2022 (2) TMI 1094 - HC - Income Tax

Reopening of assessment u/s 147 - Period of limitation - Provision for cases where assessment is in pursuance of an order on appeal, etc - HELD THAT - We are satisfied that the notice dated 10th January 2014 impugned in this petition is barred by limitation since it is issued beyond a period of six years from the end of the relevant assessment year, the time limit prescribed under Section 149(1)(b). Fresh sanction under Section 151 - The stand of Revenue that no fresh sanction under Section 151 of the said Act was required is also misconceived. Admittedly, no sanction has been accorded before issuance of notice by the Assessing Officer at Mumbai. The Revenue cannot seek to sustain the validity of the notice by relying on the sanction accorded to the issuance of the notice dated 22nd March 2013 by the Assessing Officer at New Delhi. The notice issued by the Assessing Officer at New Delhi was after obtaining approval of Additional Commissioner of Income Tax, Range-14, New Delhi. Even that notice is invalid because the notice dated 22nd March 2013 was issued after a period of four years from the end of the relevant assessment year and, therefore, sanction ought to have been accorded by the Commissioner of Income Tax. The sanction accorded by the Additional Commissioner of Income Tax, therefore, would render the notice issued by the Assessing Officer at New Delhi itself bad in law and without jurisdiction. Respondent seeking to derive validity in view of Section 150 - The other ground taken by respondent to oppose the petition is that since the notice has been issued under Section 148 read with Section 150 of the said Act, the approval under Section 151 of the said Act is not required to be obtained is also misconceived. For a moment, even if accept Revenue s contention that the present proceedings are continuation of the proceedings initiated by the Assessing Officer at New Delhi vide notice dated 22nd March 2013, the proceedings would be invalid since the notice issued by the Assessing Officer at New Delhi itself was invalid inasmuch as sanction of the appropriate authority as per Section 151 was not obtained before issuing the notice. In the circumstances, the notice dated 10th January 2014 issued by respondent no.1 under Section 148 of the said Act to petitioner and notice dated 14th February 2014 issued by respondent no.1 to Rachna Morarka for Assessment Year 2006-2007 are quashed and set aside. - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Application of Section 150 of the Income Tax Act, 1961.
3. Jurisdiction of the Assessing Officer.
4. Compliance with the provisions of Section 151 of the Income Tax Act, 1961.
5. Reassessment proceedings and limitation period.
6. Protective assessment and jurisdictional requirements.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner argued that the notice dated 10th January 2014 was barred by limitation as it was issued beyond the six-year period prescribed under Section 149(1)(b) of the Income Tax Act, 1961. The court agreed, stating, "the notice dated 10th January 2014 impugned in this petition is barred by limitation since it is issued beyond a period of six years from the end of the relevant assessment year."

2. Application of Section 150:
The respondents contended that the notice derived validity under Section 150, which allows for reassessment in consequence of any "finding" or "direction" contained in an order passed by any authority. However, the court held that the observations of the Delhi High Court could not be considered as a "finding" or "direction" under Section 150. The court stated, "none of these statutory requirements are fulfilled and therefore, Section 150 has no application and does not save the impugned notice from being barred by limitation."

3. Jurisdiction of the Assessing Officer:
The petitioner argued that the notice issued by the Assessing Officer at New Delhi was invalid as he did not have jurisdiction over the petitioner, who was assessed in Mumbai. The court supported this view, stating, "the notice issued by the Assessing Officer at New Delhi itself was invalid and of no effect since it was issued by an officer who did not have jurisdiction over petitioner."

4. Compliance with Section 151:
The petitioner contended that the notice issued by the Assessing Officer at Mumbai was invalid as it lacked the necessary sanction under Section 151. The court agreed, noting that "no sanction has been accorded before issuance of notice by the Assessing Officer at Mumbai." Furthermore, the court emphasized that the sanction accorded by the Additional Commissioner of Income Tax for the notice issued by the Assessing Officer at New Delhi was also invalid, rendering the notice "bad in law and without jurisdiction."

5. Reassessment Proceedings and Limitation Period:
The court observed that the reassessment proceedings initiated by the Assessing Officer at New Delhi were invalid due to lack of jurisdiction and improper sanction. Consequently, the subsequent notice issued by the Assessing Officer at Mumbai was also deemed invalid as it was issued beyond the six-year limitation period. The court stated, "the notice issued by the Assessing Officer at Mumbai was independent of the notice issued by the Assessing Officer at New Delhi and, therefore, the validity thereof has to be decided independently."

6. Protective Assessment and Jurisdictional Requirements:
The court held that the Revenue's attempt to make a protective assessment by reopening the assessment was impermissible. The court cited the case of DHFL Venture Capital Fund v. Income Tax Officer, stating, "where the Assessing Officer sought to make protective assessment by reopening an assessment on the ground that a contingency may arise in future resulting in escapement of income that would be wholly impermissible and would amount to rewriting of the statutory provision."

Conclusion:
The court quashed and set aside the notices dated 10th January 2014 and 14th February 2014 issued under Section 148 of the Income Tax Act, 1961, as well as the orders rejecting the petitioner's objections. The court concluded that the notices were barred by limitation, issued without proper jurisdiction, and lacked the necessary sanction under Section 151. The petitions were disposed of accordingly.

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