Reassessment under Section 147 invalid without Section 151 approval, Section 68 addition deleted after proper verification of share subscribers

ITAT Kolkata held that reassessment u/s 147 was invalid due to lack of competent authority approval u/s 151, despite information being received from the assessee itself. PCIT's revision u/s 263 was without jurisdiction as it addressed share subscription issues not part of original reassessment which concerned share dealing profits. Addition u/s 68 was deleted as CIT(A) correctly found identity, creditworthiness and genuineness of share subscribers established through verification notices, summons, bank statements and family connections proving legitimate business interest.

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Issues Involved:
1. Validity of the reopening of assessment u/s 147 r.w.s. 148 of the Income Tax Act.
2. Validity of the revision jurisdiction exercised by the CIT u/s 263 of the Act.
3. Merits of the addition made by the Assessing Officer regarding the share application money.

Summary:

Issue 1: Validity of the Reopening of Assessment u/s 147 r.w.s. 148 of the Act

The assessee argued that the reopening of the assessment u/s 147 r.w.s. 148 of the Act was invalid due to the absence of approval from the competent authority u/s 151 of the Act. The Tribunal noted that the reopening was based on information provided by the assessee itself, but the Assessing Officer failed to obtain the mandatory approval u/s 151. The Tribunal emphasized that jurisdictional defects can be challenged in collateral proceedings and cited several case laws supporting this view. Consequently, the reopening of the assessment was deemed bad in law, rendering the subsequent reassessment order non-est.

Issue 2: Validity of the Revision Jurisdiction Exercised by the CIT u/s 263 of the Act

The Tribunal considered the assessee's argument that the CIT's revision jurisdiction u/s 263 was invalid because the reassessment order u/s 147 did not address the issue of share application money. The Tribunal referred to the decision of the Hon'ble Supreme Court in 'CIT vs. Alagendran Finance Ltd.', which held that the period of limitation for revision would commence from the date of the original assessment if the reassessment did not cover the specific issue. The Tribunal concluded that the CIT's revision jurisdiction was without basis since the reassessment order was non-est, making the subsequent order passed u/s 143(3) r.w.s. 263 also unsustainable.

Issue 3: Merits of the Addition Made by the Assessing Officer Regarding the Share Application Money

On the merits, the Tribunal upheld the CIT(A)'s deletion of the addition of Rs. 10,61,00,000/- made by the Assessing Officer. The CIT(A) had thoroughly examined the evidence, including the identity, creditworthiness, and genuineness of the share subscribers. The CIT(A) noted that all share subscribers responded to notices u/s 133(6) and u/s 131, provided necessary documents, and their directors appeared before the Assessing Officer. The Tribunal found no reason to interfere with the CIT(A)'s well-reasoned order and dismissed the revenue's appeal.

Conclusion:

The Tribunal allowed the assessee's cross objections, declaring the reopening of the assessment and the revision jurisdiction exercised by the CIT as invalid. The revenue's appeal on the merits of the addition was dismissed, upholding the CIT(A)'s order.

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