Raj Kumar Jain vs. Principal Commissioner Of Income Tax I

1 IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON’BLE SHRI JUSTICE SHEEL NAGU & HON’BLE SHRI JUSTICE MANINDER S. BHATTI ON THE 5th OF MAY, 2022 WRIT PETITION No. 9297 of 2022 Between:- RAJ KUMAR JAIN S/O SHRI MANIK CHAND JAIN , AGED ABOUT 67 YEARS, OCCUPATION: PROPRIETOR OF M/S POOJA ENTERPRISES BUSSINESS R/O MAHAVIR BHAWAN SATNA (M.P.) (MADHYA PRADESH) .....PETITIONER

(BY SHRI SAPAN USRETHE, ADVOCATE) AND 1. PRINCIPAL COMMISSIONER OF INCOME TAX I THROUGH CENTRAL REVENUE BUILDING NAPIER TOWN, JABALPUR(M.P.) (MADHYA PRADESH)

This petition coming on for admission and interim relief this day, Hon’ble Shri Justice Maninder S. Bhatti passed the following: ORDER Matter heard finally with the consent of the parties. 2. The petitioner while filing this petition has prayed for following reliefs:- (i) To quash the invalid and illegal impugned assessment order passed under section 147 read with section 144 alongwith demand note under section 156 of the Act dated 31/03/2021 (Annexure P-8 and P-9); (ii) To quash the invalid and illegal notice issued under section 148 dated 31/03/2021 (Annexure P-2) as it was issued without proper sanction; (iii) To direct the appropriate authority to stay the demand recovery proceedings till the disposal of the case and/or (iv) To issue any other writ, order or direction as this Hon’ble Court deems just and fair in the facts and circumstances of the case to give relief to the petitioner. 3. The facts narrated in the petition reveal that a survey was conducted in the business premises of petitioner on 29/10/2014, as a result of which the petitioner surrendered an amount of Rs. 51,75,000/-. Thereafter, the 3 petitioner filed its income tax return on 25/01/2016 declaring total income to be Rs. 32,69,300/-. However, the petitioner received a notice under section 148 of the Income Tax Act (hereinafter shall be referred as ‘the Act’) dated 31/03/2021. The petitioner was once again served with the notice dated 23/06/2021 whereby the petitioner was called upon to submit income tax return and response to notice under section 148 of the Act, the petitioner filed its response to the notice under section 148 of the Act on 1/11/2021 as according to petitioner there was delay in filing response on account of outbreak of Covid. The petitioner also requested for supply of reasons recorded for re-opening of the assessment. Thereafter, the respondents eventually passed an order dated 31/03/2022 which is contained in Annexure P-8 by which the assessment was carried out with additions which reflects from paragraph 4 of the impugned order. The order dated 31/03/2022 was followed by a notice of demand which is contained in Annexure P-9 dated 31/03/2022 and the petitioner was called upon to pay sum of Rs. 22,50,155/-. The petitioner was then supplied with the reasons alongwith the notice dated 25/03/2022 which are contained in Annexure P-1 thus, challenging the impugned orders/notices as detailed above, the present petition has been filed. 4. Counsel for the petitioner submits that in the present case there is violation of statutory provisions contained in section 151 of the Act 4 inasmuch as in the present case the assessment year was of 2015-16 and since the respondents resorted to a notice under section 148 of the Act, they should have obtained sanction of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner for issuance of such notice. Thus, the counsel submits that in the present case instead of sanction from the competent authority as provided in section 151 (1) of the Act, the respondents obtained sanction of the authority which is lower in rank i.e. Joint Commissioner, who is only empowered to grant sanction under section 151 (2) of the Income Tax Act and not under section 151 (1) of the Income Tax Act. Thus while placing reliance on the judgment of High Court of Mumbai in the case of J.M. Financial and Investment Consultancy Services Private Limited Vs. Assistant Commissioner of Income Tax Circle 3 (2)(1) and ors. passed in W.P. No. 1050/2022 submitted that the issue in question has been already decided by the High Court of Mumbai therefore, in terms of the aforesaid order this petition also deserves to be allowed. 5. Per contra, counsel for the respondents submits that section 151 (1) of the Act only comes into play when there is assessment prior to 4 years from the date of notice under section 148 of the Act. In the present case since there was no assessment thus submits that in the present case section 151 (1) was not applicable and sanction under section 151 (2) of the Act has been 5 rightly accorded and thus, while placing reliance on Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. of the judgment of Apex Court passed in Civil Appeal No. 2830/20007 submits that there has to be a conjoint reading of sections 147 to 152 and therefore, submits that the assessment officer is empowered to initiate reassessment when intimation is given under section 143 (1) to the assesses and thus, supports the impugned orders/notices and prays for dismissal of the petition. 6. We have considered the submissions advanced by the rival parties. 7. To deal with the issue raised in the present case it is first necessary to refer to section 147 which provides that if the assessing officer has reason to believe that an income chargeable to tax has escaped assessment can assess/re-assess such income. The relevant extract of section 147 of the Act is reproduced hereinbelow:- “147. Income escaping assessment:- If the Assessing Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in 6 sections 148 to 153 referred to as the relevant assessment year) -------;” 7.1 Section 148 provides as under:- “148. Issue of notice where income has escaped assessment :- (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. ----------” 7.2 Lastly section 151 provides as under:- “151. Sanction for issue of notice (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case failing under sub- section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. 7 (3) For the purposes of sub-section (1) and sub- section (2), the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself. 8. A perusal of the aforesaid reveals that a notice under section 148 after expiry of a period of 4 years from the end of relevant assessment year cannot be issued unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner accords sanction. Section 151 (2) provides that in a case other than a case falling under section 151 (1) the sanction is required to be obtained from the Joint Commissioner. Now if the impugned orders as well as the reasons for reopening contained in Annexure P-10 are examined carefully, the same show that the sanction in the present case has been accorded by the Joint Commissioner of Income Tax under section 151 (2) of the Act. It is undisputed that the case pertains to assessment year 2015-16. It is also not in dispute that by the stage of issuance of notice under section 148 more than 4 years had already lapsed, thus, in our considered opinion, the sanction of the authorities mentioned in section 151 (1) of the Income Tax Act ought to have been obtained as a pre- requisite of the issuance of impugned notice. 8 9. The High Court of Mumbai in the case of J.M. Financial and Investment Consultancy Services Private Limited (supra) held in paragraph 7 as under:- “7. In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151 (1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner of Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31st March 2021 issued under Section 148 of the Act, which is impugned in this petition. In view thereof, the consequent orders and notices will also have to go.” 10. Therefore, in view of aforesaid analysis it is apparent that without there being sanction of the competent authority, the impugned notice under section 148 of the Act has been issued and therefore, there is jurisdictional error in doing so. Since the sanction under section 151 (1) of the Act is the basic foundation on which a notice under section 148 is issued and since the sanction under section 151 is by an incompetent authority, all ensuing exercise like notice under section 148/assessment order automatically render otios. 11. The reliance on the decision of Rajesh Jhaveri (supra) by the counsel for the respondents has no applicability as far as the case in hand is concerned. In said case the issue pertaining to grant of sanction under 9 section 151 was not a debatable issue however, the attempt of the counsel for the revenue to submit that if there is no assessment even in an assessment year prior to 4 years from the date of notice under section 148 of the Act, sanction is not required, does not impress this court. In our considered opinion this stand of the revenue is misconceived and also goes contrary to its own stand of obtaining sanction (Though by subordinate authority). Thus, the decision of the Apex Court in the Rajesh Jhaveri (supra) has no applicability as far as the present case is concerned. 12. Thus from the aforesaid analysis, it is crystal clear that the sanction in the present case was accorded by an incompetent authority (Joint Commissioner I.T). The competent authority to accord sanction is under section 151(1) of the Act i.e. Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner and not the Joint Commissioner who is only empowered under section 151 (2) of the Act (which provision is inapplicable to the fact situation herein). 13. Thus, in view of the aforesaid analysis the assessment order contained in Annexure P-8 dated 31/03/2022, demand notice (Annexure P-9) dated 31/03/2022 and also the notice under section 148 of the Income Tax Act dated 31/03/2021 (Annexure P-2) are quashed. 10 14. However, the respondents are at liberty to proceed afresh after obtaining sanction of the competent authority if they are so advised. 15. Thus, writ petition stands allowed.

( SHEEL NAGU) (MANINDER S. BHATTI )

JUDGE JUDGE nn Digitally signed by NAVEEN NAGDEVE Date: 2022.06.21 14:57:26 +05'30'