Wrong Sanction Under Section 151 Makes Reassessment Void Ab Initio

Bansal Industries Vs ITO (ITAT Delhi)

Wrong Sanction Kills Reopening Beyond 3 Years; Alleged Accommodation Entry Needs Verification: ITAT Delhi Grants Relief to Bansal Industries

Delhi  ITAT granted substantial relief to the Assessee by remanding the reassessment for AY 2015-16 for verification and quashing the reassessment for AY 2016-17 on jurisdictional grounds.

For AY 2015-16, the reassessment was initiated solely on the basis of an Investigation Wing report alleging receipt of accommodation entries of ₹38.75 lakh. The Assessee consistently contended that it had never entered into any transaction with the alleged entry operators and that no such credits appeared either in its bank account or books of account. Accepting this plea in principle, the Tribunal held that the issue requires factual verification. The matter was therefore restored to the AO with a clear direction that if no such accommodation entry is found in the bank statements or books, the addition must be deleted. The appeal for this year was allowed for statistical purposes.

For AY 2016-17, the Tribunal found a fatal jurisdictional defect. The notice u/s 148 dated 29-07-2022 was issued beyond three years from the end of the relevant AY, but the approval for reopening was obtained from the Principal Commissioner of Income Tax instead of the Principal Chief Commissioner of Income Tax, as mandatorily required u/s 151 after the Finance Act, 2021. Relying squarely on the Delhi High Court judgment in Twilight Infrastructure Pvt. Ltd. (463 ITR 702), the ITAT held that approval from an incompetent authority vitiates the entire reassessment. Consequently, the reassessment for AY 2016-17 was quashed as bad in law.

Accordingly, the appeal for AY 2015-16 was partly allowed for statistical purposes, and the appeal for AY 2016-17 was allowed in full, reaffirming that reopening beyond three years without sanction of the correct authority is void ab initio, and that reassessment cannot rest on unverified investigation reports alone.

FULL TEXT OF THE ORDER OF ITAT DELHI