TMI Blog2022 (2) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... use the notice dated 22nd March 2013 was issued after a period of four years from the end of the relevant assessment year and, therefore, sanction ought to have been accorded by the Commissioner of Income Tax. The sanction accorded by the Additional Commissioner of Income Tax, therefore, would render the notice issued by the Assessing Officer at New Delhi itself bad in law and without jurisdiction. Respondent seeking to derive validity in view of Section 150 - The other ground taken by respondent to oppose the petition is that since the notice has been issued under Section 148 read with Section 150 of the said Act, the approval under Section 151 of the said Act is not required to be obtained is also misconceived. For a moment, even if accept Revenue s contention that the present proceedings are continuation of the proceedings initiated by the Assessing Officer at New Delhi vide notice dated 22nd March 2013, the proceedings would be invalid since the notice issued by the Assessing Officer at New Delhi itself was invalid inasmuch as sanction of the appropriate authority as per Section 151 was not obtained before issuing the notice. In the circumstances, the notice dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividend were not adjudicated. The view of CIT(A) was not accepted by the Department and an appeal was filed by them before the Income Tax Appellate Tribunal (ITAT) contending that an addition under Section 2(22)(e) was required to be made in the hands of P A. The ITAT dismissed Revenue s appeal and held that the addition under Section 2(22)(e) can only be made in the hands of the shareholder and since P A was not the shareholder, addition in its hands could not be sustained, thus deciding the issue against Revenue. 4. Unhappy with the view of the ITAT, an appeal was filed by Revenue before the Hon ble High Court at Delhi maintaining their contention that the addition was required to be made in the hands of P A. The High Court was pleased to dismiss Revenue s appeal by an order and judgment pronounced on 11th May 2011 holding that the loan or advance cannot be treated as deemed dividend in the hands of the concern which is not a shareholder. Thereafter, in paragraph 30 of the judgment, the High Court observed as under : Before we part with, some comments are to be necessarily made by us. As pointed out above, it is not in dispute that the conditions stipulated in section 2(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014, the objections were rejected by respondent no.1. 8. Mr. Pardiwalla on behalf of petitioner submitted as under : (a) the notice dated 10th January 2014 impugned in the petition is barred by limitation since it is issued beyond a period of six years from the end of the relevant assessment year, which is the time limit within which the impugned notice was required to be issued as per Section 149(1)(b) of the said Act. Therefore, the impugned notice is invalid and deserves to be quashed; (b) the impugned notice dated 10th January 2014 seeks to derive validity in view of Section 150 of the said Act as is apparent from the face of the notice and Section 150 of the said Act has no application in the matter; (c) for Section 150 of the said Act to apply, the notice must be issued in consequence of or to give effect to any finding or direction and the order in question must be passed by any authority in any proceeding under this Act or by a Court in any proceeding under any other law. Since none of these statutory requirements are fulfilled in the present case, Section 150 has no application and does not save the impugned notice from being barred by limitation; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year. As held in the case of Miranda Tools (P.) Ltd. V/s. Income Tax Officer (2020) 114 taxmann.com 584 (Bombay), the sanction accorded by the Additional Commissioner of Income Tax rendered the notice issued by the Assessing Officer at New Delhi bad-in-law and without jurisdiction; (k) stand of respondents that notice under Section 148 read with Section 150 of the said Act has been issued, the approval under Section 151 of the said Act is not required to be obtained is not correct. First of all, Section 150 of the said Act has no application and secondly, Section 150 only lifts the bar of limitation for issuance of notice under Section 149 and the other conditions that are required to be complied with before jurisdiction to reassess can be validly assumed must be fulfilled. Reliance was placed on the decision of the Apex Court in the case of Income Tax Officer V/s. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC). In the alternative, since the notice is issued after four years and assessment under Section 143(3) of the said Act has been completed, the proviso to Section 147 has to be complied with and respondent has to show there was failure on part of petitioner to full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. ... 12. Therefore, for Section 150 of the Act to apply, the notice must be issued in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act or by a Court in any proceeding under any other law. In our view, none of these statutory requirements are fulfilled and therefore, Section 150 has no application and does not save the impugned notice from being barred by limitation. 13. Reliance by respondents on the observations of the Hon ble Delhi High Court in paragraph 30 of its order and judgment dated 11th May 2011 is misplaced. The observations of the Hon ble Delhi High Court cannot be considered as finding or direction as contemplated by Section 150 of the said Act. A finding can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. Similarly, a direction can be issued only by an authority under the powers conferred on it. More ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. As regards the expression direction in Section 153(3)(ii) of the Act, it is now well settled that it must be an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. 15. Even if we, for a moment, regard the observations of the Delhi High Court as finding or direction , the same are not contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. Section 116 of the said Act sets out who the authorities are. Section 116 of the said Act reads as under : 116. Income-tax authorities. There shall be the following classes of income- tax authorities for the purposes of this Act, namely :- (a) the Central Board of Direct Taxes constituted u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the said proceedings are illegal as the notice under Section 148 of the said Act issued itself was devoid of proper jurisdiction and ab initio void. The Income Tax Officer 1(I), Lucknow, however, without considering the objection continued to proceed in the matter and passed the assessment order and also directed to initiate penalty proceedings. The CIT(A) dismissed the appeal of the assessee but the ITAT in the appeal filed by the assessee allowed the appeal of the assessee on the ground that notice issued under Section 148(1) of the said Act was without jurisdiction and, therefore, the subsequent proceedings are invalid. Feeling aggrieved, the Revenue preferred an appeal before the High Court. While dismissing the appeal of the Revenue, the Court held that when the notice under Section 148 (1) of the said Act was issued, ACIT, Range-IV, Lucknow had no jurisdiction over the assessee as the jurisdiction over the assessee was transferred to the Additional CIT, Range-I, Lucknow. It was held that there cannot be situation where two Assessing Officer would have simultaneous jurisdiction over the assessee. Accordingly, it was held that the Tribunal had rightly held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in that manner only. Adopting this principle, the Division Benches of this Court in the case of Ghanshyam K. Khabrani v. Asst. CIT (2013) 34 taxmann.com 300 (Bombay) and CIT v. Aquatic Remedies P. Ltd . have held that sanction for issuance of reopening notice has to be obtained from the Authority mentioned in Section 151 and not from any other officer including a superior officer. In the present case the Chief Commissioner of Income tax is not the officer specified in section 151 of the Act. There is thus a breach of requirement of section 151(2) of the Act regarding sanction for issuance of notice under section 148 of the Act. Consequently , the impugned notice and the impugned order cannot be sustained in law. The Petitioner, therefore, is entitled to succeed. 19. The other ground taken by respondent to oppose the petition is that since the notice has been issued under Section 148 read with Section 150 of the said Act, the approval under Section 151 of the said Act is not required to be obtained is also misconceived. As stated earlier, first of all Section 150 of the said Act has no application in the present case. In any event, Section 150, as held in Income Tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gitating the conclusion of the Delhi High Court before the Apex Court, Mr. Suresh Kumar submitted that an SLP has been filed against the decision of the Delhi High Court to cover the contingency of an adverse outcome in the SLP. It is Revenue s contention before the Apex Court that the deemed dividend under Section 2(22)(e) is assessable in the hands of P A. This is certainly not permissible because the jurisdictional requirement is that respondents must entertain a belief that income chargeable to tax has escaped assessment in the hands of petitioner. It is not possible for respondents to entertain such belief if they are agitating the matter against P A. On this ground also, the impugned notice should be held as invalid. The Division Bench of this Court in DHFL Venture Capital Fund V/s. Income Tax Officer (2013) 34 taxmann.com 300 (Bombay) held that where the Assessing Officer sought to make protective assessment by reopening an assessment on the ground that a contingency may arise in future resulting in escapement of income that would be wholly impermissible and would amount to rewriting of the statutory provision. Paragraph 18 of the said judgment reads as under : 18. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an assessee has not filed a return of income simplicitor. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of ₹ 32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment' indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may escape assessment' in future. Writing legislation is a constitutional function entrusted to the legislature. (emphasis supplied) 22. In the circumstances, the notice dated 10th January 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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