ITAT Sets Aside Rs 3.47 Crore Addition, Reopening Beyond 4 Years Without PCIT Approval Is Legally Invalid:

The ITAT Kolkata has quashed the entire reassessment proceedings against Rimjhim Properties Pvt. Ltd. for Assessment Year (AY) 2011-12, holding that the reopening was invalid due to improper approval under Section 151 of the Income Tax Act, 1961.

The case was reopened based on information received from the Investigation Wing regarding a profit of Rs 2.23 lakh and transactions of Rs 19.67 lakh on the National Multi-Commodity Exchange (NMCE). Since the reopening took place more than four years after the end of the relevant assessment year, the required approval had to be obtained from the Principal Commissioner or Commissioner of Income Tax (PCIT). However, the approval was obtained from the Additional Commissioner of Income Tax (ACIT), Range-17, Kolkata. The ITAT held that such approval was invalid, making the Section 148 notice and subsequent reassessment order legally unsustainable.

The Tribunal also noted that the Assessing Officer (AO) did not make any addition concerning the income for which the reassessment was originally initiated. Instead, the AO added Rs 3.47 crore relating to speculation loss from commodity trading. Relying on the decision of the Calcutta High Court in Infinity Infotech Parks Ltd. and other judicial precedents, the Income Tax Appellate Tribunal (ITAT) held that when the income forming the basis of reopening is not assessed, the AO cannot independently assess another income discovered during reassessment proceedings.

It was noted by the tribunal that "said speculation loss was carry forward to the subsequent yeaRs Therefore, the AO has wrongly noted in the assessment order in para 9 that the assessee has wrongly adjusted loss from commodity trading to the loss of Rs3,47,08,982/-. In the appellate proceedings, the ld. CIT(A) confirmed the addition by simply affirming the order of AO. We find that the assessee has not adjusted loss or any income as observed by the Assessing Officer. Therefore, addition confirmed by the ld. CIT(A) resulted in double taxation."

Consequently, the Tribunal directed the AO to delete the addition and partly allowed the assessee’s appeal.