2016 (2) TMI 838 - AT - Income Tax

Tribunal Invalidates Income Tax Proceedings Due to Lack of Sanction and Adds Deemed Invalid, CIT(A) Decision Upheld

The I.T.O Ward 13 (4), New Delhi Versus M/s Observer Investment & Finance Pvt. Ltd. C/o RRA Tax India And Vica-Versa

The Tribunal invalidated the initiation of proceedings and issuance of notices under Section 147/148 of the Income Tax Act due to lack of proper sanction ... Sanction u/s 151 - Validity of sanction by the ld. CIT/competent authority for initiation of proceedings and issuance of notice u/s 147/148 - Held that:- While granting sanction u/s 151 of the Act for issuance of notice u/s 148 of the Act. The Additional CIT, Range 13, New Delhi only put his signature alongwith date 27.02.2006 which is not suffice to show application of mind by sanctioning authority. Furthermore, from the copy of reasons recorded by the AO for A.Y 2002-03, we are unable to see any sanction as required u/s 151 of the Act prior to issuance of notice showing the initiation of reassessment proceedings u/s 147 of the Act. In view of the above, we have no hesitation to hold that in the present case, mandatory sanction u/s 151 of the Act for issuance of notice has not been granted by the competent authority with full application of mind and thus, the AO could not assume valid jurisdiction for issuance of notice u/s 148 of the Act and initiation of proceedings and passing impugned order in pursuance thereto and hence, notice u/s 148 of the Act and re assessment orders u/s 143(3) r.w.s 147 of the Act cannot be held as valid and sustainable and we quash the same. See CIT Vs. Amar Khosla [2016 (2) TMI 796 - DELHI HIGH COURT] - Decided in favour of assessee Issues Involved:1. Validity of initiation of proceedings and issuance of notices under Section 147/148 of the Income Tax Act, 1961.2. Validity of the assessment orders passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961.3. Deletion of additions made under Section 68 of the Income Tax Act, 1961 by the CIT(A).Issue-wise Detailed Analysis:1. Validity of Initiation of Proceedings and Issuance of Notices under Section 147/148 of the Income Tax Act, 1961:The assessee challenged the initiation of proceedings and issuance of notices under Section 147/148, arguing that the Assessing Officer (AO) did not comply with the mandatory requirements prescribed under Sections 147 to 151. The Tribunal analyzed the reasons recorded by the AO and the approval granted by the Additional Commissioner of Income Tax (ACIT), noting that the ACIT merely affixed his signature without any detailed perusal or application of mind. The Tribunal relied on the decision of the Hon'ble Jurisdictional High Court in CIT Vs. Amar Khosla, which emphasized that mere affixing of a signature without proper application of mind does not meet the legal requirements. Consequently, the Tribunal held that the initiation of proceedings and issuance of notices under Section 147/148 were invalid due to the lack of proper sanction and application of mind by the sanctioning authority.2. Validity of the Assessment Orders Passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961:Given the invalidity of the initiation of proceedings and issuance of notices under Section 147/148, the Tribunal concluded that the subsequent reassessment orders passed under Section 143(3) read with Section 147 were also invalid. The Tribunal quashed the reassessment orders on the grounds that the AO did not have valid jurisdiction to issue the notices and initiate reassessment proceedings, as the mandatory sanction under Section 151 was not properly obtained.3. Deletion of Additions Made under Section 68 of the Income Tax Act, 1961 by the CIT(A):The Revenue appealed against the CIT(A)'s decision to delete the additions made under Section 68, which pertained to unexplained cash credits. However, since the Tribunal had already quashed the initiation of proceedings and the reassessment orders, the grounds raised by the Revenue became academic and infructuous. The Tribunal dismissed the Revenue's appeals, rendering the issue of deletions under Section 68 moot.Conclusion:The Tribunal allowed the cross objections of the assessee, quashing the notices under Section 148 and the reassessment orders under Section 143(3) read with Section 147 for both assessment years. Consequently, the Revenue's appeals were dismissed as infructuous. The order was pronounced in the open court on 24.02.2016.