Meenakshi Overseas (P) Ltd.,, New Delhi vs Assessee

BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. No.3148 /Del/2013 Assessment year : 2004-05 M/s. Meenakshi Overseas (P) Ltd., Vs. ITO, Ward 6(3), C/o Kapil Goel Adv., New Delhi A-1/25, Sector 15, Rohini Delhi- 110 085 GIR / PAN:AAACM6576E (Appellant) (Respondent)

Appellant by : Shri Satyajeet Goel CA Respondent by : Shri P. Dam Kanunjha, Sr. DR

Date of hearing : 11.03.2015 Date of pronouncement : 18.03.2015

ORDER

PER T.S. KAPOOR, AM:

This is an appeal field by assessee against the order of Ld. CIT(A) dated 12.02.2013. The assessee has taken various ground of appeal. Ground No.1 relates to legal issue and one legal issue raised by assessee as taken in ground No.1(e) is that requisite sanction from competent authority u/s 151 was not obtained.

2. Ld. A.R. at the outset argued about the legal grounds and took up this issue and invited our attention to the reasons recorded placed in paper book page 2 and submitted that Addl. CIT, Range 6, New Delhi had merely put his signatures and had not applied his mind and simply mechanically signed 2 ITA No.3148/Del/2013

the copy of reasons recorded. It was submitted that there is no proper satisfaction recorded as envisaged u/s 151 of the Act. Reliance was placed in this respect on the case law of Shri Hira Chand Kanuga, in I.T.A.No. 4261 & 4262/Mum/2012 pronounced by Mumbai Tribunal on 27.02.2015.

3. Ld. D.R. on the other hand submitted that the signatures put up by higher authorities itself proves that the authorities had applied his mind and it is not necessary that the whole history was to be repeated. Therefore, he heavily relied upon the orders of authorities below.

4. We have heard rival parties and have gone through the material placed on record. We find that it is an undisputed fact that reopening was done after 4 years and the reasons recorded as placed at paper book page 2 just carried the signature of Addl. CIT and which even does not mention the word 'approval'. ITAT Mumbai Bench in I.T.A. No. 4261 & 4262/Mum/2012 has dealt with a similar matter and after relying upon a number of decisions, has arrived that such type of satisfaction u/s 151 is bad in law. For the sake of convenience, we reproduce the findings of the Tribunal as contained in para 10-13 as under:

"10. In the present case the letter which is placed on record shows that the Addl. Commissioner has simply sanctioned the proposal for initiating proceedings u/s. 147 in group cases of beneficiaries of Mahasagar Securities P. Ltd. Nowhere the Addl. CIT has recorded his dissatisfaction. The Hon'ble Supreme Court in the case of Chhugamal Rajpal Vs S.P. Chaliha & Others 79 ITR 603 observed that the important safeguards provided in Sec. 147 and 151 were lightly treated by the Income-Tax Officer as well as the Commissioner.

11. In the light of the above mentioned reasons, 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 3 ITA No.3148/Del/2013

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.

12. 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 section151of 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 4 ITA No.3148/Del/2013

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".

13. 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."

5. We find that in this case law pronounced by ITAT Mumbai Bench, the Addl. CIT had placed his signature and had mentioned the word 'approved' before affixing his signature, which in the present case, is missing, therefore, present case is worse than the case decided by ITAT Mumbai Bench, wherein even word 'approved' has not been mentioned. In view of above ground No.1 (e) of appeal filed by assessee is allowed. 6, Since we have decided the issue in favour of assessee on one of the legal grounds raised by assessee, other grounds of appeal have not been adjudicated.

7. In view of above, appeal filed by assessee is allowed.

8. Order pronounced in the open court on 18th March, 2015.

Sd./- Sd./- ( G. C. GUPTA) (T.S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER Date: 18th March, 2015 Sp 5 ITA No.3148/Del/2013

Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order

(ITAT, New Delhi).

S.No. Details Date Initials Designation 1 Draft dictated on 16/3 Sr. PS/PS 2 Draft placed before author 17/3 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 18/3/15 Sr. PS/PS 6 Kept for pronouncement 18/3 Sr. PS/PS 7 File sent to Bench Clerk 18/3 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order