2024 (4) TMI 879 - AT - Income Tax

Reopening of assessment u/s 147 - absence of valid approval to be obtained u/s 151 - who is competent authority for approval in this case? - notice issued beyond period of four years - Principal Chief Commissioner of Income Tax/ Chief Commissioner of Income Tax Principal Commissioner of Income Tax/ Commissioner of Income Tax OR Additional Commissioner - HELD THAT - The erstwhile provisions of Section 151 postulates permission of Pr.CCIT/CCIT/Pr.CIT/CIT before issuance of notice u/s 148 of the Act after the lapse of 4 years. Ostensibly the re-assessment proceedings u/s 147 r.w. Section 148 in the instant case has been initiated without valid approval u/s 151 of the Act. Needless to say Section 151 of the Act serves as a cardinal safeguard for valid initiation of re-assessment proceedings and requires to be strictly followed. The satisfaction on an escaped income by Principal Chief Commissioner / Chief Commissioner / Principal Commissioner / Commissioner of Income Tax u/s 151(1) is thus incumbent before the proceedings u/s 147 is set in motion. In the instant case as noted the approval has been obtained from Addl. CIT not competent for granting requisite approval u/s 151 of the Act. Such remissness on the part of the AO have rendered the entire re-assessment proceedings invalid and bad in law. As held in the case of Dr. Sashi Kant Garg 2005 (8) TMI 81 - ALLAHABAD HIGH COURT the irregularity in obtaining the sanction of the competent authority is the substantive defect incurable under the provisions of the Act . Consequently the re-assessment order stands quashed as pleaded on behalf of the assessee at the threshold. In view of such conclusion other aspects of grievances are thus not required to be addressed. Appeal of the assessee is allowed.

Summary

Issues involved: Validity of approval u/s 151 for initiation of proceedings u/s 147 of the Income Tax Act, 1961.

Summary:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-IV, Kanpur concerning AY 2015-16. The main contention raised was the absence of valid approval u/s 151 for initiation of proceedings u/s 147. The assessee argued that the approval obtained from the Additional Commissioner of Income Tax was not in line with the requirement of Section 151, as it should have been obtained from the Principal Chief Commissioner of Income Tax/ Chief Commissioner of Income Tax Principal Commissioner of Income Tax/ Commissioner of Income Tax due to the lapse of four years from the end of the assessment year. The entire proceedings were challenged on the grounds of lack of proper sanction of the competent authority, which rendered the re-assessment order invalid and bad in law.

The Tribunal noted that the approval obtained from the Additional Commissioner of Income Tax instead of the superior authorities as required by Section 151 did not meet the legal requirements. It was emphasized that Section 151 serves as a crucial safeguard for the valid initiation of re-assessment proceedings, and the satisfaction of the competent authority is essential before proceeding u/s 147. The Tribunal referred to a case law where it was held that irregularity in obtaining the sanction of the competent authority is a substantive defect incurable under the provisions of the Act. As a result, the re-assessment order was quashed at the threshold, and the appeal of the assessee was allowed.

Therefore, the entire re-assessment proceedings were deemed invalid due to the lack of proper approval u/s 151, and the appeal of the assessee was allowed based on this ground.