2023 (9) TMI 423 - AT - Income Tax

Condonation of delay - HELD THAT - In the present case the report of the AO relied by the DR shows that the physical copy of orders was returned back by the postal authorities and the soft copy was send to the email address which was not provided by the assessee to the Department and the same was also not mentioned as email address for communication in Form No. 35. As per assessee the orders came to his notice on 03.09.2022 and he filed appeals on 14.09.2022. It is a settled law that in matters of condonation of delay, a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities. Application for admission of additional grounds - As these are legal grounds based on the provisions of the Act and prepositions rendered by Hon ble Supreme Court, Hon ble jurisdictional High Court of Delhi and coordinate benches of the Tribunal. Therefore in the totality of the facts and circumstances additional grounds are admitted for hearing. Applications are allowed. Reopening of assessment u/s 147 or 153C - Assessments were completed/unabated on the date of receipt of information from the Investigation Wing on 12.03.2013 and documents/material was found and seized during the course of search and seizure operation therefore the only action to be taken by the AO was available u/s. 153C of the Act and he was not entitled to invoke provisions of section 147/148 to initiate reassessment proceedings on the basis of material found and seized during the course of search and seizure operation on the third person. Therefore, there was no justification for the A.O. to have been initiated proceedings w/s. 147 / 148 of the I.T. Act. The correct course of action would have been to proceed against the assessee under section 153C. Approval u/s. 151(2) - AO initiated reassessment proceedings and issued notice u/s. 148 of the Act by mentioning applicable section as 147(b)which was not in existence in the book of statue at the time of recording reasons and the ld. PCIT also granted approval u/s. 151 on the said proposal of AO. Therefore as safely hold that the authorities below have proceeded to initiate reassessment proceedings and notice u/s. 148 and also granting approval u/s. 151 of the Act, without application of mind and by mentioning in applicable and non-existent provision of the Act. Therefore initiation of reassessment proceedings and all consequent proceedings and orders including impugned reassessment order u/s. 143(3)/147 of the Act is invalid being bad in law and thus I quash the same. Accordingly, additional ground no. 2 of assessee is also allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeals.
2. Admission of additional grounds of appeal.
3. Validity of reassessment proceedings initiated under sections 147/148 instead of section 153C.
4. Validity of approval under section 151 based on a non-existent section 147(b).

Summary of Judgment:

1. Application for Condonation of Delay:
The assessee contended that the delay in filing the appeals was due to non-receipt of the first appellate order on the provided email addresses, and only discovered the order on an email not given for communication. The Tribunal, referencing the Hon'ble Supreme Court's judgment in N. Balakrishnan vs. M Krishnamurthy, condoned the delay, emphasizing a justice-oriented approach and the absence of any malafide intention by the assessee. The delay was thus condoned, and appeals were admitted for hearing.

2. Application for Admission of Additional Grounds:
The assessee sought to admit additional grounds challenging the initiation of proceedings under sections 147/148 based on documents seized from a third party and the approval under section 151 given for reopening under a non-existent section 147(b). The Tribunal admitted these grounds, noting they were legal issues going to the root of the matter and could be adjudicated based on existing records.

3. Validity of Reassessment Proceedings:
The Tribunal found that the reassessment proceedings were initiated based on documents seized during a search on a third party (S.K. Jain Group), which should have invoked section 153C, not sections 147/148. Citing the Supreme Court's judgment in PCIT vs. Abhisar Buildwell Pvt. Ltd., the Tribunal held that in cases involving incriminating material found during a search, section 153C should be invoked. Therefore, the initiation of proceedings under sections 147/148 was deemed invalid and void. Additional ground no. 1 was allowed.

4. Validity of Approval under Section 151:
The Tribunal noted that the approval for reopening was given under a non-existent section 147(b), which was omitted from the statute effective 01.04.1989. This indicated a lack of application of mind by the Assessing Officer and the Principal Commissioner of Income Tax (PCIT). Relying on the Bombay High Court's judgment in Smt. Kalpana Shantilal Hariya Vs. ACIT and similar Tribunal decisions, the Tribunal held that such approval was invalid. Consequently, the reassessment proceedings and the resultant orders were quashed. Additional ground no. 2 was allowed.

Conclusion:
The Tribunal allowed the appeals on legal grounds, quashing the reassessment proceedings initiated under sections 147/148 and the approval under section 151 based on a non-existent section. The other grounds of appeal were not adjudicated due to the lack of submissions from both parties. The order was pronounced in the open court on 16.06.2023.