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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SH. N. K. SAINI & SMT. BEENA A. PILLAI
ORDER PER BEENA A. PILLAI, JM: The present appeals & cross objections have been filed 1. by revenue and assessee against order dated 10.12.2013 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00) passed by Ld.CIT(A)-X, New Delhi for assessment year 1998- 99 and 1999-2000 on the following grounds of appeal:
ITA 872/del/2014
1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and on facts in quashing the action u/s 147 invoked by the AO”.
2. The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
CO No. 254/del/2014
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in rejecting the contention of the assessee that there was no service as per law of the notices including notice u/s 148 and thus the reassessment order passed by Ld. AO was without assuming jurisdiction as per law and therefore are illegal and void ab initio.
2. That in any case and in any view of the matter, action of Ld. CIT(A) in rejecting the contention of the assessee that there was no service as per law of the notices including notice u/s 148 is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That the cross objector craves the leave to add, amend, modify, delete any of the ground(s) of cross objection before or at the time of hearing.
Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00)
1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law and on facts in quashing the action u/s 147 invoked by the AO”.
2. The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.” CO No. 255/del/2014
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in rejecting the contention of the assessee that there was no service as per law of the notices including notice u/s 148 and thus the reassessment order passed by Ld. AO was without assuming jurisdiction as per law and therefore are illegal and void ab initio.
That in any case and in any view of the matter, action of Ld. CIT(A) in rejecting the contention of the assessee that there was no service as per law of the notices including notice u/s 148 is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That the cross objector craves the leave to add, amend, modify, delete any of the ground(s) of cross objection before or at the time of hearing. 2. The brief facts of the case are as under:
A survey operation under section 133A of the Act was conducted at the business premises of assessee on Page 3 of 11 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00)
26.09.2003 and statement of Sh. Sanjay Ghai, Director was recorded during survey operation. Enquiries were conducted from the records and assessing officer came to the conclusion that assessee had failed to file its return of income for assessment year 1998-99. On scrutiny of impounded books of accounts during survey operation, assessing officer was of the view that assessee had taxable income. Accordingly notice under section 148 was issued requiring assessee to file its return of income. In compliance to the notice issued under section 142(1) of the Act, assessee did not file any reply neither did he file return of income. Assessing officer was left with no choice but to complete assessment under section 144 of the Act. Assessing officer completed assessment on 24.03.2006 under section 148 read with section 144 of the Act, by making various additions in the hands of assessee.
Aggrieved by order of Ld. AO, assessee preferred an appeal before Ld. CIT (A). Assessee took the plea that approval under section 151 of the Act has been taken from Ld. CIT for issuing notice under section 148 of the Act, instead of JCIT or Addl CIT. It was submitted before Ld. CIT (A) that issue of notice under section 148 is invalid in the case of assessee.
Ld. CIT (A) allowed the legal issue raised by assessee by relying upon decision of Hon’ble Bombay High Court in the case of Ghanshyam K. Khabarani vs. CIT reported at 346 ITR 443 and decision of Hon’ble Delhi High Court in Page 4 of 11 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00) the case of CIT vs. S.P.L. Siddhant Ltd. reported at 45 ITR 223.
Aggrieved by order of Ld. CIT(A) revenue is in appeal before us now. Assessee has filed cross objection supporting order of Ld. CIT (A).
At the outset, Ld. AR submitted that grounds raised in both the assessment years by revenue relates to compliance of conditions under section 151 of the Act. We are, therefore, inclined to dispose of these grounds in both the assessment years by way of a common order.
Ld. DR submitted that reopening of assessment was based on the information gathered during the survey which indicated that the assessee did not file its return of income for assessment years 1998-99 and 1999-2000.
Ld. DR submitted that authority required to grant its approval to the reopening of assessment was Additional Commissioner of Income-Tax, however, approval has been granted fact by Ld. CIT, Delhi-III, New Delhi and notice under section 148 was issued on 26.03.2005 by affixture. He submitted that forwarding letter of Commissioner of Income- Tax would indicate that he was satisfied of circumstances, which warranted grant of approval. Ld. DR submitted that satisfaction/approval has been obtained from a higher authority than one contemplated by law cannot be considered to be an invalid notice. He submitted that proposal for Page 5 of 11 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00) reopening of these assessments has been made through proper channel and such technical mistakes should not be considered as a hindrance. He supported order passed by assessing officer and submitted that assessment has been conducted as per law.
8. On the contrary, Ld. AR submitted that assessing officer at page 1 of his order has admitted that approval was obtained from Ld. CIT. He submitted that all the notices were issued by Department at wrong address. Ld. AR further submitted that in remand report called by Ld. CIT (A), it has been admitted by assessing officer himself that approval should have been taken under section 151 from JCIT instead of Ld. CIT. Ld. AR submitted that notice is claimed to have been issued by assessing officer on an address is an eyewash, when assessing officer knew that the company did not exist on such address at which notices were sent.
Ld. AR submitted that, it is an admitted position that assessee had not filed its return of income for both assessment years under consideration and therefore the case of assessee would be governed by section 151(2) of the Act which requires satisfaction of Joint Commissioner to be reached. He placed reliance upon decision of Hon’ble Bombay High Court in the case of Ghansyam K. Khabarani vs. CIT, reported in 346 ITR 443 and decision of Hon’ble Delhi High Court in the case of CIT vs. SPL Siddhant Ltd., reported in 345 ITR 223. Page 6 of 11 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00)
We have perused the submissions advanced by both sides in light of records and decision relied upon by Ld.AR. Before us, it has been contended by Ld. AR, that notice dated 24.03.2005 has been issued beyond a period of 4 years and therefore, satisfaction should have been recorded by JCIT instead of Ld. CIT.
In the instant case admittedly neither assessment under section 143(3) nor any notice under section 147 has been completed prior to the issuance of notice dated 24.03.2005. It is also observed from assessment order passed by Ld. AO that assessee had not filed its return of income for both the years under consideration before issuance of notice under section 148. Therefore, on such facts sub clause 2 of section 151 of the Act would be applicable which reads as under:
“Sanction for Issue of Notice (2) in a case other than a case falling under subsection (1), no notice shall be issued under section 148 by an assessing officer, who is below the rank of joint 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.”
On bare reading of sub clause (2) to section 151 of the Act, the sanctioning authority for issue of notice under section 148 in a situation mentioned therein, is a joint Commissioner of Income Tax. However, from the records placed before us it is clear that Ld. CIT has sanctioned for issuance of notice under section 148. The expression "Joint Page 7 of 11 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00)
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 present case, the records indicate that a proposal on 10.03.2005, was submitted to the Commissioner of Income- Tax, Delhi -III, by the Additional Commissioner of Income-Tax circle -VII(1), New Delhi. On 22.03.2005, Commissioner of Income-Tax, after recording satisfaction granted approval. Copy of the reasons recorded and their sanction granted by Ld. CIT, Delhi-III is a part of the order passed by Ld. CIT(A). Further, from the remand report reproduced in the order of Ld. CIT(A), the position has been admitted by Ld.AO.
Hon’ble Bombay High Court in the case of Ghansyam K. Khabarani vs. CIT (supra) on similar facts has held as under:
“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 of Income-tax is not a Joint Commissioner within the meaning of section 2(28C). In the present case, the Additional Commissioner of Income-Tax forwarded the proposal submitted by the Assessing Officer to the Commissioner of Income-Tax. The approval which has been granted is not by the Additional Page 8 of 11 Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00)
Commissioner of Income-tax but by the Commissioner of Income-tax. There is no statutory provision here 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. In a similar situation the Delhi High Court in CIT v. SPL's Siddhartha Ltd. (ITA No. 836 of 2011 decided on September 14, 2011)—since reported in [2012] 345 ITR 223 (Delhi) held that powers which are conferred upon a particular authority have to be exercised by that authority and the satisfaction which the statute mandates of a distinct authority cannot be substituted by the satisfaction of another. We are in respectful agreement with the judgment of the Delhi High Court.”
It is observed that Ld. CIT(A) has given a detailed finding in respect of the manner in which the sanction has to be obtained on the facts before us. Revenues argument though seems plausible and logical because the Commissioner or Chief Commissioner is an undoubtedly ranked higher authority than Joint Commissioner, yet at the same time, the provision contained in Sec. 151(2) unambiguously states that the competing authority in such cases, as before us is the Joint Commissioner. Revenue submissions that such technicalities should not be allowed to be corrected would render sub-section (2) of section 151 superfluous.
Sarvodaya Realtors Vs DCIT(AY 1998-99, 1999-00)
On the basis of the above discussion respectfully following the decision of Hon’ble Bombay High Court in the case of Ghansyam K. Khabarani vs. CIT, reported in 346 ITR 443 and decision of Hon’ble Delhi High Court in the case of CIT vs. SPL Siddhant Ltd reported in 345 ITR 223, we hold that the notice of reopening cannot be held to be sustainable in law. Accordingly grounds raised by the revenue for both assessment years stands dismissed.
The cross objections raised by assessee being CO No. 254/Del/2014 and 255/Del/2014 are in support of order passed by Ld. CIT(A). As we have dismissed the appeal filed by revenue, the cross objections filed by assessee becomes infructuous.
In the result appeals filed by revenue and cross objections filed by assessee for assessment year 1998-99 and 1999-2000 stand dismissed.
Order pronounced in the open court on 21st March, 2017.