2018 (11) TMI 1917 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Valid approval u/s 151 required from the Additional Commissioner of Income Tax - HELD THAT - For assuming proper jurisdiction while reopening of the assessment it was incumbent upon the AO to take approval from the competent authority as contemplated under section 151 of the Act. If such procedure was not followed, then the AO would have acted without jurisdiction. This issue would ultimately go to the root of the dispute because this is a jurisdictional issue. It does not require any discovery of new facts, because if approval is taken, then it must be on the assessment record. There would be no requirement of fresh investigation of facts. Therefore, we admit this ground of appeal and proceed to adjudicate the grounds on merit. We have perused every approval. We find that the ld.Additional Commissioner has neither written yes nor no against the column, what to talk of his satisfaction for authorizing the AO to reopen the assessment. The Hon ble Gujarat High Court in the case of Adani Port 2013 (5) TMI 660 - GUJARAT HIGH COURT has observed that sub-section (1) of section 151 of the Act is an important procedural safeguard against arbitrary exercise of power of issuing notice for reopening of the assessment previously framed. Now, the approval nowhere exhibits the satisfaction of the ld.Additional Commissioner. We deem it appropriate to take note of the finding of the Hon ble Madhya Pradesh High Court in the case of CIT Vs. Goyanka Lime Chemical Ltd. 2015 (5) TMI 217 - MADHYA PRADESH HIGH COURT . wherein the Hon ble Court has observed that expression yes, I am satisfied also did not fulfill the requirement of section 151(1) because this does not spell out application of mind objectively We are satisfied that no proper approval was accorded by the ld.Additional Commissioner and the assessment orders are not sustainable. All the assessment orders are quashed in the cases of all the assesses - Assessee appeal allowed.

Summary

Issues involved:
1. Approval requirement under section 151 of the Income Tax Act for reopening assessments.
2. Validity of assessment orders based on the satisfaction of the Additional Commissioner.
3. Consideration of case law in determining the sufficiency of approval for reopening assessments.

Detailed Analysis:
1. The primary issue in this case pertains to the requirement of proper approval under section 151 of the Income Tax Act for reopening assessments. The Assessee contended that assessments were not sustainable as the Additional Commissioner did not provide proper approval before reopening the assessments. The Assessee cited the judgment of the Hon’ble Supreme Court in the case of NTPC, emphasizing that jurisdictional issues can be raised even before the second appellate authority. The Assessee submitted details obtained under the RTI Act to support the lack of proper approval. The Revenue argued that the Assessee did not raise this objection before the ld.CIT(A), questioning its admissibility before the Tribunal.

2. The Tribunal acknowledged the jurisdictional importance of obtaining proper approval before reopening assessments under section 151 of the Act. It was noted that if the AO did not follow the prescribed procedure, the assessments would be considered without jurisdiction. The Tribunal admitted the ground of appeal related to the lack of proper approval and proceeded to evaluate the case on its merits.

3. The Tribunal then analyzed the merit of the case concerning the sufficiency of the Additional Commissioner's satisfaction for authorizing the reopening of assessments. The Assessee argued that the Additional Commissioner's mere signature without any explicit satisfaction did not meet the legal requirements. Citing relevant case laws such as CIT Vs. Goyanka Lime & Chemicals Ltd., the Assessee contended that such incomplete satisfaction did not render the assessment orders sustainable. The Tribunal considered the observations of the Hon’ble Gujarat High Court and the Hon’ble Madhya Pradesh High Court, emphasizing the importance of objective satisfaction by the approving authority.

4. After careful consideration of the arguments and case laws presented, the Tribunal found that the approvals obtained from the Additional Commissioner lacked the necessary satisfaction as mandated by section 151 of the Act. Referring to authoritative judgments, the Tribunal concluded that the assessment orders were not sustainable due to the absence of proper approval. Consequently, all assessment orders were quashed, granting relief to the Assessees. The Tribunal also allowed the Revenue the opportunity to apply for a recall of the order if new material demonstrating proper approval emerged during re-verification by the AO.

In conclusion, the Tribunal's judgment focused on the critical procedural requirements under section 151 of the Income Tax Act for reopening assessments and emphasized the necessity of obtaining proper approval with objective satisfaction from the approving authority to ensure the validity of assessment orders.