2018 (1) TMI 317 - AT - Income Tax

Reopening of assessment u/s 147 - sanction envisaged by the scheme of section 151 - need for satisfaction of the Joint/Addl. Commissioner of Income-tax - Held that - All the judicial precedents filed before us fall in the category in which there is nothing on the record to demonstrate, or even suggest, that the Joint/ Additional Commissioner concerned has recorded his satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for initiating the reassessment proceedings. We have carefully perused these precedents but we do not find any reference to the finding that in those cases satisfaction of the Joint/Addl. Commissioner of Income-tax, to the effect that, on the reasons recorded by the Assessing Officer, it was a fit case for initiating the reassessment proceedings, was also on record. A decision rendered without taking note of this fact cannot be an authority for the proposition that even when such a satisfaction by the appropriate authority is on record, just because similar satisfaction is expressed by the higher authority is also on record, requirements of section 151 cannot be taken as having been complied with. The binding nature of judicial precedents is only for what they actually decide and not what can be inferred from these judicial precedents. Nothing, therefore, turns on these precedents in the present case. On the contrary, being satisfied that sanction envisaged by the scheme of section 151, i.e. by recording satisfaction on the reasons recorded by the Assessing Officer that it is a fit case for initiating reassessment proceedings, is given by the prescribed authority on the facts of this case, these judicial precedents are not clearly relevant in the present context.

Issues Involved:
1. Reopening of assessment under section 147 of the Income-tax Act.
2. Compliance with conditions under section 151 of the Income-tax Act.
3. Validity of approval process for reopening assessment.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The appellant challenged the correctness of the order passed by the CIT(A), Gandhinagar, Ahmedabad, which confirmed the action of the Assessing Officer (AO) in reopening the assessment under section 147 of the Income-tax Act for the assessment year 2005-06. The appellant argued that the reopening was improper and did not meet the statutory requirements.

2. Compliance with Conditions under Section 151:
The appellant contended that the conditions required under section 151 were not complied with. Specifically, the appellant argued that the AO forwarded the proposal for reopening to the CIT through the Joint Commissioner of Income-tax (JCIT). The JCIT expressed satisfaction with the reasons and forwarded the proposal to the CIT, who approved it. However, the notice under Section 148 was issued before the CIT's approval was received, rendering it invalid. The appellant cited precedents such as Ghanshyam K. Khabrani v. ACIT and CIT v. SPL's Siddhartha Ltd. to support the argument that non-compliance with the prescribed authority's approval is bad in law.

3. Validity of Approval Process for Reopening Assessment:
The appellant's counsel argued that the case was covered by previous orders where reopening was quashed because the AO obtained approval from the Commissioner instead of the JCIT, as required under section 151. The counsel asserted that even though the JCIT had expressed satisfaction, the ultimate approval by the Commissioner vitiated the process. The Departmental representative argued that the approval process inherently included the JCIT's satisfaction and urged confirmation of the reopening.

Tribunal's Findings:

Internal Processing Sheet:
The Tribunal examined the internal processing sheet used by the income tax authorities, which demonstrated that the JCIT had indeed expressed satisfaction with the reasons recorded by the AO before the Commissioner granted the final approval. The Tribunal noted that this procedure is a standard operating procedure within the income tax department.

Statutory Provisions of Section 151:
The Tribunal referred to the statutory provisions of section 151, which require the satisfaction of the prescribed authority (JCIT or Commissioner, as applicable) on the reasons recorded by the AO. The Tribunal emphasized that the satisfaction of the JCIT was on record, satisfying the requirements of section 151. The Tribunal concluded that the approval by the Commissioner, in addition to the JCIT's satisfaction, did not invalidate the proceedings.

Judicial Precedents:
The Tribunal acknowledged the appellant's reliance on judicial precedents but distinguished the present case by highlighting that the JCIT's satisfaction was on record, which was not adequately demonstrated in the precedents cited. The Tribunal asserted that a decision rendered without considering this fact cannot be an authority for the proposition that the approval by the Commissioner alone invalidates the reopening.

Section 292B:
The Tribunal invoked section 292B, which prevents proceedings from being invalidated due to any mistake, defect, or omission if they are in substance and effect in conformity with the intent and purpose of the Act. The Tribunal found that the approval process adhered to the statutory requirements and any procedural defects did not render the proceedings invalid.

Conclusion:
The Tribunal dismissed the appellant's grievances, finding them devoid of legally sustainable merits. The Tribunal emphasized the importance of presenting complete facts and supporting evidence to judicial forums to assist in dispensing justice. The appeal was dismissed, and the order was pronounced in the open court on November 30, 2017.

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