2021 (11) TMI 710 - HC - Income Tax

Reopening of assessment u/s 147 - notice issued without approval of competent authority - HELD THAT - There was non-application of mind while granting the approval. Moreover, in the order dated 21/09/2021 passed by Respondent dealing with the objections filed by Petitioner, the stand of the AO is not what Mr. Suresh Kumar stated in Court today. In the objection dated 17/09/2021, Petitioner has brought to the notice of the AO that notice issued u/s 148 dated 25/06/2019 was illegal and was issued without approval of competent authority and approval dated 26/06/2019 was an afterthought to cover up the action of the learned Deputy CIT. In the order dated 21/09/2021 rejecting this objection, the AO does not deny that the approval was dated 26/06/2019 whereas the notice was dated 25/06/2019 but simply states that the reason of escapement of income was sent for approval to Additional CIT on 14/06/2019 much before the notice under Section 148 was issued. Petitioner s submission that the notice dated 25/06/2019 issued u/s 148 of the Act was illegal since there was no prior approval as required under Section 151(2) of the Act has to be accepted. Notice itself has to be quashed and set aside. In such a case, the consequential orders also have to be set aside. Therefore, prayers (a) and (a1) which read as under, are granted. (a) a writ in the nature of mandamus, prohibition, certiorari, or any other appropriate writ, direction or order quashing the notice dated 25.06.2019 issued by the Respondent No.1 under section 148 and consequent proceedings initiated pursuant thereto under section 147 of the Act; (a1) issue a writ of Certiorari or any other appropriate writ, direction, or order thereby quashing and setting aside the impugned order dated 21.09.2021 (Exhibit G) and impugned assessment order dated 28.09.2021 (Exhibit N) passed by the Respondents.

Summary

Issues:
Quashing of notice under Section 148 of the Income Tax Act, 1961 and consequent proceedings initiated under Section 147 due to lack of prior mandatory approval of the Additional CIT as required under Section 151(2) of the Act.

Analysis:
The petition sought to quash a notice dated 25/06/2019 issued under Section 148 of the Income Tax Act, 1961, and subsequent proceedings initiated under Section 147. An interim order was passed followed by a final Assessment Order during the pendency of the petition, leading to its amendment to include these orders for quashing. The main ground raised was the lack of prior mandatory approval of the Additional CIT as required under Section 151(2) of the Act before issuing the notice. The court found that no such approval was in place before the notice was issued, and thus, the other grounds raised were not delved into.

The notice under Section 148 mentioned obtaining necessary satisfaction of the Range 1(3), Mumbai, with a copy of approval noting satisfaction for issuing the notice. The discrepancy highlighted was that the approval was granted on 26/06/2019, a day after the notice was issued on 25/06/2019, indicating a lack of application of mind while granting approval. The Assessing Officer's stand in court contradicted the objections filed by the petitioner, where it was alleged that the approval dated 26/06/2019 was an afterthought to cover up the illegal issuance of the notice without prior approval.

The court accepted the petitioner's submission that the notice dated 25/06/2019 was illegal due to the absence of prior approval as mandated under Section 151(2) of the Act. Consequently, the court quashed the notice and set aside the consequential orders, granting the prayers in the petition for the same. The respondents were given the liberty to take appropriate legal steps, and the petitioner was allowed to raise objections upon receiving a fresh notice. Ultimately, the petition was disposed of by the court.