2021 (10) TMI 503 - AT - Income Tax

Validity of reopening of assessment - validity of approval from a superior authority - whether Notice issued by obtaining prior approval from the learned Commissioner of Income-tax is bad in law and contrary to the provisions of section 151(2)? - HELD THAT - An identical issue has been examined in the case of Ghanshyam K. Khabrani 2012 (3) TMI 266 - BOMBAY HIGH COURT and it was held that when 151(2) of the Act mandates that sanction to be taken for issuance of notice u/s. 148 of the Act in certain cases has to be of Joint Commissioner, then reopening of assessment with the approval of Commissioner is unsustainable We hold that notice issued u/s. 148 of the Act with the prior approval of Ld. CIT is not in accordance with the provisions of section 151(2) of the Act and hence the same is not sustainable. In that view of the matter the impugned assessment order would get vitiated. Accordingly, the assessee wins on this issue. - Decided in favour of assessee.

Summary

Issues:
Challenge to the validity of notice issued for reopening assessment under section 148 of the Income-tax Act, 1961 based on obtaining prior approval from the Commissioner of Income Tax instead of the Joint Commissioner as mandated by section 151(2) of the Act.

Analysis:

Issue 1: Validity of notice under section 148 of the Act based on approval from the Commissioner of Income Tax instead of the Joint Commissioner

1. The appellant challenged the notice issued for reopening assessment for the assessment year 2005-06, arguing that the approval obtained from the Commissioner of Income Tax was contrary to the provisions of section 151(2) of the Income-tax Act. The appellant contended that since they were not previously assessed, the Assessing Officer should have obtained permission from the Joint Commissioner of Income Tax as per the Act.

2. The appellant relied on various decisions to support their argument, emphasizing that the approval process under section 151 of the Act requires compliance with specific hierarchical authorities. The appellant pointed out that the Assessing Officer's failure to obtain approval from the appropriate authority as mandated by law rendered the assessment invalid and liable to be quashed.

3. The respondent, however, argued that the approval from the Commissioner of Income Tax, being a superior authority, was in line with the objective of section 151 of the Act, which aims to safeguard the interests of the assessee. The respondent contended that the involvement of a higher authority in granting approval does not invalidate the assessment proceedings, as the Joint Commissioner is usually aware of such proposals sent to the Commissioner.

4. The Tribunal examined the provisions of section 151 of the Act, particularly section 151(2), which specifies the requirement for obtaining approval from the Joint Commissioner for issuing notices under section 148 after the expiry of four years from the relevant assessment year. The Tribunal noted that since the appellant was not previously assessed, the provisions of section 151(2) applied, necessitating approval from the Joint Commissioner.

5. Citing precedents from the High Courts of Bombay and Delhi, the Tribunal held that obtaining approval from the Commissioner of Income Tax instead of the Joint Commissioner, as mandated by section 151(2) of the Act, rendered the notice issued under section 148 invalid. The Tribunal emphasized that statutory provisions must be strictly adhered to, and the satisfaction required for exercising a power under the Act must be by the designated authority.

6. Consequently, the Tribunal quashed the assessment order on legal grounds, ruling in favor of the appellant on the issue of the validity of the notice issued under section 148 of the Act. As a result, the Tribunal allowed the appeal filed by the assessee, leading to the orders passed by the tax authorities for the relevant year being set aside.

7. The judgment highlights the significance of procedural compliance in tax assessments and underscores the importance of adhering to statutory requirements, particularly regarding the approval process for reopening assessments under the Income-tax Act.

This detailed analysis provides an overview of the judgment, focusing on the key issue of the validity of the notice for reopening assessment under section 148 of the Income-tax Act based on the approval obtained from the Commissioner of Income Tax instead of the Joint Commissioner as required by section 151(2) of the Act.