Reassessment notice issued with sanction from JCIT was void as under proviso to sub-section (1) of section 151 sanction was required from CCIT/CIT

Reassessment notice issued with sanction from JCIT was void as under proviso to sub-section (1) of section 151 sanction was required from CCIT/CIT

ABCAUS Case Law Citation:
ABCAUS 1092 (2016) (12) ITAT

Assessment Year : 2006-07

Important Case Laws relied upon:
CIT VS. SPL’s Siddhartha Ltd. (2012) 345 ITR 223 (Del)

The Grievance:
The assessee’s ground was that the issue of notice u/s 148 after taking sanction for approval from the Joint Commissioner of Income Tax was void ab-initio.

Brief Facts of the Case:
The assessee filed return which was originally processed u/s 143(1). Thereafter, an order u/s 143(3) was passed accepting the returned income. Thereafter, the AO initiated re-assessment proceedings as per section 147 and passed the order u/s 144 read with 147 of the Income Tax Act, 1961. In the reasons recorded for reassessment it was mentioned that the administrative approval from the Joint CIT, Range was granted.

The assessee’s appeal was dismissed by the CIT(A) and the addition was also enhanced.

Contentions of the Assessee:
It was submitted that in the present case, the approval should have been done only after taking approval from the Chief Commissioner or Commissioner of Income Tax as the case may be, since the original assessment in this case was completed u/s 143(3) and the sanction for reassessment actually obtained from JCIT rendered the assessment order void ab initio.

Observations made by the ITAT:
The Tribunal observed that section 151, prior to its substitution by the Finance Act, 2015 provides that sanction for issue of notice should be obtained by the AO from JCIT. In case a period of four years from the end of the relevant assessment year has expired and the original assessment was made u/s 143(3) or section 147, then, the proviso provides that no notice can be issued without seeking sanction from the Chief Commissioner of Income-tax or Commissioner of Income-tax.

It was further noted that sub-section (2) of section 151, on the other hand, applies to cases not falling under sub-section (1). The effect of sub-section (2) is that where no assessment was earlier made, notice can be issued by an AO u/s 148 after the expiry of four years from the end of the relevant assessment year only after obtaining sanction from JCIT.  Thus, it is apparent that there are two categories of cases requiring sanction for issue of notice u/s 148 viz., those in which assessment was earlier made u/s 143(3) or section 147, which are covered u/s 151(1) of the Act and rest of the cases, which are covered u/s 151(2) of the Act.

The Tribunal observed that in the instant case, the original assessment was completed u/s 143(3) on 30.4.2008 and the sanction was obtained by the AO on 28.3.2013, that is , after a period of four years from the end of the relevant assessment year. Therefore, the case was directly covered under proviso to sub-section (1) of section 151 as per which the sanction was required from Chief Commissioner or Commissioner and not JCIT.

It was apparent from the assessment order that the AO obtained sanction from JCIT. As the pre-requisite of re-assessment, being, sanction from the competent authority, was obtained by the AO from a wrong authority, the proceedings flowing therefrom and the consequential order passed cannot be sustained.

The Tribunal pointed out that the Hon’ble jurisdictional High Court dealt with almost similar situation when the AO in that case sought approval of Commissioner only as against the required sanction from the JCIT. The Hon’ble High Court held that it could not be said that the Joint Commissioner/Additional Commissioner had granted the approval and accordingly set aside the notice and the consequential assessment.

Held:
It was held that the AO did not acquire a valid jurisdiction for the reassessment and the assessment order was quashed.