2019 (11) TMI 1184 - AT - Income Tax

Reopening of assessment - approval to the reopening of assessment in a mechanical manner - HELD THAT - In the present case the approving authority has given approval to the reopening of assessment in a mechanical manner without due application of mind by mentioning only Yes, I am satisfied that it is a fit case for issue of Notice u/s. 148 in Column No. 12 of the Format for Recording the Reasons for Initiating Proceedings u/s. 147 and For obtaining the Approval of the Addl./JCIT Commissioner of Income Tax and therefore, the legal issue in dispute is squarely covered by the aforesaid finding of the Tribunal, hence, respectfully following case of Krishna Print Pack, Meerut vs. ITO, Ward 1(3), Meerut 2019 (10) TMI 843 - ITAT DELHI relevant to assessment year 2009-10, the reassessment is hereby quashed and accordingly the legal ground of assessee is allowed.

Issues Involved:
1. Validity of the reopening of the assessment under Section 147/148 of the Income Tax Act.
2. Validity of the notice issued under Section 148.
3. Confirmation of the addition of ?48,14,839 as long-term capital gains.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment under Section 147/148:
The Assessee challenged the reopening of the assessment on several grounds, including the lack of communication of reasons to believe and the absence of coherence between the reopening grounds and the final assessment. The Assessee argued that the reopening was based on property sale information which did not provide valid reasons to believe that income had escaped assessment. Furthermore, the Assessee claimed that the notice issued under Section 148 was void ab initio and lacked jurisdiction and authority of law.

The Tribunal examined the approval process for reopening the assessment and found that the Joint Commissioner of Income Tax (JCIT) had granted approval in a mechanical manner without proper application of mind. The JCIT merely endorsed the approval with the statement, "Yes, I am satisfied that it is a fit case for issue of Notice u/s. 148," which indicated a lack of proper satisfaction and due diligence. This mechanical approval rendered the reassessment unsustainable in the eyes of the law.

2. Validity of the Notice Issued under Section 148:
The Tribunal referred to a precedent set by the ITAT, SMC, Bench, New Delhi in the case of Krishna Print Pack, Meerut vs. ITO, Ward 1(3), Meerut, where a similar issue was adjudicated. In that case, the reopening of the assessment was quashed due to the mechanical manner in which the JCIT had granted approval. The Tribunal found that in the present case, the approving authority had similarly failed to apply its mind properly, leading to the conclusion that the reassessment proceedings were invalid.

3. Confirmation of the Addition of ?48,14,839 as Long-Term Capital Gains:
Given that the Tribunal quashed the reassessment proceedings on legal grounds, it did not adjudicate the merits of the addition of ?48,14,839 as long-term capital gains. The Assessee had argued that the amount received was by way of inheritance and exempt from taxation under Section 56, and that the addition made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] was based on hypothetical assumptions. However, since the reassessment itself was deemed invalid, the Tribunal found it unnecessary to address this issue.

Conclusion:
The Tribunal allowed the Assessee's appeal, quashing the reassessment proceedings due to the invalid and mechanical approval process by the JCIT. Consequently, the legal ground challenging the validity of the reassessment was upheld, and the appeal filed by the Assessee was allowed. The Tribunal did not address the merits of the addition of ?48,14,839 as long-term capital gains, considering it academic in nature following the quashing of the reassessment.

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