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Facts
The appellant's assessment was reopened beyond the three-year period without obtaining the necessary approval from the Principal Chief Commissioner of Income Tax. The reopening notice was issued by the AO based on a restriction of the s.54 exemption claim to 50% due to joint property purchase, citing non-submission of documents for reassessment.
Held
The Tribunal held that the reopening of assessment was invalid as the required approval from the Principal Chief Commissioner of Income Tax was not obtained after the three-year period had elapsed. The assessment order was consequently quashed.
Key Issues
Whether the reopening of assessment beyond three years was valid without the approval of the Principal Chief Commissioner of Income Tax as required under Section 151(ii) of the Act.
Sections Cited
147, 148, 151, 50C, 54, 148A, 144, 250
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Income Tax Appellate Tribunal, Mumbai “SMC” Bench, Mumbai.
Before: Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
On facts and in circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), National Faceless Appeals Centre [hereinafter referred to as the learned CIT(A)1 erred in passing the Order u/s. 250 of the Income-tax Act, 1961 (the Act) without appreciating the provisions of law, facts, submissions, documents and case laws. The Appellant prays that the entire assessment be treated as bad in law. The Appellant prays that the entire assessment be treated as bad in law. Validity of Reopening of assessment 2. The learned CIT(A) erred in law while upholding the reassessment u/s. 147 of the Act without following proper guidelines, procedures and directives required by the Act, Rules, Circulars, Notifications and other statutory schemes, etc. The Appellant prays that the entire proceedings be held as bad in law and deleted in toto. 3. The learned CIT(A) erred in law in sustaining the assessment without realising the fact that there is no addition made in respect of any reason recorded for reopening the said assessment. The Appellant prays that the actions of the AO be held as bad in law and entire assessment proceeding be held as void ab initio.
2 Rekha Chandrakant Padalkar 4. The learned CIT(A) erred in sustaining the reopening of the assessment merely on the basis of audit objections and without verifying the information readily available in the Return of Income. The Appellant prays that the entire proceedings be held as bad in law and totally quashed.
5. The CIT(A) erred in upholding the assessment carried out based on the Notice u/s. 148 of the Act issued without proper approval and procedure and was therefore invalid. The Appellant prays that the entire proceedings be held as invalid and deleted in toto.
Denial of opportunity to be heard 6. The learned CIT(A) erred in dismissing the appeal without considering the request for additional time submitted by the Appellant on medical grounds and denying the opportunity to present her case with relevant documents. The Appellant prays that the Order passed he held as invalid and deleted in toto.
Cost of Acquisition of Rs.586,677 7. The learned CIT(A) erred in upholding the restricting of the indexed cost of acquisition without any basis to an arbitrary amount of Rs,500,000. The Appellant prays that the entire indexed cost of acquisition be allowed to the Appellant.
Exemption u/s. 54 8. The learned CIT(A) erred in upholding that merely because property is purchased in joint name by the Appellant, the amount eligible for exemption u/s. 54 of the Act will be limited to the 50% of the cost of acquisition instead of amount invested. The Appellant prays that the entire amount invested be allowed as exemption u/s. 54 of the Act.”
From the assessment order passed by the Ld. AO, it is noticed that the assessment was reopened after passing the order u/s. 148A(d) of the I. T. Act with the reasoning that capital gains were not computed by considering stamp duty valuation as per provisions of section 50C of the Act. During the assessment proceedings, the appellant has not filed required documents like agreement for purchase of property and bank statements showing payment made for purchase of property. Hence, the Ld. AO passed an order u/s. 147 r.w.s. 144 of the Act by restricting the claim of appellant u/s. 54 of the Act to 50% as the property was purchased jointly with her son.
3 Rekha Chandrakant Padalkar 3. Aggrieved by the restriction to 50% of exemption u/s. 54 of the Act, the appellant filed an appeal before the Ld. CIT(A). The first appellate authority, Ld. CIT(A), dismissed the appeal of the appellant as the required documents were not filed and the adjournment request was not acceded to.
Then, the appellant came with an appeal before the ITAT with the grounds of appeal mentioned in page No. 1 of this order. During the appeal proceedings before the ITAT, the appellant has challenged the reopening of the assessment as the same is barred by limitation and pleaded that the notice u/s. 147 is bad in law. The Ld. AR of the appellant has filed a paper book during the appeal proceedings in which the reopening of the assessment was assailed alongwith merits relating to restricting the exemption u/s. 54 of the Act. The first argument of Ld. AR of the appellant is that the notice of reopening is barred by limitation. The assessment year involved is A.Y. 2017-18 and notice u/s. 148 of the Act was issued on 21.7.2022 by the Ld. AO. It was mentioned that if the notice of reopening is issued after three years, then approval is to be taken from Principal Chief Commissioner of Income Tax. In the impugned case, the A.Y. involved is A.Y. 2017-18 and reopening notice was issued on 21.7.2022 which is beyond the three years. The period of three years exceeded but the Ld. AO has taken approval of Principal Commissioner of Income Tax and not the approval of PCCIT. The sanctioning authority to give approval beyond three years is Principal Chief Commissioner of Income Tax u/s. 151(ii) of the Act for the assessment year under consideration. In view of the improper approval, it was argued that the assessment order passed by Ld. AO is void ab intio and bad in law. The Ld. AR of appellant relied on the decision of Hon'ble Supreme Court in the case of Union of India Vs. Rajeev Bansal and other (340 CTR 865) (SC).
The Ld. DR relied on the orders of the lower authorities.
4 Rekha Chandrakant Padalkar 6. After hearing both sides, it is decided that the issue is now squarely covered by the decision of Hon'ble Supreme Court in the case of Rajeev Bansal and others (supra), which is followed by the Coordinate Bench of the ITAT, Mumbai in the case of Manish Financial (ITA No. 5055/Mum/2024). In this case, it was held that the sanctioning authority to accord approval for reopening the case is, before three years power is vested with Principal Commissioner of Income Tax and after three years, approval is to be accorded by the Principal Chief Commissioner of Income Tax. The assessment order passed by the Ld. AO is invalid in the eyes of law and quashed in the impugned case as the approval is taken from the Principal Commissioner of Income Tax before reopening the case, whereas approval ought to have been taken from the Principal Chief Commissioner of Income Tax as the period of three years elapsed from the end of relevant assessment year. As the assessment order is quashed on the ground of reopening the case, the arguments/grounds relating to merits of the case are not adjudicated and appellant’s appeal is allowed.