2018 (11) TMI 1648 - AT - Income Tax

Validity of reopening of assessment - notice issued before approval from Commissioner or competent authority obtained - addition of bogus purchases - HELD THAT - Section 151 contemplates that no notice u/s 148 shall be issued by the AO, after the expiry of a period of four years from the end of the relevant assessment year, unless necessary approval from Commissioner or competent authority is obtained. No doubt in the present case, AO has applied for such approval which was granted on 29.3.2017, but before grant of approval, AO has already issued notice on 28. 3. 2014 which is without any jurisdiction. He can issue notice only after getting approval. CIT(A) has rightly quashed the assessment because the very foundation for issuance of notice under section 148 is the approval from the competent authority, i. e. Commissioner of Income Tax, and in the absence of such, such notice is void ab initio - Decided against revenue.

Summary

Issues:
1. Jurisdiction of notice under section 148 of the Income Tax Act, 1961.
2. Addition of ?43,09,98,411 on account of bogus purchases.

Jurisdiction of Notice under Section 148:
The Revenue appealed against the order of the ld. CIT(A)-3, Surat, for the Asstt. Year 2007-08, specifically challenging the holding that the notice under section 148 of the Income Tax Act, 1961 was void ab initio. The ld. AO issued the notice on 28. 3. 2014 before obtaining necessary approval from the Commissioner of Income Tax, as required under section 151 of the Act. The approval was granted on 29. 3. 2014. The ld. CIT(A) found that the notice was issued without jurisdiction, rendering the assessment order unsustainable. The Tribunal concurred, emphasizing that the very foundation for issuing a notice under section 148 is the approval from the competent authority, and in its absence, the notice is void ab initio. Thus, the Tribunal dismissed the Revenue's appeal, upholding the quashing of the assessment due to the lack of jurisdiction in issuing the notice.

Addition of ?43,09,98,411 on Account of Bogus Purchases:
The Revenue also contested the deletion of the addition of ?43,09,98,411 made by the ld. AO on account of bogus purchases. The ld. AO had made this addition based on information received regarding accommodation entries of bogus purchases. However, the Tribunal's decision primarily focused on the jurisdictional issue related to the notice under section 148. The Tribunal did not delve into the merits of the addition of bogus purchases due to the fundamental flaw in the notice issuance process. Consequently, the Tribunal dismissed the Revenue's appeal without addressing the substantive grounds related to the addition of the disputed amount.

In conclusion, the Tribunal's judgment centered on the jurisdictional aspect of the notice under section 148, highlighting the importance of obtaining necessary approval before issuing such notices to maintain the validity of the assessment process. The dismissal of the Revenue's appeal underscored the significance of adhering to procedural requirements to ensure the legality and sustainability of tax assessments.