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Facts
The assessee challenged a reassessment order for AY 2009-10, which added Rs. 30,95,000 for cash deposits. The appeal was significantly delayed, but condonation was granted due to the assessee's husband's serious illness, subsequent demise, and the impact of the COVID pandemic. The core contention was the invalidity of the reassessment proceedings due to improper sanction under Section 151(1) for issuing notice under Section 148 beyond four years.
Held
The Tribunal ruled that the sanction for initiating reassessment proceedings under Section 148 beyond four years, as required by Section 151(1) of the Income Tax Act, was mistakenly provided by the Additional CIT instead of the Principal CIT or Chief Commissioner. This rendered the Assessing Officer's assumption of jurisdiction invalid and the Section 148 notice bad in law. Consequently, the assessment order was quashed.
Key Issues
Whether reassessment proceedings initiated beyond four years were valid when the required sanction under Section 151(1) was obtained from an authority other than the prescribed Principal CIT or Chief Commissioner.
Sections Cited
Section 147, Section 148, Section 151(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: MS MADHUMITA ROY
PER MADHUMITA ROY, JUDICIAL MEMBER
The instant appeal filed by the assessee is directed against the order dated 29.12.2017 passed by Learned Commissioner of Income Tax(Appeals)-1, NOIDA arising out of the order dated 28.10.2016 passed by the ITO, Ward-1(1)NOIDA, under Section 147/148 of the Income Tax Act, 1961 (hereinafter referred to as Page1 “ the Act”) (for Assessment Year 2009-10).
The appeal is barred by limitation for 1865 days. In fact the order passed by the First Appellate Authority was on dated 29.12.2017 and the DIN was generated on 13.03.2018. The assessee received the order on 01.03.2019. The assessee’s husband namely Shri Prakash Keshav Shukla who was looking after the financial affairs of the company suffered serious heart ailment in 2019 and ultimately expired on 23.04.2023 at the age of 52 years. Relevant to mention that a major portion of this particular period of delay was affected by COVID pandemic. Thus, the assessee could only file the appeal on 26.06.2024. In support of such facts the assessee before us also filed an application seeking Condonation of delay along with an affidavit, the contents/reasons whereof seems to be genuine having regard to the medical documents submitted by the assessee and moreso, the same has not been converted by the Learned DR. Further that, the reasons assigned by the assessee categorically mentioned in the application seeking Condonation of delay supported by affidavit affirmed by the assessee as acceptable particularly when no intentional laches is found on the part of the assessee in filing the appeal before us late, the application for Page2 Condonation of delay is thus, allowed.
At the time of hearing of the instant appeal the Learned Counsel appearing for the assessee has drawn our attention to the application raising additional grounds of appeal filed by the assessee dated 10.10.2024 challenging the maintainability of the proceedings in the absence of approval granted by the competent authority in terms of the provisions Section 151(1) of the Act before issuing notice under Section 148 of the Income Tax Act beyond 4 years. Further that, issuance DIN on 13.03.2018 whereas the order was passed by the CIT(A)on 29.12.2017 is also violative of the provisions of the Act. As there is no change of fact in the matter and since these are legal grounds to the issues involved in the matter relying upon the judgment passed by the Hon’ble Apex Court in the case of National Thermal Power Corporation Vs CIT reported in 229 ITR 383(SC), these additional grounds are admitted.
As the ground of appeal relates to non grant of approval by the competent authority under Section 151(1) of the Act which goes to the root of the matter, this ground is taken for adjudication at the very threshold.
The assessee was served with the notice under Section 148 Page3 of the Act dated 04.03.2016 after recording reasons by the Learned A.O.. Notice under Section 142(1) of the Act, was thereafter, issued on 29.04.2016 and again on 20.09.2016 along with questionnaire for necessary compliances.
The subject in dispute is the cash deposit made by the assessee amounting to Rs.3095000/- in the saving bank account lying with Mahamedha Urban Co-operative Bank during the year under consideration. The assessee was directed to furnish the reply in regard to source of such cash deposit and since the assessee could not furnish any reply action under Section 147 of the Act was initiated and notice, accordingly, under Section 148 of the ACT was issued on 04.03.2016 after recording reasons and after obtaining approval from the Principal Commissioner of Income Tax, NOIDA as claimed by the respondent department. Such assessment was finalized upon making addition of Rs.30,95,000/- in the absence of compliance made by the assessee which is further confirmed by First Appellate Authority. Hence the instant appeal before us. In fact the First Appellate Authority dismissed the matter ex-party since the assessee did not participate in the hearing before him.
The assessee before us joins issue on the aspect of approval Page4 claimed to have been granted by the Principal Commissioner of Income Tax, NOIDA. In this regard the Learned Counsel appearing for the assessee has taken us to the RTI reply by and under the order dated 26.06.2024 issued by the Commissioner of Income Tax, Range-1 NOIDA in response to the RTI appeal preferred by the assessee seeking copy of the satisfaction note and sanction granted by the Principal Commissioner of Income Tax, NOIDA under Section 151 for initiating proceedings by issuing notice under Section 148 of the Act. The same is annexed to the Paper Book filed before us; the copy of the form for recording the reasons for initiating proceedings under Section 148 of the Act and for obtaining the approval of PCIT, NOIDA is annexed thereto. He has further drawn our attention to Column- 11 of the said form which is kept for recording satisfaction of the Additional/Joint Commissioner of Income Tax on the reasons recorded by the Assessing Officer that it is a fit case for issuance of the notice under Section 148 of the Act. In the right hand side of the said column it has been noted by the Additional Commissioner of Income Tax Range-I, NOIDA , “Yes I am satisfied on the reasons recorded by the AO that it is a fit case for the issuance of a notice under Section 148.” Such noting was done Page5 on 17.02.2016. Column-12 of the said form appearing at page 5 of the Paper Book is kept for recording satisfaction of the Principal Commissioner of Income Tax on the reasons recorded by the AO that it is a fit case for issuance of the notice under Section 148 of the Act. In the right hand side of the said column nothing is written by the PCIT nor his signature is appearing therein. Therefore, it is clearly evident that the PCIT has not approved the reasons recorded by the Learned AO as claimed by the Assessing Officer as reflected in his order dated 28.10.2016 under Section 147/144 of the Act finalizing the reassessment upon making addition of Rs.30,95,000/-. Such fact placed before us by the Learned AR has not been able to be controvert by the Learned DR.
Under this facts and circumstances of the matter Learned AR relied upon the judgment passed by the Coordinate Bench in the case of Marble Art Vs ACIT reported in (2021) 129 taxmann.com 435(Delhi-Trib), Judgment passed in the matter of Voltas Limited Vs Assistant Commissioner of Income Tax, reported in (2022) 141 taxmann.com 127 (Bombay), the judgment passed by the Rajasthan High Court in the matter of Dhadda Exports Vs Income Tax Officer, Ward-1(1), Jaipur, Page6 reported in (2015) 58 taxmann.com 176(Rajasthan) and in the matter of Anil Jaggi Vs ACIT reported in (2018) 89 taxmann.com 266 Bombay. On the other hand the Learned DR relied upon the order passed by the authorities below.
We have heard the rival submissions made by the respective parties and perused the relevant materials available on record. Section 151(1) of the Act dealt with the sanction for issuance of notice under Section 148 of the Act. It specifies that no notice under Section 148 of the Act beyond the period of 4 years from the end of the relevant Assessment Year can be issued unless the PCIT/CCIT is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. In the case in hand, it is an admitted fact that such approval has been granted by the Additional CIT on 17.02.2016 as appeared from the form containing the approval annexed at Page.5 of the Paper Book filed by the assessee before us and not by the PCIT which ought to have been given approval as the reopening has been done beyond the period of 4 years for the end of the relevant Assessment Year by issuing notice under Section 148 of the Act dated 04.03.2016. Thus the same is not in terms of the settled provisions of law. Such fact has not been able to be controverted Page7 by the Learned DR. It is admittedly a failure on the part of the Assessing Officer to take sanction of the appropriate authority contemplated under Section 151 of the Act which would go to the very root of the validity of the assumption of jurisdiction by the Assessing Officer. In this particular case sanction for issue of notice have been taken from the Additional Commissioner of Income Tax Range-I, NOIDA instead of Principal Commissioner or Chief Commissioner and as such sanction granted for assumption of jurisdiction was not in terms of the provisions under Section 151 of the Act. The notice issued by the AO under Section 148 of the Act is, thus on a wrong footing and found to be bad in law and therefore, liable to be quashed.
In this connection judgments relied upon by the Learned AR have been duly considered by me. In all the judgments it has been held that sanction under Section 151 by the appropriate authority is a pre-requisite for issuance of re-opening notice under Section 148 of the Act ( when re-opening is beyond 4 years from the end of the relevant assessment year) in the absence of which sanction becomes legally not valid and is, therefore, liable to set aside.
Thus, taking into consideration the entire aspect of the Page8 matter as it is evident from the records itself that sanction has not been given by the PCIT or CCIT on the reasons recorded by A.O. for initiating the proceedings under Section 147 of the Act for issuing of notice under Section 148 of the Act when the reopening is beyond the period of 4 years from the end of relevant assessment year but sanction has been given by the Additional CIT dated 17.02.2016, the assumption of jurisdiction by the Learned AO to reopen assessment was not in accordance with the provision under Section 151 of the Act, the notice issued under Section 148 of the Act is found to be, invalid, bad in law and is, therefore, set aside. Consequently, the order of assessment is quashed. Assessee’s appeal is, thus, allowed.
Order pronounced in the open court on 29th October, 2024.