2017 (2) TMI 997 - AT - Income Tax

Validity of reopening of assessment - sanction of ld. CIT was obtained instead of JCIT as provided u/s 151 - Held that - There was no new material before the AO for re-opening of the concluded assessment. The re-opening was made beyond the four year from the end of relevant assessment year. Moreover, there was no proper sanction from the competent authority for issue of notice as provided u/s 151 of the Act. Thus, in view of the above discussion, the re-opening of assessment u/s 147 is bad-in-law. - Decided in favour of assessee.

Summary

Issues:
1. Validity of re-opening proceedings under section 147 read with section 148 of the Income Tax Act, 1961.
2. Compliance with the provisions of section 151 for obtaining necessary permission for re-opening the assessment.

Issue 1 - Validity of re-opening proceedings:
The case involved two appeals by the assessee against the orders of the Commissioner of Income-Tax (Appeals) for Assessment Years 2004-05 and 2006-07. The primary contention was the validity of re-opening proceedings under section 147 read with section 148 of the Income Tax Act, 1961. The assessee argued that the notice issued under section 148 for the relevant assessment year was beyond the four-year period from the end of the relevant assessment year. The Assessing Officer (AO) had re-opened the assessment for AY 2004-05 during the assessment proceedings for AY 2008-09. The AO's reasons for re-opening the assessment were based on the cessation of the assessee's business activity in 1997. The AO disallowed certain expenses in the assessment order passed under section 143(3)/147 of the Act. The assessee contended that the re-opening was arbitrary and illegal, as there was no new material before the AO for re-opening the concluded assessment. The Tribunal held that the re-opening was beyond the prescribed time limit and lacked proper sanction from the competent authority, rendering it bad-in-law.

Issue 2 - Compliance with section 151 for obtaining necessary permission:
The second issue revolved around compliance with the provisions of section 151 for obtaining necessary permission to re-open the assessment. The assessee argued that the permission required under section 151 of the Act was not obtained from the Joint Commissioner as mandated. The Tribunal analyzed the procedural requirements under section 151(2) and emphasized that the satisfaction of the Joint Commissioner was essential for issuing a notice under section 148 after the expiry of four years from the end of the relevant assessment year. It was highlighted that the approval granted by the Commissioner of Income Tax did not fulfill the statutory requirement, as the satisfaction had to be of the Joint Commissioner specifically. Citing relevant case laws, the Tribunal concluded that the absence of proper sanction from the competent authority for issuing the notice rendered the re-opening of the assessment invalid.

In conclusion, the Tribunal allowed the appeals of the assessee for both AYs 2004-05 and 2006-07, holding the re-assessment orders passed under section 143(3) read with section 147 as invalid due to the procedural lapses in re-opening the assessments. The Tribunal's detailed analysis focused on the statutory compliance requirements and the lack of new material to justify the re-opening of the assessments, emphasizing the importance of adhering to procedural safeguards in income tax proceedings.