The Delhi bench of the Income Tax Appellate Tribunal (ITAT) granted partial approval to the appeal made under Section 147 & 148 of the Income Tax Act, 1961. The basis for this decision was that the Assessing Officer (AO) had initiated assessment proceedings and issued a notice without adequate satisfaction and jurisdiction.
The assessee, Agasthya Auto Products LLP, a Limited Liability Partnership firm raised the appeal on the grounds that the order passed by the Commissioner of Income Tax was bad, both in the eye of law and on the facts and the initiation of the proceedings under Section 147, read with Section 148, made by Assessing Officer (AO) was bad and liable to be quashed
The counsel of the assessee submitted that on the facts and circumstances of the case the initiation of proceedings under Section 147 read with Section 148 of the Income Tax Act, 1961 made by the AO was bad in law and liable to be quashed as the condition and procedure prescribed under the statue have not been satisfied and complied with by the AO.
However, after paying attention towards copy of the reasons recorded by the AO, the tribunal found the AO property followed and analyzed the material received from the Investigation Wing and thereafter have valid reasons to believe that income has escaped assessment for the relevant period therefore, the legal ground may kindly be dismissed
The counsel further submitted that the AO has erred in initiating the reopening of assessment under section 147 of the Act without obtaining valid approval from the competent authority as per mandatory requirement under Section 151 of the Income Tax Act therefore, the reassessment proceedings and impugned reassessment order also deserved to be quashed only on this count.
However, after paying attention, the tribunal found that the AO applied his mind and thereafter mentioned detailed reasons for granting approval, showing application of mind and thereafter having satisfaction on the reasons recorded by the AO that it was a fit case for issue notice under section 148 of the Act, therefore, the legal ground may kindly be dismissed.
The tribunal after careful consideration was of the considered view that thePCIT gave his approval under Section 151 of the Income Tax Act wherein, he gave a detailed basis based on the exercise undertaken by him, before granting approval under section 151 of the Income Tax Act.
The tribunal found no discrepancies that could indicate a lack of due consideration by the PCIT (Principal Commissioner of Income Tax) while granting approval under section 151 of the Income Tax Act. As a result, the tribunal concluded that the assessee has no grounds to rely on within the legal framework of tax jurisprudence
The bench comprising of C.M. Garg (Judicial Member) observed that the AO drew a conclusion that the information remains unexplained and hence it was undisclosed income of the assessee for the year under consideration. Thereafter, the AO directly jumped to conclusion that he has reason to believe that the assessee’s undisclosed income for AY 2011-12 has escaped assessment within the meaning of section 147 of the Income Tax Act therefore, it is fit case for initiation of notice under section 148 of the Act.
Based on this observation, the tribunal issued an order to nullify the challenged proceedings conducted under Section 147 of the Income Tax Act, the notice issued under section 148 of the Act, and the reassessment order dated 31.12.2018 for Assessment Year 2011-12.
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