2014 (6) TMI 931 - AT - Income Tax

reopening of assessment - permission from Commissioner of Income Tax instead of Joint Commissioner of Income - Tax Held that - reopening of assessment after taking permission from Commissioner of Income Tax instead of Joint Commissioner of Income Tax is not valid. Accordingly, the same is quashed. Once the issue of notice under Section 148 is held to be invalid, consequentially, the assessment order passed in pursuance to such notice is also quashed. - Decided in favour of assessee

Summary

Issues:
Validity of reassessment proceedings under Section 147/148/143(3) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Validity of Reassessment Proceedings
The appeal challenged the order of the learned CIT(A)-XXII, New Delhi regarding the initiation of reassessment proceedings by the Assessing Officer. The appellant contended that the reassessment was initiated without valid reasons and independent evidence. The appellant raised concerns about the legality of the notice issued under Section 148, citing a discrepancy in the authority granting approval for reopening the assessment.

The appellant argued that since the original assessment records for the relevant year were unavailable, it was improper to reopen the assessment without ascertaining whether the assessment was completed under Section 143(1) or 143(3). The appellant emphasized that without proper verification, the Assessing Officer lacked the basis to conclude that income had escaped assessment. On the other hand, the Revenue defended the reassessment, stating that the approval from a senior authority was obtained due to unavailability of original records.

Analysis:
The Tribunal examined Section 151 of the Income Tax Act, which outlines the procedure for issuing notices under Section 148. It was noted that the Assessing Officer must follow specific guidelines based on whether the original assessment was completed under Section 143(1) or 143(3). In this case, uncertainty existed regarding the completion status of the original assessment for the relevant year.

The Tribunal observed that the Assessing Officer's inability to determine the original assessment status and the absence of documentary evidence raised serious doubts about the validity of the reassessment. Notably, the appellant's affidavit stating no assessment under Section 143(3) was completed remained uncontested. The Tribunal concluded that Section 151(2) applied due to the absence of a completed assessment under Section 143(3).

The Tribunal referenced a relevant case law where it was held that approval for notice under Section 148 must be granted by the Joint Commissioner or Additional Commissioner, not the Commissioner of Income Tax. Applying this precedent, the Tribunal deemed the reassessment invalid as permission was obtained from the wrong authority. Consequently, the notice under Section 148 and the subsequent assessment order were quashed.

Given the invalidity of the reassessment, the Tribunal did not address the additional grounds of appeal related to additions made in the reassessment order. Ultimately, the Tribunal allowed the appeal in favor of the assessee, thereby annulling the reassessment and its outcomes.

This detailed analysis highlights the critical legal arguments, procedural discrepancies, and judicial interpretation leading to the Tribunal's decision to invalidate the reassessment proceedings.