Assessment reopening beyond three years invalid due to improper sanction and income below Rs 50 lakh threshold under section 149

The ITAT Mumbai held that the reopening of assessment beyond three years was invalid on two grounds. First, the sanction was improperly obtained from Pr. CIT instead of the required Pr. CCIT for assessments reopened beyond three years, following Siemens Financial Services precedent. Second, the notice under section 148 was barred by limitation as the alleged income escapement of Rs. 9,00,000 was below the Rs. 50,00,000 threshold required for extended limitation period under section 149(1)(b), citing Ganesh Dass Khanna judgment. The tribunal ruled the notice was issued without jurisdiction and set aside the reassessment order as null and void, deciding in favor of the assessee.

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Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Adequacy of opportunity for the assessee to be heard.
3. Non-allowance of the cost of improvement on the sale of properties.
4. Failure to refer the matter to the Department Valuation Officer.
5. Non-allowance of deductions claimed under Chapter-VIA and advance tax.

Issue-wise Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147 of the Income Tax Act, 1961:
The primary issue was whether the Assessing Officer (AO) erred in reopening the assessment under Section 147. The Tribunal noted that the AO reopened the assessment based on specific information that the assessee sold immovable property below the stamp duty value, violating Section 50C of the Act. However, the Tribunal found that the sanction for reopening was obtained from the Principal Commissioner of Income Tax (Pr. CIT) instead of the Principal Chief Commissioner of Income Tax (Pr. CCIT), as required for assessments reopened beyond three years. The Tribunal relied on the Bombay High Court's judgment in Siemens Financial Services (P.) Ltd. vs. DCIT, which clarified that the approval of the Pr. CCIT is mandatory in such cases. Therefore, the notice issued under Section 148 was deemed invalid and without jurisdiction.

2. Adequacy of Opportunity for the Assessee to be Heard:
The assessee argued that the AO passed the final and draft assessment orders without providing sufficient opportunity to be heard, violating the principles of natural justice. The Tribunal did not delve into this issue in detail, as the reassessment order was already quashed on jurisdictional grounds.

3. Non-allowance of the Cost of Improvement on the Sale of Properties:
The assessee contended that the AO erred in not allowing the cost of improvement on the sale of properties, leading to an incorrect computation of capital gains. The Tribunal did not address this issue on merits, given that the reassessment order was nullified.

4. Failure to Refer the Matter to the Department Valuation Officer:
The assessee argued that the AO ignored their specific request to refer the matter to the Department Valuation Officer to determine the fair value of the property. The Tribunal did not examine this issue further, as the reassessment order was invalidated.

5. Non-allowance of Deductions Claimed under Chapter-VIA and Advance Tax:
The assessee claimed that the AO did not allow deductions under Chapter-VIA amounting to Rs. 1,82,619/- and advance tax amounting to Rs. 94,807/-. The Tribunal did not consider this issue on merits due to the quashing of the reassessment order.

Conclusion:
The Tribunal concluded that the impugned notice issued under Section 148 was without jurisdiction, rendering the resultant reassessment order null and void. Consequently, the appeal of the assessee was allowed, and the reassessment order was set aside. The Tribunal did not find it necessary to delve into the merits of the case due to the jurisdictional error. The order was pronounced on 20th August 2024 in Mumbai.

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