JCIT Vs Sharmanji Yarns Pvt. Ltd. (ITAT Chandigarh)
Reopening Quashed: ITAT Holds Notice Invalid for Violation of Sec.151A & Wrong Sanction—58.68 Cr Bogus Purchase Addition Collapses
These cross-appeals arose from reassessment proceedings where the AO made a massive addition of Rs. 58.68 crore treating purchases from eight parties as bogus. CIT(A) restricted the addition to 9% estimation, resulting in appeals by both Revenue & Assessee.
At the threshold, Assessee raised two pure legal grounds:
(1) Notice u/s 148 issued by wrong authority (JAO instead of FAO)
The notice dated 30.03.2023 was issued by Jurisdictional AO, whereas Sec.151A & CBDT Notification 18/2022 (29.03.2022) mandate that all notices u/s 148 must be issued only by the Faceless AO (FAO). Relying on the binding judgment of P&H High Court in Jatinder Singh Bhangu (165 Taxmann.com 115) & the later decision in Om Satya Overseas (178 Taxmann.com 137), Tribunal held that issuance of notice by JAO vitiates the entire reassessment.
(2) Reopening beyond 3 years without sanction of specified authority
For AY 2016-17, the reopening on 30.03.2023 was clearly beyond 3 years, requiring sanction under Sec.151(ii) from the Principal Chief Commissioner (Pr.CCIT). However, AO had wrongly obtained approval from PCIT-1, Ludhiana, which is not the competent authority for cases falling beyond 3 years. Based on Bombay HC rulings (Chitra Supekar, Gigantic Mercantile), & Delhi HC rulings (Twylight Infrastructure, Ashok Kumar Makhija), Tribunal held the approval invalid, rendering notice void-ab-initio.
