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of <h1>Tribunal overturns reassessment due to incorrect sections and lack of diligence in approval process.</h1> <h3>Mahalaxmi Ornaments House Pvt. Ltd., Versus ITO, Ward-16 (1), Delhi</h3> Mahalaxmi Ornaments House Pvt. Ltd., Versus ITO, Ward-16 (1), Delhi - TMI Issues Involved:1. Condonation of delay in filing the appeals.2. Admission of additional grounds of appeal.3. Validity of reassessment proceedings initiated under sections 147/148 instead of section 153C.4. Validity of approval under section 151 based on a non-existent section 147(b).Summary of Judgment:1. Application for Condonation of Delay:The assessee contended that the delay in filing the appeals was due to non-receipt of the first appellate order on the provided email addresses, and only discovered the order on an email not given for communication. The Tribunal, referencing the Hon'ble Supreme Court's judgment in N. Balakrishnan vs. M Krishnamurthy, condoned the delay, emphasizing a justice-oriented approach and the absence of any malafide intention by the assessee. The delay was thus condoned, and appeals were admitted for hearing.2. Application for Admission of Additional Grounds:The assessee sought to admit additional grounds challenging the initiation of proceedings under sections 147/148 based on documents seized from a third party and the approval under section 151 given for reopening under a non-existent section 147(b). The Tribunal admitted these grounds, noting they were legal issues going to the root of the matter and could be adjudicated based on existing records.3. Validity of Reassessment Proceedings:The Tribunal found that the reassessment proceedings were initiated based on documents seized during a search on a third party (S.K. Jain Group), which should have invoked section 153C, not sections 147/148. Citing the Supreme Court's judgment in PCIT vs. Abhisar Buildwell Pvt. Ltd., the Tribunal held that in cases involving incriminating material found during a search, section 153C should be invoked. Therefore, the initiation of proceedings under sections 147/148 was deemed invalid and void. Additional ground no. 1 was allowed.4. Validity of Approval under Section 151:The Tribunal noted that the approval for reopening was given under a non-existent section 147(b), which was omitted from the statute effective 01.04.1989. This indicated a lack of application of mind by the Assessing Officer and the Principal Commissioner of Income Tax (PCIT). Relying on the Bombay High Court's judgment in Smt. Kalpana Shantilal Hariya Vs. ACIT and similar Tribunal decisions, the Tribunal held that such approval was invalid. Consequently, the reassessment proceedings and the resultant orders were quashed. Additional ground no. 2 was allowed.Conclusion:The Tribunal allowed the appeals on legal grounds, quashing the reassessment proceedings initiated under sections 147/148 and the approval under section 151 based on a non-existent section. The other grounds of appeal were not adjudicated due to the lack of submissions from both parties. The order was pronounced in the open court on 16.06.2023.
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