ITAT Raipur Quashes Reassessment Order for AY 2017-18 — Approval Under Section 151(ii) Obtained from Wrong Authority
Overview of the Case
The Income Tax Appellate Tribunal, Raipur, delivered a significant ruling in Manoj Rajput Vs DCIT-1(1) concerning the validity of reassessment proceedings initiated for Assessment Year 2017-18. The Tribunal allowed the assessee's appeal and quashed the assessment order dated 11.05.2023, which had been framed under Section 147 read with Section 144 and Section 144B of the Income Tax Act, 1961. The core finding was that the Assessing Officer had secured sanction from an authority who lacked the requisite jurisdiction under the amended Section 151 of the Act, thereby rendering the entire reassessment exercise jurisdictionally invalid.
The appeal had been filed against the order dated 04.10.2023 passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center, Delhi, which had upheld the additions made by the Assessing Officer.
Background: How the Reassessment Was Initiated
The Assessing Officer received credible information pointing to substantial credit entries totalling Rs. 66.10 lakh in the assessee's bank account during the previous year relevant to AY 2017-18. Since the assessee had not filed a return of income for that year, the Assessing Officer proceeded to initiate reassessment proceedings under Section 147 of the Income Tax Act, 1961.
A notice under Section 148 was served on the assessee on 26.04.2023. Following repeated reminders from the department, the assessee eventually filed a return of income in compliance with the said notice, declaring brokerage income of Rs. 12.51 lakh. The assessee further claimed that the remaining credit entries in the bank account were attributable to loans and advances received, and therefore did not represent undisclosed income.
The Assessing Officer was not persuaded by this explanation, primarily because no supporting documentation or evidence was furnished to substantiate the claimed source of the balance credits amounting to Rs. 53.59 lakh (i.e., Rs. 66.10 lakh minus Rs. 12.51 lakh). Consequently, the Assessing Officer treated this amount as unexplained investment, invoking Section 69 read with Section 115BBE of the Act, and determined the total assessed income at Rs. 66.10 lakh.
Proceedings Before the First Appellate Authority
The assessee approached the CIT(Appeals), NFAC, Delhi, challenging the additions. However, despite repeated opportunities afforded during the appellate proceedings — notices were issued on multiple occasions, with a final opportunity extended on 04.09.2023 — the assessee did not appear or file any submissions.
The CIT(Appeals), relying on the principle that filing an appeal does not merely mean lodging paperwork but requires active and effective participation, upheld the addition of Rs. 53.59 lakh and dismissed the appeal. The first appellate authority relied upon the decision in M/s Chhabra Land and Housing Ltd. (ITAT, Chandigarh), which had followed the Hon'ble Supreme Court's ruling in B.N. Bhattachargee, 118 ITR 461 (SC), underscoring that an appeal must be meaningfully pursued.
Assessee's Challenge Before the ITAT
Before the Tribunal, the assessee's Authorised Representative raised two fundamental jurisdictional objections against the validity of the reassessment: