2018 (8) TMI 135 - HC - Income Tax

Reopening of assessment - sanctioning/ permission to issue notice under Section 148 - notice not been granted by the Additional Commissioner of Income Tax - Held that - It is undisputed position before us that in terms of Section 151(2) the sanctioning/ permission to issue notice under Section 148 has to be issued by the Additional Commissioner of Income Tax. We find that the AO had not sought the approval of the Designated Officer but of the Commissioner of Income Tax. This is clear from the Form used to obtain the sanction. In any case, the approval/ satisfaction recorded in the form submitted for sanction of the CIT by the Assessing Officer reproduced herein above, it is clear that the Additional Commissioner of Income Tax had not granted permission to initiate reopening proceedings against the Respondent-Assessee. The view of the Additional Commissioner of Income Tax was subject to the approval of his superior the Commissioner of Income Tax. Thus, there was no final sanction granted by the Additional Commissioner of Income Tax for issuing the notice dated 25th March, 2011 to reopen the Assessment. Further, it is the Commissioner of Income Tax who directed the issuance of the notice under Section 148 of the Act to the Assessing Officer. Thus, it is very clear that the final sanction/ approval was that of the Commissioner of Income Tax as indicated in the Form and also in the two letters dated 24th March, 2011 and 25th March, 2011. As decided in Ghanshyam K. Khabrani v/s. Assistant Commissioner of Income Tax 2012 (3) TMI 266 - BOMBAY HIGH COURT to hold that, the approval/ permission to issue the notice dated 25th March, 2011 had not been granted by the Additional Commissioner of Income Tax, but by the Commissioner of Income Tax and, thus in breach of Section 151 of the Act. - decided in favour of assessee

Summary

Issues:
1. Jurisdictional requirement for reopening assessment under Section 151(2) of the Income Tax Act, 1961.

Comprehensive Analysis:
The judgment by the Bombay High Court involved a challenge to an order passed by the Income Tax Appellate Tribunal regarding the reopening of assessment for the Assessment Year 2004-05 under Section 147 of the Act. The main issue raised was whether the Tribunal was correct in quashing the order made under Section 143(3) read with Section 147, holding that the same was out of jurisdiction due to non-compliance with the requirements of Section 151(2) of the Act. The Respondent contended that the sanction for issuing the notice had to be obtained from the Additional Commissioner of Income Tax as per Section 151(2), while in this case, the sanction was obtained from the Commissioner of Income Tax, thus breaching the jurisdictional requirement.

The Respondent challenged the reopening notice issued by the Assessing Officer on the grounds that the permission/sanction for the notice was obtained from the Commissioner of Income Tax instead of the Additional Commissioner of Income Tax as required by Section 151(2) of the Act. Despite this challenge, the Assessing Officer proceeded to pass a reassessment order, which was then appealed to the Commissioner of Income Tax (Appeals) and subsequently to the Tribunal.

The Tribunal allowed the appeal by the Respondent, following a previous decision of the Court, and held that the approval to issue the notice had not been granted by the appropriate authority, the Additional Commissioner of Income Tax, but by the Commissioner of Income Tax, thus violating Section 151 of the Act. The Court examined the relevant forms and communications exchanged between the tax authorities, which clearly indicated that the final sanction for reopening the assessment was granted by the Commissioner of Income Tax, not the Additional Commissioner of Income Tax as required by law.

Referring to a previous judgment, the Court emphasized that the power conferred upon a particular authority must be exercised by that authority, and the satisfaction required by the statute cannot be substituted by another authority. Therefore, the Tribunal's decision was upheld, and the appeal was dismissed as the question raised did not give rise to any substantial question of law.