Reassessment on wrong presumption that assessee not have PAN and non filer void

Reassessment on the wrong presumption that assessee not have PAN and is a non return filer held void ab initio as basic premise on which initiated has no legs to stand – ITAT

ABCAUS Neutral Case Law Citation:
ABCAUS 3688 (2023) (03) ITAT

Important Case Laws relied upon by parties:
National Thermal Power Corporation 229 ITR 383 (SC)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the reassessment made u/s 147 of the the Income Tax Act, 1961 (the Act).

The Assessing Officer (AO) received AIR/CIB information that the assessee had sold an immovable  property. The AO in reasons recorded stated that in the absence of PAN, information regarding filing of return for the relevant Assessment Year was not available, capital gain arising on sale of said property had escaped assessment within the meaning of section 147 of the Act.

Before the Tribunal, the assessee requested to admit the additional ground inter alia that the impugned reopening action u/s 148 made on the basis of incorrect /erroneous /non existing basis that assessee do not have PAN and is a non return filer.

Before the ITAT the assessee contended that as per copy of the reasons recorded by the Assessing Officer, the AO noted that in absence of PAN, information regarding filing of return for relevant Assessment Year was not available and hence reached the conclusion that no capital gain had been declared by the  assessee on the sale of immovable property.

The assessee submitted that he did file return of income and declared the capital gain income accrued on account of sale of  property. Therefore, the AO had proceeded to initiate  reassessment proceedings u/s 147 of the Act on basis of incorrect and wrong facts therefore only on this ground  initiation of reassessment proceedings and all consequent orders deserves to be quashed.  

It was also submitted that the approval u/s 151 of the Act was given by the PCIT in a mechanical manner without application of mind by putting a seal in relevant para of approval u/s. 151 of the Act.

The Tribunal from the copy of the ITR observed that the return of income was filed by the assessee within prescribed time limit and as per computation of income the assessee offered long term capital gain income for taxation and also paid due taxes etc. thereon.

The Tribunal opined that the basic premise on which the AO  initiated reassessment proceedings had no legs to stand therefore the same was found to be void ab initio being bad in law.

Further, the ITAT observed that the PCIT has put a seal above his signature which states “yes, I am satisfied that it is a fit case to issue notice u/s. 148 of the I.T. Act 1961”.

The Tribunal opined that the requirement of approval u/s 151 of the Act is not a formal ritual but it is mandatory legislative requirement which has to be done after due application of mind to the material gathered by the AO and reasons recorded by him. The Tribunal stated that merely putting a seal as approving statement is not sufficient and make it clear that the approving authority granted approval in a mechanical manner without application of mind. Therefore, the initiation of reassessment proceedings also fails on this count, the ITAT opined.

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