.12.2005.
An intimation dt. 16/03/2011 was received from Investigation Wing, Ahmedabad on 21/03/2011 giving details of information regarding beneficiaries of Mahasagar Securities Pvt. Ltd. (now known as Alang Securities Pvt. Ltd.) wherein details of group share scam was elaborated. From the details received, it is observed that search and seizure action 132 of the I.T. Act was undertaken in the case of M/s.Mahasagar Securities Pvt.Ltd. by the DDIT (Investigation), Unit-l(4), Mumbai on 25/11/2009. The search led to detailed investigation regarding transactions taken in the bank accounts of the concerned company and its sister concerns i.e. Gold Star Finvest (Pvt) Ltd. etc. The directors of these companies are Shri Mukesh M.Chokshi ITA No. 229/Ahd/2015 Bharat Ramjibhai Patel vs. ITO Asst.Year - 2005-06 -5- and Shri Jayesh K.Sampat. During the course of search, it is found that the group companies are engaged in fraudulent billing activities and indulge in the business of providing bogus speculation profit/ loss, short term/ long term capital gain/loss, share application money, commodity profit/ loss on commodity trading (through MCX) since many years. On verification of the list of clients, who have taken accommodation entries from the above group companies, it is observed by the undersigned that the present assessee Shri Patel Arvindbhai Ramjibhai (HUF), Prop:
of Auto Enterprise, is one of the beneficiaries of accommodation entries. Total of accommodation entries received by Shri Arvindbhai Ramjibhai Patel during F.Y.2004-05 pertaining to A.Y.2005-06 is to the tune of Rs. 4,23,095/-. It is seen from the regular return of income filed by the assessee for the year under consideration that such transaction and the relatable income has not been reflected therein. Thus, income to the extent relatable to the reported undisclosed transactions of Rs. 4,23,095/- has escaped assessment.
In view of the above facts, I have reason to believe that there is failure on the part of the assessee to disclose full and truly all material facts necessary for his assessment and accordingly no opinion was formed in this regard in the original assessment. Accordingly, I have reason to believe that income has escaped assessment to the extent stated above. Proposal was sent for reopening of the assessment and the CIT, Gandhinagar vide letter No.CIT/GNR/148/HBS/2010-11 dated 30-3-2011 approved action U/s. 147 of the I T Act. Accordingly assessment has reopened U/s. 147 of the I T Act."
6. A bare reading of the aforesaid reasons recorded gives an unmistakable impression that the AO has proceeded on a wrongful belief of the case covered by first proviso to section 147 of the Act. In the absence of any assessment framed under s.143(3) of the Act, the assessment is not governed by first proviso to S.147.
The AO also relied upon the 'satisfaction' formulated by the CIT concerned under s.151 of the Act for the purposes of issuance of notice under s.148 of the Act. We have perused the form of approval obtained by AO from the superior authority and find that although Addl.CIT has noted that he is satisfied with the reasons for reopening the assessment, the 'satisfaction' note was further sent to the Commissioner for its ultimate approval. Clearly the entire procedure of obtaining approval culminated with the Commissioner. Section 151 provides that where the notice under s.148 of the Act is issued after expiry of a period of four years from the end of the relevant assessment year and the assessment has not been carried under s.143(3) of the Act the designated superior competent authority is Jt.CIT/Addl.CIT and not the Commissioner. Thus, while the permission of the superior competent authority is incumbent in all cases where the notice under s.148 is proposed after the end of four years from the end of relevant assessment year, the jurisdiction for ITA No. 229/Ahd/2015 Bharat Ramjibhai Patel vs. ITO Asst.Year - 2005-06 -6- approval of superior authority is structured and the approval of the Commissioner although higher in pedestal to the Addl.CIT cannot be a substitute of the statutory approval required from the Jt.CIT/Addl.CIT. The approval by the Commissioner also implies that the sanction given by the CIT is unmindful of the facts and thus unfounded. Likewise, the so-called approval by the Addl.CIT as an intermediator also reflects that both the superior authority have acted mechanically or perfunctorily. Needless to say, the reopening casts heavy burden on the assessee. The assessee has to assist the AO and have to dig out the old records for this purpose. Thus, the superior authority cannot grant requisite sanction in a light hearted manner and is duty bound to apply its mind before allowing the AO to proceed under s.147/148 of the Act. The act of sanction under s.151 without application of mind to issue notice under s.148 of the Act is bad in law. When reasons recorded as well as the approval obtained are read in combined manner, the conclusion is inescapable that the action of the AO is bad in law. Thus, jurisdiction usurped by the AO under s.147 is unsustainable in law. Consequently, the reassessment made pursuant thereto is devoid of legal sanction. Accordingly, we find merit in the preliminary objection raised by the assessee towards reopening assessment under s.147. Since the action of re-opening is found to be unsustainable, we do not consider it necessary to adjudicate the ground taken by the assessee on merits. "
7. In parity, we find considerable merit in the objection raised by the assessee. In the absence of approval of the competent authority designated under s.151 of the Act, the notice issued under s.148 of the Act for assumption of jurisdiction under s.147 is vitiated and non-est. The entire reassessment proceedings is accordingly a non-starter. Consequently, the orders of the AO & CIT(A) are required to be quashed. We do so accordingly.
ITA No. 229/Ahd/2015Bharat Ramjibhai Patel vs. ITO Asst.Year - 2005-06 -7-
8. In the result, appeal of the assessee is allowed.
This Order pronounced in Open Court on 04 / 09 /2017
Sd/- sd/-
(राजपाल यादव) ( द प कुमार के डया)
या यक सद य लेखा सद य
(RAJPAL YADAV) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 04/ 09 /2017
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &यथ% / The Respondent.
3. संबं5धत आयकर आयु7त / Concerned CIT
4. आयकर आय7 ु त(अपील) / The CIT(A)-Gandhinagar
5. 8वभागीय त न5ध, आयकर अपील य अ5धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स&या8पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 30.8.17(dictation-pad 7-pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...30.8.17
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......5.9.17
7. Date on which the file goes to the Bench Clerk.....................5.9.17
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................