Assessment Reopening Declared Invalid, Appeal Allowed

The Tribunal declared the reopening of the assessment under section 147 invalid as the sanction for issuing notice under section 148 was not granted by the competent authority as required by law. Consequently, the assessment order was quashed, and the merits of the addition under section 68 were not considered. The appeal was allowed in favor of the assessee.

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Issues Involved:
1. Validity of reopening of assessment under section 147 of the Income-tax Act.
2. Merits of addition made under section 68 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147 of the Income-tax Act:

The primary issue raised by the assessee in grounds 1 and 2 concerns the validity of the reopening of the assessment under section 147 of the Income-tax Act. The assessee contended that the approval for reopening the assessment was not granted by the competent authority as required under sub-section (2) of section 151 of the Act. It was argued that since the original assessment was made under section 143(1) of the Act, the Joint Commissioner of Income Tax (JCIT) was the competent authority to grant sanction for the issuance of notice under section 148. However, in this case, the sanction was granted by the Commissioner of Income Tax (CIT), which the assessee claimed invalidated the entire proceeding under section 147.

The Departmental Representative acknowledged that the sanction was indeed granted by the CIT but argued that since a superior authority had granted the sanction, it should not be considered invalid.

Upon examining the rival submissions and the materials on record, the Tribunal noted that the original return of income filed by the assessee was processed under section 143(1) and not subjected to scrutiny assessment. Therefore, as per section 151(2) of the Act, the sanction for issuance of notice under section 148 should have been obtained from the JCIT. The Tribunal found that the approval for the issuance of notice under section 148 was obtained from the CIT, not the JCIT, thus violating the statutory requirement.

The Tribunal cited several judicial precedents, including the decision of the Hon'ble Delhi High Court in the case of Yum! Restaurants Asia Pte Ltd. Vs. DDIT & Ors., which emphasized that when a statutory provision requires a certain act to be done by a particular authority in a particular manner, it should be done by that authority in that manner only. Any deviation from this prescribed procedure renders the action invalid.

Given the clear legal principle and the facts of the case, the Tribunal concluded that the sanction for the issuance of notice under section 148 was not granted by the competent authority as required under section 151(2) of the Act. Consequently, the notice issued under section 148 was declared invalid, and the assessment order passed in pursuance thereof was also deemed legally unsustainable and quashed.

2. Merits of Addition Made under Section 68 of the Income-tax Act:

Since the Tribunal found the reopening of the assessment under section 147 to be invalid, the merits of the addition made under section 68 of the Income-tax Act became academic and were not adjudicated. The Tribunal set aside the impugned order of the learned Commissioner (Appeals) and allowed the appeal in favor of the assessee.

Conclusion:

The Tribunal allowed the appeal, declaring the reopening of the assessment under section 147 invalid due to the sanction for the issuance of notice under section 148 not being granted by the competent authority as required under section 151(2) of the Act. Consequently, the assessment order passed was quashed, and the merits of the addition under section 68 were not examined. The decision was pronounced in the open court on 14th July, 2022.

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