Loading judgment…
Facts
The Revenue and assessee filed appeals against the order of the CIT(A). The original assessment was completed, but the case was re-opened under Section 147 due to information regarding bogus purchases. The assessee argued that the reassessment proceedings were invalid due to a lack of proper approval under Section 151.
Held
The Tribunal held that the approval for issuing the notice under Section 148 for AY 2016-17 was not obtained from the specified authority (PCCIT/CCIT) as required by Section 151(ii) of the Act. Consequently, the reassessment proceedings were deemed invalid and the order under Section 147 read with Section 143(3) was quashed.
Key Issues
Whether the reassessment proceedings initiated under Section 147 were valid in the absence of proper approval from the prescribed authority under Section 151.
Sections Cited
147, 143(3), 69C, 37(1), 80G, 115JB, 151, 148, 148A, 133(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: MS. MADHUMITA ROY & MRS. RENU JAUHRI
The above captioned appeals are filed by the Revenue as well as assessee against the order u/s 250 of The Income Tax Act, 1961
1 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. (hereinafter referred to as, “Act”), order dated 28.10.2024, passed by CIT(A), Delhi.
In the departmental appeals No. , the grounds of appeal are identical. Hence, Appel No. 4987/DEL/2024 being duplicate and is hereby dismissed as infructuous. Since these cross appeals pertain to the same assessment year, these are being disposed of vide a common order.
The Revenue has raised following grounds of appeal: “ (1) The Ld. CIT(A) erred in deleting the addition of Rs. 1,23,53,940/- u/s 69C of the Income tax Act, 1961 on account of bogus purchases made from M/s Akshay Sales Corporation (Prop. Sh. Bijender Jain) who is accepted to be entry operator providing bogus bills of purchases, and disallowance to 25% of the said amount u/s 37(1) of the Act. (a) The Ld. CIT(A) erred in restricting the disallowance on account of bogus purchases from M/s Akshay Sales Corporation, despite the fact that it has been held that the entire transaction with Akshay sales Corporation were not genuine..
(2) Whether on the facts or circumstances of the case Ld. CIT(A) erred in deleting the addition of Rs. 1,56,22,095/- (out of total addition of Rs. 1,70,22,025/-) under Rule 8D(ii), ignoring the amended provisions of Rule 8D notified in notification no. 43/2016 dated 02.06.2016, which states that disallowance computed on the basis of monthly average of opening and closing balance of investment which does not or shall not form part of total income.
(a) Whether on the facts or circumstances of the case Ld. CIT(A) erred in restricting the 2 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. addition in book profit u/s 115JB only to the extent admitted by the assessee and not what has been determined in the assessment order.
(3) The Ld. CIT(A) erred in deleting the addition made Rs. 4,20,38,982/- (out of total claim of Rs. 4,25,63, 1 14/-) without appreciating that ascertainment of a debt as bad debt is the primary condition for a debt to be written off. No evidence whatsoever has been provided before the Assessing Officer or the Ld. CIT(A) that the debts are actually turned bad. Writing off in its own books is a self serving act and can be used to manipulate the profit of any year solely at the discretion of assessee.
(4) The Ld. CIT(A) erred in deleting the disallowance u/s 80G of the Act amounting to Rs. 77,80,000/- on account of donation paid to The Anugrah Foundation, Nav shitij and Vedic Iife Society amounting to Rs. 4,40,000/-, 1,20,000/- and 1,50,00,000/- respectively by admitting additional evidences without giving an opportunity to the Assessing Officer under Rule 46A.
(a) Ld. CIT(A) erred in allowing deduction us 80G of the Act in respect of the Anugrah Foundation despite noting that there were discrepancies in the receipt of donation. (5) 5. The appellant craves to add or amend any/all the grounds of appeal before or during the hearing of the appeal.”
The assessee has raised the following grounds of appeal: “ (a) That on the facts and in the circumstances of the case, the disallowance, imposition of tax and interest with reference thereto, the qualification of taxable income and the tax liability, has been grossly unjustified, erroneous and unsustainable and necessary direction be given to the AO to give appropriate relief in accordance with law. (b) That on the facts and in the circumstances of the case, the Ld. AO has grossly erred in passing the order u/s 147 r.w.s.
3 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. 143(3) of the Act in utter disregard to the provisions of the Act and hence, the order passed is illegal and void ab initio.
(c) That on the facts and in the circumstances of the case, the CIT(A) ought to have considered that the order u/s 147 of the Act has been passed containing multiple factual discrepancies and hence the order passed is not valid and liable to be quashed.
(d) That on the facts and in the circumstances of the case, the approval taken by Ld. AO u/s 151 is mechanical approval as the same has been granted by PCIT/CIT instead of PCCIT/PDGIT/ CCIT/ DGIT.
(e) That on the facts and in the circumstances of the case, the initiation of reassessment proceedings is not valid and void ab initio as the same is time barred in accordance with the latest judgement of Hon'ble Apex Court issued in Rajeev Bansal case.
(f) That on the facts and in circumstances of the case, the CIT(A) erred in upholding the addition of Rs. 30,88,485/- on account of alleged bogus purchases from M/s Akshay Sales Corporation and completely ignored the submissions of the appellant. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred into not taking cognizance of the evidence produced by the appellant during the course of the proceedings, substantiating the genuineness of the transaction being undertaken by it with M/s Akshay Sales Corporation.
(g) That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO disallowing the deduction of interest on late deposit of tax deducted at source (“TDS") of Rs. 1,15,248/- while computing the total income under normal provisions of the Act and book profits u/s 115JB of the appellant.
4 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD.
(h) That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the disallowance to Rs. 13,99,930/- u/s 14A of the Act under the normal provisions of the Act ignoring the fact that no disallowance was required to be made as the appellant was having sufficient interest free funds available to make such investment. That on the facts and in circumstances of the case, the CIT(A) erred in upholding the action of the Assessing Officer in invoking Rule 8D of the Income Tax Rules, 1962 (the Rules') without appreciating that preconditions for applying the said rule as prescribed in sub- section (2) of section 14A of the Act were not satisfied. That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the disallowance to Rs. 7,28,537/- made to book profits computed under Section 1 15JB of the Act, on account of expenses incurred in relation to exempt income.
(i) That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the disallowance of bad debts written off amounting to Rs. 5,24,132/-.
(j) That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the disallowance of claim of deduction w/s 80G amounting to Rs. 99,000/-.
(k) That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the grounds stated here-in-above, either before or at the time of hearing of this appeal. ”
Brief facts of the case are that the assessee had filed return for A.Y. 2016-17 on 30.11.2016, declaring total income of Rs. 16,14,95,670/-. Subsequently, the return was revised on 07.03.2018, declaring total income of Rs. 5,09,16,090/-. The case was selected for scrutiny and assessment was completed u/s 133(3) of the Act on 18.12.2019 at an 5 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. income of Rs. 5,43,51,070/-. Subsequently, on receipt of information form the Investigation Wing, with regard to bogus entries taken by the assessee company from M/s. Akshay Sales Corporation to the tune of Rs. 2,07,84,630/-, the case was re-opened and assessment was thereafter completed u/s 147 r.w.s 143(3) of the Act at an income of Rs. 72,54,47,390/- vide order dated 31.05.2023. 5.1 Aggrieved, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 28.08.2024, Ld. CIT(A) allowed part relief to the assessee in respect of some of the grounds. Aggrieved with the order, both the revenue as well as the assessee are in appeal before the Tribunal. Although multiple grounds have been raised in both these appeals, we first take up the legal ground relating to absence of approval by the prescribed authority raised by the assessee vide Ground No. 4 of its appeal.
5.2 Brief facts relating to the issue are that a notice u/s 148 was initially issued on 30.06.2021, after obtaining approval of the PCIT Central- 1, Delhi. Thereafter, in view of the directions of the Hon’ble Apex Court in the case of Ashish Agarwal, a show-cause notice u/s148A(b) was issued on 25.05.2022, providing information based on which the earlier notice u/s 148 had been issued. The assessee replied to the same vide letter dated 08.06.2022. As the assessee’s reply was not found acceptable, an order u/s 148A(d) of the Act was passed by the Ld. AO on 28.07.2023 and, consequently, notice u/s 148 was also issued on 30.07.2022, after obtaining approval of the PCIT (Central)-1, Delhi.
5.3 Before us, Ld. AR has submitted that the notice u/s148 was issued on 30.07.2022 i.e., more than three years after the end of the relevant
6 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. A.Y. 2016-17 and, therefore, sanction of PCCIT/CCIT was required to be obtained instead of PCIT, as is the case. He has further argued that the issue is covered by the decision of the Hon’ble Apex Court in the case of Union of India vs Rajeev Bansal [2024] 167 taxmann.com 70(SC), wherein it has been held that the approval of Principal Chief Commissioner or Chief Commissioner is required to be taken u/s 151(ii), if the notice is issued after more than three years have elapsed form the relevant assessment year. Ld. DR, on the other hand has strongly relied on the orders of the lower authorities.
5.4 We have heard the rival submissions and perused the material placed on record. It is seen that the issue regarding approval of the specified authority u/s 151 of the Act raised by the assessee is squarely covered by the decision of the Hon’ble Apex Court wherein it has been held as under: “73. Section 151 imposes a check upon the power of the Revenue to reopen assessment. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority Derore assessments. The provision issuing a notice under section 148. The purpose behind this procedural check is to save the assessee o harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. 110d Taxman 315/221 ITR 538 (SC)V[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:
Regime Time Limits Specified authority Section Before expiry of four Joint Commissioner 151(2) of the years from the end of old regime the relevant assessment year Section After expiry of four Principal Chief 151(1) of the years from the end of Commissioner or Chief old regime the relevant Commissioner or assessment year Principal 7 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. Commissioner or Commissioner Section Three years or less Principal 151(i) of the than three years from Commissioner or new regime the end of the relevant Principal Director or assessment year Commissioner or Director Section More than three years Principal Chief 151(ii) of the have elapsed from the Commissioner or new regime end of the relevant Principal Director assessment year General or Chief Commissioner or Director General
The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:
(i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping Was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under 8 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.”
5.5 Respectfully following the decision of the Hon’ble Apex Court, we, hereby hold that in the proceedings initiated u/s 148 for A.Y. 2016-17, approval of the specified authority i.e., PCCIT/CCIT has not been taken before issue of notice u/s 148 as required u/s 151(ii) of the 9 | P a g e , 5010, 4987/DEL/2024 ACIT VS JAKSON LTD. Act, rendering the entire reassessment proceedings invalid. Consequently, the order u/s 147 r.w.s 143(3) is, hereby, quashed.
Since the impugned notice and assessment order has been quashed, the remaining grounds of appeal raised by the assessee as well as the grounds raised by the revenue are rendered infructuous and, hence are not required to be adjudicated upon.
In the result, the appeal of the assessee is allowed and both the appeals of revenue are dismissed. Order pronounced in the Open Court on 23-12-2025.