Reopening approval by an officer superior to Joint Commissioner invalid. Approval by a superior officer do not satisfy the requirement of Section 151(2) of the Income Tax Act.
ABCAUS Case Law Citation:
ABCAUS 2053 (2017) (08) HC
This present writ petition was filed under Articles 226 and 227 of the Constitution, seeking the quashing of notice issued by the Deputy Director of Income Tax (Assessing Officer or ‘AO’) under Section 148 of the Income Tax Act, 1961 (the Act seeking to reopen the assessment for Assessment.
Assessment Year : 2005-06
Important Case Laws Cited/relied upon by the parties:
Commissioner of Income Tax v. SPL’s Siddhartha Ltd. 2012 (345) ITR 223 (Del)
Commissioner of Income Tax-8 v. Soyuz Industrial Resources Ltd. (2015) 58 taxmann.com 336 (Del)
Brief Facts of the Case:
The case of the assessee was reopened u/s 147 by issue of notice u/s 148. Since the original assessment was processed under Section 143(1), and since the reopening was after the expiry of four years from the end of the relevant AY, in terms of Section 151(2) of the Act, the approval for the reopening of the assessment had to be granted, by an officer of the rank of Joint Commissioner, which in this case was the Additional Director of Income Tax (Addl. DIT). However, the approval was granted by the DIT who was an officer superior to the Addl. DIT.
The assessee challenged the reopening of the assessment and raised objection which were disposed off by the AO rejecting the objections raised.
The assessee had filed the instant Writ in the High Court for quashing the notice u/s 148 and also challenged order passed by the AO rejecting the objections raised to the reopening of the assessment.
Contention of the Petitioner Assessee:
It was submitted that the approval under section 151(2) was granted by the DIT who was an officer superior to the Addl. DIT. It was accordingly contended by the Petitioner that the impugned notice under Section 148 of the Act and all proceedings pursuant thereto were bad in law. It was urged that even if the approval had been granted by an officer superior i.e. the DIT, it would not cure the defect.
Contentions of the responding Revenue:
It was contended that when the Addl. DIT recorded the words “put up for approval” he, in fact, should be understood to have applied his mind, approved the note of the AO, and only thereafter put up the note for further approval to the DIT.
Observations made by the High Court:
The Hon’ble High Court observed that the note prepared by the AO was put up to the Addl. DIT who recorded “put up for approval” with his signature and put up the file to the DIT. The next signature on the file is that of the DIT who states in a single word “Approved”.
The Hon’ble High Court observed that the Addl. DIT merely “put up for approval” the file and did not himself accord approval of the AO’s proposal for reopening of the assessment.
The Hon’ble High Court observed that where the original assessment was processed under Section 143(1) of the Act, and the reopening is sought to be done after the expiry of four years from the end of the relevant AY, the mandatory requirement under Section 151(2) of the Act is that the approval for the reopening of the assessment should be by an officer of the rank of the Joint Commissioner (in this case, the Addl. DIT) and not other officer including a superior officer.
It was observed that the argument that the approval by an officer superior to the Joint Commissioner will satisfy the requirement of Section 151(2) of the Act, was categorically negated by the court in an earlier decision which was again followed in another case.
The Hon’ble High Court concluded that in view of the clear position in law, in the present case, the mandatory requirement under Section 151 (2) of the Act, as it stood at the relevant time, had not been fulfilled.
The reopening of the assessment held bad in law.