2021 (11) TMI 539 - HC - Income Tax

Validity of reopening of assessment u/s 147 - eligibility of reason to believe - eligible approval u/s 151 - According to petitioner, the reasons, which were given alongwith the impugned notice clearly pertains to some other assessee and not petitioner and approval, which has been issued under Section 151 is based on reasons pertaining to some other assessee and not petitioner - HELD THAT - The approval, as it appears from the document, has been given by one Dinesh Chander Patwari, Principal Commissioner of Income Tax 2, Mumbai on 30th March 2019. The proposal was submitted by one Abhay Siddharth Deware. The proposal was recommended by Ashutosh Rajhans, who has noted Yes, I am satisfied that this is a fit case to issue notice under Section 148 and Dinesh Chander Patwari has endorsed a remark after considering the reason recorded by AO the approval is granted . The reasons annexed to the said approval pertains to another assessee being M/s. Glance Investment (I) Pvt. Ltd. Mr. Chhotaray submitted that inadvertently wrong annexure was sent alongwith the approval under Section 151. We do not find that statement even in the impugned order rejecting the objections. In our view, there has been total non application of mind while granting the approval. Only approval is dated 30th March 2019 which has been granted relying upon the reasons annexed thereto. Section 151 of the said Act in force at the relevant time, in sub-section (1) provides that no notice shall be issued under Section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the AO, that it is a fit case for the issue of such notice. The only approval on file is one dated 30th March 2019 to which the reasons pertaining to another assessee is relied upon. For the subsequent reasons dated 20th August 2019 and 12th September 2019, no satisfaction has been recorded by a Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner on those reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. - Decided in favour of assessee.

Summary

Issues:
Impugning notice and order based on lack of reason to believe income escaped assessment under Section 147 of the Income Tax Act, 1961. Non-application of mind in granting approval under Section 151. Lack of fresh approval for subsequent reasons for reopening assessment.

Analysis:

1. The petitioner challenged a notice and order issued on the grounds that there was no reason to believe that income chargeable to tax had escaped assessment. The petitioner argued that the notice was invalid under Section 147 of the Income Tax Act as the reasons provided pertained to a different assessee. The petitioner contended that subsequent reasons were also not valid as they lacked fresh approval. The court noted the petitioner's submissions and directed the petitioner to annex a legible document during the proceedings.

2. The respondents failed to file a reply despite multiple extensions. The court found the excuse of the COVID-19 pandemic for the delay in filing the reply unacceptable, as sufficient time had passed for the respondents to respond. The court criticized the respondents for issuing unreasonable notices with short response times and for not granting adjournments during the lockdown period.

3. Upon reviewing the documents, the court found that the approval dated 30th March 2019 under Section 151 of the Income Tax Act was based on reasons pertaining to a different assessee. The court highlighted the lack of application of mind in granting the approval and noted that no fresh approval was provided for subsequent reasons given for reopening the assessment.

4. The court emphasized that under Section 151 of the Income Tax Act, a notice cannot be issued after four years from the end of the relevant assessment year without the satisfaction of the Principal Chief Commissioner or Commissioner. Since the only approval on file was based on reasons pertaining to another assessee, the court ruled in favor of the petitioner and quashed the impugned notice and order.

5. The court concluded that due to the lack of proper approval and valid reasons for reopening the assessment, the impugned notice and order were set aside. As the petition succeeded on this ground, the court did not express views on other grounds raised by the petitioner. The petition was disposed of accordingly.