Tribunal Invalidates Assessment Order Due to Procedural Lapses

The Tribunal allowed the appeal, holding the assessment order invalid due to procedural lapses and lack of proper inquiries. The addition of Rs. 9,75,90,067 under Section 68 was deemed unjustified as the assessee disowned the bank accounts, citing fraudulent use of documents. The appeal was allowed on legal and merit grounds, setting aside the assessment order.

---

---

Issues Involved:
1. Legality of the proceeding initiated under Section 148 of the Income-tax Act, 1961.
2. Validity of the assessment order passed under Section 147 of the Income-tax Act, 1961.
3. Compliance with conditions contained in Section 151 of the Income-tax Act, 1961.
4. Addition of Rs. 9,75,90,067/- under Section 68 of the Income-tax Act, 1961.

Summary:

Legality of the Proceeding Initiated Under Section 148:
The assessee challenged the legality of the assessment proceedings initiated under Section 148 of the Income-tax Act, 1961. The notice under Section 148 was issued on 29.03.2017, but the approval from the Principal Commissioner of Income Tax (Pr. CIT) was received only on 31.03.2017. This discrepancy indicated that the notice was issued without the necessary prior approval as mandated under Section 151 of the Act. The Tribunal found this procedural lapse to render the entire assessment proceeding invalid.

Validity of the Assessment Order Passed Under Section 147:
The Tribunal noted that the reasons to believe recorded by the Assessing Officer (AO) were based on information received from another department, which lacked independent application of mind. The AO's reasons to believe contained an incorrect bank account number, further questioning the validity of the assessment order. The Tribunal found that the assessment order did not comply with the provisions of Sections 148 to 151 of the Act.

Compliance with Conditions Contained in Section 151:
The Tribunal observed that the approval for issuing the notice under Section 148 was communicated to the AO only on 31.03.2017, while the notice was issued on 29.03.2017. This indicated non-compliance with Section 151, which requires prior approval from the Pr. Commissioner. The Tribunal held that the notice issued without prior approval was not in accordance with the law.

Addition of Rs. 9,75,90,067/- Under Section 68:
The assessee denied ownership of the two bank accounts in question and claimed that they were opened fraudulently using his documents. The Tribunal noted that the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] did not conduct adequate inquiries to verify the assessee's claims. The assessee had filed complaints with the police regarding the fraudulent use of his documents, but no action was taken by the tax authorities to investigate these claims. The Tribunal found that the addition of Rs. 9,75,90,067/- was not justified as the assessee had consistently disowned the bank accounts and the transactions therein.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the assessment order was bad in law due to procedural lapses and lack of adequate inquiries. The addition of Rs. 9,75,90,067/- was also found to be unjustified. The appeal was allowed on both legal and merit grounds, and the assessment order was set aside.

Order Pronounced:
The order was pronounced in the open court on 17th March, 2023.

---