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2015 (3) TMI 795 - ITAT LUCKNOW

2015 (3) TMI 795 - ITAT LUCKNOW - [2015] 39 ITR (Trib) 574 (ITAT [Luck]) - Reopening of assessment - issuance of Notice u/s 148 r.w.s 151(2) - Sanction for issue of notice - Held that:- Provisions of sub-section (2) of section 151 of the Act is to be applied for issuing notice under section 148 of the Act and as per sub-section (2) of section 151 of the Act, the Assessing Officer was required to obtain sanction/approval from the Jt. Commissioner of Income-tax and in the instant case, approval/sa .....

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sued under section 148 of the Act is illegal and void ab initio. In the instant case, since notice under section 148 of the Act was issued without obtaining approval from the competent authority, notice issued under section 148 of the Act is invalid and, therefore, the assessment framed consequent thereto is not a valid assessment and void ab-initio. We accordingly set aside the order of the ld. CIT(A) and annul the assessment. Provisions of section 292BB of the Act is not applicable in the pres .....

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inter alia, on the following grounds:- 1. That the Ld. C.I.T.(A)-II has erred in law and on facts in not considering and appreciating that the appellant, while filing the return of income, had taken into account the deemed sale consideration as required under section 50C of the Income Tax Act, 1961 for the purpose of computing taxable Capital Gains and had computed Long Term Capital Gain for his l/3rd share in the demised property, therefore, the addition of ₹ 3,33,795/- arbitrarily made b .....

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on record is wholly unjustified insupportable in law and on facts and liable to be quashed. 4. That the authorities below, while completing the assessment and also the appeal ex-parte, have completely ignored the statement of income attached with and forming part of the Return Of Income for the assessment year 2003-2004, hence also the consequent order(s) are illegal and unsustainable. 5. That the authority(ies) below have also erred in law and on facts in treating the alleged addition of ₹ .....

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facts and circumstances of the case, be granted. 2. During the course of hearing of the appeal, the ld. counsel for the assessee has moved an application for admission of additional grounds, which are as under:- 1. That while sustaining the addition of ₹ 3,33,795/-, being long term capital gain, the Ld. CIT(A)-II, Kanpur has erred in law and on facts and failed to appreciate that the notice u/s 148 of the Income Tax Act,1961 dated 30.03.2010 was issued after taking sanction/approval of Co .....

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was illegal and void-ab-initio and hence, the consequent assessment framed u/s 144/148 of the Income Tax Act, 1961 is without jurisdiction, invalid, void ab initio and liable to be annulled. 3. Since the additional grounds raised by the assessee are legal in nature and go to the root of the case, we admit the same. 4. On these additional grounds, the ld. counsel for the assessee has contended that the Assessing Officer has obtained sanction for issuance of notice under section 148 of the Income .....

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e Tribunal in the case of Jai Prakash Ahuja vs. Income Tax Officer reported in [2014] 48 taxmann.com 86 (Lucknow Trib.), in which it has been held that the provisions of sub-section (2) of section 151 of the Act is to be applied for issuing notice under section 148 of the Act and as per sub-section (2) of section 151 of the Act, the Assessing Officer was required to obtain sanction/approval from the JCIT and if the approval/sanction was obtained from the ld. Commissioner of Income-tax, it is not .....

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ving carefully examined the orders of the lower authorities in the light of the rival submissions, we find that undisputedly the relevant assessment year involved is 2003-04 and the notice under section 148 of the Act was issued on 30.3.2010. Copy of notice issued under section 148 of the Act is available at page 6 of the compilation of the assessee. As per provisions of section 151(2) of the Act, the Assessing Officer was required to obtain approval from the JCIT before issuance of notice under .....

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the notice issued under section 148 of the Act without obtaining approval from the competent authority is not a valid assessment, as by issuing an invalid notice under section 148 of the Act, the Assessing Officer did not assume valid jurisdiction for completing the assessment under section 143(3) read with section 147 of the Act. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:- 7. Having given a thoughtful consideration to the rival submissions and .....

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of the relevant assessment year. Therefore, before issuing notice under section 148 of the Act, the Assessing Officer was required to obtain sanction/approval from the competent authority prescribed under section 151 of the Act. For the sake of reference, provisions of section 151 of the Act is extracted hereunder:- 151. Sanction for issue of notice.-(1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice sha .....

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icer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing officer, that it is a fit case for the issue of such notice. 8. Under section 151 of the Act .....

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t. Commissioner of Income-tax is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. In case assessment requires reopening after four years from the end of the relevant assessment year, the Assessing Officer is required to obtain approval/sanction from the Chief Commissioner or Commissioner before issuance of notice under section 148 of the Act. 9. Sub-section (2) of the Act deals those types of cases where assessment was not completed under .....

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f the Act that sanction was required by the Assessing Officer from the Jt. Commissioner of Income-tax. 10. In the instant case, undisputedly no assessment was framed under section 143(3) of the Act or 147 of the Act as admitted by the Department in reply to the information sought under the R.T.I. Act. It is also an undisputed fact that the assessment was sought to be reopened after four years from the end of the relevant assessment year i.e. 2003-04, as notice under section 148 of the Act was is .....

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ion/approval from the Jt. Commissioner of Income-tax and in the instant case, approval/sanction was obtained from the ld. Commissioner of Income-tax. Therefore, we have no hesitation in holding that the sanction accorded by the ld. Commissioner of Income-tax is not in accordance with law and in such a situation sanction accorded to the Assessing Officer is not valid and hence the Assessing Officer could not assume jurisdiction to issue notice under section 148 of the Act and in that case when th .....

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s. For the sake of reference, we extract the provisions of section 292BB of the Act as under:- 292BB. Notice deemed to be valid in certain circumstances. Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precl .....

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arious judgments rendered on the subject and we find that in the case of CIT vs. SPL S Siddhartha Ltd. (supra), the Hon'ble Delhi High Court has categorically held that it is an established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be & .....

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approval of the Commissioner. The objection of the assessee before the Tribunal was that the Assessing Officer had not taken the approval from the Joint Commissioner, instead, approval was taken from the Commissioner who was not competent to approve even when he was a higher Authority inasmuch as section 151 specifically mentions Joint Commissioner as the Competent Authority. This contention of the assessee was accepted by the Tribunal thereby quashing the assessment proceedings. It was apparen .....

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. It, thus, cannot be said that it is an irregularity curable under section 2925. [Para 5] Section 116 also defines the Income-tax authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in the specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hier .....

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r other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now well-settl .....

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view well-established principles law laid down in catena of judgments including that of the Supreme Court. [Para 10] 15. Similar view was also reiterated by the Hon'ble Bombay High Court in the case of Ghanshyam K Khabrani vs. ACIT-1 (supra) by holding that when section 151(2) of the Act mandates satisfaction of Jt. Commissioner of Income-tax for issuance of notice under section 148 of the Act, the reopening of assessment with the approval of the ld. Commissioner of Income-tax is not sustain .....

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tor of Income-tax (Investigation) to the effect that an amount approximately of ₹ 10 crores was received by the assessee during the financial year 2002-03 corresponding to assessment year 2003-04 but for the assessment year 2003-04, only an addition of ₹ 4.9 crores was made and since an amount of ₹ 5.1 crores remained to be taxed, said amount was sought to -be taxed as income having escaped assessment for assessment year 2004-05. The assessee challenged impugned notice contendi .....

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be reopened , for assessment year 2004-05; and that under section 151(2) the approval was required to be issued by the Additional Commissioner but in the instant case, the Additional Commissioner had not granted approval, he having forwarded the proposal submitted by the Assessing Officer to the Commissioner. HELD On admitted facts no reasonable person duly informed in law could have formed a reason to believe that there was an escapement of income in assessment year 2004-05. The case of the re .....

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appeal is pending. The mandatory requirement of section 147 is that there must be a reason to believe that income has escaped assessment. Ex-facie the reasons which were disclosed to the assessee cannot form the basis of a reason to believe that income has escaped assessment for assessment year 2004-05. Moreover, it is evident that even the letter dated 11-3- 2010 of the Additional DIT (Investigation) was much prior to the flnalization of the assessment for assessment year 2003-04 on 27-12-2010 .....

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or section 147 for assessment year 2004-05. Hence, under sub-section (2) of section 151, no notice can be issued under section 148 by an Assessing Officer who is below the rank of Joint Commissioner after the expiry of 4 years from the end of the relevant assessment year I unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. The expression 'Joint Commissioner' is defined in section 2(28C) to mea .....

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approval to the proposal submitted by the Assessing Officer. There is merit in the contention raised on behalf of the assessee that the requirement of section 151(2) could have only been fulfilled by the satisfaction of the Joint Commissioner that this is a fit case for the issuance of a notice under section 148. Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner. That expression has a distinct meaning by virtue of the definition in section 2(28C). The Commissioner .....

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ise of a power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner, it has to be done in that manner. [Para 6] Once the Court has come to the conclusion that there was no compliance of the mandatory requirements of sections 147 and 151(2), the notice reopening the assessment cannot be sustained in law. [Para 7]. 16. Following the aforesaid judgments of the Hon'ble Delhi and Bombay High Court, the ITAT Delhi Bench in the case of In .....

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