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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A.L. Saini, AM]
ORDER Per Shri A.T.Varkey, JM:
This is an appeal preferred by the assessee against the action of the CIT(A)-1, Kolkata dated 25.03.2019 u/s 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) for Assessment Year (hereinafter ‘AY’) 2009-10.
First ground of the assessee is as under:
For that the ld. Pr. CIT erred in invoking the provisions of sec. 263 when the original assessment itself passed u/s 147/143(3) was bad in law and ab-initio-void and such order cannot be set aside u/s 263 since the reopening of the assessment u/s 147 itself was bad in law.
Brief facts of the case pertaining to the ground no. 1 is as follows. The AO in the assessment order notes that the case was reopened u/s 147 of the Act with prior approval from ld. Addl. CIT, Range-3, Kolkata in accordance with provision of Section 151 of the Act. Thereafter he notes that he issued notice u/s 148 of the Act on 30.03.2016 after recording reasons on the note sheet and the notice was duly served upon the assessee and thereafter completed the assessment after transferring it to ITO, Ward-3(1) pursuant to the order passed u/s 120 by Pr. CIT-1, Kolkata and thereafter
Assessment Year: 2009-10 M/s. Charm Vincom Pvt. Ltd. the re-assessment order was passed on 08.12.2016. According to the ld. Counsel for the assessee Sh. S.M. Surana, the AO has issued notice on 30.03.2016 u/s 148 of the Act to the assessee conveying his desire to reopen the assessment of AY 2009-10 which means the reopening notice was issued beyond four years from the end of the relevant assessment year. The ld. AR clarified that since the relevant assessment year under consideration is AY 2009-10, four years expired from the end of the relevant assessment year on 31.03.2014. According to the ld. Counsel for the assessee, since it is a case wherein the AO desires to reopen after the expiry of a period of four years from the end of the relevant assessment year, he could have issued notice u/s 148 of the Act only after taking approval from either Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner. According to the ld. Counsel for the assessee, the AO ought not to have issued any notice u/s 148 of the Act without either of these officers recorded their satisfaction on the reasons recorded by the AO that it is a fit case for issue of re-opening notice as envisaged in Section 151 of the Act. He drew our attention to Section 151 of the Act which reads as follows:
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.
We note that admittedly, the approval u/s 151(1) of the Act, in the case on hand has been granted by the Additional Commissioner of Income Tax Range – 3 and not by the Commissioner of Income Tax as mandated under the Act. Hence the reopening in question is bad in law as held by the Hon’ble Bombay High Court in the case of Ghanshyamdas Khabrani vs. ACIT 346 ITR 443, wherein it has been held as follows:-
“The second ground upon which the reopening is sought to be challenged is that the mandatory requirement of section 151(2) has not been fulfilled. Section 151 requires a sanction to be taken for the issuance of a notice under section 148 in certain cases. In the instant case, an assessment had not been made under section 143(3) or section 147 for assessment year 2004-05. Hence, under sub-section (2) of section 151, no notice can be issued under section 148 by an Assessing Officer who is below the rank of Joint Commissioner after the expiry of 4 years from the end of the relevant assessment year 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. The expression 'Joint Commissioner' is defined in section 2(28C) to mean a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under section 117(1). In the instant case, the record before the Court indicates that the Assessing Assessment Year: 2009-10 M/s. Charm Vincom Pvt. Ltd. Officer submitted a proposal on 28-3-2011 to the Commissioner (Appeals) through the Additional Commissioner. On 28-3-2011, the Additional Commissioner forwarded the proposal to the Commissioner. On this, a communication was issued on 29-3-2011 from the office of the Commissioner (1) conveying approval to the proposal submitted by the Assessing Officer. There is merit in the contention raised on behalf of the assessee that the requirement of section 151(2) could have only been fulfilled by the satisfaction of the Joint Commissioner that this is a fit case for the issuance of a notice under section 148. Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner. That expression has a distinct meaning by virtue of the definition in section 2(28C). The Commissioner is not a Joint Commissioner within the meaning of section 2(28C). In the instant case, the Additional Commissioner forwarded the proposal submitted by the Assessing Officer to the Commissioner. The approval which has been granted is not by the Additional Commissioner but by the Commissioner. There is no statutory provision 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 functionary for the exercise of a power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner, it has to be done in that manner. [Para 6] Once the Court has come to the conclusion that there was no compliance of the mandatory requirements of sections 147 and 151(2), the notice reopening the assessment cannot be sustained in law. [Para 7]”
Under similar circumstances, the Lucknow Bench of the ITAT in the case of Balbir Singh, being dt. 13/03/2015, wherein the judgement of the Delhi High Court in the case of CIT vs. SPL’s Siddhartha Ltd. [2012] 345 ITR 223 (Delhi) was referred, and wherein it has been held as follows:-
“It was apparent from records that the Assessing Officer had specifically sought the approval of the Commissioner only. Therefore, it could not be said that the Joint Commissioner/Additional Commissioner had granted the approval. Further, no doubt, the file was routed through Additional Commissioner. However, he also, in turn forwarded the same to the Commissioner. [Para 4] It is clear that the Additional CIT did not apply his mind or gave any sanction. Instead, he requested Commissioner to accord the approval. It, thus, cannot be said that it is an irregularity curable under section 292B. [Para 5] Section 116 also defines the Income-tax authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in the specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. [Para 7] Thus, if authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular Assessment Year: 2009-10 M/s. Charm Vincom Pvt. Ltd. issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now wellsettled. [Para 8] The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. [Para 9] Therefore, the Tribunal has rightly decided the legal aspect, keeping in view wellestablished principles of law laid down in catena of judgments including that of the Supreme Court. [Para 10] No question of law arises. This appeal is accordingly dismissed. [Para 11]”
We note that the Hon’ble Supreme Court in the case of Ramchandra Keshav Adke & Ors vs Govind Joti Chavare And Ors 1975 AIR 915 (SC) held that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden. We note that as per sub-Section (1) of Section 151, no notice could have been issued u/s 148 of the Act by an AO, after the expiry of four years from the end of relevant assessment year unless the Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner is satisfied, on the reasons recorded by such AO, that it is a fit case for issue of such notice. So when the statute mandates the satisfaction of a particular functionary/authority for the exercise of a power, the satisfaction must be of that authority. So since the satisfaction/approval is not of any of the authorities given in sub-Section (1) of Section 151 of the Act, the notice issued by AO u/s 148 of the Act is without jurisdiction as a consequence the re-assessment framed by AO dated 05.12.2016 is null in the eyes of law and bad in law. Since the re-assessment order dated 05.12.2016 itself is bad in law and is non-est in the eyes of law, since the AO could not have issued the notice intimating the reopening u/s 148 without the approval of the Commissioner or authorities specified in Section 151(1) of the Act, the AO does not have the jurisdiction to issue the notice u/s 148 of the Act. Therefore the AO’s order dated 05.12.2016 itself is without jurisdiction and is null in the eyes of law.
Assessment Year: 2009-10 M/s. Charm Vincom Pvt. Ltd.
The impugned order of the Pr. CIT which is challenged before us is admittedly stemming from the order of the AO dated 05.12.2016 which we have already held to be null in the eyes of law. Therefore all consequential action on the basis of the order of AO dated 05.12.2016 is also null in the eyes of law. This is based on the legal maxim “Sublato Fundamento Credit Opus” meaning in case a foundation is removed, the super structure falls. In Badrinath Vs. TamilNadu AIR 2000 SC 3243 the Hon’ble Apex Court held that once the basis of proceedings is gone all consequential order and acts would fall in the ground automatically which is applicable to judicial and quasi judicial proceedings.
For taking this decision we also rely on ratio laid in the order of this Bench of the Tribunal in the case of M/s. Classic Flour & Food Processing vs. CIT in to 766/Kol/2014 dtd. 05.04.2017 and M/s. D.D. Deposits & Advances Pvt. Ltd. vs. CIT in ITA No. 1214/Kol/2013 dtd. 11.05.2018.
Therefore in the light of the discussion supra, we quash the impugned order of the ld. Pr. CIT dated 28.03.2019 passed u/s 263 of the Act.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 1st January, 2020 Sd/- (A.L. Saini) Sd/- (A. T. Varkey) Accountant Member Judicial Member Dated: 1st January, 2020 Bidhan (P.S.) Copy of the order forwarded to:
1. 1. Appellant – M/s. Charm Vincom Pvt. Ltd., 46, Biplabibarin Ghosh Sarani, Kolkata-700 054.
2. Respondent – ITO, Ward-3(1), Kolkata.
3. CIT(A)- 1, Kolkata. (sent through e-mail) 4. CIT 5. DR, Kolkata Benches, Kolkata. (sent through e-mail)