HC asks CBDT to frame a scheme to train AO on how to apply mind while recording reasons

Case Details: Sharvah Multitrade Company (P.) Ltd. v. ITO - [2022] 134 taxmann.com 134 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram and Amit B. Borkar, JJ.
  • Rohan Deshpande and Ms. Farzeen Khambatta for the petitioner.
  • Sham V. Walve for the Respondents.

Facts of the Case

Assessee filed the instant writ petition before the Bombay High Court. The primary ground was that the Assessing Officer (AO) had issued a notice under section 148, and the reasons recorded for such issue of notice show total non-application of mind.

Assessee claimed that the AO does not know the meaning of the words “application of mind” because he seems to be using this expression without applying his mind. Thus, the notice & the reassessment proceedings are whole without jurisdiction, illegal, arbitrary, and liable to be quashed.

High Court Held

The Bombay High Court held that the reasons recorded for reopening assessment indicate total non-application of mind in as much as it shows the assessee to be the provider of bogus accommodation entries as well as the beneficiary of the entries. A company cannot provide bogus entry to itself, and therefore, this clearly shows total non-application of mind by the AO. Even approval for the issue of notice was granted mechanically without applying mind to reasons recorded.

Further, the AO disposed off the assessee’s objections to notice without application of mind. In the result, writ petition was allowed. AO cautioned to be careful in future. A copy of this order be also sent to the Chairman, CBDT, who may perhaps formulate a scheme whereby the officers are trained how to apply their mind and what all points should be kept in mind while recording the reasons.

The Chairman, CBDT, may also advise the concerned Commissioners not to grant approval under section 151 of the said Act mechanically but after considering the reasons carefully and scrutinizing the same.