2015 (11) TMI 644 - AT - Income Tax

Validity of reopening of assessment - notice u/s. 148 has been issued with the approval of the Addl. CIT - Held that - According to Section 151(1) of the I.T. Act, after the expiry of the 4 years from the end of the relevant assessment year, no notice u/s. 148 of the I.T. Act shall be issued unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the AO that is fit case for the issue of such notice. In view the case of the Assessee is fall under section 151(1) of the I.T. Act and not u/s. 151(2) of the I.T. Act, because according to section 151(2) in the cases other than the case fallen under sub-section (1) of Section 151, no notice shall be issued u/s. 148 by the AO, who is below the rank of JCIT, unless the JCIT is satisfied on the reasons recorded by such AO, that is a fit case for the issuance of such notices. In the present case, the case of the assessee has been reopened after the expiry of 4 years and in the present case of the assessee the approval/satisfaction should be from the Chief Commissioner or Commissioner only. In the present case, the case of the assessee has been reopened and notice u/s. 148 has been issued with the approval of the Addl. CIT, therefore, the notice u/s. 148 is bad in law and liable to be quashed. Ld. CIT(A) has rigtly declared invalid the Notice u/s. 148 of the I.T. Act issued on 28.3.2011 for the asstt. Year in dispute i.e. 2004-05, which is beyond the period of 4 years from the end of the assessment year. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment order made under section 143(3)/147 due to the notice under section 148 being issued without proper approval.
2. Whether the case is covered under section 151(2) or section 151(1) of the Income Tax Act.
3. The validity of reopening the case based on information received without independent verification by the Assessing Officer.

Detailed Analysis:

1. Validity of the Assessment Order Under Section 143(3)/147:
The primary issue was whether the assessment order made under section 143(3)/147 was valid, given that the notice under section 148 was issued without obtaining approval from the Commissioner or Chief Commissioner of Income Tax. The Revenue contended that the approval was obtained from the Additional Commissioner of Income Tax, which should suffice under section 151(2). However, the CIT(A) quashed the assessment order, stating that the approval must come from the Commissioner or Chief Commissioner as mandated by section 151(1) since no previous assessment was made in this case. The Tribunal upheld this view, emphasizing that the statutory requirement was not met, thereby rendering the notice invalid.

2. Applicability of Section 151(1) vs. Section 151(2):
The Revenue argued that the case fell under section 151(2), which allows for approval from the Additional Commissioner of Income Tax. However, the CIT(A) and the Tribunal concluded that section 151(1) was applicable because the notice was issued after the expiry of four years from the end of the relevant assessment year. According to section 151(1), such a notice requires the satisfaction of the Chief Commissioner or Commissioner. The Tribunal noted that the Additional Commissioner is not equivalent to the Commissioner as defined under section 2(16) of the Act, and thus, the notice issued with the Additional Commissioner's approval was invalid.

3. Independent Verification by the Assessing Officer:
The Tribunal also addressed the issue of whether the Assessing Officer had an independent reason to believe that income had escaped assessment. The CIT(A) found that the reopening of the case was based solely on information received from the ACIT, Rewari, without any independent verification or belief by the Assessing Officer. The Tribunal agreed, stating that the Assessing Officer must have an independent reason to believe, which was absent in this case. The reliance solely on the ACIT's information without further inquiry rendered the notice void.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to quash the notice under section 148 and the subsequent assessment order. It reaffirmed that the approval for issuing the notice must come from the Commissioner or Chief Commissioner when required by statute, and that the Assessing Officer must independently verify the reasons for reopening the case. The appeals filed by the Revenue were dismissed, and the order was pronounced in the open court on 27/10/2015.