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Facts
For AY 2009-10, the assessee's return declaring a loss was subject to reassessment following a PCIT order under Section 263. The AO added Rs. 14,01,00,000/- as unexplained cash credit from fresh share capital and premium, which was confirmed by the Ld. CIT(A). The assessee appealed to the ITAT, primarily challenging the legal validity of the reassessment proceedings due to improper approval.
Held
The Tribunal observed that reassessment initiated within four years required approval from the Joint Commissioner of Income Tax, but the approval was obtained from the CIT/PCIT. Citing High Court judgments, it was held that approval not granted by the legally competent authority renders the entire reassessment proceedings void ab-initio. Therefore, the appeal was allowed on this legal ground.
Key Issues
Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act are void ab-initio due to approval for initiation being obtained from an incompetent authority (CIT/PCIT instead of Joint Commissioner) when the reassessment was done within four years from the end of the relevant assessment year.
Sections Cited
147, 143(3), 263, 148, 151
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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
(PAN: AACCH 0875 R) ( अपीलाथ� ) Respondent / ��यथ� Appellant / Date of Hearing / सुनवाई 13.03.2025 क� �त�थ Date of Pronouncement/ 22.04.2025 आदेश उ�घोषणा क� �त�थ For the assessee / Shri Miraj D Shah, A.R �नधा�रती क� ओर से For the revenue / राज�व Shri Praveen Kishore, CIT DR क� ओर से ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the assessee against the order of Commissioner of Income Tax (Appeals)- NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 12.10.2023 for AY 2009-10.
Brief facts of the case of the assessee are that for AY 2009-10 the assessee filed return of income declaring total loss at Rs. 7,490/-. The assessment was completed u/s 147/143(3) of the Act, subsequently the Ld. PCIT-1, Kolkata passed an order u/s 263 of the Act by giving direction to the AO to pass an afresh assessment order after conducting Assessment Year: 2009-10 Highland Tradelink pvt. Ltd. independent enquiries into the subscription to the share capital and investment of Rs. 14 crores made in this case. The AO in pursuant to the said order assessed the income of the assessee at Rs. 14,01,68,010/-.
Aggrieved with the order of AO the assessee went in appeal before the Ld. CIT(A) wherein the addition of Rs. 14,01,00,000/- has been confirmed. The assessee preferred an appeal before the ITAT, wherein the case of the assessee has been remitted to the file of AO for fresh adjudication. The AO in compliance to the order passed, issued notice to the assessee with detailed questionnaire, the assessee filed detailed submission. The AO after considering the submission made by the assessee has held that introduction of fresh share capital, including premium amounting to Rs. 14,01,00,000/- is nothing but the assessee’s own money and added the same in the income of the assessee by treating it as an unexplained cash credit.
Aggrieved by the said order the assessee preferred an appeal before the Ld. CIT(A) wherein the assessee challenges the order of AO on legal as well as on merit of the case but the Ld. CIT(A) has dismissed the appeal of the assessee by rejecting the legal grounds as well as on merit.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. Counsel appeared on behalf of the assessee challenges the impugned order of the Ld. CIT(A) on legal grounds challenging the very reopening of case, and according to him in the instant case approval had been given by PCIT-1 Kol, though PCIT Kol-1,was not entitled to give approval as the reassessment proceedings were initiated within four years and it was the Joint Commissioner of Income Tax being the specified authority to grant approval. The Ld. Counsel submits that since the reassessment was void in law hence the entire subsequent proceeding is also bad in law. The Ld. Counsel draws the attention of this Tribunal on the paper book regarding certified copy of notice dated 24.11.2011 u/s 148 of the Act indicating the approval of the PCIT, Kolkata -1, certified copy of letter dated 27.01.2023 issued from ITO Wd- 1(1) Kol by mentioning that approval from competent authority u/s 151 of the Act not Assessment Year: 2009-10 Highland Tradelink pvt. Ltd. readily available on the record. The Ld. Counsel cited a decision passed by Hon’ble Bombay High Court in the case of CIT vs. Aquatic Remedies Pvt. Ltd. in [2018] 96 taxmann.com 609 (Bom-HC) and also placed reliance on the order passed by the Co- ordinate Bench, Kolkata in in case of ITO vs. Highlight Commotrade Pvt. Ltd. for AY 2009-10 dated 12.02.2025.
Contrary to that the Ld. D.R supports the impugned order.
In the present case, only legal ground has been raised by the assessee with regard to approval, as according to him in the instant case approval had been given by person who is not authorized to approve permission. According to him, the Ld. CIT(A) has dismissed the ground of the assessee ignoring the settled law. We have gone through the order passed by the Ld. CIT(A) and find that the Ld. CIT(A) in its order had held thus:
8.1.3. Notwithstanding the letter No. ITO, Ward-1(1)/Highland Tradelink/2022-23/620 dated 27.01.2023, it is clear from the copy of notice u/s 148 of the Act, the approval and the necessary satisfaction of the Commissioner of Income Tax, CIT, Kol-1, Kolkata was obtained prior to the issuance of notice u/s 148 of the Act in this case. Further, it is also to be noted that the Commissioner of Income Tax, CIT,Kolkata-1 was competent authority in the jurisdictional hierarchy of the appellant and is placed above the post of Joint Commissioner of Income Tax in the pecking order. The argument of appellant in this case that Commissioner of Income Tax, CIT, Kol-1 is a non-specified authority for this purpose in this case does not hold ground as the post of CIT, Kol-1 is a higher authority in the jurisdictional hierarchy of the appellant. Certainly, this argument of the appellant would have weight if the authority whose approval was obtained for issuing the notices u/s 148 of the Act was below the rant of competent authority as mandated in the Act for this purpose. Further all the case laws cited by the appellant has been considered and is found that the facts and circumstances in those cases are not similar to the extent case and hence are not applicable.
On perusal of the above findings of the Ld. CIT(A), it admits of no doubt that in the present case approval had been given by the CIT, Kolkata-1. The Ld. CIT(A) has rejected this ground of the assessee by holding that post of the Ld. CIT(A), Kolkata is higher from Joint Commissioner so the contention of the assessee is not tenable. The Ld. CIT(A) further observed in its finding that argument of the appellant/ assessee would have weight if the authorities whose approval was obtained for issuing notice u/s 148 of the Act was below the rank of competent authority. It is pertinent to mention here that in the instant case reopening of assessment proceedings has been done within four years from the end of relevant assessment year. Notice u/s 148 of the Act dated 24.11.2011 Assessment Year: 2009-10 Highland Tradelink pvt. Ltd. was issued to the assessee by AO after obtaining necessary satisfaction of CIT. We have also gone through the paper book filed by the assessee and find that vide its letter dated 21.1.2022 were asked certified copy of reasons recording for reopening of assessment and approval from the competent authority. The said letter herein below:
In compliance to the same, ITO, Ward-1, Kolkata has sent a reply which is as below:
Assessment Year: 2009-10 Highland Tradelink pvt. Ltd. 9. Going over the aforesaid letter, there is no denying to this fact that approval u/s 148 had been given by the CIT-Kolkata-1,.
We have gone through the judgment of Hon’ble Bombay High Court passed in the case of CIT vs. Aquatic Remedies Pvt. Ltd. (supra) has held thus:
“9. It is undisputed position before us that in terms of Section 151(2) of the Act, the sanctioning/ permission to issue notice under Section 148 of the Act has to be issued by the Additional Commissioner of Income Tax. We find that the Assessing Officer had not sought the-approval of the Designated Officer but of the Commissioner of Income Tax. This is clear from the Form used to obtain the sanction. In any case, the approval/ satisfaction recorded in the form submitted for sanction of the Commissioner of Income Tax by the Assessing Officer reproduced herein above, it is clear that the Additional Commissioner of Income Tax had not granted permission to initiate re-opening proceedings against the Respondent-Assessee. The view of the Additional Commissioner of Income Tax was subject to the approval of his superior - the Commissioner of Income Tax. Thus, there was no final sanction granted by the Additional Commissioner of Income Tax for issuing the notice dated 25th March, 2011 to re-open the Assessment. Further, it is the Commissioner of Income Tax who directed the issuance of the notice under Section 148 of the Act to the Assessing Officer. Thus, it is very clear that the final sanction/ approval was that of the Commissioner of Income Tax as indicated in the Form and also in the two letters dated 24th March, 2011 and 25th March, 2011.
This Court in Ghanshyam K Khabrani (supra) while dealing with almost similar/ identical situation has observed as under:— The approval which has been granted is not by the Additional Commissioner of Income Tax but by the Commissioner of Income Tax. There is no statutory provision here under which a power to be exercised by an officer can be exercised by a superior officer. When the statute mandates the satisfaction of a particular manner, it has to be done in that manner. In a similar situation, the Delhi High Court in CIT v. SPL's Siddhartha Ltd. (ITA No. 836 of 2011 decided on September 14, 2011) - since reported in [2012] 345 ITR 223 (Delhi) held that powers which are conferred upon a particular authority have to be exercised by that authority and the satisfaction which the statute mandates of a distinct authority cannot be substituted by the satisfaction of another. We are in respectful agreement with the judgment of the Delhi High Court."(Emphasis supplied) 10. We have also gone through the judgement passed by the Co-ordinate Bench, Kolkata in (supra).
Going over the above discussion as well as keeping in view the judgment passed by the Hon’ble Bombay High Court as well as Co-ordinate Bench of Kolkata, we find force in the argument of the Ld. Counsel of the assessee that entire reassessment proceedings is bad in law as approval had not been taken by the competent authority as a result of which the appeal of the assessee has been allowed on the legal ground. Reassessment is ab-initio void for want of granting of approval from competent In the result, the appeal filed by the assessee is allowed.