2013 (11) TMI 312 - AT - Income Tax

Sanction of JCIT for re-opening u/s 148 of the Income tax act - Re-opening of assessment u/s 148 of the Income Tax Act Held that - In the normal course a notice under section 148 could not have been issued beyond 31.3.2009, but verification of assessment records revealed that the date of issue was 15.06.2009. Now, since it is a case of reopening beyond 4 years, in addition to minimum quantum of income that is escaped, sanction of Joint Commissioner or Additional Commissioner is required, which is lacking here. That is, though there is no problem with the quantum of income escaped, there is a problem in not getting sanction of the Joint Commissioner or Additional Commissioner for issue of notice under section 148 - Assumption of jurisdiction under section 148 for the assessment year 2004-05 is without authority of law and as such invalid Decided against the Revenue. Departmental appeals should be dismissed on account of low tax effect when applying the circular dt. 9.2.2011 - Tax effect for the individual appeal for each assessment year is less than Rs. 3 lakhs Held that - Reliance has been placed on the judgment of the Hon ble Supreme Court in the case of CIT vs. Atma Ram Properties (P) Ltd. 2012 (9) TMI 542 SUPREME COURT , wherein it was held that CBDT circular should not be applied ipso facto particularly when the matter has cascading effect. Cases in which common principle may be involved in subsequent large number of matters cannot be dismissed by applying the circular ipso facto. In view of his observation of the Apex Court, tax effect of all the appeals put together should be considered while applying the circular. In the circumstances, total tax effect of all the appeals put together in all the cases is more than Rs.3 lakhs and therefore we do not accept the contention of the learned A.R Decided in favor of Revenue.

Issues Involved:
1. Validity of notice u/s. 148 for assessment years 2004-05 to 2007-08.
2. Approval requirement for notice u/s. 148.
3. Jurisdictional validity of reassessment proceedings.
4. Communication of additional grounds of appeal to the Assessing Officer.
5. Allowance of enhanced interest and remuneration to partners.
6. Reliance on impounded material for assessment.
7. Tax effect for dismissal of departmental appeals.
8. Delay in filing cross objection.
9. Reopening of assessment u/s. 147.
10. Examination of collections admitted by the assessee.
11. Compliance with Rule 46A of the I.T. Rules, 1962.

Analysis:

1. Validity of Notice u/s. 148:
The Revenue appealed against the CIT(A) order for assessment years 2004-05 to 2007-08, challenging the notice u/s. 148. The CIT(A) held that the notice was issued without the required approval of the Joint Commissioner/Additional Commissioner, rendering it invalid. The Revenue contended that the notice was valid, but the CIT(A) and the assessee disagreed, leading to the dismissal of the Revenue's appeal for A.Y. 2004-05.

2. Approval Requirement for Notice u/s. 148:
The CIT(A) observed that the Assessing Officer needed prior approval from the Joint Commissioner or Additional Commissioner for issuing the notice u/s. 148 beyond 4 years, which was lacking in this case. Both the D.R. and A.R. presented arguments, with the A.R. asserting that the notice was invalid without the required approval. Consequently, the Order of the CIT(A) was upheld, and the Revenue's appeal was dismissed for A.Y. 2004-05.

3. Jurisdictional Validity of Reassessment Proceedings:
In the cross objection for A.Y. 2004-05, the assessee challenged the reassessment proceedings, citing lack of sanction under section 151 of the Income Tax Act. The CIT(A) upheld the quashing of the reassessment, emphasizing the absence of proper sanction. However, the delay in filing the cross objection was condoned, and the cross objection was dismissed as infructuous due to the decision on the Revenue's appeal.

4. Communication of Additional Grounds of Appeal:
The Revenue's appeal for A.Y. 2005-06 raised the issue of the CIT(A) not forwarding the additional grounds of appeal to the Assessing Officer, violating Rule 46A. The Tribunal remitted this issue to the Assessing Officer for reconsideration after giving the assessee an opportunity to be heard, allowing the Revenue's appeal for statistical purposes.

5. Allowance of Enhanced Interest and Remuneration to Partners:
The CIT(A) allowed enhanced interest and remuneration to partners, which the Revenue contended was not commensurate with section 40(b) of the I.T. Act. The Tribunal remitted this issue to the Assessing Officer for further adjudication along with the additional grounds of appeal, allowing the Revenue's appeal for statistical purposes.

6. Reliance on Impounded Material for Assessment:
The CIT(A) directed the Assessing Officer to examine collections admitted by the assessee in statements filed with the return, as they were in agreement with records submitted to the Entertainment Tax Officer. The Tribunal remitted this issue to the Assessing Officer for examination, allowing the cross objection for statistical purposes.

7. Tax Effect for Dismissal of Departmental Appeals:
The Tribunal rejected the contention that departmental appeals should be dismissed based on individual tax effects, citing a Supreme Court decision. The total tax effect of all appeals was considered, leading to the dismissal of the argument and upholding of the appeals for statistical purposes.

8. Delay in Filing Cross Objection:
A delay in filing the cross objection was condoned after the assessee provided reasons for the delay, and the cross objection was dismissed as infructuous due to the decision on the Revenue's appeal.

9. Reopening of Assessment u/s. 147:
The CIT(A) confirmed the validity of the reassessment for A.Y. 2005-06, as the notice u/s. 148 was issued within 4 years and after recording reasons. The Tribunal upheld the reopening of assessment for this year, rejecting the challenge in the cross objection.

10. Examination of Collections Admitted by the Assessee:
The Tribunal remitted the issue of collections admitted by the assessee to the Assessing Officer for examination, as they were in agreement with records submitted to the Entertainment Tax Officer. This issue was allowed for statistical purposes in the cross objection.

11. Compliance with Rule 46A of the I.T. Rules, 1962:
The Tribunal remitted the issue of non-communication of additional grounds of appeal to the Assessing Officer for reconsideration, emphasizing compliance with Rule 46A. The Revenue's appeal was allowed for statistical purposes based on this ground.

This detailed analysis covers the various issues involved in the legal judgment delivered by the Appellate Tribunal ITAT Hyderabad, addressing the arguments presented by the Revenue and the assessee for each issue across multiple assessment years.

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