2025 (4) TMI 843 - AT - Income Tax

Procedural Errors Nullify Tax Reassessment: Invalid Approval Form and Incorrect Factual Findings Render Section 147 Proceedings Void

The Tribunal invalidated reassessment proceedings under Section 147 of the Income Tax Act due to incorrect factual findings by the Assessing Officer. The ... Reopening of assessment - invalid satisfaction accorded for reopening of assessment - notice issued after the expiry of 4 years - HELD THAT:- Though sanction claimed to have been obtained from the Learned PCIT, for re-opening of assessment for AY 2012-13, document whereof annexed at page-7 of the Paper Book filed before us, no date has been mentioned by the PCIT while granting such sanction under Section 151 of the Act. The same, thus, cannot be said to be a valid one and therefore, consequentially the notice under Section 148 of the Act dated 31.03.2019 on the basis of such invalid sanction is found to be illegal and void ab initio. The judgment relied upon passed by the Hon’ble High Court in the matter of Shree Tarlok Chand Lal Goyal [2023 (9) TMI 842 - DELHI HIGH COURT] has been duly considered wherein it is found that on the basis of wrong finding of fact that the assessee has not filed the return of income for the year under consideration reasons to believe was recorded whereas the assessee duly filed the return of income. As the foundation on the basis of which the assessee’s proceedings has been triggered against the assessee is found to be wrong, the entire assessment proceedings has been quashed as void ab initio. Decided in favour of assessee. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are: Whether the initiation of proceedings under Section 147 of the Income Tax Act, 1961, was valid in light of the alleged incorrect findings of fact by the Assessing Officer (AO). Whether the sanction obtained under Section 151 of the Act for reopening the assessment was legally valid given the absence of a date on the approval form by the Principal Commissioner of Income Tax (PCIT).ISSUE-WISE DETAILED ANALYSIS1. Validity of Proceedings under Section 147 Relevant legal framework and precedents: Section 147 of the Income Tax Act allows for reassessment if the AO has reason to believe that any income chargeable to tax has escaped assessment. The Delhi High Court's judgment in Shree Tarlok Chand Lal Goyal vs ACIT was referenced, where similar issues of incorrect factual findings led to the quashing of proceedings. Court's interpretation and reasoning: The Tribunal noted that the AO's reasons for reopening the assessment were based on the incorrect assertion that the assessee had not filed a return for the relevant year, despite evidence to the contrary. This incorrect factual basis invalidated the 'reason to believe' required for Section 147 proceedings. Key evidence and findings: The Tribunal found that the assessee had indeed filed the return on 08.08.2012, contrary to the AO's recorded reasons. This discrepancy was critical in determining the invalidity of the proceedings. Application of law to facts: The Tribunal applied the precedent from the Delhi High Court, concluding that since the foundational fact was incorrect, the entire reassessment process was void ab initio. Treatment of competing arguments: The Tribunal addressed the Revenue's position by emphasizing the incorrectness of the AO's foundational facts, which rendered the proceedings unsustainable. Conclusions: The Tribunal concluded that the proceedings under Section 147 were vitiated due to the incorrect factual foundation and were thus void ab initio.2. Validity of Sanction under Section 151 Relevant legal framework and precedents: Section 151 requires the satisfaction of the PCIT/CCIT that the case is fit for issuing a notice under Section 148, especially after four years from the end of the relevant assessment year. Court's interpretation and reasoning: The Tribunal scrutinized the approval process and noted the absence of a date on the sanction form by the PCIT, which is a procedural requirement for validating the sanction. Key evidence and findings: The Tribunal observed that the PCIT's sanction lacked a date, which is crucial for determining the sanction's validity within the statutory framework. Application of law to facts: The Tribunal applied the legal requirement that a valid sanction must be properly documented, including the date, to ensure procedural correctness. Treatment of competing arguments: The Tribunal considered the Revenue's argument that the PCIT had granted approval, but emphasized that the procedural lapse of not dating the approval rendered it invalid. Conclusions: The Tribunal concluded that the sanction was not in accordance with the law due to the absence of a date, thereby invalidating the notice under Section 148 and the subsequent proceedings.SIGNIFICANT HOLDINGS The Tribunal held that the reassessment proceedings were void ab initio due to the incorrect factual foundation, as the AO's recorded reasons were based on the false premise that the assessee had not filed a return. The Tribunal emphasized the importance of procedural compliance in obtaining sanction under Section 151, highlighting that the absence of a date on the PCIT's approval rendered the sanction invalid. Core principles established: The necessity of accurate factual foundations for proceedings under Section 147 and the critical nature of procedural compliance in obtaining sanctions under Section 151. The Tribunal quashed the reassessment proceedings and allowed the assessee's appeal, reinforcing the principle that procedural and factual inaccuracies can invalidate tax proceedings.