2021 (2) TMI 679 - AT - Income Tax

Validity of reopening of the assessment for want of sanction/satisfaction of Pr. CCIT/CCIT/PCIT/CIT - Reopening after four years - mandatory condition as provided u/s. 151(1) - HELD THAT - In the new substituted provision of Section 151(1) it is mandatory requirement for issuing notice u/s 148 after expiry of four years from the end of the relevant assessment year that unless the Pr. CCIT/CCIT/PCIT/CIT is satisfied on the reasons recorded by the AO that it is fit case for issue such notice. Therefore, there is no difference in the higher authority whose satisfaction is required prior to issuing notice u/s. 148 in all the cases where the notice u/s. 148 is issued after the expiry of four years from the end of the relevant assessment year. Hence,reopening in the case in hand is not valid as the Assessing Officer has not satisfied the mandatory condition as provided u/s. 151(1) read with proviso being the satisfaction of Pr. CCIT/CCIT/PCIT/CIT. Accordingly, the reopening of the assessment is quashed being void and consequently the reassessment order is also liable to be quashed as void ab initio. Appeal filed by the assessee is allowed.

Summary

Issues:
Validity of reopening of assessment for want of necessary sanction/satisfaction of Pr. CCIT/CCIT/PCIT/CIT.

Analysis:
The appellant challenged the reopening of assessment by the Assessing Officer, contending that the notice issued under section 148 lacked the required sanction of higher authorities. The original assessment was completed under section 143(3) in 2009, and the reassessment was done in 2015 after issuing a notice under section 148 in 2014. The appellant argued that the reopening was invalid due to the absence of prior sanction from the appropriate authority, as per the provisions of Section 151(1) of the Income Tax Act.

The appellant relied on various legal precedents to support their argument, emphasizing the necessity of obtaining the sanction of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before issuing a notice under section 148. The appellant contended that the satisfaction of the higher authorities was a mandatory condition for reopening assessments completed under section 143(3) after the expiry of four years from the relevant assessment year.

The Departmental Representative argued that in cases where the reopening is done by an officer above the rank of Assistant Commissioner or Deputy Commissioner, the satisfaction of the Joint Commissioner is required, as per Section 151(2) of the Act. The Departmental Representative supported the decision of the CIT(A) upholding the validity of the reopening based on the relevant provisions of the Act.

The Tribunal analyzed the provisions of Section 151 of the Income Tax Act, distinguishing between cases falling under sub-section (1) and sub-section (2) based on the completion of the original assessment under section 143(3). The Tribunal noted that in cases where the original assessment was completed under section 143(3) and the reopening was after four years from the end of the assessment year, the proviso to sub-section (1) mandated the satisfaction of higher authorities before issuing a notice under section 148.

The Tribunal referred to a jurisdictional High Court decision that emphasized the requirement of satisfaction of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in cases of reopening after the expiry of four years from the end of the relevant assessment year. The Tribunal concluded that the reopening in the present case was not valid as the Assessing Officer failed to satisfy the mandatory condition specified in Section 151(1) regarding the sanction of higher authorities.

As a result of the invalid reopening, the Tribunal quashed the reassessment order, rendering Ground No. 3 of the appeal irrelevant. The Tribunal allowed the appeal filed by the assessee, pronouncing the order in open court on 17/02/2021.