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2025 (5) TMI 443 - HC - Income TaxValidity of reassessment proceedings for want of necessary approval - valid sanction u/s 151 - HELD THAT - In the present case there is no dispute that the original assessment proceedings had culminated into the assessment order dated 30.12.2008 passed u/s 143(3). Therefore in terms of the proviso (1) to Sub-section (1) of Section 151 of the Act no notice u/s 148 could be issued unless the Commissioner of Income Tax CIT or the Chief Commissioner of Income Tax CCIT was satisfied on the reasons recorded by the AO that it was a fit case for issuance of such notice. Admittedly in the present case no approval was obtained from the CIT or the CCIT. The notice under Section 148 of the Act was issued with the approval of the JCIT and not CCIT or CIT. Clearly the notice under Section 148 of the Act was invalid as issued contrary to the provisions of Section 151 (1) of the Act. Any proceedings continued pursuant to said notice including the assessment order passed u/s 147 of the Act cannot be sustained. Thus question whether the reassessment proceedings are without the jurisdiction as it did not have the approval of the statutory authority as mandated u/s 151 is answered in favour of the Assessee and against the Revenue.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are: (i) Whether the Income Tax Appellate Tribunal (Tribunal) erred in law and on facts in reversing the order of the Commissioner of Income Tax (Appeals) [CIT(A)] which had deleted the addition of Rs. 5,18,27,005/- on account of capital gains under Section 45 of the Income Tax Act, 1961 (the Act); (ii) Whether the order of the Tribunal suffers from perversity; (iii) Whether the reassessment proceedings initiated under Section 148 of the Act were without jurisdiction due to the absence of necessary approval from the statutory authorities as mandated under Section 151 of the Act. 2. ISSUE-WISE DETAILED ANALYSIS Issue (iii): Validity of Reassessment Proceedings for Lack of Statutory Approval under Section 151 of the Act Relevant Legal Framework and Precedents: Section 151(1) of the Income Tax Act, as applicable at the relevant time, mandates that where an assessment under Section 143(3) or Section 147 has been completed for the relevant assessment year, no notice under Section 148 can be issued by an Assessing Officer below the rank of Assistant Commissioner or Deputy Commissioner unless the Commissioner of Income Tax (CIT) or Chief Commissioner of Income Tax (CCIT) is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issuing such notice. The proviso explicitly requires approval from the CIT or CCIT for issuance of a notice under Section 148 after the original assessment has been completed. The Joint Commissioner of Income Tax (JCIT) does not have the authority to grant this sanction in such cases. Court's Interpretation and Reasoning: It was undisputed that the original assessment for AY 2006-07 had been completed via an order dated 30.12.2008 under Section 143(3). Therefore, the proviso to Section 151(1) applies mandating approval from either the CIT or CCIT before issuing a notice under Section 148 for reassessment. In the instant case, the notice under Section 148 was issued on 22.03.2013 with the approval of the JCIT and not the CIT or CCIT. The Court held that such approval from the JCIT is insufficient and contrary to the statutory mandate. Key Evidence and Findings: The record clearly showed that the notice under Section 148 was issued with JCIT approval only, and no approval was obtained from the CIT or CCIT. This procedural defect was fatal to the validity of the reassessment proceedings. Application of Law to Facts: Since the statutory requirement for approval from the CIT or CCIT was not complied with, the notice under Section 148 was invalid. Consequently, all subsequent proceedings including the assessment order dated 24.03.2014 passed under Section 147 were without jurisdiction and could not be sustained. Treatment of Competing Arguments: The Revenue did not dispute the absence of approval from the CIT or CCIT but contended that the JCIT's approval sufficed. The Court rejected this contention strictly interpreting the statutory language, emphasizing that the proviso to Section 151(1) distinctly requires approval from the CIT or CCIT in cases where the original assessment has been completed. Conclusion: The Court answered this issue in favour of the Assessee, holding the reassessment proceedings invalid for want of requisite approval. Issues (i) and (ii): Merits of Addition on Capital Gains and Alleged Perversity of Tribunal's Order Since the Court found the reassessment proceedings to be invalid on jurisdictional grounds, it declined to address the substantive questions concerning the correctness of the Tribunal's reversal of the CIT(A) order and the alleged perversity of the Tribunal's decision. The CIT(A) had deleted the addition of Rs. 5,18,27,005/- on account of long-term capital gains from the sale of agricultural land, primarily on the ground that the Assessee was not confronted with the incriminating material relied upon by the Assessing Officer (AO), including an Excel sheet recovered from a searched third party's device. The CIT(A) also noted the absence of any statement recorded by the Directorate of Revenue Intelligence (DRI) indicating that part consideration was paid in cash. The Tribunal, however, reversed the CIT(A)'s order and upheld the addition made by the AO. Given the invalidity of the reassessment notice, the Court did not delve into the merits of these findings or the correctness of the Tribunal's factual and legal conclusions. 3. SIGNIFICANT HOLDINGS The Court's crucial legal reasoning on the jurisdictional issue is encapsulated in the following verbatim excerpt: "In the present case, no approval was obtained from the CIT or the CCIT. The notice under Section 148 of the Act was issued with the approval of the JCIT and not CCIT or CIT. Clearly, the notice under Section 148 of the Act was invalid as issued contrary to the provisions of Section 151 (1) of the Act. Any proceedings continued pursuant to said notice including the assessment order passed under Section 147 of the Act cannot be sustained." Core principles established include:
Final determinations on each issue are:
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