The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) quashed the income tax assessment order due to a lack of higher authority approval under Section 151 of the Income Tax Act, 1961 for the reopening beyond three years.
Sunil Harischandra Keni, the assessee filed a return declaring an income of Rs. 16,42,210 for the Assessment Year 2017-18. During the year, the assessee purchased a property worth Rs. 70 lakhs. However, the stamp duty value of the property was Rs. 1,69,12,500.
The Income Tax Department deemed the difference taxable under Section 56(2)(vii)(b) of the Income Tax Act, classifying it as “Income from other sources.” Based on the belief that income had escaped assessment due to the undervaluation, the department reopened the assessment under Section 148 of the Income Tax Act, 1961.
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A notice under Section 148 was issued to the assessee. The assessment order was passed adding the difference of Rs. 92,12,500 to the assessee’s total income as “Income from other sources.”
The assessee contested this addition before the Commissioner of Income Tax (Appeals) [CIT(A)] arguing that the sanction for reopening was obtained under Section 151(i) but since more than three years had passed, it should have been done under Section 151(ii).
The assessee’s counsel relied on the assessee’s own case ruling by the Bombay High Court which had quashed the reassessment due to the improper sanction. The Commissioner of Income Tax (Appeals) [CIT(A)] agreed with the assessee and deleted the addition of Rs. 92,12,500.
Aggrieved, revenue appealed this decision before ITAT arguing that the reopening of the case was justified as there was reason to believe that income had escaped assessment.
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The two-member bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) examined the order of the Bombay High Court in the case of assessee issued in W.P. (L) No. 15147 of 2024 on 6th May 2024.
Given that the Bombay High Court had already ruled in favor of the assessee on this issue, the ITAT found no reason to interfere with the earlier decision made by CIT(A), which had followed the High Court’s ruling.
Therefore, the ITAT upheld the decision of the CIT(A) and dismissed the revenue’s appeal.
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