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Income Tax Appellate Tribunal, Kolkata Bench, Kolkata
Before: SHRI ABY. T. VARKEY & SHRI M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL Kolkata Bench, Kolkata (Bench – “D”)
BEFORE SHRI ABY. T. VARKEY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER
I.T.A. No.1233/Kol/2015 Assessment year 2008-09 I.T.O Wd-39(2), Midnapore G. S. Sharma & Ors. [PAN : AAGFG5967J] -Vs- (Appellant/Revenue) (Respondent/Assessee)
For the Appellant Shri A. K. Sinha, Addl. CIT For the Respondent Shri Somnath Ghosh, Advocate Date of Hearing 09.06.2017 07.07.2017 Date of Pronouncement
ORDER Per M. BALAGANESH, AM
This appeal by revenue is arising out of order of CIT(A)-11, Kolkata vide Appeal No.544/CIT(A)-11/Ward-39(2)/Mid/14-15/Kol dated 24.07.2015 against the order of the assessment framed by I.T.O, Wd -39(2), Midnapore under Section 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for Assessment Year 2007-08 vide his order dated 28.03.2013.
2 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. 2. The only issue to be decided in this appeal is as to whether the Ld. CIT (A) was justified in quashing the reassessment proceedings in the facts and circumstances of the case.
The brief fact of this issue is that the assessee is a partnership firm carrying on the business of mining and transportation.
The return of income for the A.Y 2008-09 was filed by the assessee on 30.09.2008 disclosing total income of Rs.9264/-. The assessment was completed by the Ld. A.O u/s 144 of the Act on 30.12.2010 after rejection of books of accounts u/s 145(3) of the Act and income estimated at Rs.4,24,382/- by applying 8% of total deposits in the bank. Hereafter, the Ld. A.O issued notice u/s 148 of the Act on 07.03.2012 which was within four years from the end of the relevant assessment year. The said notice u/s 148 was issued after seeking prior approval of Ld. Commissioner of Income Tax, Kolkata-XIX, Kolkata. The reassessment was completed u/s 147/143(3) of the Act on 28.03.2013 determining total income at Rs.37,60,630/- for the A.Y 2008-09. Before the Ld. CIT(A) it was contended that the reassessment framed by the Ld. A.O suffers from the basic infirmity in as much as the said reopening notice u/s 148 of the Act was issued after obtaining the prior approval of Ld. Administrative Commissioner instead of Ld. Joint Commissioner of Income Tax in terms of Section 151(2) of the Act. The Ld. CIT(A) verified the reasons recorded for reopening the assessment wherein it has been clearly mentioned that the Ld. A.O had reopened the same after obtaining the prior approval of the Ld. CIT instead of JCIT. The Ld. CIT(A) annulled the reassessment proceedings by making the following observations:
I have carefully considered the arguments of the A/R of the appellant and perused relevant assessment order as well as the records. The short issue
3 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. for my consideration in the additional grounds of appeal is that whether the approval u/s.151(1) of the Act has been obtained from the proper authority or not. In this connection, it is pertinent to refer to the provisions of section 151 of the Act which reads as under:
"Section 151. Sanction for Issue of Notice:
(1) In a case where an assessment 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 Chief 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."
6.1 From the above, it is evident that s. 151 of the Act provides the procedure which is to be followed before issue of notice under section 148 of the Act. Sub-section (1) of Section 151 of the act would be applicable where the original assessment was completed under Section 143(3) and sub-section (2) would be applicable where the original assessment was completed under Section 143(1). In the instant case, it is an admitted fact that the original assessment was completed under Section 144 read with s. 143(3) which is evident from the following observation of the impugned assessment order framed u/s. 147/143(3) of the Act that for reopening of assessment that “………. The return was selected for scrutiny u/s-143(3). Assessment was completed on 30-12-2010 u/s-l44/143(3) as the assessee failed to produce books of Accounts......"
4 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. 6.2 From the above, it is evident that the AO at the time of recording reasons for reopening of assessment has categorically stated that the original assessment was framed u/s. 144/143(3) for the assessment for AY 2008-09. In the course of hearing, the original assessment records were called for and it was found that the original assessment was completed under Section 144. In the face of these admitted facts, I accept the arguments that regular assessment was completed under Section 144 and, therefore, sub-section (1) of Section 151 would be applicable.
6.3 Under section 151 of the Act, the authorities are identified who can issue notice for reopening of assessment under section 148 of the Act after forming a belief that income chargeable to tax has escaped assessment. As per sub-section (1) of section 151, where an assessment is framed under sub-section (3) of section 143 or 147, no notice shall be issued under section 148 by an Assessing Officer who is below the rank of Assistant Commissioner / Deputy Commissioner of Income-tax unless Joint Commissioner of Income-tax is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. In case an assessment requires reopening after four years from the end of the relevant assessment year, the Assessing Officer is required to obtain approval/sanction from the Chief Commissioner or Commissioner before issuance of notice under section 148. In the instant case, undisputedly assessment was framed under sections 144. It is also an undisputed fact that the assessment was sought to be reopened was within four years from the end of the relevant assessment year, i.e., 2008-09, as notice under section 148 was issued on 07-03-2012. It is also an undisputed fact that sanction/approval was accorded by the Commissioner and not by the Joint Commissioner as mentioned in the reasons recorded by the AO. Admittedly, the assessment was reopened within four years from the end of the relevant assessment year and the AO was below the rank of Assistant Commissioner or Deputy Commissioner, as required in sec. 151(1) of the Act. Therefore, he had to take the permission from Joint Commissioner of Income Tax but the assessment was reopened after taking permission from Commissioner of Income Tax-XIX, Kolkata. The Hon'ble Delhi High Court has considered this issue in the case of CIT vs. SPL's Siddhartha Ltd. [2012]345 ITR 223, wherein their Lordships held as under:--
"Held, that under section 151 of the Act, it was only the Joint Commissioner or Additional Commissioner, who could grant the approval for issue of notice under section 148. The approval was not
5 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. granted by the Joint Commissioner. Instead, it was taken from the Commissioner of Income Tax. This was not an irregularity curable under section 292B. The notice was not valid."
Further, the Hon’ble Bombay High Court in the case of Ghanshyam K. Khabrani vs. ACIT [2012] 346 ITR 443, wherein it was 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 is not a Joint Commissioner within the meaning of section 2(28C). In the instant case, the Additional Commissioner forwarded the proposal submitted by the Assessing Officer to the Commissioner. The approval which has been granted is not by the Additional Commissioner but by the Commissioner. There is no statutory provision under which 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."
6.4 The ratios of the above decisions are squarely applicable to the instant case and, respectfully following the same, I am of the considered opinion that reopening of the assessment after taking approval from Commissioner of Income Tax-XIX, Kolkata instead of Joint Commissioner of Income Tax, Range-2, Midnapore is not and therefore, the AO did not assume proper jurisdiction to issue notice u/s. 148 of the Act. Thus, notice issued u/s. 148 of the Act is invalid and, therefore, assessment framed consequent thereto is void ab initio. Accordingly, the assessment framed consequent to illegal/invalid notice is hereby annulled.
Since the assessment itself has been quashed, the other grounds of appeal which are against the addition made in the order of reassessment do not survive adjudication.
Aggrieved the revenue is in appeal before us on the following grounds:
6 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. 1. That Ld. CIT(A) has erred in law and on facts by holding that the entire proceeding is void ab-initio without appreciating the fact that the proceeding u/s. 147 was initiated after issuing legal notice u/s. 148 on the basis of reasons recorded u/s. 148(2) and after having taken approval from Ld. CIT.
That Ld. CIT(A) has erred in law and on facts in observing that re- assessment proceedings initiated by issue of notice u/s. 148 become without jurisdiction and re-assessment framed is to be annulled without appreciating the fact that since the assessee has joined the proceedings consequent to the notice u/s. 148 of the Act, he has no right to challenge the validity of the re-opening of assessment in the light of the provisions of Section 292BB of the Act.
That the order of the Ld. CIT being erroneous in law and on facts which needs to be vacated and the order of the A.O. be restored.
That the appellant craves leave to add, alter or amend any of the grounds of appeal during the course of hearing.
The Ld. D.R relied on the provisions of section 292BB of the Act stated that the assessee has cooperated in the reassessment proceedings and hence, cannot question the validity of the reassessment thereafter. In response to this, the Ld. A.R relied on the decisions of the Hon’ble Delhi and Bombay High Court supra relied by the Ld. CIT(A). He also placed reliance on the Co-ordinate Bench decision of the Lucknow Tribunal in the case of Sardar Balbir Singh vs. Income Tax Officer reported in [2015] 39 ITR (Trib.), 574 (Lucknow Trib.) dated 13.03.2015.
We have heard the rival submissions. It is not in dispute that the Section 148 notice in the instant case has been issued after getting approval of the Ld. CIT instead of Ld. JCIT. The Ld. CIT(A) by placing reliance on the decisions of Hon’ble Delhi High Court supra had quashed the reassessment proceedings. The
7 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. same are not reiterated for the sake of brevity. We find that the decision relied by the Ld. A.R on the Co-ordinate Bench of Lucknow Tribunal clearly supports the case of the assessee wherein it was held as follows:-
Following the aforesaid judgments of the Hon'ble Delhi and Bombay High Court, the Income-tax Appellate Tribunal Delhi Bench in the case of ITO v. Tirupati Cylinders Ltd., New Delhi (supra) has also held that under section 151 of the Act, it was only the Joint Commissioner or Additional Commissioner who could grant the approval for issuance of notice under section 148 of the Act and if the approval is not granted by the Joint Commissioner or Additional Commissioner and instead it was granted by the Learned Commissioner of Income-tax, then the same was not an irregularity curable under section 292F of the Act and notice under section 148 of the Act would be invalid and void ab initio. The Tribunal accordingly quashed the assessment after holding that reopening was not done in accordance with the provisions of the Act.
Again the same view was taken by the Pune Bench of the Tribunal in the case of Rahul Constructions v. Deputy CIT (supra). 18. Keeping in view the totality of the facts and circumstances of the case and the judgments referred to above, we are of the considered opinion that sanction accorded by the learned Commissioner of Income-tax to the Assessing Officer for issuance of notice under section 148 of the Act was not proper, therefore, the Assessing Officer did not assume proper jurisdiction to issue notice under section 148 of the Act. Thus, notice issued under section 148 of the Act is invalid and, therefore, assessment framed consequent thereto is invalid and void ab initio. We accordingly quash the assessment framed consequent to illegal/invalid notice."
In the light of the aforesaid legal position, we are of the view that in the instant case, since notice under section 148 of the Act was issued without obtaining approval from the competent authority, notice issued under section 148 of the Act is invalid and, therefore, the assessment framed consequent thereto is not a valid assessment and void ab initio. We accordingly set aside the order of the learned Commissioner of Income-tax (Appeals) and annul the assessment.
8 I.T.A. No.1233Kol/2015 Assessment Year 2008-09 G.S. Sharma & Ors. 8. Respectfully following the aforesaid decisions, we do not find any infirmity in the order of the Ld. CIT(A) in quashing the reassessment proceedings in the facts and circumstances of the case. Accordingly, the grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 07.07.2017. Sd/- Sd/- [Aby. T. Varkey] [M. Balaganesh] Judicial Member Accountant Member
Dated : 07.07.2017 {RS SPS}
Copy of the order forwarded to: 1. Appellant– I.T.O., Wd-39(2), Midnapore. 2. Respondent- G. S. Sharma & Others, Madhu Bhavan, South Inda, Kharagpur, Dist. Paschim Midnapore, W.B. – 721301. 3. CIT(A)- Kolkata 4. CIT – , Kolkata 5. CIT(DR), Kolkata Benches, Kolkata