2017 (3) TMI 1232 - AT - Income Tax

Tribunal quashes reassessment due to lack of approval from tax authorities

The Tribunal quashed the notice issued under Section 148 and the reassessment completed under Section 147/143(3) due to the lack of proper approval from ... Reopening of assessment - approval not taken u/s. 151(1) - non appropriate sanctions - Held that:- Approval should be taken u/s. 151(1) and according to Section 151(1) of the I.T. Act, after the expiry of the 4 years from the end of the relevant assessment year, no notice u/s. 148 of the I.T. Act shall be issued unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the AO that is fit case for the issue of such notice. In view the case of the Assessee is fall under section 151(1) of the I.T. Act and not u/s. 151(2) of the I.T. Act, because according to section 151(2) in the cases other than the case fallen under sub-section (1) of Section 151, no notice shall be issued u/s. 148 by the AO, who is below the rank of JCIT, unless the JCIT is satisfied on the reasons recorded by such AO, that is a fit case for the issuance of such notices. Thus the case is fallen u/s. 151(1) of the I.T. Act. In the present case, the case of the assessee has been reopened the assessment after the expiry of 4 years and in the present case of assessee the approval/satisfaction should be from the Chief Commissioner or Commissioner only. However, the case of the assessee has been reopened and notice u/s. 148 has been issued with the approval of the Addl. CIT, therefore, the notice u/s. 148 is bad in law and is quashed. See COMMISSIONER OF INCOME TAX Versus SPL'S SIDDHARTHA LTD [2011 (9) TMI 640 - DELHI HIGH COURT ] - Decided in favour of assessee Issues Involved:1. Legality of notice issued under Section 148 and the Assessment Order under Section 147/143(3).2. Validity of proceedings initiated under Section 147/148.3. Reopening of assessment under Section 148 without fresh/tangible material.4. Issuance of notice under Section 148 beyond four years.5. Failure to produce relevant facts by the Assessee.6. Issuance of notice under Section 148 based on report from Directorate of Income Tax (Inv.) without independent application of mind.7. Issuance of notice under Section 148 for verification and examination.8. Approval from the competent authority under Section 151.9. Legality of the approval from ACIT.10. Legality of the additions made.11. Addition of Rs. 48,04,000 on account of share application money.12. Addition of Rs. 96,080 on account of alleged expenditure to arrange share application money.13. Ignoring confirmations, bank statements, and Income Tax returns during assessment.14. Misconstruction and misinterpretation of evidence and materials.15. Unjust, illegal, arbitrary, and excessive observations and additions.16. Incorrect charging of interest under Sections 234A, 234B, and 234C.17. Right to add, amend, alter, and/or delete grounds of appeal.Comprehensive Issue-wise Detailed Analysis:1. Legality of Notice Issued Under Section 148 and the Assessment Order Under Section 147/143(3):The Assessee challenged the notice issued under Section 148 and the subsequent assessment order under Section 147/143(3) as illegal, bad in law, without jurisdiction, and barred by time limitation. The Tribunal found that the notice issued on 21.3.2013 was beyond four years after the original assessment completed on 24.12.2008, thus requiring approval from the Chief Commissioner or Commissioner, which was not obtained.2. Validity of Proceedings Initiated Under Section 147/148:The proceedings initiated under Section 147/148 were contested as invalid due to the lack of jurisdiction, as the preconditions stipulated in Section 147 were not satisfied. The Tribunal noted that the approval for the notice was obtained from the Additional Commissioner of Income Tax, which contravened Section 151.3. Reopening of Assessment Under Section 148 Without Fresh/Tangible Material:The Assessee argued that the reopening of assessment lacked fresh or tangible material and was not based on an independent application of mind by the Assessing Officer. The Tribunal found that the reopening was based on information received from the Directorate of Income Tax (Inv.), suggesting the issuance of notice under Section 148.4. Issuance of Notice Under Section 148 Beyond Four Years:The notice issued under Section 148 was beyond four years from the end of the relevant assessment year. The Tribunal highlighted that the approval required under Section 151(1) was not obtained from the Chief Commissioner or Commissioner, rendering the notice invalid.5. Failure to Produce Relevant Facts by the Assessee:The Assessee contended that there was no failure on their part to produce relevant facts fully and truly. The Tribunal did not specifically address this issue as the primary focus was on the legality of the notice and the approval process.6. Issuance of Notice Under Section 148 Based on Report from Directorate of Income Tax (Inv.) Without Independent Application of Mind:The notice under Section 148 was issued based on a report from the Directorate of Income Tax (Inv.) without any independent application of mind. The Tribunal noted that the reasons recorded for issuing the notice were routine and casual.7. Issuance of Notice Under Section 148 for Verification and Examination:The Assessee argued that the notice under Section 148 was issued for verification and examination, which is not permitted by law. The Tribunal did not specifically address this issue in detail.8. Approval from the Competent Authority Under Section 151:The Tribunal focused on this issue and found that the approval for the notice under Section 148 was obtained from the Additional Commissioner of Income Tax instead of the Chief Commissioner or Commissioner, as required under Section 151(1). This rendered the notice invalid and the reassessment was quashed.9. Legality of the Approval from ACIT:The approval from the Additional Commissioner of Income Tax was deemed illegal as it was given without the proper application of mind and contravened Section 151.10. Legality of the Additions Made:The Tribunal did not specifically address the legality of the additions made, as the primary focus was on the validity of the notice and the approval process.11. Addition of Rs. 48,04,000 on Account of Share Application Money:The Tribunal did not specifically address this issue as the reassessment was quashed based on the invalid notice.12. Addition of Rs. 96,080 on Account of Alleged Expenditure to Arrange Share Application Money:Similarly, the Tribunal did not specifically address this issue due to the quashing of the reassessment.13. Ignoring Confirmations, Bank Statements, and Income Tax Returns During Assessment:The Tribunal did not specifically address this issue as the reassessment was quashed.14. Misconstruction and Misinterpretation of Evidence and Materials:The Tribunal did not specifically address this issue due to the quashing of the reassessment.15. Unjust, Illegal, Arbitrary, and Excessive Observations and Additions:The Tribunal did not specifically address this issue as the reassessment was quashed.16. Incorrect Charging of Interest Under Sections 234A, 234B, and 234C:The Tribunal did not specifically address this issue due to the quashing of the reassessment.17. Right to Add, Amend, Alter, and/or Delete Grounds of Appeal:The Assessee reserved the right to add, amend, alter, and/or delete grounds of appeal, but the Tribunal focused on the primary legal issue of the validity of the notice and the approval process.Conclusion:The Tribunal quashed the notice issued under Section 148 and the reassessment completed under Section 147/143(3) due to the lack of proper approval from the Chief Commissioner or Commissioner as required under Section 151(1). The appeal filed by the Assessee was partly allowed on this ground.