Tribunal quashes reassessment order citing non-existent provision, lack of material facts disclosure.

Sumangal Techpark (P) Ltd. Versus ITO, Ward-24 (3), New Delhi.

Sumangal Techpark (P) Ltd. Versus ITO, Ward-24 (3), New Delhi. - TMI Issues Involved:

1. Initiation of proceedings under Section 148 and the consequent order under Section 147.
2. Reliance on non-existing provisions to support reopening of assessment.
3. Mechanical approval by the Principal Commissioner of Income Tax (Pr. CIT).
4. Non-compliance with the first proviso to Section 147 regarding the disclosure of material facts.

Issue-wise
Detailed Analysis:

1. Initiation of proceedings under Section 148 and the consequent order under Section 147:

The assessee challenged the initiation of proceedings under Section 148 and the consequent order under Section 147 on several grounds, including the assertion that the initiation was contrary to the provisions of law, the mandatory procedure laid down in the Act was not followed, the notice issued under Section 148 was time-barred, and the approval of the Addl. CIT and Pr. CIT was mechanical and without application of mind.

2. Reliance on non-existing provisions to support reopening of assessment:

The assessee argued that the reopening of the assessment was based on the applicability of a non-existing provision, Section 147(c) of the Income Tax Act. This reliance on a non-existent section indicated non-application of mind by the authorities involved in the initiation of action under Section 147. The Tribunal referred to several judgments, including the Bombay High Court's decision in Smt. Kalpana Shantilal Haria vs. ACIT and the Delhi High Court's decision in Yum! Restaurants Asia Pte Ltd vs. DDIT, which quashed reassessment proceedings on similar grounds of non-application of mind.

3. Mechanical approval by the Principal Commissioner of Income Tax (Pr. CIT):

The Tribunal found that the approval granted by the Pr. CIT was mechanical and without application of mind. The proforma for approval showed glaring mistakes, and the authorities failed to point out these omissions before granting approval. The Tribunal referred to several cases, including Chhugamal Rajpal vs. S.P. Chaliha and CIT vs. M/s S. Goyanka Lime and Chemicals Ltd, where mechanical approval was deemed fatal for the validity of reassessment proceedings.

4. Non-compliance with the first proviso to Section 147 regarding the disclosure of material facts:

The assessee contended that the reassessment proceedings were initiated after four years from the end of the relevant assessment year, and there was no specific allegation that the escapement of income was due to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal observed that the reasons recorded by the AO did not identify specific material facts not disclosed by the assessee. The Tribunal referred to several judgments, including the Delhi High Court's decision in Best Cybercity (India) Pvt Ltd vs. ITO, which held that bald assertions of non-disclosure do not meet the mandatory requirement of the proviso to Section 147.

Conclusion:

The Tribunal quashed the reassessment proceedings and the reassessment order on the grounds that the initiation of proceedings under Section 147 was based on a non-existent provision, the approval by the Pr. CIT was mechanical, and there was non-compliance with the first proviso to Section 147 regarding the disclosure of material facts. Consequently, the other grounds of appeal challenging the validity of reassessment proceedings were rendered academic and were not adjudicated. The appeal filed by the assessee was partly allowed.