2016 (3) TMI 26 - HC - Income Tax

Validity of reopening of assessment - Sanction for issue of notice - sanction had to be taken from Chief CIT or CIT instead of Additional CIT - Held that - In the present case, the first notice under section 148 dated 22.2.1994 was served on the assessee on 7.3.1994 in response to which the assessee filed his return on 19.3.1996. The AO received information about the assessee having received commission income of ₹ 2 lacs from one CP Singh. The proceedings for reassessment commenced by the issue of the first notice could be completed only upto 31.3.1996 in view of the provisions of Section 153(2) prescribing time limit for completion of assessment or reassessment proceedings. As on 31.3.1996, the Assessing Officer could not proceed to assess or reassess assessee s income on the basis of the first return filed by the assessee on 19.3.1996. Therefore, it could not be said that any proceedings were pending before the Assessing Officer when the second notice was issued. The second notice issued under section 148 dated 17.3.1997 was therefore valid. As far as the objection of the assessee regarding absence of consent under section 151(1) proviso is concerned, it cannot be said that there was any assessment done in the case of the assessee pursuant to the first notice under section 148. Only an intimation under section 143(1)(a) was issued. The decisions referred to by the learned CIT(A) on this issue clearly support the view that intimation under section 143(1)(a) is not assessment. Therefore, the provision of Section 151(2) alone would apply to the present case. Therefore, consent under section 151(1) for issue of notice under section 148 has rightly held by the CIT(A) and ITAT to be not necessary Examining the issue on merits relating to taxability of only 50% in the hands of the assessee whatever be the nature of the money received by the assessee, the same was in the nature of income liable to tax. The CIT(A) s direction to bring to tax this sum in the assessment year in which the assessee received these sums and also confirmed by ITAT was proper and calls for no interference - Decided against assessee

Issues Involved:
1. Interpretation of Section 151 of the Income Tax Act, 1961.
2. Validity of proceedings under Section 148/147 initiated after four years.
3. Approval and sanction by the Additional Commissioner of Income Tax under Section 151(1).
4. Contradiction with the decision of the jurisdictional High Court in CIT vs. Rajesh Talkies.
5. Tax liability of the appellant as a joint owner of agricultural land.

Detailed Analysis:

1. Interpretation of Section 151 of the Income Tax Act, 1961:
The primary issue was whether the Tribunal's decision resulted from an incorrect interpretation of Section 151 of the Income Tax Act, 1961. The Tribunal concluded that processing a return under Section 143(1)(a) of the Act, even in response to a notice under Section 147, did not result in an assessment. This interpretation was supported by the judgment in Apogee International Limited, which was affirmed by the Apex Court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers Pvt. Limited. Therefore, Section 151(1) was not applicable as no assessment was made under Section 143(3) or Section 147.

2. Validity of Proceedings under Section 148/147 Initiated After Four Years:
The appellant contended that the reassessment proceedings initiated after four years required the satisfaction of the Chief Commissioner or Commissioner under Section 151(1). The Tribunal, however, found that the first notice under Section 148 dated 22.2.1994 did not result in an assessment as only an intimation under Section 143(1)(a) was issued on 22.3.1996. Thus, the second notice issued on 17.3.1997 was valid as per Section 151(2), which requires satisfaction from the Joint Commissioner, not the Chief Commissioner or Commissioner.

3. Approval and Sanction by the Additional Commissioner of Income Tax under Section 151(1):
The Tribunal held that since no assessment was made pursuant to the first notice under Section 148, the case fell under Section 151(2) rather than Section 151(1). Therefore, the consent of the Chief Commissioner or Commissioner was not necessary, and the Additional Commissioner's approval sufficed.

4. Contradiction with the Decision of the Jurisdictional High Court in CIT vs. Rajesh Talkies:
The appellant argued that the Tribunal's view was contrary to the jurisdictional High Court's decision in CIT vs. Rajesh Talkies. However, the Tribunal found that the facts of the present case differed from those in Rajesh Talkies, and the decision in Apogee International Limited was more relevant. Consequently, the Tribunal's interpretation was upheld.

5. Tax Liability of the Appellant as a Joint Owner of Agricultural Land:
On the merits, the appellant contended that only 50% of the commission amount should be taxed as the property was jointly owned. The Tribunal rejected this argument, noting that the entire commission amount of Rs. 2,05,804/- was received by the appellant and was taxable. The Tribunal's findings were based on facts and were not shown to be illegal or perverse.

Conclusion:
The appeals were dismissed, and the substantial questions of law were answered against the appellant. The Tribunal's interpretation of Section 151 was upheld, and the reassessment proceedings initiated after four years were deemed valid. The appellant's tax liability on the entire commission amount was confirmed.

← Previous Next →