2016 (2) TMI 1094 - AT - Income Tax

Applicability of the provisions of section 151 - reopening of assessment - notice issued without obtaining the prior sanction of the authority mentioned - Held that - As gone through the letter dated 25.03.2011 which states approval for the issue of notice u/s 148 reg. . This letter subsequently talks of according of the approval and further issue of the notice u/s 148. Section 151 in my opinion does not talk of approval of the action of the AO but requires satisfaction of the Joint Commissioner on the reasons recorded by the AO that it is a fit case for the issue of such notice. There is difference in the word satisfaction and approval . Approval can be subsequent to the occurrence of the events while the satisfaction as per the provisions of section 151 has to be prior to the issue of the notice. Satisfaction represents a decision based on the material on record. As noted what the Addl. Commissioner of Income-tax has approved the issuing of the notice u/s 148. He has not given any finding that on the basis of the reasons recorded by the AO he is satisfied that it is a fit case for the issue of the notice u/s 148 of the Act. What he has done he has approved the proforma sent by the AO. This approval has also been received by the AO on 29.08.2011 i.e. after the issue of the notice u/s 148 dated 28.03.2011. This does not meet the requirement of the provisions of section 151 (2) and therefore quash the notice issued u/s 148 (2) as this was issued merely in a mechanical manner without applying the mind by the Addl. Commissioner to the reasons recorded by the AO.

Summary

Issues:
Validity of notice u/s 148 for assessment year 2005-06 without valid sanction u/s 151.

The judgment involves multiple appeals filed against orders of the CIT (Appeals). The assessee raised 10 grounds of appeal in each case, but did not press grounds no.3 & 9. The ld. Counsel did not argue grounds no.1, 2, 7, 8 & 10, focusing only on grounds no.4, 5 & 6 related to the applicability of section 151 of the Income-tax Act, 1961. The parties agreed to decide all appeals based on facts from a specific case. The case involved initiation of action under section 147 with notices issued for non-compliance. The assessee challenged the initiation and lack of valid sanction under section 151 before the CIT (A), which partially allowed the appeal.

The ITAT Delhi analyzed the approval process for issuing notice u/s 148 for the assessment year 2005-06. The notice was issued after four years from the end of the relevant assessment year without prior sanction under section 151. The Addl. Commissioner's approval was received after the notice was issued, which did not align with the provisions of section 151(2) requiring satisfaction of the Joint Commissioner before issuing the notice. The ITAT emphasized the distinction between "satisfaction" and "approval," stating that the approval received post-notice issuance did not meet the statutory requirement. Citing the Chhugamal Rajpal case and other precedents, the ITAT held that a notice issued without prior sanction as per section 151 would be invalid, leading to the quashing of the notice and subsequent proceedings.

The judgment referred to relevant legal provisions and precedents to support the decision to quash the notice issued without valid sanction under section 151. The ITAT highlighted the importance of obtaining prior satisfaction of the Joint Commissioner before issuing a notice u/s 148 after the expiry of four years from the relevant assessment year. By quashing the notice and partly allowing the appeals, the ITAT upheld the requirement of compliance with statutory provisions for initiating proceedings under section 147. The judgment emphasized the necessity of following procedural requirements to maintain the validity of notices issued for reassessment purposes.