2024 (8) TMI 110 - AT - Income Tax

Validity of sanction of the specified authority u/s. 151(1) for issue of notice u/s. 148 - scope of reassessment proceedings - HELD THAT - In the present case, the original assessment was completed under the provisions of section 143(3). The sanction of the specified authority u/s. 151(1) is a condition precedent for issue of notice u/s. 148. The provisions of section 151 mandates that prior sanction of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is required to be obtained for issuance of notice u/s. 148 if the period of four years had elapsed from the end of the relevant assessment year. In the present case, the notice u/s. 148 of the Act was issued on 28.03.2014 and the relevant A.Y. is 2007-08. Thus, there is no dispute that period of more than four years had elapsed from the end of the relevant assessment year and the approval is required to be obtained only from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, whereas the sanction was obtained from the Joint Commissioner of Income-tax. The failure of the AO to obtained prior permission from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the case may be is against the provisions of section 151. As evident from the assessment order, the AO had not sought the sanction from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, but of the Joint Commissioner of Income-tax. It is trite law that when the statute mandates the satisfaction of the particular functionary for the exercise of power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner it has to be done in that manner and in no other manner. The sanction obtained from a wrong authority vitiates the notice u/s. 148 of the Act. The issue of notice u/s. 148 of the Act in the instant case is bad in law. Further, such defect is not curable under the provisions of section 292B of the Act as held in the case of Dhadda Exports and ITO and Another 2015 (4) TMI 304 - RAJASTHAN HIGH COURT - Decided in favour of assessee.

Summary

Issues: Validity of approval obtained u/s. 151(1) for notice u/s. 148 of the Income-tax Act, 1961

Analysis:
The appeal pertains to an order of the National Faceless Appeal Centre for the assessment year 2007-08. The appellant, a construction company, filed a return of income declaring Nil income, which was initially accepted by the assessing officer. Subsequently, based on information from search operations, the AO issued a notice u/s. 148 for escaped income assessment. The appellant challenged the validity of the approval u/s. 151 and the addition made. The CIT(A)/NFAC upheld the approval's validity and confirmed the addition, citing the decision in Pr.CIT vs. NRA Iron & Steel Pvt. Ltd.

The appellant contended that the approval obtained from the Joint Commissioner of Income-tax was invalid, as per section 151(1) requirements. The AO had not sought approval from the specified authorities as mandated by law. The appellant relied on the Hon'ble Bombay High Court's decision in Thirdware Solutions Ltd. Vs. DCIT to support their argument.

The Tribunal noted that the notice u/s. 148 was issued after the four-year period from the relevant assessment year had elapsed, necessitating approval from specific authorities as per section 151. The approval obtained from the Joint Commissioner of Income-tax was not in compliance with the statutory requirement. Citing various legal precedents, the Tribunal emphasized the importance of strict adherence to statutory provisions when exercising powers under the law.

The Tribunal held that obtaining approval from the wrong authority rendered the notice u/s. 148 invalid. It rejected the argument that the defect was curable under section 292B of the Act, as held by the Hon'ble Rajasthan High Court in Dhadda Exports and ITO and Another. Consequently, the order of the CIT(A) was deemed illegal and set aside, leading to the quashing of the reassessment proceedings.

In conclusion, the Tribunal allowed the appeal filed by the assessee, highlighting the critical importance of obtaining proper approvals as mandated by law for initiating assessment proceedings.