Reopening Invalid Due to Mismatch in Sanctioning Authorities and Lack of Proper Sanction u/s 151: ITAT quashes order [Read Order]

The Kolkata Bench of the Income Tax AppellateTribunal (ITAT) quashed a reassessment order due to the mismatch in sanctioning authorities and lack of proper approval required under Section 151 of theIncome Tax Act.

Trinity Enclave Pvt. Ltd. (assessee) filed its return for Assessment Year 2017-18 declaring a total income of ₹17,640. The case was subsequently selected for reopening under Section 147 based on information regarding cash deposits made during the demonetization period.

During the assessment, the Assessing Officer (AO) noted that the assessee had deposited ₹12,20,000 into a corporation bank account between November 9, 2016, and December 31, 2016.

The AO observed that the assessee had not made any significant cash withdrawals prior to the demonetization period and concluded that the deposits represented unaccounted income. The AO finalized the assessment by treating the entire deposit of ₹12,20,000 as escaped income, following the issuance of a notice under Section 148 on March 31, 2021.

Aggrieved by the assessment, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal. Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT.

The assessee argued that the notice issued under Section 148 was invalid due to a lack of valid approval under Section 151 of the Income Tax Act. The assessee pointed out that while the Section 148 notice claimed satisfaction was obtained from the "Range-4, Kolkata," the internal "reasons to believe" recorded that approval was received from the "CCIT-2, Kolkata."

The Single Member Bench comprising Rajesh Kumar (Accountant Member) observed that having two different sanctioning authorities mentioned for the same approval demonstrates a total non-application of mind.

The tribunal further noted that the NationalFaceless Assessment Centre (NFAC) had issued a show-cause notice on March 15, 2022, despite not having jurisdiction prior to the notification of the e-assessment scheme on March 29, 2022.

The Bench held that the assessment framed by the AO on March 30, 2022, was also invalid as the preceding proceedings were conducted without proper jurisdiction. It concluded that the jurisdictional defect regarding the Section 151 sanction was fatal to the Revenue's case.

The orders of the lower authorities were set aside and the notice issued under Section 148 was quashed along with the consequent assessment. The appeal of the assessee was allowed.

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