Reassessment Initiated on Incorrect Jurisdiction and Mechanical Approval: ITAT quashes Proceedings [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal(ITAT) quashed the reassessment proceedings initiated under Section 147, citing incorrect jurisdiction and mechanical approval under Section 151 of Income Tax Act,1961.

Nikita Mahajan,appellant-assessee,challenged the jurisdiction under Section 147 of the Act and the additions made by the Assessing Officer (AO) on Long Term Capital Gain (LTCG) from share sales.

The assessee's counsel argued that the AO wrongly assumed jurisdiction under Section 147 of the Act, claiming no income tax return (ITR) was filed for AY 2016-17. However, the AO’s own order confirmed that the return was filed on August 2, 2016, declaring an income of ₹6,40,160. The counsel pointed out that the assessee had also filed returns in previous years, making the AO's assumption factually incorrect.

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On merits, the counsel stated that the share transactions were made through banking channels and the resulting capital gains were exempt from tax. Therefore, the AO’s claim of income escapement was baseless.

The counsel highlighted that the Additional Commissioner of Income Tax(CIT)’s approval for reopening the assessment was mechanical, with a generic remark stating it was a fit case for reassessment. The counsel argued that such blanket approval lacked proper application of mind, making it invalid.

To support the claims, the counsel referred to judgments from the Bombay High Court and the ITAT, which held that reassessments based on incorrect facts or mechanical approvals were unsustainable.

The counsel concluded that the reassessment was invalid due to the incorrect assumption of no return filing and the lack of proper sanction.

The two member bench comprising Sudhir Kumar(Judicial Member) and Pradip Kumar Kedia(Accountant Member) examined the contentions regarding the jurisdiction assumed under Section 147 of the Act. The AO issued the notice under Section 148, claiming the assessee had not filed an ITR for AY 2016-17. However, the assessee demonstrated that the ITR was filed on August 2, 2016, declaring an income of ₹6,40,160. The tribunal noted that the AO’s own assessment order confirmed this filing, making the claim of no return factually incorrect.

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The appellate tribunal held that the entire basis for reopening the assessment was flawed, as it relied on a false assumption. Citing previous judgments, it concluded that reopening assessments based on incorrect facts was invalid and required quashing.

The ITAT also found that the Additional CIT granted approval for reassessment mechanically, without proper application of mind. The approval contained only a generic statement, making it a mere formality rather than a reasoned sanction. Referring to previous tribunal and High Court rulings, the bench held that such mechanical approval rendered the reassessment invalid.

The tribunal found the reassessment order under Section 147 invalid due to incorrect facts and mechanical approval under Section 151. It set aside the proceedings, ruling that the AO lacked proper jurisdiction.

In short,the appeal filed by the assessee was allowed.

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