MEHTA SULFITES (I) LTD,MUMBAI vs. ACIT 10(2), MUMBAI

सुनवाई क� तार�ख / : 27/10/2015 Date of Hearing घोषणा क� तार�ख / : 20/11/2015 Date of Pronouncement आदेश / O R D E R PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 08-04-2013 of Commissioner of Income Tax (Appeals)22 , Mumbai (Hereinafter called as the CIT(A) ) for assessment year 1999-2000. The assessee has raised following additional grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in making disallowance of depreciation on plant and machinery amounting to Rs.8,29,134/- without considering our submission properly.

(A.Y.1996-97) 2M/s Mehta Sulfites (India) Ltd. Vs. CIT

2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in making addition u/s68 of Rs.73,35,000/- without considering our submission properly.

Additional Grounds 3. On the facts and in the circumstances of the case and in law, the proceeding initiated by issuance of notice dated 13-03-06 u/s 148 of the I.T. Act, is invalid and bad in law. 4. On the facts and in the circumstances of the case and in law, the assessment order passed u/s144 r.w.s. 147 of the I.T. Act , is invalid and bad in law.

2. At the outset the ld.AR drew to our attention to application dated 26.10.2015 requested for admission of additional grounds of appeal by submitting that same were inadvertently not raised in the appeal filed earlier and the same involved legal issues which go to the roots of the matter in the appeal. The ld. Counsel prayed for the admission of these grounds by placing reliance on the decision of the Hon’ble Supreme Court in case of National Thermal Power Ltd. Vs CIT 229 ITR383(SC).The ld DR opposed the admission of same on the ground that the same was not raised earlier. After hearing the counsels for both the parties we are of the view that since the issue raised by the counsel of the assessee in the additional grounds of appeal are legal issues and go to the very basis of the case of the assessee and therefore, the same are admitted.

3 The common issue raised in the additional grounds by the ld. Counsel of the assessee is that the proceedings initiated by issue of notice 148 were invalid and so were the order of re-assessment made as a result of these proceedings.

(A.Y.1996-97) 3M/s Mehta Sulfites (India) Ltd. Vs. CIT 4 The brief facts of the case are that the assessment u/s144 of the I.T. Act was framed at 25/03/2003 at a total loss of Rs.2,83,55,630/-. Thereafter u/s148 of the Act was issued on 13/06/2006 after obtaining approval of CIT-M on 09/03/2006. Assessee did not file return in response to the notice u/s147 of the Act dated 30/06/2006. However the assessee addressed a letter dated 29.08.2006 to the ld. AO to treat the return filed originally on 28/11/2000 as return in response to notice 148 of the Act. Thereafter the AO framed the assessement u/s 144 r.w.s 147 vide order dated 31/08/2006.The said order was appealed against before the first appellate authorities raising the various grounds. However, the first appellate authorities dismissed the appeal by citing various reasons.

5 The ld. Counsel for the assessee submitted before us that the reassessment proceeding u/s147 r.w.s 148 of the Act and consequent assessment order u/s144 r.w.s. 147 of the Act dated 31.08.2006 were invalid and void ad initio. The ld. Counsel argued that where the assessment proposed to be re-opened after four years from the end of the relevant assessment year under section 147 r.w.s. 148 of the Act which was framed u/s 144 of the Act , issue of notice u/s 148 were to be sanctioned/approved by joint Commissioner and only then the re-assessment proceeding could have been validly initiated. However, in the instant case the re- assessment proceedings u/s147 r.w.s. 148 were sanctioned CIT-M on 09/03/06 which is against the provision of the Act. The ld. Counsel submitted that the original assessment in the case of the assessee was framed u/s 144 r.w.s. 143 vide order dated 25.03.2003 and therefore, the notice for re-assessment could only be sanctioned u/s151(2) of the Act by the Joint Commissioner and whereas as a matter fact in the present case the AO obtained the sanction of the Commissioner u/s 151(1) of the Act which is bad and therefore the re-assessemnt proceedings and consequential order

(A.Y.1996-97) 4M/s Mehta Sulfites (India) Ltd. Vs. CIT passed u/s 144 r.w.s. 147 dated 31.08.2006 were also in valid and non est and should be quashed. The ld. Counsel strongly placed reliance on the decisions of the Tribunal dated 29.05.2015 ‘B’ Bench and also the decision of Bombay High Court in the case of Ghanshyam Khabrani v/s Asst. CIT (2012) 346 ITR 443. The ld. Counsel finally prayed that the re-assessment proceedings u/s 147 r.w.s. 148 of the Act and order passed u/s144 r.w.s 147 as a result of the said proceedings may kindly quashed on the ground that in the present case the issuance of notice u/s 148 of the Act was required to be sanctioned u/s 151(2) of the Act by the Joint commissioner and not u/s 151(1) of the Act by the Commissioner of Income Tax which is in violation of the provisions of section 151(2) of the Act. The ld. DR on the other hand submitted that the reassessment proceeding were initiated after of obtaining due sanction from the CIT(M) u/s 151(1) and therefore, prayed for upholding the order of CIT(A).

4 We have considered the rival submissions of the counsel for the assessee as well as the ld. Departmental Representative and perused the material on record. We note that the assessee filed its return of income on 28.11.2000 by declaring loss of Rs.3,34,76,100/-. Thereafter the AO framed the assessment u/s 144 r.w.s. 143(3) of the Act vide order dated 25.03.2003 at a loss of Rs.2,83,58,630. The ld. AO issue notice u/s 148 of the Act on 13.03.2006 after recording reasons the copy of which is filed as page no. 78 of the paper book to withdraw the depreciation on plant and machinery. The ld. AO moved a proposal for obtaining sanction vide letter No ACIT 10(2)/Prop/u/s.147/2005-06 dated 03.03.2006 copy of which is filed as page no.79 of the paper book. The extracts of the said letter are reproduced as under:

NO.ACITl O(2)/Prop.uls.117 12005906. Office of the Asstt.

(A.Y.1996-97) 5M/s Mehta Sulfites (India) Ltd. Vs. CIT Commissioner of Income Tax-I 0(2), R.NO. 432, 4th floor,Aayakar Bhavan, M.K.Road, Murnbai-400 020. Dated: 3rdMarch,2006

The Commissioner of Income-tax-I 0 Mumbai.

Sub.: Proposal for reopening of assessment in the case of M/s. Mehta Sulfites Pvt. Ltd. -Asstt.Year 1999-2000 & 2000-01 ************

Sir,

Kindly refer to the above.

Yours faithfully, (B.D. MITRA ) Assistant Commissioner of Income-tax 10(2), Mumbai. Encl..:As above.

(A.Y.1996-97) 6M/s Mehta Sulfites (India) Ltd. Vs. CIT 5 It is clear from the above letter that the sanction for issue of notice u/s 148 was accorded by CIT(M) on 09.03.2006. Now, the legal questions raised by the ld. Counsel of the assessee before us is that the reassessment proceedings are invalid and void and so is the consequently assessment order. We note that the original assessment has been framed u/s 144 r.w.s. 143(3) of the Act vide order dated 25.03.2003 which was proposed to be re-opened and re-assessed by issue notice u/s 148 of the Act on 13.03.2006 after obtaining the sanction u/s 151 (1) of the Act from the CIT Mumbai and the assessment was framed u/s 144 r.w.s. 147 at Rs.2,83,55,630 vide order dated 31.08.2006. From the facts of the case is clear that the issue of notice 148 has been sectioned by CIT-M u/s 151(1) of the Act however where the assessment framed u/s 144 of the Act is proposed to be reopened under reassessment proceeding u/s 148 of Act , the issue of notice u/s 148 has to be sanctioned by joint commissioner of income tax u/s 151(2) of the Act whereas in the present case the issuance of notice had been sanctioned and approved by CIT u/s 151(1) in violation of provisions of section 151(2). The language used in the section 151 of the Act is reproduced as under :

(1) No notice shall be issued u/s 148 by an AO, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the AO, 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 , unless the Joint Commissioner is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice.

(A.Y.1996-97) 7M/s Mehta Sulfites (India) Ltd. Vs. CIT Thus, from the perusal of the above provisions it is clear that in the present case of the asssessee , the sanction for issue of notice u/s 148 was to be given by the Joint Commissioner u/s151(2) and not by the CIT u/s 151(1) which in our view has wrongly been given. In the case of Ghanshyam Khabrani v/s CIT (Supra) similar issue was decided by the Hon’ble Court by holding under sub-section (2) of section 151 of the Income-tax Act, 1961, no notice can be issued under section 148 by an AO 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 the such AO, that it is a fit case for the issue of such notice. The expression “Joint 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 u/s 117(1). Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner of income tax . The 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). 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 only . We therefore, respectfully following the decision of the Jurisdictional High Court quash reassessment proceeding as being invalid.

In the result, the assessee’s appeal is allowed. प�रणामतः �नधा�रती �वीकृत क� जाती है ।

Order pronounced in the open court on 20th Nov , 2015

(A.Y.1996-97) 8M/s Mehta Sulfites (India) Ltd. Vs. CIT Sd/- Sd/- ( Joginder Singh ) ( Rajesh Kumar ) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 20.11.2015 Ashwini आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT - concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,