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2014 (1) TMI 1312 - AT - Income TaxValidity of Re-assessment u/s 147/148 of the Act Sanction from Additional CIT not taken Violation of Section 151 of the Act - Deletion made u/s 68 of the Act Unexplained cash credits Commission paid from undisclosed sources Held that - The decision in CIT vs. Suman Waman Chaudhary 2008 (2) TMI 568 - BOMBAY HIGH COURT followed - The express requirement of Section 151 (2) is that of grant of sanction for issuance of a notice u/s 148 of the Act, by an Assessing Officer not below the rank of Joint Commissioner, where a period of more than four years has elapsed since the passing of an assessment order u/s 143 (1) of the Act the approval had not been accorded by the Addl. CIT, but had been sought for from the Commissioner, the action of the Tribunal in quashing the assessment proceedings was upheld by the Hon ble High Court, holding that this was not an irregularity curable u/s 292B of the Act thus, the issuance of the notice u/s 148 of the Act in the present case is a nullity, and the same is not curable u/s 292B of the Act the reassessment and all proceedings are quashed Decided in favour of Assessee.
Issues:
1. Validity of initiation of re-assessment proceedings. 2. Compliance with Section 151 of the Income Tax Act for issuance of notice u/s 148. 3. Justification of notice u/s 148 based on reasons recorded by the Assessing Officer. Analysis: Issue 1: Validity of initiation of re-assessment proceedings The Department's appeal and the assessee's Cross Objections for Assessment Year 2001-02 were against an order passed by the CIT (A)-V, New Delhi. The Department contended that the Ld. CIT (A) erred in deleting additions made by the Assessing Officer under section 68 of the Act on account of unexplained cash credits and commission paid from undisclosed sources. The Department relied on information from the Investigation Wing regarding bogus entries received by the Assessee Company. The Department argued that the facts of the case were different from precedents cited by the CIT (A). Issue 2: Compliance with Section 151 for notice u/s 148 The Assessing Officer issued a notice u/s 148 of the IT Act based on information received from the Directorate of Investigation. The assessee contended that the notice was issued without obtaining sanction from the Addl. CIT, as required under Section 151(2) of the Act. The assessee cited legal precedents to support the argument that the notice was issued in a mechanical manner without proper verification of the information received. The Tribunal found that the notice was issued without the required sanction, rendering it a nullity. Issue 3: Justification of notice u/s 148 The Assessing Officer's reasons for reopening the assessment were challenged by the assessee, arguing that the notice was based on borrowed satisfaction from the Investigation Wing, rather than the Assessing Officer's independent satisfaction. The assessee contended that the reasons recorded were only based on suspicion, not belief, as required by Section 147 of the Act. Legal precedents were cited to support the argument that the notice lacked justification based on the Assessing Officer's reasons alone. In conclusion, the Tribunal found in favor of the assessee, quashing the reassessment proceedings due to the absence of sanction required under Section 151 for issuing the notice u/s 148. The Tribunal held that the notice issued without proper sanction was a nullity and not curable under the Act. The Cross Objection of the assessee was allowed, while the appeal of the department was dismissed.
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