2023 (11) TMI 344 - HC - Income Tax

Validity of reopening of assessment - as argued notice u/s 148A(b) has been issued to a deceased person and even the order u/s 148A(d) is not a valid as sanction u/s 151 has been granted without application of mind - HELD THAT - No notice u/s 148 of the Act can be issued without undertaking enquiry before assessment u/s 148A - We find this statement having been made twice in the affidavit in reply - It is rather obvious that no such enquiry has been made because if the AO had only made such an enquiry or even bothered to verify the Income Tax Portal relating to the deceased assessee, he would have certainly come to know that the assessee is deceased and had died on 23rd July 2020. The notice under Section 148A(b) of the Act has been issued without making the enquiry as mandated u/s 148A, thus is bad in law and has to be quashed and set aside. Invalid sanction u/s 151 - We agree that the approval applied for and granted u/s151 of the Act exposes the total non application of mind by the AO who applied for the approval, the Additional/Joint Commissioner of Income Tax who recommended granting of approval and the Principal Commissioner of Income Tax who granted the approval. We say this because Row 9 of the approval form, copy whereof can be found in the affidavit in reply, states time limit for current proceedings covered under Section 149(1)(b) for more than 3 years but not more than 10 years . The assessment pertains to Assessment year 2019-2020, whereas the notice issued under Section 148A(b) of the Act is dated 29th March 2023 and, therefore, within the three years period. If we take Row 9 to be correct, then Row 7 indicates the quantum of income which has escaped assessment Rs.3 lakhs . Therefore, the notice issued under Section 148A(b) of the Act itself could not have been issued. Therefore, if only the AO who applied for approval under Section 151 of the Act had only read the approval form, he would have made the required corrections. If only the Additional/Joint Commissioner of Income Tax had read the approval form and the order under Section 148A(d) of the Act and the file relating to the matter, he would not have recommended granting of approval. So also the Principal Commissioner of Income Tax. If he had only read the file, he would have realised that if the time limit for current proceedings is covered under Section 149(1)(b) of the Act, i.e., for more than 3 years but not more than 10 years, he has no power to grant approval and the approval should have been granted by the Principal Commissioner of Income Tax. Reassessment proceedings quashed - Decided in favour of assessee.

Summary

Issues involved:
The validity of notice under Section 148A(b) of the Income Tax Act, 1961, the order under Section 148A(d) of the Act, and the notice under Section 148 of the Act due to the deceased status of the assessee and lack of application of mind in granting approval under Section 151 of the Act.

Summary:

Issue 1: Validity of notice under Section 148A(b) of the Act:
The petitioner challenged a notice issued under Section 148A(b) of the Act to a deceased person, along with the order under Section 148A(d) of the Act and another notice under Section 148 of the Act. The primary contention was that the notice under Section 148A(b) was invalid as it was issued to a deceased individual. The petitioner had applied to be registered as the legal heir of the deceased assessee, which was accepted and verifiable from the Income Tax Portal. The court found that the notice under Section 148A(b) was issued without the mandated enquiry, rendering it invalid and supporting this view with a precedent judgment.

Issue 2: Lack of application of mind in granting approval under Section 151 of the Act:
The court also considered the approval granted under Section 151 of the Act, highlighting the total non-application of mind by the Assessing Officer and other tax officials involved. The approval form indicated errors, such as the time limit for proceedings and the quantum of income, which should have been corrected before granting approval. It was concluded that if the officials had reviewed the approval form properly, they would have realized the errors and not recommended or granted approval. Consequently, the order under Section 148A(d) of the Act and the subsequent notice under Section 148 of the Act were quashed and set aside due to the lack of application of mind in the approval process.

Conclusion:
In conclusion, the court quashed and set aside the order dated 18th April 2023 under Section 148A(d) of the Act and the consequent notice dated 18th April 2023 under Section 148 of the Act based on the invalidity of the notice under Section 148A(b) and the lack of application of mind in granting approval under Section 151 of the Act.