ITAT Dismisses Income Tax Dept Appeal for Lack of Valid Approval in Reassessment Proceedings [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an appeal filed by the Income Tax Department (ITD) against an order of the Commissioner of Income Tax (Appeals) (CIT(A)) quashing reassessment proceedings initiated against an assessee as it was not in accordance with the mandatory requirement of Section 151 of the Income Tax Act, 1961. 

The assessee, M/s Soumya Tradecom Pvt. Ltd filed its income return for A.Y. 2011-12 on 31.07.2012. On 28.02.2019, the Assessing Officer reopened the assessment, adding Rs. 4,97,14,844/- for share application money and share capital. 

The assessee challenged the reassessment order in an appeal before the Commissioner of Income Tax (Appeals), which allowed the appeal and quashed the order. The revenue challenged the order before the Tribunal.

The assessee argued that the reassessment order was invalid due to the approving authority’s failure to record proper satisfaction and grant approval without application of mind. They also argued that the AO did not make specific allegations of income concealment or tax evasion. The reassessment order was issued after over six years, exceeding the limitation period under Section 148 of the Act.

The revenue argued that the reassessment order was valid due to Section 151 of the Act’s approval. They also argued that the AO made specific allegations of income concealment or tax evasion. They also argued that the delay in issuing the order was justified as the AO needed to gather more information.

In the case of CIT vs. S. Goyanka Lime & Chem. Ltd., the Supreme Court in 2011 held that the reassessment order must be issued within the period of limitation prescribed under Section 148 of the Act.

The Two member bench comprising Chandra Mohan Garg (Judicial Member) and M. Balaganesh (Accountant Member) dismissed the appeal of the revenue and upheld the order of the CIT(A) and found that the approving authority had not recorded proper satisfaction and had granted approval without application of mind in a mechanical manner. This was not in accordance with the mandatory requirement of Section 151 of the Act.

The Tribunal mandates that the approving authority must confirm the case’s suitability for reopening, alleging income concealment or tax evasion, and issue the reassessment order within the prescribed time frame under Section 148 of the Act.

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