Tribunal invalidates assessments for lack of proper approval, prohibits addition of ungrounded income

The Tribunal invalidated the reopening of assessments for the years 2010-11 and 2011-12, citing lack of proper approval from the competent authority under Section 151 of the Income-tax Act. Additionally, income not initially part of the reasons for reopening was added, which was deemed impermissible. Consequently, all additional income added beyond the original grounds was deleted, and the Revenue's appeals were dismissed. The Tribunal stressed the importance of obtaining correct approval and sticking to the reasons provided for reopening assessments.

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Issues Involved:
1. Reopening of assessment under Section 147/148 of the Income-tax Act.
2. Validity of approval obtained for reopening the assessment.
3. Addition of income not forming part of the reasons recorded for reopening the assessment.

Issue-wise Detailed Analysis:

1. Reopening of assessment under Section 147/148 of the Income-tax Act:
The assessee challenged the reopening of assessment for Assessment Years 2010-11 and 2011-12, arguing that the Assessing Officer (AO) did not have valid reasons to believe that income had escaped assessment. The AO had issued a notice under Section 148 on 08.01.2016, after recording reasons based on cash deposits found in the bank account of the assessee, which were not reflected in the income returns. The assessee contended that reopening was invalid as it was done beyond four years without proper approval from the competent authority.

2. Validity of approval obtained for reopening the assessment:
The Tribunal examined whether the AO obtained proper approval from the competent authority as required under Section 151 of the Income-tax Act. The AO claimed to have taken approval from the Joint Commissioner, which was not sufficient as per the law. For reopening assessments beyond four years, approval from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner was mandatory. The Tribunal found that the AO did not obtain such approval, making the reopening invalid.

3. Addition of income not forming part of the reasons recorded for reopening the assessment:
For Assessment Year 2011-12, the AO had reopened the assessment based on cash deposits of Rs. 1.63 crores. However, the final assessment did not make any addition on this ground but instead added unexplained credits from other sources. The Tribunal referred to the judgments of various High Courts, including the Gujarat High Court in CIT vs. Mohmed Juned Dadani, which held that if no addition is made on the ground for which the assessment was reopened, then any other additions cannot be sustained. Consequently, the Tribunal deleted all other additions made by the AO and confirmed by the CIT(A).

Conclusion:
The Tribunal allowed the Cross-Objections of the assessee, quashing the reopening of assessments and invalidating the subsequent additions. As a result, the appeals of the Revenue were dismissed. The Tribunal emphasized the necessity of obtaining proper approval for reopening assessments and adhering to the reasons recorded for such actions.

Order Pronounced:
The order was pronounced on 2nd August 2021 at Ahmedabad, with both Cross-Objections of the assessee allowed and the appeals of the Revenue dismissed.

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