Recognizing the AO’s mistake in getting the approval, ITAT quashed the reassessment proceedings

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) quashed reassessment proceedings because the approval was wrongly obtained from the Principal Commissioner of Income Tax ( PCIT ) instead of the Principal Chief Commissioner of Income Tax ( PCCIT ) or Director General of Income Tax ( DGIT ). The ITAT ruled that reassessment cannot proceed after three years without approval from the higher-level authorities. The assessee, Arihant Engineers, a firm based in Mumbai. For the assessment year 2018-19, the assessee had not filed its income tax return but made high-value transactions which led to a reassessment under Section 147 of the Income Tax Act, 1961. Get a Complete Kit of Essential Books for Daily Practice, Click Here In April 2022, a notice was issued to the assessee under Section 148, intimating the initiation of reassessment proceedings. The assessee submitted a response to the notice but the Jurisdictional Assessing Officer rejected the submission and found discrepancies in the reported land purchase cost and failure to provide a sale agreement and proof of brokerage expenses. The JAO determined that Rs. 65 lakh had escaped assessment and issued a notice under section 148 of the Income Tax Act, adding Rs. 22,92,130 in long-term capital gains to the assessee’s income for reassessment. Get a Complete Kit of Essential Books for Daily Practice, Click Here The assessee challenged the order before the Mumbai bench of ITAT arguing that the reassessment notice under Section 148, issued on 22-04-2022 was invalid. The assessee’s counsel pointed out that if more than three years have passed since the end of the relevant assessment year, the approval should have been obtained from the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General, not the Principal CIT as per Section 151(ii) of the Income Tax Act. The two-member bench comprising Prashant Maharishi ( Accountant Member ) and Sandeep Singh Karhail ( Judicial Member ) observed that the reassessment proceedings were initiated in contravention of the law, as the reassessment notice was not approved by the correct authority. The tribunal relied on the decision from the case of Siemens Financial Services (P.) Ltd. v/s DCIT, where similar issues regarding the approval authority were raised, and the reassessment proceedings were found invalid. Get a Complete Kit of Essential Books for Daily Practice, Click Here Therefore, the tribunal quashed the notice issued under Section 148 of the Income Tax Act and the subsequent reassessment proceedings. The entire reassessment order under Section 147 was declared void ab initio and set aside. The appeal of the assessee was allowed.