Joint Commissioner's approval for reassessment notice upheld, despite Commissioner's additional review

To delve deeper, you can read the original judgement of the court order here.

Case Name:

Mayurbhai Mangaldas Patel Vs Income Tax Officer (High Court of Gujarat)

Tax Appeal No. 29 of 2018

Key Takeaways:

1. The Joint Commissioner's approval is sufficient for issuing a notice under section 148, even if a higher authority (Commissioner) also reviews the case.

2. The legal requirement is fulfilled if the Joint Commissioner expresses satisfaction with the Assessing Officer's reasons for reopening the assessment.

3. Additional review by a higher authority doesn't invalidate the process if the proper authority (Joint Commissioner) has already approved.

Issue:

Was the requirement of sub-section(2) of section 151 of the Income Tax Act satisfied before issuing a notice under section 148 for reassessment?

Facts:

1. The Assessing Officer recorded reasons for reopening the assessment.

2. A printed proforma with 13 entries was used for approval.

3. The Joint Commissioner expressed satisfaction with the Assessing Officer's reasons on 28.3.2011.

4. The Commissioner also reviewed and approved the case, though this wasn't legally required.

Arguments:

Assessee's argument:

- The competent authority should have been the Joint Commissioner, not the Commissioner.

- Approaching a higher authority (Commissioner) for approval would vitiate the reassessment proceedings.

Revenue's argument:

- The Tribunal correctly found that the conditions of sub-section(2) of section 151 were satisfied.

- The Joint Commissioner had indeed granted approval before the Commissioner's review.

Key Legal Precedents:

1. Anirudhsinhji Karansinhji Jadeja v/s. State of Gujarat (AIR 1995 SC 2390):

This case established that when a statute assigns a duty to a specific administrative officer, it must be performed by that officer.

2. Commissioner of Income-tax v. SPL's Siddhartha Ltd (2012) 17 taxmann.com 138 (Delhi):

This case quashed a reassessment notice where only the Commissioner (not the Joint Commissioner) had recorded satisfaction.

The court distinguished the current case from these precedents, as the Joint Commissioner had properly recorded his satisfaction here.

Judgement:

The High Court dismissed the appeal, concluding that:

1. The Joint Commissioner had expressed satisfaction that it was a fit case for issuing a reassessment notice.

2. The requirement of section 151(2) was fulfilled.

3. The additional review by the Commissioner didn't invalidate the Joint Commissioner's prior approval.

FAQs:

Q1: Does the Commissioner's additional review invalidate the process?

A1: No, as long as the Joint Commissioner has properly approved first, additional review doesn't invalidate the process.

Q2: What's the key difference between this case and the SPL's Siddhartha Ltd case?

A2: In the SPL's Siddhartha Ltd case, only the Commissioner had recorded satisfaction. Here, the Joint Commissioner properly recorded satisfaction before the Commissioner's review.

Q3: What does section 151(2) of the Income Tax Act require?

A3: It requires that for Assessing Officers below the rank of Joint Commissioner, the Joint Commissioner must be satisfied with the reasons for issuing a notice under section 148.

Q4: Can a higher authority's approval substitute for the designated authority's approval

A4: No, the designated authority (in this case, the Joint Commissioner) must approve. A higher authority's approval alone is not sufficient.

Q5: What was the significance of the printed proforma in this case?

A5: The proforma provided a structured way for the Joint Commissioner to record his satisfaction, which was crucial in proving that proper procedures were followed.

1. The assessee has filed this appeal challenging the judgment of Income Tax Appellate Tribunal raising the following questions for our consideration :

“(1) Whether on facts and in law, the Income Tax Appellate Tribunal is right in holding that provisions of S.151(2) of the Income Tax Act are complied with when actual satisfaction was taken of Commissioner only?

(2) Whether on facts and in law, the additional commissioner is said as satisfied on the reasons recorded when after signing approval sheet as satisfied, he forwarded it for approval of higher authority?

(3) Whether on facts and in law, the Income Tax Appellate Tribunal is right in holding that provisions of S.151(2) are complied with when Assessing Officer has sent form for approval of Commissioner only which was routed through Addl. Commissioner?

4. Whether on facts and in law, the Income Tax Appellate Tribunal is right in not following its own decisions?

5. Whether on facts and in law, the Income Tax Appellate Tribunal is right in observing that irregularity of taking sanction for issue of notice u/s 151 is curable defect u/s 292B of the Income Tax Act?”

2. Though multiple questions are raised, one single issue that arises in the appeal is whether the requirement of sub- section(2) of section 151 of the Act were satisfied before issuance of notice under section 148 of the Act.

3. Case of the assessee is that the authority competent referred to in sub­section(2) of section 151 was the Joint Commissioner, instead in the present case, higher authority i.e. Commissioner was approached and necessary sanction/approval was granted by him which would vitiate the initiation of proceedings for reassessment. The Tribunal however took the view that even the Joint Commissioner had granted such approval. Merely because the Commissioner had also applied his mind, would not vitiate the proceedings.

4. In this background, counsel for the appellant drew our attention to the necessary approval order which is verbatim reproduced by the Tribunal in the impugned judgment. He relied on the judgment of Supreme Court in case of Anirudhsinhji Karansinhji Jadeja v/s. State of Gujarat reported in AIR 1995 SC 2390 and on the judgment of Delhi High Court in case of Commissioner of Income­tax v. SPL's Siddhartha Ltd reported in (2012) 17 taxmann.com 138 (Delhi).

5. On the other hand, learned counsel for the Revenue opposed the appeal contending that the Tribunal has appreciated facts properly and found that conditions of sub­section(2) of section 151 are satisfied.

6. The approval is granted in printed proforma which contains as many as 13 entries. Entries no. 1 to 11 referred to relevant informations concerning the case on hand, such as, income of the assessee, his PAN number, order of assessment in question, etc.. Entry no.11 pertains to reasons for the formation of belief that income chargeable to tax had escaped assessment. Entry no.12 reads as under :

“Whether the Addl. Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s.148”

In response to this question, the Joint Commissioner had made the following remarks in his own handwriting :

“I am satisfied with the reasons recorded by the AO.” Below this, he had put his signature with date of 28.3.2011.

7. It is true that this form contained entry no.13 which read as under :

“Whether the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s.148”.

Against this, the Commissioner of Income­tax also had remarked that he was satisfied that notice under section 148 was required to be issued.

8. It is thus undisputable that Joint Commissioner had expressed his satisfaction that it was a fit case for issuing notice of reopening of the assessment. This was on the basis of reasons recorded by the Assessing Officer which were also furnished to him. His satisfaction and approval was therefore, complete.

9. Sub­section(2) of section 151 provides that in cases specified therein, no notice under section 148 of the Act would be issued by an Assessing Officer who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by the Assessing Officer that it is a fit case for issuance of such notice. Clearly thus, this requirement was fulfilled.

10. The legal proposition is that when the statute casts a duty on a certain administrative officer, the same must be performed by him and the satisfaction arrived at even by the higher authority would not be sufficient. However, in the present case, there was no lack of satisfaction or exercise of power by the Joint Commissioner. He in clear terms, expressed his satisfaction that on the basis of the reasons recorded by the Assessing Officer, it was a fit case for issuance of notice under section 148 of the Act. Merely because the papers were thereafter for some erroneous reason also placed before the Commissioner who also recorded his similar satisfaction would not take away anything from the previous conclusion.

11. In case of Anirudhsinhji Karansinhji Jadeja (supra), the sanction to be granted under the Terrorist and Disruptive Activities (Prevention) Act, 1987 had to be done by the D.S.P. Instead of exercising such powers, he made a report to the Additional Chief Secretary and asked his permission to proceed under the TADA Act. This was clearly found in breach of statutory requirement by the Supreme Court. Relying upon and referring to this judgment of Supreme Court, Delhi High Court in case of SPL's Siddhartha Ltd (supra), quashed the notice of reopening of assessment, in which satisfaction, as referred to in section 151 of the Act, was arrived at by the Commissioner, though the proper authority was Joint Commissioner. It was a case where the Joint Commissioner had not recorded any such satisfaction but merely placed the file before the Commissioner for his view. Both these cases are therefore, clearly distinguishable.

12. In the result Tax Appeal and Civil Application are dismissed.

(AKIL KURESHI, J)

(B.N. KARIA, J)