2024 (10) TMI 360 - AT - Income Tax

Validity of reassessment proceedings initiated u/s 147 - period of limitation - HELD THAT - As in the present case, the period of three years has elapsed from the end of the relevant assessment year and the order dated 22/04/2022 was passed u/s 148A(d) of the Act after obtaining the approval of the Principal CIT-27, Mumbai, we are of the considered view that the Revenue has not followed the mandatory provisions of the Act while initiating the reassessment proceedings and sanction of the Specified Authority is not in conformity with the law prevalent at the time of grant of sanction. Thus, in the present case, it is discernible that the notice under section 148 was issued on 22/04/2022 in contravention of the provisions of section 151 as the sanction of the concerned Specified Authority was not obtained. Accordingly, the notice issued u/s 148 of the Act is void ab-initio and bad in law and therefore is quashed. The entire reopening proceedings and assessment order passed u/s 147 r/w section 144B of the Act is also quashed. Appeal by the assessee is allowed.

Summary

Issues Involved:

1. Validity of reassessment proceedings initiated under section 147 of the Income Tax Act.
2. Validity of the notice issued under section 148 of the Act and whether it is barred by limitation.
3. Confirmation of the addition of Rs. 22,92,130 as long-term capital gain.
4. Disallowance of brokerage expenses of Rs. 65,000.
5. Levy of interest under sections 234A and 234B of the Act.
6. Initiation of penalty proceedings under section 274 read with section 270A of the Act.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings:
The primary issue pertained to the validity of reassessment proceedings under section 147 of the Income Tax Act. The assessee challenged the reopening of assessment, arguing that the order dated 22/04/2022 was passed under section 148A(d) without proper approval from the Specified Authority as required under section 151(ii) of the Act. The Tribunal noted that the provisions of section 148, as amended by the Finance Act 2021, require prior approval from the Specified Authority, which, if more than three years have elapsed from the end of the relevant assessment year, should be the Principal Chief Commissioner or Principal Director General. The Tribunal found that the approval was incorrectly obtained from the Principal CIT-27, Mumbai, and not from the appropriate Specified Authority, rendering the reassessment proceedings invalid.

2. Validity of Notice under Section 148:
The notice issued under section 148 was challenged on the grounds of being barred by limitation and lacking proper jurisdictional approval. The Tribunal referenced the Hon'ble Jurisdictional High Court's decision in Siemens Financial Services (P.) Ltd. v/s DCIT, which emphasized that for notices issued beyond three years, approval must be obtained from the Principal Chief Commissioner or equivalent authority. Since the notice in question was issued without such approval, it was deemed void ab-initio and bad in law.

3. Confirmation of Addition as Long-term Capital Gain:
The Tribunal did not delve into the merits of the addition of Rs. 22,92,130 as long-term capital gain, as the reassessment proceedings themselves were quashed due to jurisdictional defects. Therefore, this ground was rendered academic and not addressed substantively.

4. Disallowance of Brokerage Expenses:
Similar to the issue of long-term capital gains, the disallowance of brokerage expenses amounting to Rs. 65,000 was not specifically adjudicated due to the quashing of the entire reassessment proceedings on jurisdictional grounds.

5. Levy of Interest under Sections 234A and 234B:
The Tribunal did not specifically address the issue of interest levied under sections 234A and 234B, as the primary jurisdictional defect led to the quashing of the entire assessment order, rendering this issue academic.

6. Initiation of Penalty Proceedings:
The initiation of penalty proceedings under section 274 read with section 270A was not separately analyzed, as the reassessment proceedings were quashed, making this issue moot.

Conclusion:
The Tribunal allowed the appeal by the assessee, primarily on the jurisdictional ground that the notice under section 148 and the subsequent reassessment proceedings were invalid due to the lack of proper approval from the Specified Authority as required by the amended provisions of the Act. Consequently, the entire reassessment proceedings and the assessment order were quashed, and other grounds raised by the assessee were not addressed as they were rendered academic.