ASHOK BALDEVBHAI PATEL,MUMBAI vs. ASST CIT CIR 16(2), MUMBAI

Brief facts of the case are that the assessee is an individual, filed his return of income for Assessment Year 2004-05 on 06.08.2014 declaring total income of Rs. 1,38,260/-. The assessee has shown his income from commission and salary. The assessment was completed under section 143(3) r.w.s. 153C of the Act on 24.12.2008. Subsequently, the assessment was re-opened under section 147 of the Act. Notice under section 148 was issued on 19.05.2009. The assessment under section Ashok Baldevbhai Patel 143(3) r.w.s. 147 was completed on 27.12.2010. The Assessing Officer while passing the assessment order made the addition under section 68 for Rs. 19,00,000/-, on account of cash found with the assessee by Assistant Director Investigation Ahemadabad. On appeal before the ld. CIT(A), the reopening was sustained, however, the addition under section 68 was partly sustained to the extent of Rs. 12,50,000/-. Therefore, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us. The assessee has raised the following grounds of appeal:

1. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and facts in passing the order u/s, 250 of the Act partly allowing the appeal filed by the appellant.

We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. At the outset of the hearing, the ld. AR of the assessee submits that ground No.1 is general and needs no adjudication.

Ground No.2 relates to validity of re-opening under section 147 of the Act. The ld. AR of the assessee submits that the assessment was reopened under section 147. The notice under section 148 dated Ashok Baldevbhai Patel 19.05.2009 was served upon the assessee. Notice under section 148 served by the Assessing Officer is not valid. The notice under section 148 was sent and served after the expiry of four year from the end of relevant Assessment Year. Since, the notice under section 148 was served after the expiry of four year from the end of assessment year; the assessing officer should have obtained the prior approval of Commissioner of Income tax. No such approval of Commissioner of Income tax was obtained by assessing officer prior to issuance of notice under section 148. The ld. AR of the assessee submits that copy of notice under section 148 is placed on record (page No. 6 of PB). During the reassessment the assessee requested for copy of the approval of re- opening from the Assessing Officer. The Assessing Officer vide its letter dated 28.10.2011 informed the assessee that assessment was re- opened under section 148 after taking prior approval of Additional Commissioner - Range 16(2), vide order/ letter No ‘Add CIT Rg Re- opening/2008-09 dated 30.03.2009’. The ld. AR of the assessee further submits that admittedly the notice of re-opening was served upon the assessee after expiry of four year from the end of Assessment Year; therefore, approval should have been obtained from the Commissioner of Income Tax. The ld. AR further submits that no specific reason of re- opening was recorded by Assessing Officer except explaining the reasons to the assessee. The ld. AR of the assessee submits that neither 3 ITA No.787/M/14- Ashok Baldevbhai Patel the approval of competent person was obtained nor proper reasons for re-opening was recorded, therefore, the issuance of notice under section 148 is invalid and bad in law, therefore, all subsequent action thereto are nonest. In support of his submission the ld. AR for the assessee filed the copy of statutory provision of section 151 prevailing, during the relevant period. Further to buttress his submissions the ld. AR of the assessee relied upon the decisions of Bombay High Court in case of Ghanshyam K. Khabrani Vs ACIT & Ors [346 ITR 443], Nirmal Bang Securities Pvt. Ltd. Vs ACIT & Ors [382 ITR 93], Titanor Components Ltd Vs ACIT & Ors [343 ITR 183],Hindustan Lever Ltd. Vs ACIT & Ors [268 ITR 332] and Morarjee Goculdas Spinning And Weaving Co Ltd Vs P.N. Bansal & Another [208 ITR 471], Mumbai Tribunal in Vaman International Pvt. Ltd. Vs DCIT [ITA No. 1040 & 1041/Mum/2017] dated 27.09.2017, Rajasthan High Court in case of Dhadda Exports Vs ITO [377 ITR 347], Allahabad High Court in case of Dr. Shashi Kant Garg v. CIT & Ors [285 ITR 158], and Mumbai Tribunal in Anil Jaggi v. ACIT [ITA No. 3049 /Mum/2016] dated 20.12.2017.

On the other hand, the ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue submits that the assessee fully participated in the re-opening assessment proceeding. The assessee was granted full opportunity to contest the case. The assessee cannot raise 4 Ashok Baldevbhai Patel such objection in view of the provision under section 292BB of the Act. In support of his submissions the ld. DR for the revenue relied on the decision of Hon’ble Gujarat High Court in N.K. Industries Vs ITO (362 ITR 502) and CIT Vs P.V.S Beedies Pvt. Ltd (237 ITR 13).

We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also gone through the various case law relied by respective parties. In our view certain facts, dates are not in dispute. It is not in dispute that initially assessment under section 143(3) r.w.s. 153C was completed on 24.12.2008. Further, it is not in dispute that notice under section 148 dated 19.05.2009 was served upon the assessee. The perusal of notice shows it does not contain the reference, if any prior approval of competent officer/authority was availed by Assessing Officer. The Assessing Officer vide its letter dated 28.10.2011 communicated to the assessee that assessment was re-opened after taking prior approval of additional CIT-Range 16(2) vide letter dated 30.09.2009.

The Hon’ble Bombay High Court in case of Ghanshyam K. Khabrani vs. ACIT (supra) held that section 151 requires a sanction to be taken from the issuance of notice under section 148 in certain cases. The sub-section (2) of section 151 prescribed that no notice can be issued under section 148 by Assessing Officer who is below the rank of JCIT after the expiry of four year from the end of relevant Assessment Year unless the Joint Commissioner of Income tax is satisfied on reasons recorded by Assessing Officer, that it is a fit case for issue of such notice. The Hon’ble Court further held that when the statute mandate the satisfaction of a particular functionary for exercise of power, the satisfaction must be of that authority, and further held that where a statute require something to be done in a particular manner, it has to be done in that manner.

The Hon’ble Rajasthan High Court in Dhadda Export vs. ITO held that when the notice under section 148 has been issued to the assessee beyond the expiry of four year after end of relevant Assessment Year. The proviso to section 151 (1) of the Act stipulated at the relevant time that no such notice itself be issued after expiry of four year from the end of relevant Assessment Year, unless the Chief Commissioner or the Commissioner of Income Tax is satisfied, on the reasons recorded by Assessing Officer. The Hon’ble Rajasthan High Court further held that section 292B of the Act cannot be made to validate the action which has been rendered illegal due to breach of mandatory condition of the sanction of the satisfaction of the 6 Ashok Baldevbhai Patel Chief Commissioner or Commissioner of Income Tax under the proviso to sub-section (1) of section 151 of the Act. The inherent lacuna affecting the very correctness of the notice under section 148 is not curable by recourse to section 292B. 9. The similar view taken by Co-ordinate Bench in Waman International Pvt. Ltd. (supra). Considering the legal and factual discussion discussed above, we find that the re-opening under section 147 is invalid, therefore, all subsequent action thereto are void ab initio. The ratio of decision in N.K Industries vs. ITO & CIT vs. P.V.S. Beedies Pvt. Ltd. (237 ITR 13) relied by ld. DR for the Revenue are not applicable on the factual matrix of the present case so far as to the issue related with the prior approval of re- opening from competent authority. In N.K. Industries (supra) and in P.V.S Beedies Pvt. Ltd. (supra), the Assessing Officer made the re-opening at the behest of audit party, which may be relevant to the issue of reason to believe, however, still the assessing officer was required to record the reasons of reopening. However, the issue before us is all together different. Further, in our considered view, the violation of mandatory provision provided under the statute cannot be validated by resorting to the 292B or 292BB of the Act. Thus, the submission of ld. DR that assessee participated in re-assessment proceeding and co-operated during the re- assessment proceeding, has no force. In the result, ground No.2 of the appeal is allowed. 7 Ashok Baldevbhai Patel

As we have allowed the ground No.2 of the appeal raised by assessee and the re-assessment under section 147 is held invalid, therefore, the discussion on ground No.3, which relates to the merit of the case has become academic.

In the result, appeal filed by assessee is allowed.