2023 (3) TMI 94 - AT - Income Tax

Reopening of assessment u/s 147 - invocation of reassessment proceedings based on non-existing provisions of the law, i.e., 147(C) - notice issued u/s 148 is time barred as issued after 4 years from the end of the relevant assessment year where the case has already been assessed u/s 143(3) - DR submitted that the mention of non-existent provision of section 147(C) of the Act is a clerical mistake which is curable u/s 292B - HELD THAT - AO, in the first page of reasons mentioned in column 7 that provisions of section 147(C) is applicable which is non-existent in the statute book for AY 2010-11. This apparently shows non-application of mind by the AO while filling proforma in a mechanical manner and the ld. ACIT and Ld. PCIT also approved the same in a mechanical manner. So far as the contention of the ld. Sr. DR that this defect is curable u/s 292B of the Act is concerned, this contention was decided in the case of Madhu Apartments India Pvt. Ltd., 2021 (2) TMI 709 - ITAT DELHI the relevant part of which has already been reproduced in the earlier part of this order since the same was referred to and included in the relevant part of the order of the ITAT in the case of Omkam Developers Ltd. ( 2021 (5) TMI 414 - ITAT DELHI . Therefore, we hold that the impugned reassessment proceedings and the impugned reassessment order deserves to be quashed and we hold so. Validity of initiation of reassessment proceedings u/s 147 - HELD THAT - As per requirement of mandatory provisions i.e., proviso to section 147, the AO is required to make specific allegation to identify the particular facts not fully and truly disclosed by the assessee and compliance of the said mandatory provision solely depends on verification of facts/material disclosed by the assessee in the course of assessment proceedings and from perusal of the reasons recorded. In a case the AO did not disclose anything on the evidences furnished during the original assessment proceedings and failed to identify the particular facts or material which were not fully and truly disclosed by the assessee, then, the initiation of reassessment proceedings beyond the period of four years from end of relevant assessment year has to be held as void ab initio and bad in law as per various judgements including the judgement of the Hon ble jurisdictional High Court of Delhi in the case off Dushyant Kumar Jain ( 2016 (5) TMI 113 - DELHI HIGH COURT ) and Usha International Ltd. ( 2012 (9) TMI 767 - DELHI HIGH COURT ). The initiation of reassessment proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act is void ab initio and bad in law being initiated without complying with the mandatory provisions of first proviso to section 147. Thus we have quashed the reassessment proceedings and reassessment order while adjudicating the legal ground No.3 of the assessee, no additions made by the AO could be held as sustainable.

Issues Involved:

1. Initiation of proceedings under Section 148 and the consequent order under Section 147.
2. Reliance on non-existing provisions to support reopening of assessment.
3. Mechanical approval by the Principal Commissioner of Income Tax (Pr. CIT).
4. Non-compliance with the first proviso to Section 147 regarding the disclosure of material facts.

Issue-wise
Detailed Analysis:

1. Initiation of proceedings under Section 148 and the consequent order under Section 147:

The assessee challenged the initiation of proceedings under Section 148 and the consequent order under Section 147 on several grounds, including the assertion that the initiation was contrary to the provisions of law, the mandatory procedure laid down in the Act was not followed, the notice issued under Section 148 was time-barred, and the approval of the Addl. CIT and Pr. CIT was mechanical and without application of mind.

2. Reliance on non-existing provisions to support reopening of assessment:

The assessee argued that the reopening of the assessment was based on the applicability of a non-existing provision, Section 147(c) of the Income Tax Act. This reliance on a non-existent section indicated non-application of mind by the authorities involved in the initiation of action under Section 147. The Tribunal referred to several judgments, including the Bombay High Court's decision in Smt. Kalpana Shantilal Haria vs. ACIT and the Delhi High Court's decision in Yum! Restaurants Asia Pte Ltd vs. DDIT, which quashed reassessment proceedings on similar grounds of non-application of mind.

3. Mechanical approval by the Principal Commissioner of Income Tax (Pr. CIT):

The Tribunal found that the approval granted by the Pr. CIT was mechanical and without application of mind. The proforma for approval showed glaring mistakes, and the authorities failed to point out these omissions before granting approval. The Tribunal referred to several cases, including Chhugamal Rajpal vs. S.P. Chaliha and CIT vs. M/s S. Goyanka Lime and Chemicals Ltd, where mechanical approval was deemed fatal for the validity of reassessment proceedings.

4. Non-compliance with the first proviso to Section 147 regarding the disclosure of material facts:

The assessee contended that the reassessment proceedings were initiated after four years from the end of the relevant assessment year, and there was no specific allegation that the escapement of income was due to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal observed that the reasons recorded by the AO did not identify specific material facts not disclosed by the assessee. The Tribunal referred to several judgments, including the Delhi High Court's decision in Best Cybercity (India) Pvt Ltd vs. ITO, which held that bald assertions of non-disclosure do not meet the mandatory requirement of the proviso to Section 147.

Conclusion:

The Tribunal quashed the reassessment proceedings and the reassessment order on the grounds that the initiation of proceedings under Section 147 was based on a non-existent provision, the approval by the Pr. CIT was mechanical, and there was non-compliance with the first proviso to Section 147 regarding the disclosure of material facts. Consequently, the other grounds of appeal challenging the validity of reassessment proceedings were rendered academic and were not adjudicated. The appeal filed by the assessee was partly allowed.

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