2023 (12) TMI 1184 - AT - Income Tax

Reopening assessment under Section 147 invalid without Joint Commissioner sanction under Section 151(2) and wrong jurisdictional officer

ITAT Surat held that reopening of assessment u/s 147 for bogus purchases after four years was invalid. The AO failed to obtain mandatory sanction from ... Reopening of assessment u/s 147 - bogus purchases - case reopened after four years - competent jurisdictional Assessing Officer to issue notice - AO received information from DDIT(Inv.) Mumbai as well as DDIT(Inv), Unit-VI, Jhandewalan, New Delhi and thus made his belief that income of assessee as “escaped assessment” as recorded above. HELD THAT:- We find merit in the submission of assessee that all the material relating to assessment was available with the Assessing Officer in the original assessment completed u/s 143(3) - AO has nowhere recorded that he obtained any sanction/ approval from Joint-Commissioner of Income-tax as mandated u/s 151(2). We further find merit in the submission of assessee that jurisdictional AO in case of assessee lies with Assessing Officer at Surat. However, notice under section 148 was issued by AO i.e., ITO Ward-33(2), New Delhi. Thus, the reopening is not only suffering by “satisfaction” from proper approval by competent person as well as the notice under section 148 was not issued by a competent jurisdictional Assessing Officer. Therefore, the reopening as well as issuance of notice under section 148 is bad-in-law. Since the re-opening u/s 147 and issuance of notice under section 148 is bad-in-law, subsequent action initiated thereto have become ab initio. Considering the fact that we have held the validity of re-opening and issuance of notice under section 148 had invalid, therefore, subsequent action has become ab initio and the ground of assessee succeeds on primary contention raised - Appeal of assessee is allowed. Issues Involved:1. Validity of reopening assessment under section 147 and issuance of notice under section 148 of the Income Tax Act, 1961.2. Addition of Rs. 70,10,470/- as bogus purchases.Summary:Validity of Reopening Assessment and Issuance of Notice:The assessee challenged the reopening of the assessment under section 147 and the issuance of notice under section 148 of the Income Tax Act, 1961. The Tribunal found that the case was reopened based on information from the DDIT (Investigation) Mumbai and New Delhi, which indicated that the assessee had engaged in bogus purchases from M/s Vitrag Jewels. However, the Tribunal noted that the reopening occurred after four years from the end of the relevant assessment year, and there was no assertion by the Assessing Officer that the assessee failed to disclose fully and truly all material facts necessary for the assessment. Additionally, the Tribunal observed that the notice under section 148 was issued by an officer who did not have jurisdiction over the assessee, and there was no evidence of the required sanction/approval from the Joint-Commissioner of Income-tax as mandated under section 151(2). Consequently, the Tribunal held that the reopening and the issuance of the notice were invalid, rendering subsequent actions ab initio.Addition of Rs. 70,10,470/- as Bogus Purchases:The Tribunal noted that the original assessment under section 143(3) had already examined the issue of unverifiable purchases, including those from M/s Vitrag Jewels, and made an addition of Rs. 90,40,927/-. This addition was deleted by the CIT(A) and upheld by the ITAT in a previous appeal. During the reassessment, the assessee provided evidence such as invoices, bank statements, and confirmations to substantiate the purchases from M/s Vitrag Jewels. The Tribunal found that the Assessing Officer did not effectively dispute this evidence. Given that the reopening and the issuance of the notice were deemed invalid, the Tribunal did not adjudicate the merits of the additions, treating the issue as academic.Conclusion:The Tribunal allowed the appeal of the assessee, holding that the reopening of the assessment and the issuance of the notice under section 148 were invalid, and thus, all subsequent actions were ab initio. The appeal was allowed on these primary grounds, rendering the adjudication on the merits of the additions unnecessary.