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Income Tax Appellate Tribunal, DELHI BENCH SMC NEW DELHI
Before: SHRI B.P. JAIN
ORDER This appeal of the assessee arises from the order of learned CIT(A)-I, Gurgaon, vide order dated 11.02.2015 for the assessment year 2002-03.
The assessee has raised as many eight grounds of appeal
, i.e., the legal grounds as well as grounds on merit. “1. That having regard to the facts and circumstance of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of ld. Assessing Officer in framing impugned assessment order without assuming jurisdiction as per law and without serving the mandatory notices under sections 142(1), 148 and 143(2) of the Income Tax Act, 1961.
2. That having regard to the facts and circumstance of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of ld. Assessing Officer in framing impugned assessment order without complying the mandatory conditions of section 147 to 153 of the Income Tax Act, 1961 and reopening of the case is bad in law and beyond the jurisdiction of the ld. Assessing Officer.
3. That having regard to the facts and circumstance of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of ld. Assessing Officer in framing the impugned assessment being beyond jurisdiction, bad in law, illegal, unjustified, against the principles of natural justice and void ab initio.”
3. I have heard the rival contentions and perused the facts of the case. The issue at the outset is of two folds, firstly whether the assumption of jurisdiction by the Assessing Officer was legal in reopening assessment u/s.147 of the Act or not. In this regard, learned counsel for the assessee, DR. Rakesh Gupta, Advocate invited my attention at page 12 of the Assessing Officer’s order, paragraph 5.1 of the order, which is reproduced for the sake of convenience as under: “5.1 Regarding reopening of the case: The notice u/s 148 was issued after taking approval of Additional CIT and was duly served upon assessee on 30.03.2007. The reasons were based on the material collected by AO in course of reassessment proceedings for the assessment year 2003-04. The copy of reasons were provided to assessee in the course of original reassessment proceedings on 07.12.2007 vide ordersheet entry dated 07.12.2007, in the course of appellant proceedings as well as in the course of present proceedings. More particularly assessee was provided with a copy of reasons vide notice dated 24.12.2010. Assessee neither in course of original reassessment proceedings nor in course of present proceedings objected even once on the validity of reopening. Matter has also been discussed by CIT APPEAL PANCHKULA IN APPEAL No.142/GGN/07-08 dated 01.12.2008 in para 4.4, 4.5 and 4.6. It has been held by the CIT appeal, Panchkula that AO has rightly invoked the provisions of sec 147 and reopening of assessments are justified.”
Dr. Gupta invited my attention to the provisions contained in Section 151. “151. Sanction for issue of notice- (1) In a case where an assessment order under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, 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: Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four 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”
4.1 From the provisions of Section 151(2), it is evident that if the case is reopened by any Assessing Officer who is below the rank of Joint Commissioner within four years no approval from the higher authority is required. The officer below the rank of the Joint Commissioner are Income Tax Officer, ACIT, DCIT to reopen the assessment within four year u/s.151(2) mandatorily did not have any approval from their superior authority. The reliance was placed on the decision in the case of S. Sewa Singh Gill vs. CIT (1962) 46 ITR 0152 High Court of Punjab at Delhi placed at paper book page 247 to 250 where it has been held that competency of ITO cannot be doubted and challenged as the assessment drafted by the ITO is final assessment and the CIT(A) making the approval regarding assessment is not valid. The facts of the case and the decision’s relevant part are reproduced below:
"Reference correspondence resting with the I. T. O's letter No. 1335, dated the 23rd of March, 1954. Will the I. T. O. please report immediately whether the pending assessment for the year 1945-46 in the above case has already been completed? If not, he should complete the same without further delay under intimation to this office. The draft assessment order may. however, be got approved by the I. A. C. before finalising the said assessment." This was followed by a further letter dated the 26th of May, 1954, from the Inspecting Assistant Commissioner to the Income-tax Officer which reads - "The draft assessment order in the case noted above has not so far been received in this office for my approval. The I. T. O. is therefore requested to submit the same without further delay." It was then that the assessment order was sent to the Inspecting Assistant Commissioner by the Income-tax Officer with a covering letter also dated the 26th of May, 1954, which, reads - "I have the honour to submit herewith the draft assessment order for 1945-46 in the case of Sardar Sewa Singh Gill for favour of approval. The order is to be approved by you as directed to the undersigned in C. I. T.'s No. K-185 (45)/ 52-53/2070 dated the 8th of May, 1954."
The accompanying assessment order is neither signed nor dated by the Income-tax Officer, though nowhere in the order itself is, it described as merely a draft order.
The question which arises is whether this assessment order or draft order as it is described by the respondents amounts to an assessment made by the Income-tax Officer under Section 23 of the Act or whether, as was contended on behalf of the respondents, there was no assessment. The contention of the petitioner in this respect may be summed up as being that there is no legal warrant whatever in the Income-tax Act or any other Act for an assessment to be made subject to the approval of a superior officer of the officer who is to make the assessment, and that therefore, once the Income-tax Officer had made his assessment, it at once became final and could not be changed by him even if the approval of the superior officer which was wrongly ordered in this case was withheld.
This principle was followed by me in C. W. No. 6 of 1953. Edward Keventer (Successors) Ltd. v. The State of Delhi, decided on the 20th of October, 1953, in which the award o£ a Land Acquisition Collector which had actually been approved by the Collector of Delhi and filed in the office had been withdrawn at the instance of the Chief Commissioner and an award by which the compensation was very heavily reduced was substituted. I held in that case that the award became the award of the Collector as soon as it was filed in the office and that although the approval of the Collector had in fact been obtained, this was unnecessary and unwarranted.
Apart from this there is no dearth of authorities to the effect that where under a statute it is the duty of a particular officer to decide a certain matter the matter must be decided according to the judgment of that officer and not under the directions of a superior.
In the present case the question of the submission of the assessment order of the Income- tax Officer for the approval of the Inspecting Assistant Commissioner appears to have only crept in at a late stage. In fact it does not seem to have been contemplated until about three months after the petitioner had appeared before the Income-tax officer and, because of complaints from the petitioner regarding the delay, the Commissioner thought fit by his letter of the 8th of May, 1954, to direct the obtaining of the approval of the Inspecting Assistant Commissioner before the award was finalised. In my opinion this direction must be held to be illegal and unwarranted.......
Technically this argument appears to me to be correct, but the case appears to depend mainly on the fact that quite evidently the order of assessment in this case is the best judgment of the Income-tax Officer on the matters before him and that this was intended to be his final decision in the matter unless he was ordered to revise it by, the Inspecting Assistant Commissioner and in my opinion once the Income-tax Officer had given his considered judgment on the matters which he was called on to decide, the process of submitting his order for the approval of his superior or, as the case may be, for revision carried out under his directions, was something which simply could not be done, and in my opinion the principle laid down in Motivala's case, ILR 36 Bom 599 applies to the present case.
One argument advanced on behalf of the respondents was that under the provisions of Section 29 of the Act any assessment order made by an Income-tax Officer must be followed by the service on the assessee of a notice of demand, and it is contended that the assessment order in this case could not be regarded as an assessment because it was not followed by such a notice of demand. Actually in the present case the notice which would follow from the terms of the assessment would be one intimating a refund, but whether the notice was to be for a demand or a refund is immaterial. The same argument applies as in Motivala's case, ILR 36 Bom 599 that the only thing which prevented the Income- tax Officer from giving effect to the terms of his assessment order without delay was the order for the obtaining of the prior approval of the Inspecting Assistant Commissioner, which is the main bone of contention in the petition and which I have already held to be illegal.”
Learned counsel for the assessee also relied upon the decision in the case of CIT vs. SPL’s Siddhartha Ltd. (2012) 345 ITR 0223 (Del.). The relevant decision in the said cases is reproduced hereinbelow:
“6. It is relevant to point out that sub-Section (1) and sub-Section 2 of Section 151 of the Act are two independent provisions. The definition of Joint Commissioner is contained in Section 2(28C) and the definition of Commissioner given in Section 2(16), which are as under:
“Joint Commissioner means a person appointed to be a Joint Commissioner of Income Tax or an Additional Commissioner of Income Tax under sub-Section (1) of Section 117.
“Commissioner” means a person appointed to be a Commissioner of Income Tax under sub-Section(1) of Section 117.”
Section 116 of the Act 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 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. It was so held in the following decisions:
(i) CIT Vs. Naveen Khanna (dated 18.11.2009 in (DHC). (ii) State of Bihar Vs. J.A.C. Saldanna & Ors. AIR (1980) SC 326. (iii) State of Gujarat Vs. Shantilal Mangaldas, AIR (1969) SCN 634.
8. 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 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 sell- settled. In Sheo Narain Jaiswal & Ors. Vs. ITO, 176 ITR 35 (Pat.), it was held: “Where the Assessing Officer does not himself exercise his jurisdiction under Section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non satisfaction of the condition precedent.” 5. The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja Vs. 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. 6. We are, therefore, of the opinion that the Tribunal has rightly decided the legal aspect, keeping in view well established principles of law laid down in catena of judgments including that of the Supreme Court.” 6. In the circumstances and the facts of the present case, the AO has acted at the behest of the superior authority and accordingly assumption of jurisdiction was bad. Accordingly, it will be a case of failure to exercise the discretion all together and such direction is held to be illegal and unwarranted, therefore, order so passed by the AO is directed to be quashed.
7. Secondly, the present matter was restored back to the file of the AO by the ITAT in vide order dated 10th September, 2009 and the order is on record. The relevant paragraph is reproduced hereinbelow:
“Firstly, we shall proceed to see as to whether the Assessing Officer has complied the provisions of section 147 to 151 of the Act, as per law or not. In this case, the notice u/s. 148 was issued on 28.93.2007, after recording the reasons, which are mentioned in the assessment order itself. The AO thereafter issued noticed u/s. 142(1) to the assessee on 01. 11.2007, in reply-thereto, the assessee requested the AO to furnish the copy of reasons recorded. Thereafter, the copies of reasons were furnished to the assessee on 07.12.2007. The filed its reply on 27.12.2007. The case was fixed for hearing on 31.12.2007, and thereafter, the AO completed the assessment on the very same day i.e. 31.12.2007. Fromthe perusal of the assessment order, its is, thus clear that the assessment has been completed within. three days after the receiving the assessee's reply on 27.12.2007. The assessee's objections to the reasons recorded has not been considered and decided by the AO before he makes the .assessment u/s. 147 of the Act. We, therefore, find that the spirit of the judgment of Hon'ble Supreme Court in the case of GKW Driveshaft Limited reported in 251 ITR, 19 (SC) has not been compiled with. At this stage, the ld. counsel for the assessee has submitted that this irregularity can be cured if the matter is restore back to the file of the AO, directing him to deal with the objections raised by the assessee before passing the assessment order on merit. In this connection, ld. counsel.
In the result, both the appeals filed by the assessee as well as by the revenue are allowed for statistical purpose. 7.1 From the said order of the ITAT, it is evident that objections of the reasons recorded was not considered and decided by the AO. The AO makes the assessment u/s.147 of the Act. Learned counsel for the assessee relied upon the decision in the case of M/s. S. Power Pvt. Ltd. vs. ITO in dated 29.04.2016 at pages 288 to 300 and the relevant decision in paragraph 16 is reproduced hereinbelow:
In the present case also there was a failure on the part of the AO to comply with the mandatory requirement of disposing off the objections of the assessee, therefore, the reopening was not valid. Accordingly, it can safely be held that the reopening done by the AO 147 r.w.s. 148 of the Act on the basis of incorrect reasons and without disposing off the objections raised by the assessee was invalid. In that view of the matter the impugned order passed by the ld. CIT(A) is set aside and the reassessment framed by the AO u/s.147 r.w.s. 143(3) of the Act is quashed.
7.2 The reliance in the said decision was placed in the case of PCIT vs. Tupper Ware India Pvt. Ltd. reported in (2016) 284 CTR 68 (Del) available at pages 251 to 255 and the relevant paragraph at page 253. The relevant paragraph of the decision is reproduced hereinbelow.
6. The court is of the considered view that after having correctly understood the decision of the Supreme court in G.K.N. Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT(A) committed an error in not quashing the reopening order and the consequent assessment.
In the circumstances and facts of the case, the identical facts are there in the present case and the AO has not disposed of the objections of the reasons raised by the assessee as mentioned by the ITAT in the first round, and therefore, necessarily the assessment is liable to be quashed. Accordingly, we order to quash the said assessment/re-assessment. Thus on both the counts legally the assessee succeeds on legal grounds and grounds no.1, 2 and 3 are allowed. Since, the assessee succeeds on legal grounds. The grounds on merit become academic in nature, therefore, do not require any adjudication.
9. In the result, the appeal of the assessee in ITA is allowed.