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TMI Blog2024 (3) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... four years without taking approval from higher authority u/s 151(1). AR is very much correct in submitting that if such an approach is allowed to AO, this would be a clear circumvention as well as defiance and violation of section 151(1) made by Parliament. We may be hastened to add here that although in present appeal, the Ld. DR is supporting AO s approach just to save this case of department but otherwise even the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner would not accept such approach of AO and they would certainly say that such approach of AO is unauthoritative and invalid. We may also add here that the AO was having time to issue notice uptill 31.03.2022, therefore the AO could very well obtain a fresh approval from Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner u/s 151(1) and issue notice to assessee after four years even though he had taken earlier approval u/s 151(2) from Joint Commissioner. In that case, there would have not been any lapse. But the AO has not done so. Therefore, in the present case, we agree with Ld. AR s pleading that the AO was not having a valid approval fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not having any income from business. However, the assessee filed its original return of income u/s 139(1) on 28.09.2015 declaring a total income of Rs. 22,73,04,890/- from interest on bank deposits. This return was processed u/s 143(1) of the Act. Subsequently, the AO re-opened assessment by issuing notice dated 30.03.2021 u/s 148 calling the assessee to re-file return. In response, the assessee re-filed return on 28.04.2021 repeating the same income of Rs. 22,73,04,890/-. Thereafter, the AO issued statutory notices u/s 143(2) and 142(1) from time to time which the assessee complied with. The assessee submitted details/documents as required by AO from time to time. Finally, the AO completed assessment vide order dated 30.03.2022 u/s 147 assessing total income at Rs. 61,84,54,919/- with three (3) types of additions/ adverse conclusions as under: (i) The AO made an addition of Rs. 38,08,18,089/- u/s 56(2)(viib) on the premise that the assessee had received excessive consideration for issue of shares; (ii) The AO made an adverse conclusion that the assessee had received cash of Rs. 34,43,98,002/- from different vendors from whom depreciable fixed assets were acquired. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act was issued by the AO without first obtaining an appropriate sanction from an appropriate authority as prescribed under the then prevailing provisions of section 151 of the Act. 1(d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuance of the notice under s. 148 of the Act, without considering the material fact that first of all, the sanction was granted by an inappropriate authority and secondly, the sanction so granted was not in accordance with law, inasmuch, the sanction was granted in a mechanical manner and without application of mind. 2(a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in upholding the findings given by the AO to the effect that the appellant company had booked excessive capital expenditure in its books of account under the garb of bogus payments aggregating to a sum of Rs. 34,43,98,002/- to vendors during the relevant previous year and as also, in upholding the findings of the AO to the effect that the depreciation claimed by the appellant company in the subsequent years, on the enhanced value of Rs. 34,43,98, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial fact that during the course of the assessment proceedings, the AO had not made any independent inquiry by way of issuance of any summons under s.131 or letter under s.133(6) of the Act to the concerning vendors. 3(a) That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 1,03,31,940/- made by the AO in the appellant's income on the allegation of payment of commission to various vendors in lieu of bogus capital expenditure, by holding the same as unexplained expenditure of the appellant under s. 69C of the Act without properly considering and appreciating the explanation of the appellant to the effect that the entire financial transactions undertaken by it during the relevant previous year with various vendors were fully genuine and duly supported by credible evidences and therefore, it was neither required, nor it had made any payment of commission to any vendor at any point of time. 3(b) That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the impugned addition of Rs. 1,03,31,940/- made by the AO in the appellant's income, under s. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year. [Emphasis supplied] 5. Ld. AR submitted that the section 147 is subject to the provisions of section 148 to 153 and sections 148 to 153 prescribe different-different requirements, conditions, time-limitations, etc. Section 151 is one section falling in the series of sections 148 to 153 and therefore section 147 is also subject to section 151. The means, the AO must follow the provision of section 151 but in present case, there is a violation of section 151. 6. To show such violation, Ld. AR carried us to various Pages of Paper- Book to apprise the factual position. Firstly, he demonstrated that the AO issued notice dated 30.03.2021 u/s 148 to assessee, the said notice is scanned and re-produced below: 7. Then, he showed that for obtaining approval u/s 151, the AO sent a proposal dated 22.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed submission also but the CIT(A) has wrongly rejected assessee s submission and upheld AO s action. The Ld. AR made following pleadings to oppose the CIT(A) s order: 9.1 The CIT(A) has observed that the AO sent proposal to Joint Commissioner on 22.10.2019 and the Joint Commissioner had also granted approval on 23.10.2019, which was before 31.03.2020 i.e. before expiry of 4 years period from end of AY 2015-16; therefore the AO was having a valid approval in possession in terms of section 151(2). Ld. AR submitted that such observation made by CIT(A) is very much faulty for the simple reason that the AO actually issued notice to assessee on 30.03.2021 which was beyond the outer limit of four years. He argued that the section 151(1) and 151(2) are independent of each other and prescribe clear-cut and altogether different provisions for issuance of notices based on time-frame. While section 151(1) requires approval to be taken from higher authorities, namely Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner for issuance of notice after expiry of four years, section 151(2) permits issuance of notice within four years after obtaining approval fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expire on 31.03.2022. Being so, the TOLA is not applicable because section 3(1)(a) of TOLA, re-produced above, clearly prescribes its applicability to cases where the time-limit for issuing notice was to expire during 20.03.2020 to 29.06.2020 or such other date after 29.06.2020 as the Central Govt. may notify. Since the Central Govt. ultimately notified 31.03.2021, the section 3(1)(a) was applicable only for the situations where the time-limit would expire upto cut-off date of 31.03.2021. In assessee s case, the time limit to issue notice was not expiring on 31.03.2021, the AO had time-limit upto 31.03.2022; and (ii) Even if the TOLA may have extended the time-limit to issue notice as prescribed in section 149 of the Act but that would not amount to amending the provisions of section 151(1)/(2) requiring approval from a specific authority. Ld. AR submitted that exactly these twin-propositions of assessee s case have been dealt and decided by Hon ble Mumbai High Court in a series of decisions wherein the Hon ble High Court was pleased to quash the proceedings undertaken by AO: (a) JM Financial and Investment Consultancy Services Private Limited Vs. ACIT, Circle-3(2)(1) and others or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here be, is saved by section 292BB and the assessee is precluded from raising such an objection due to bar imposed in section 292BB. 12. In re-joinder, Ld. AR submitted that just to address the contention raised by Ld. DR and without prejudice to his earlier submission, when the AO got approval as early as on 23.10.2019 and the Covid Pandemic came into being on 15.03.2020/20.03.2020, the AO had about 5 months ample time to issue notice but the AO did not. Thus, the AO himself made a serious lapse and now the revenue is just trying to cover up the AO s lapse by gaining sympathy and support from Covid-19 pandemic whereas the Covid came into being in March, 2020. Therefore, the revenue cannot be granted any such concession to cover up the lapse of AO. With regard to the rescue sought by revenue on the strength of section 292BB, Ld. AR submitted that the section 292BB applies in different situations, it does not apply where the AO has not obtained a valid approval as mandated by section 151(1) and yet issued notice to assessee. 13. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is a fit case for the issue of notice . It is further noteworthy that sub-section (1) prescribes a higher authority if the notice is to be issued after expiry of four years. There is a significant purpose involved in prescribing higher authority of department in sub-section (1) as compared to sub-section (2). The language is also very clear and does not leave any scope of ambiguity and the words are very plain and specific. It is clearly prescribed in sub-section (1) that No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years .. . Thus, if the AO wants to issue notice after expiry of four years, this can be done only under the approval of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner . The language does not give any scope or flexibility to AO to obtain approval within four years from lower-authority u/s 151(2), keep such approval in file and subsequently issue notice after four years without taking approval from higher authority u/s 151(1). Ld. AR is very much correct in submitting that if such an approach is allowed to AO, this would be a clear circumvention as well as def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AR has quoted several decisions but we re-produce below the first in sequence referred by Ld. AR i.e. JM Financial and Investment Consultancy Services Private Limited Vs. ACIT, Circle-3(2)(1) and others order dated 04.04.2022: (2023) 451 ITR 205 (Bombay HC) / (2022) (4) TMI 1446: 1 Petitioner is impugning a notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961 (the Act) for Assessment Year 2015-2016, an order dated 24th January 2022 rejecting petitioner's objections to reopening, the sanction granted under Section 151 of the Act dated 26th March 2021 for issuance of notice under Section 148 of the Act and a subsequent notice dated 24th January 2022 under Section 142(1) of the Act. 2. We would straightaway go to the sanction granted under Section 151 of the Act. It is petitioner's case that the approval obtained for issuing notice under Section 148 of the Act is not in accordance with the mandate of Section 151 as the said approval is of Additional Commissioner of Income Tax instead of Principal Commissioner of Income Tax. It is petitioner's case that the reasons put up for approval on 23rd March 2021, which is after the expiry of four ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifies that the Income Tax Officer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6. Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions may not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. 7. In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleading that the revenue has protection of section 292BB is meritless and liable to be rejected. 16. In our extensive discussions in preceding paragraphs, we have dealt all contentions of parties. That brings us to conclude that the AO has issued notice u/s 148 without having a valid approval mandated by section 151(1). Being so, we are of considered view that the revenue s case is suffering from jurisdictional defect and the entire proceeding u/s 148 / 147 undertaken by AO is illegal and unsustainable. We, therefore, allow ground 1(a), 1(c) and 1(d) of assessee s appeal and quash the order passed by AO. Consequently, we make it clear that not only the additions made by AO are deleted but also the adverse conclusion made by AO for not allowing depreciation in subsequent years on enhanced value of assets is also quashed. The AO shall allow depreciation on full value of assets (including the enhanced value of Rs. 34,43,98,002/- alleged by AO) in subsequent years. Ordered accordingly. 17. Since we have already quashed AO s order, other grounds raised by assessee whether on legality or merits are not required to be adjudicated, those grounds are left open. Revenue s appeal: 18. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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