AO's reopening assessment beyond four years invalid without proper Section 151(1) sanction from competent authority

The ITAT Delhi held that reopening of assessment beyond four years requires valid sanction under Section 151(1) from PCIT or CCIT. Since the AO obtained approval only from Additional CIT rather than the competent authority, the assumption of jurisdiction was improper. The notice issued under Section 148 was declared invalid and bad in law. The assessment reopening was set aside and the assessee's appeal was allowed due to non-compliance with mandatory statutory requirements for reopening beyond the prescribed time limit.

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Issues:
1. Condonation of delay in filing appeal due to COVID pandemic and personal reasons.
2. Additional grounds challenging the maintainability of proceedings.
3. Approval by competent authority under Section 151(1) for issuing notice under Section 148.
4. Validity of assessment based on cash deposit in the bank account.
5. Lack of approval by Principal Commissioner of Income Tax for reopening assessment beyond 4 years.

Analysis:
1. The appeal was delayed by 1865 days due to personal reasons, including the husband's illness and subsequent demise, with a significant portion of the delay attributed to the COVID pandemic. The Tribunal allowed the condonation of delay considering the genuine reasons provided by the assessee and the absence of intentional delay.

2. Additional grounds challenging the maintainability of proceedings were admitted by the Tribunal based on legal issues raised by the assessee regarding the approval granted by the competent authority and the violation of provisions under the Income Tax Act.

3. The issue of approval by the competent authority under Section 151(1) for issuing notice under Section 148 was crucial. The Tribunal found that the Principal Commissioner of Income Tax had not approved the reasons recorded by the Assessing Officer for reopening the assessment, rendering the notice invalid and bad in law. The failure to obtain proper sanction from the appropriate authority was deemed fatal to the assumption of jurisdiction by the Assessing Officer.

4. The assessment was based on a cash deposit in the bank account, and the assessee failed to provide a satisfactory explanation for the source of the deposit. The Tribunal upheld the addition made by the Assessing Officer and the First Appellate Authority due to the lack of compliance by the assessee.

5. The Tribunal, after considering relevant judgments, concluded that the absence of approval by the Principal Commissioner of Income Tax for reopening the assessment beyond 4 years rendered the notice under Section 148 invalid. The Tribunal set aside the order of assessment and allowed the assessee's appeal based on the invalidity of the notice issued by the Assessing Officer.

This comprehensive analysis of the legal judgment highlights the key issues addressed by the Tribunal, including the condonation of delay, approval by the competent authority, validity of assessment, and the lack of approval for reopening the assessment beyond the statutory period. The Tribunal's decision to allow the appeal was primarily based on the procedural irregularities and lack of proper authorization in initiating the reassessment proceedings.

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