Raj Kumar Tyagi vs ITO

“On careful perusal of information received, relevant details/evidences submitted and reasons recorded by the AO, the cases from Sl.No.1 to 111 as listed in the Annexure enclosed appear prima-facie to be fit case for action u/s 147 r.w.s. 148 of the Income Tax Act, 1961”.

Draft Order is put up for kind perusal/ approval please. If approved the requisite report may kindly be sent O/o the Addl. CIT, Range-61, New Delhi for kind information please. Steno Dr. CIT.12, New Delhi.

On careful perusal of information received, relevant details/evidences submitted as reasons received by the Assembly Officer, the cases from SL. no. 1 to 111 as listed in the annexures enclosed appear prima facie to be fit cases for action 1/3 147/148 of the I.T. Act, 1961. 28/03/2021

“19.

Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for reopening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof;

(iii)

where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons;

(iv)

the exercise of considering the Assessee’s objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed.”

“Sanction mechanism under section 151

21.

Evidently, the reassessment was first proposed internally on March 24, 2021 by the jurisdictional Assessing Officer, and was recommended by a Range Officer on March 25, 2021, and approved by the Principal Commissioner of Income-tax on the same day all under section 151 of the Act. Therefore, the reassessment has been contemplated and initiated one year after the expiry of four years from the end of the relevant assessment year d (2015-16). Therefore, failure by the petitioner to disclose material facts was a jurisdictional imperative, which was simply incapable of being discerned from the material on record. Therefore, we have no hesitation in holding that the Revenue's bid to initiate reassessment is unfounded and in direct conflict with section 147 of the Act. Therefore, the sanction for reassessment under section 151 could simply not have been given.

22.

The requirement for sanction by a high-ranking official under section 151, is an inherent check and balance in the statutory scheme of the Act. Such officers are expected to apply their mind to the facts and the applicable law and then accord sanction. In the instant case, the proposed reassessment was sanctioned by the Principal Commissioner of Income-tax, with the following remarks:

"Yes, I am satisfied with the reasons recorded by the Assessing Officer for issuance of notice under section 148 of the Income-tax Act, 1961." (emphasis¹ supplied)

23.

The power to sanction reassessment under section 151, is coupled with a duty to exercise such power reasonably, and not arbitrarily. It is trite law that absence of valid reasons constitutes arbitrariness. In the instant case, the entire process of according sanction demonstrates non-application of mind to the ingredients of section 147, rendering the sanction to be h arbitrary, calling for intervention by a writ court. Evidently, the proposal, the recommendation and the approval in the instant case was mechanical, without either application of mind to the law and the facts or even a modi-cum of how the ingredients of the law had been met. In short, the machinery under section 151 completely failed.

"Reading of the proviso to section 147 makes it clear that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year.

In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was March 31, 1997 and from that date if four years are counted, the period of four years expired on March 31, 2001. The notice issued is dated November 5, 2002 and received by the assessee on November 7, 2002. Under these circumstances, the notice is clearly beyond the period of four years.

The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the court, on the strength of the affidavit or oral submissions advanced.

Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of the proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside." (emphasis¹ supplied)

"(A)

The order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 rejecting the objections raised by the petitioner are declared to be arbitrary and devoid of valid reasons and, therefore, illegal;

(B)

Consequently, the order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 and all consequential proceedings in respect of the reassessment are hereby quashed and set aside."

26.

Rule is made absolute in the aforesaid terms, and the writ petition is disposed of accordingly. There shall be no order as to costs.”

22.

“It is further seen from the copy of order sheet available at pages 405 to 407 of the paper book for AY 2012-13 , as reproduced above, in the case of assessee, the approval for AY 2014-15 was granted twice at S.No. 62 & 79 and for AY 2013-14 at S.No. 68 however, no approval was available for AY 2015-16 by Ld. Pr.CIT. This further established the fact that the approval in the case of the assessee was given in a mechanical manner and approval for multiple assesses was given by a single order thus, Ld. Pr. CIT has not applied his mind while granting the approval for re-opening of the assessment. In view of these facts and placing reliance on the judgement of Hon’ble Supreme Court in the case of CIT vs. S. Goyanka Lime & Chemical Ltd. (supra) and further Hon’ble Jurisdictional High Court as referred above in assessee’s appeal for AY 2012-13 in ITA No 1434/Del/2024, we have no hesitation in holding that the approval granted by Ld. Pr. CIT is without application of mind and was granted in mechanical manner therefore, the reassessment proceedings initiated u/s 147 of the Act and the consequent re-assessment order passed u/s 147 r.w.s. 143(3) for all the three assessment years i.e. for AY 2013-14, AY 2014-15 and AY 2015-16 are hereby, quashed. The grounds of appeals Nos. 1 & 2 for all these three years are thus allowed.”