2023 (12) TMI 401 - AT - Income Tax

Validity of reopening of assessment u/s 147 - prior sanction of approval u/s 151 of the Act from the competent authority not taken - Exemption u/s 10(26BBB) denied - HELD THAT - We find that prior sanction of approval u/s 151 of the Act from the competent authority is mandatory before the reopening of assessment. As it has been duly confirmed that no approval U/s 151 of the Act is on record for the years under consideration, the assumption of jurisdiction U/s 147 of the Act becomes void ab initio. Accordingly, the entire reassessment proceedings are hereby quashed. Assessee appeal allowed.

Summary

Issues involved:
The issues involved in this case are related to the validity of reassessment proceedings and the eligibility of the Assessee for exemption u/s 10(26BBB) of the Income Tax Act, 1961.

Validity of Reassessment Proceedings:
The Assessee challenged the validity of the reassessment proceedings through Additional Grounds. The Bench admitted the Additional Grounds as they were legal issues. It was noted that no approval u/s 151 of the Act was obtained by the Assessing Officer for reopening the assessment. Despite multiple opportunities given to the Revenue, no approval was produced. The absence of approval renders the assumption of jurisdiction u/s 147 of the Act void ab initio. Consequently, the reassessment proceedings were quashed, and the Additional Grounds challenging the validity of the reopening were allowed. Other grounds raised by the Assessee were not adjudicated upon due to the quashing of the reassessment.

Eligibility for Exemption u/s 10(26BBB):
The Assessee, a corporation set up by the State for the welfare of ex-servicemen, claimed exemption u/s 10(26BBB) of the Act. The Assessee contended that it met the conditions prescribed in the section. However, the Learned Commissioner of Income Tax (Appeals) and the Assessing Officer held otherwise. They argued that the Assessee was not established by a central, state, or provisional act, as required by the Act. The main objectives of the corporation were to provide various benefits to ex-servicemen and their dependents. The Assessee insisted that all conditions under section 10(26BBB) were satisfied. The dispute revolved around the interpretation of the Act regarding the establishment and eligibility criteria for exemption.

Conclusion:
The Appellate Tribunal quashed the reassessment proceedings due to the absence of approval u/s 151 of the Act, rendering the assumption of jurisdiction void ab initio. As a result, the Assessee's appeals were allowed. The eligibility of the Assessee for exemption u/s 10(26BBB) remained a point of contention, with the Assessee claiming fulfillment of prescribed conditions while the Revenue contended otherwise.