2012 (9) TMI 522 - HC - Income Tax

Validity of notice issued u/s 148 - non-fulfillment of mandatory requirement of Section 151(2) - approval of the Joint Commissioner not taken - Held that - Respondents have failed to produce the approval of the Additional Commissioner or the Joint Commissioner either in the affidavit in reply or even otherwise. Whether the approval was granted or not is an objective fact which can be established only by producing the approval. It is not the respondents case that the approval was in fact granted, but is misplaced. In affidavit in reply, it is expressly stated that the impugned notice was issued with the approval of CIT-2, Mumbai. There is not a whisper about the Additional Commissioner or the Joint Commissioner having granted the approval. The alleged approval therefore, in any event, is contrary to the provisions of section 151 and therefore notice reopening the assessment cannot be sustained in law - Decided in favor of assessee

Summary

Issues:
1. Validity of notice under section 148 of the Income Tax Act, 1961.
2. Compliance with the requirements of section 151 for issuing the notice.

Analysis:

Issue 1: Validity of notice under section 148
The petitioner sought a writ of certiorari to quash a notice under section 148 of the Income Tax Act, 1961 dated 28.1.2004, issued by respondent No.1, the Commissioner of Income Tax. The petitioner had filed its return of income on 28.11.1997, which was accepted under section 143(1). Subsequently, an assessment order was passed on 14.3.2005 without furnishing the reasons for the impugned notice. The petitioner contended that the reasons for the notice had not been provided, leading to a series of appeals and remands to communicate the reasons. The reasons were eventually furnished on 10.2.2011 by the Deputy Commissioner of Income Tax. However, the petitioner argued that the necessary approval as per section 151 had not been obtained, specifically highlighting the absence of approval from the Joint Commissioner, rendering the notice liable to be set aside.

Issue 2: Compliance with section 151 requirements
The petitioner's counsel argued that the approval required under section 151 had not been obtained for issuing the notice under section 148. Despite an endorsement directing to put up for approval, there was no evidence that the approval was actually granted. The respondents failed to produce the approval despite opportunities to do so. The petitioner's objections also raised concerns about the lack of proper sanction due to the absence of comments from the Additional Commissioner. The respondents' reliance on an implied approval was refuted, emphasizing the need for explicit approval as per the statutory provisions. The judgment referred to a Division Bench decision highlighting the necessity of compliance with section 151(2) and the distinct role of the Joint Commissioner in granting approval for issuing notices under section 148. The Court concluded that the notice reopening the assessment lacked legal sustainability due to non-compliance with mandatory requirements.

In conclusion, the High Court of Bombay held the notice under section 148 to be invalid and set it aside, ruling in favor of the petitioner. The Court emphasized the importance of obtaining proper approval as per the statutory provisions, specifically from the Joint Commissioner, for issuing notices under section 148. The judgment highlighted the significance of strict compliance with procedural requirements to ensure the legality and validity of such notices.