2021 (1) TMI 234 - AT - Income Tax

Tribunal quashes reassessment due to procedural errors, deletes penalty, aligns with Supreme Court.

RAM NIWAS JAIN Versus ITO, WARD 38 (2), NEW DELHI

RAM NIWAS JAIN Versus ITO, WARD 38 (2), NEW DELHI - TMI Issues Involved:1. Validity of the assessment order under sections 147/143(3) of the Income Tax Act, 1961.2. Mechanical approval under section 151 of the Income Tax Act.3. Non-issuance of mandatory notice under section 143(2) of the Income Tax Act.4. Validity of penalty proceedings under section 271(1)(c) of the Income Tax Act.Detailed Analysis:1. Validity of the Assessment Order under Sections 147/143(3):The assessee challenged the assessment order passed under sections 147/143(3) on the grounds that no notice was issued under section 143(2) before completing the assessment proceedings. The Tribunal found that the mandatory notice under section 143(2) was indeed not issued by the Assessing Officer (AO), which is against the law as laid down by the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon (2010). Consequently, the assessment framed by the AO was quashed.2. Mechanical Approval under Section 151:The assessee contended that the approval for reopening the assessment under section 151 was granted in a mechanical manner by merely putting 'Yes' without proper application of mind. The Tribunal agreed with the assessee, citing the Hon'ble Supreme Court's decision in CIT vs. S. Goyanka Lime & Chemical Ltd. (2015), which held that such mechanical approval invalidates the reopening of the assessment. Thus, the Tribunal quashed the reassessment proceedings on this ground as well.3. Non-Issuance of Mandatory Notice under Section 143(2):The Tribunal emphasized that the issuance of a notice under section 143(2) is a mandatory requirement for completing the assessment under section 147. The absence of such notice rendered the assessment order invalid, as supported by the Supreme Court's ruling in Hotel Blue Moon. Therefore, the reassessment proceedings were quashed due to this procedural lapse.4. Validity of Penalty Proceedings under Section 271(1)(c):The penalty order under section 271(1)(c) was also challenged, with the assessee arguing that the penalty was initiated in a routine manner without specifying any charge. The Tribunal noted that since the reassessment itself was quashed, the penalty proceedings based on the invalid assessment order could not stand. Consequently, the penalty of Rs. 1,92,158 was deleted.Conclusion:The Tribunal allowed both the quantum and penalty appeals filed by the assessee. The reassessment proceedings were quashed due to the non-issuance of the mandatory notice under section 143(2) and the mechanical approval under section 151. Consequently, the penalty imposed under section 271(1)(c) was also deleted. The Tribunal's decision was in line with the precedents set by the Hon'ble Supreme Court in relevant cases.