2024 (8) TMI 1363 - AT - Income Tax

Reopening of assessment - valid sanction accorded u/s 151 or not? - HELD THAT - As the assessment was reopened beyond three years, sanction is required from Pr. CCIT whereas in the case of assessee, sanction has been obtained from Pr. CIT. this issue has been considered in the case of Siemens Financial Services (P.) Ltd. 2023 (9) TMI 552 - BOMBAY HIGH COURT as held that as the notice under section 148 of the Act is issued on 31 July 2022 and, hence, is issued beyond period of three years from the end of the relevant assessment year and, accordingly, the approval of the specified authority under section 151(ii) of the Act should be taken. Time limit for reopening under the new regime - HELD THAT - As on perusal of the reasons recorded for re-opening the assessment, the escapement of income is only Rs. 9,00,000/- and for which alleged escapement is less than Rs. 50,00,000/-, notice issued u/s 148 of the Act is barred by limitation considering Section 149(1)(b) of the Act. This issue has been duly considered in the case of Ganesh Dass Khanna 2023 (11) TMI 763 - DELHI HIGH COURT as decided that new regime for reopening assessments was enacted is that where escapement of income was below Rs. 50 lakhs, the normal period of limitation, i.e., three (03) years was to apply. In comparison, the extended period of ten (10) years would apply in serious tax evasion cases where there was evidence of concealment of income of Rs. 50 lakhs or more in the given period. Thus we are of the considered view that the impugned notice issued u/s 148 of the Act is without jurisdiction and hence set aside making the resultant re-assessment order null and void - Decided in favour of assessee.

Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Adequacy of opportunity for the assessee to be heard.
3. Non-allowance of the cost of improvement on the sale of properties.
4. Failure to refer the matter to the Department Valuation Officer.
5. Non-allowance of deductions claimed under Chapter-VIA and advance tax.

Issue-wise Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147 of the Income Tax Act, 1961:
The primary issue was whether the Assessing Officer (AO) erred in reopening the assessment under Section 147. The Tribunal noted that the AO reopened the assessment based on specific information that the assessee sold immovable property below the stamp duty value, violating Section 50C of the Act. However, the Tribunal found that the sanction for reopening was obtained from the Principal Commissioner of Income Tax (Pr. CIT) instead of the Principal Chief Commissioner of Income Tax (Pr. CCIT), as required for assessments reopened beyond three years. The Tribunal relied on the Bombay High Court's judgment in Siemens Financial Services (P.) Ltd. vs. DCIT, which clarified that the approval of the Pr. CCIT is mandatory in such cases. Therefore, the notice issued under Section 148 was deemed invalid and without jurisdiction.

2. Adequacy of Opportunity for the Assessee to be Heard:
The assessee argued that the AO passed the final and draft assessment orders without providing sufficient opportunity to be heard, violating the principles of natural justice. The Tribunal did not delve into this issue in detail, as the reassessment order was already quashed on jurisdictional grounds.

3. Non-allowance of the Cost of Improvement on the Sale of Properties:
The assessee contended that the AO erred in not allowing the cost of improvement on the sale of properties, leading to an incorrect computation of capital gains. The Tribunal did not address this issue on merits, given that the reassessment order was nullified.

4. Failure to Refer the Matter to the Department Valuation Officer:
The assessee argued that the AO ignored their specific request to refer the matter to the Department Valuation Officer to determine the fair value of the property. The Tribunal did not examine this issue further, as the reassessment order was invalidated.

5. Non-allowance of Deductions Claimed under Chapter-VIA and Advance Tax:
The assessee claimed that the AO did not allow deductions under Chapter-VIA amounting to Rs. 1,82,619/- and advance tax amounting to Rs. 94,807/-. The Tribunal did not consider this issue on merits due to the quashing of the reassessment order.

Conclusion:
The Tribunal concluded that the impugned notice issued under Section 148 was without jurisdiction, rendering the resultant reassessment order null and void. Consequently, the appeal of the assessee was allowed, and the reassessment order was set aside. The Tribunal did not find it necessary to delve into the merits of the case due to the jurisdictional error. The order was pronounced on 20th August 2024 in Mumbai.

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