Reopening of Assessment after 4 Year with Approval of Joint Commissioner is Invalid: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the reopening of assessment after 4 years with the approval of joint commissioner was invalid.

Assessee, Maiden Marketing India Private Limited filed return of income declaring loss. The assessment under Section 143(3) of the Income Tax Act was finalised by determining the total income under Section 115JB of the Income Tax Act. Subsequently, the case of the assessee was reopened under Section 147 of the Income Tax Act by issuing of notice under Section 148 of the Income Act on the ground that the expenses debited towards increase in share capital amounting was capital expenditure and same could not be allowed as revenue expenditure.

The assessment under Section 147 read with Section 144B of the Income Tax Act was finalised adding expenses for increase in share capital by treating as capital expenditure. The AO had also added the share capital and share premium received during the financial year 2014-15.

In respect of increase in the share capital and share premium received by the assessee company from its related group company the assessing officer was of the view that 99.99% of share of the assessee company was held by its holding company namely Maiden Marketing Pte. Ltd., Singapore and being a related company, it could easily manipulate transactions.

Himanshu Gandhi on behalf of the assessee submitted that approval under Section 151 of the Income tax Act in the case of the assessee for reopening assessment was provided by the Joint Commissioner of Income Tax, which was not valid as the case of the assessee company was reopened after 4 years for which the approval of Commissioner of Income Tax was required as provided under section 151 of the Income Tax Act.

Mahita Nair appeared on behalf of the revenue. 

The two-member Bench of Amit Shukla, (Judicial Member) and Amarjit Singh, (Accountant Member) allowed the cross objection of the assessee dismissing the appeal filed by the revenue referring to the decision in Voltas Ltd. Vs. ACIT that as per provisions of Section 151(1) of the Income Tax Act sanction of Commissioner or Principal Commissioner was a prerequisite for issuance of a reopening notice under Section 148 of the Income Tax after expiry of four years was liable to be seaside.

The Bench further held that as in the case of the assessee four years had expired from the end of relevant assessment year as provided under Section 151(1) of the Income Tax Act, only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner could have accorded the sanction not the Joint Commissioner of Income Tax.

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