|CORAM:||Rajpal Yadav (JM), Sudhakar Reddy (AM)|
|CATCH WORDS:||Reopening, sanction|
|COUNSEL:||Ashwani Taneja, Dr. Rakesh Gupta|
|DATE:||October 22, 2014 (Date of pronouncement)|
|DATE:||November 7, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 147/ 151: Sanction by the CIT with word "approved" without recording satisfaction note renders reopening invalid|
(i) A simple reading of the provisions of Sec. 151(1) with the proviso clearly show that no such notice shall be issued unless the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice which means that the satisfaction of the Commissioner is paramount for which the least that is expected from the Commissioner is application of mind and due diligence before according sanction to the reasons recorded by the AO. In the present case, the order sheet which is placed on record show that the Commissioner has simply affixed “approved” at the bottom of the note sheet prepared by the ITO technical. Nowhere the CIT has recorded his satisfaction. In the case before the Hon’ble Supreme Court (supra) that on AO’s report the Commissioner against the question “whether the Commissioner IS satisfied that it is a fit case for the issue of notice under section 148 merely noted 11 Yes 11 and affixed his signature there under. On these facts, the Hon’bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon’ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm’s failure to disclose material facts and if the Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid.
(ii) 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 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. (Amarlal Bajaj (ITAT Mumbai) followed)
A Os generally proceed to REVIEW their own Assessment Orders u/s 143 without any jurisdiction / power for the same, misusing Sections 147/147 simply to harass Assessees, to go through Appeal after Appeal and so on….
Most of the times, the completed assessments are reopened on account of objections raised by the Revinue Audit or on receiving intimation from the intelligence wing of the Department. In case of Audit objection, the A.O. has to take remedial action by reopening the assessment as he is left with no alternative, even though he may have resisted the objection initially. In case where the intimation is from the Investigation Wing, the tendency is to just issue notice under 148 of the Act without applying the mind. In both the type of situations, the A.O. usually initiates proceeding under section 147 mechanically without making any effort to justify the reopening the assessment. As a result of inadequate paper work of bringing on record the satisfaction of the A.O about the escapement of income, the fate of Revenue in such cases is doomed from the initial stage itself. In view of such half hearted approach from the Revenue Authorities, many good cases are lost in appeals and valuable time, energy and of course tax payable on such escaped income is lost forever.