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Facts
The AO made additions for income under section 56(2)(vii) due to a difference in property value and for unexplained investment under section 69. The CIT(A) upheld these additions. The assessee challenged the reopening of assessment, arguing the notice under section 148A(b) was issued beyond the time limit.
Held
The Tribunal held that the approval for reopening the assessment was not obtained from the competent authority as required by law, making the reopening proceedings invalid. Additionally, the notice under section 148 was found to be issued beyond the limitation period.
Key Issues
Whether the reassessment proceedings are invalid due to lack of approval from a competent authority and issuance of notice under section 148 beyond the limitation period.
Sections Cited
56(2)(vii), 69, 148A(b), 148, 149(1)(a), 147, 149(2)
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Income Tax Appellate Tribunal, Mumbai “H(SMC
Before: Shri Rahul Chaudhary (JM) & Shri Omkareshwar Chidara (AM)
In the above cited appeal, the Ld. AO has added an amount of Rs. 1.08 crore for the income returned by appellant under section 56(2)(vii) of the Income Tax Act because there is a difference in the value of property shown in the document as purchase value and the value determined by State Government. The second addition relates to unexplained investment under section 69 of the Act. The Ld. CIT(A) upheld the additions made by Ld. AO for the reasons mentioned in his order.
Aggrieved by the orders of Ld. AO and Ld. CIT(A), an appeal was filed by appellant before ITAT challenging the reopening the assessment by issuing a notice under section 148A(b) of the Act. The appellant challenged this show-cause notice, order under section 148A(d) dated 26.7.2022, notice of escapement of income under section 148 dated 26.7.2022 and reassessment proceedings alongwith reassessment order under section 147 of the Act by stating that the same are bad in law and invalid. Subsequently,
2 Bhavesh Jayanti Sondarwa an additional ground was taken by appellant that the notice under section 148 dated 26.7.2022 was issued beyond the time limit prescribed under section 149(1)(a) of three years as the alleged escaped income was less than Rs. 50 lakh, being 1/3rd of the proposed addition of Rs. 1.05 crore.
The Ld. AR of the appellant has filed detailed written submission and also in which reliance was placed on the decision of Rajiv Bansal of Hon'ble Supreme Court (469 ITR 46). In this case, Hon'ble Supreme Court has given a table which clearly shows who is the competent authority to give approval to reopen the assessment depending on the time limits. After the expiry of three years the competent authority to issue approval is Chief Commissioner of Income Tax/Principal Chief Commissioner of Income Tax, whereas in this case the L. AO took approval from Principal Commissioner of Income Tax. Hence, the notice issued dated 26.7.2022 after sanction of Principal Commissioner of Income Tax is bad in law.
The second ground taken by Ld. AR of appellant is that the notice issued by Ld. AO under section 148 dated 26.7.2022 is late by 34 days.
The Ld. DR relied on the orders of Ld. AO/Ld. CIT(A).
Heard both sides. Before going to adjudicate issue on merits, it is observed that the appellant filed this appeal with a delay of 148 days. The Ld. AR filed an affidavit signed by appellant explaining the reasons for delay. After going through this affidavit, the Bench finds that the explanation given by appellant is bonafide and hence the delay is condoned and proceeded to adjudicate the matter on merits. The Bench finds that there is merit in the argument of Ld. AR of the appellant because Hon'ble Supreme Court in the case of Rajeev Bansal (supra) has held that if the period crosses three years, the approval should be taken Chief Commissioner of Income Tax/Principal Chief Commissioner of Income Tax, whereas in the impugned case, the Ld. AO obtained approval from Ld. Principal Commissioner of Income Tax who is 3 Bhavesh Jayanti Sondarwa not the competent authority to accord the approval to reopen the assessment. Hence, the reopening proceedings are invalid.
The second argument that the notice issued under section 148 by the Ld. AO is also barred by limitation, is also correct. The due date to issue notice under section 148 of the Act after adding grace period of seven days as per VI proviso to amended section 149(2) is 22.6.2022, whereas the Ld. AO issued notice on 26.7.2022 and hence there is delay of 34 days to pass the order under section 148A(d) and issue notice under section 148 of the Act. Hence, the entire reassessment proceedings are invalid. Since the approval was not taken from competent authority, the whole proceedings to reopen the assessment and consequent additions in assessment does not have legs to stand.
In view of the above, the reassessment proceedings are held invalid and consequently the additions made are deleted.
The appeal of appellant is allowed.
Order pronounced in the open Court on 25/09/2025.