SMT. RAJ KUMARI,MUZAFFARNAGAR vs. ITO, MUZAFFARNAGAR

O R D E R All these appeals have been filed against the respective orders of the CIT (Appeals).

3. Grounds No.1, 2, 7, 8 & 10 were not argued by the ld. Counsel during the course of the hearing.

4. The only ground on which the ld. Counsel relied and argued are grounds no.4, 5 & 6 which relate to the applicability of the provisions of section 151 of the Income-tax Act, 1961 (hereinafter ‘the Act’).

Thereafter, notice u/s 142(1) of the Act dated 27.07.2011 calling for the filing of the income-tax return was sent through speed post asking to make case on the basis of the inquiry conducted after the receipt of the TEP that the assessee has sold approximately 25 bigha land after plotting @ Rs.800/- per sq.yards but the sale deeds were executed at the circle rate @ Rs.300/- per sq.yards. During the impugned assessment year, the assessee sold the plots of land measuring 4,779.79 sq.mtrs. along with other persons having total circle value at Rs.37,36,562/- in Government record. It had valued at Rs.20,000/- per bigha as on 01.04.1981. The assessee’s share was 1/4th at Rs.8,02,584/- which was added in the income of the assessee.

The assessee went in appeal before the CIT (A) and challenged the initiation of the proceedings u/s 147 as well as the fact that there was no valid sanction u/s 151 prior to the issue of the notice u/s 148. The CIT (A) partly allowed the appeal of the assessee.

“ ….. Please refer to your letter F.No.Nil Dated Nil on the above subject. In this connection approval for issuing of notice u/s 148 of the Income Tax Act, 1961 is hereby accorded in the following cases for A.Y. 2004-05 and 2005-06. The prescribed proforma duly approved, are enclosed herewith.

The said approval was received in the office of the Income-tax Officer, Ward 2 (1), Muzaffarnagar on 29.03.2011 which fact is apparent from the receipt date being marked on the said letter available at page 7A of the paper book. This letter clearly shows that the approval for the issue of the notice u/s 148 has been received by the AO after the issue of the notice u/s 148 (2). Now, the question arises before me whether the approval so granted is in accordance with the provisions of section 151 of the Act. The provisions of section 151 as was in existence prior to its amendment by the Finance Act, 2015, as was in existence on the date when the notice u/s 148(2) was issued read as under :-

5 & 1298/Del./2014 ITA Nos.1300 to 1305/Del./2014 “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 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. Explanation.—For the removal of doubts, it is hereby declared that the Joint Commissioner, the Principal Commissioner or Commissioner or the Principal Chief Commissioner or Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.”

Sub-section (1) is applicable in case where the assessment has been completed u/s 143(3) or section 147 and the notice has been issued after the expiry of four years. Sub-section (2) is applicable in a case other than the case not falling under sub-section (1). In the case of the assessee, it is a fact that no assessment was earlier made u/s 143(3) or 147 and, therefore, the case of the assessee falls within the provisions of section 151(2). This section mandates that the notice u/s 148 cannot be issued by an AO who is below the rank of Joint Commissioner after the expiry of four years from the relevant assessment year unless the Joint Commissioner is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such Joint Commissioner being satisfied on the reasons recorded by the AO about the fitness of a case for the issue of notice u/s 148 need not to issue such notice himself. From the copy of the notice which is available at page 7, it is apparent that the notice in this case has been issued after the expiry of four years on 28.03.2011. The Addl. Commissioner approved the issuing of the notice u/s 148 of the Act vide letter dated 25.03.2011.

The said letter was received by the Income-tax Officer on 29.08.2011. The letter has not been received on 25.03.2011. The provisions of section 151(2) is explicitly clear that the notice u/s 148 cannot be issued unless the Joint Commissioner is satisfied on the reasons recorded by such AO that it is a fit case for the issue of the notice. This clearly denotes that the satisfaction must be recorded by the Joint Commissioner before the issue of the notice and the AO can issue the notice only after the satisfaction of the Joint Commissioner. I have gone through the letter dated 25.03.2011 which states “approval for the issue of notice u/s 148 – reg.”. This letter subsequently talks of according of the approval and further issue of the notice u/s 148. Section 151, in my opinion, does not talk of approval of the action of the AO but requires satisfaction of the Joint Commissioner on the reasons recorded by the AO that it is a fit case for the issue of such notice. There is difference in the word ‘satisfaction’ and ‘approval’.

Approval can be subsequent to the occurrence of the events while the issue of the notice. Satisfaction represents a decision based on the material on record. The decision may not be conclusive. It requires application of mind by the authority and to give specific finding after looking into the reasons recorded by the AO that it is a fit case for the issue of such notice.

Merely approving of the notice, in my opinion, will not satisfy the ingredients as laid down u/s 151 of the Act. On approval from the letter dated 25.03.2011, I noted what the Addl. Commissioner of Income-tax has approved the issuing of the notice u/s 148. He has not given any finding that on the basis of the reasons recorded by the AO, he is satisfied that it is a fit case for the issue of the notice u/s 148 of the Act. What he has done, he has approved the proforma sent by the AO. This approval has also been received by the AO on 29.08.2011 i.e. after the issue of the notice u/s 148 dated 28.03.2011. This, in my opinion, does not meet the requirement of the provisions of section 151 (2) and, therefore, I quash the notice issued u/s 148 (2) as this was issued merely in a mechanical manner without applying the mind by the Addl. Commissioner to the reasons recorded by the AO.

8 & 1298/Del./2014 ITA Nos.1300 to 1305/Del./2014 India Electricity Supply Co. Ltd. vs. ITO – 333 ITR 237. Hon’ble Allahabad High Court in the case of Dr. Shashi Kant Garg v. Commissioner of Income-tax – 285 ITR 158 under para 33 of its order held that it is now well settled that a notice issued without obtaining the prior sanction of the authority mentioned in the provisions of section 151 where its proviso to sub-section (1) or the sub-section (2) would be invalid and the entire proceedings taken in pursuance thereof is liable to be quashed and the same would be without jurisdiction. I accordingly quash the order passed in consequence of issuing of the notice u/s 148 (2) of the Act.