S.K. Khanduja, Advocate for the Appellant. A.K. Singh, CIT (DR) for the Respondent.

1. This appeal by the assessee is directed against the order dated 08.08.2019 of ld. CIT(A), Lucknow for AY 2007-08. The assessee has raised the following grounds:

“1. Because tin; Ld. Deputy Commissioner of Income-tax, Circle-II Allahabad (ld. Dy. CIT) erred on facts and in law in not dropping the assessment proceedings, initiated by issuing notice u/s 148 (of Income Tax Act, 1961) dated 29.03.2014, since the assesses company was already assessed earlier u/s 143(3) (of Income Tax Act, 1961) vide order dated 22.12.2009 and the procedure for issuing this notice u/s 148 (of Income Tax Act, 1961) as contained in proviso to section 151(1) (of Income Tax Act, 1961) entailed sanction of either the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner prior to issuance of the notice but the sanction of the Joint Commissioner of Income tax was incorrectly taken.

2. Because the Hon'ble Allahabad High Court has held in Dr. Shashi Kant Garg, vs Commissioner Of Income-tax (2006) 203 CTR 75 / 2006 285 ITR 158 that a notice issued u/s 148 (of Income Tax Act, 1961) without obtaining the prescribed sanction of the Chief Commissioner of Commissioner of Income-tax us laid down in section 151 (of Income Tax Act, 1961) is invalid and cannot be sustained and the assessment done on the basis of such a notice is to be set aside.

3. Because, without prejudice to the above, the service of the notice issued u/s 148 (of Income Tax Act, 1961) dated 29.03.2014 is invalid.

4. Because, without prejudice to the above, the assessment framed is bad both on facts and in law.

5. Because the assessee reserves the right to add, alter, delete or rescind any ground of appeal.

6. Because the order of the ACIT is generally bad both on facts and in law.”

2. The Grounds No. 1 and 2 regarding validity of reopening of the assessment for want of sanction/satisfaction of Pr. CCIT/CCIT/PCIT/CIT. The assessee company filed its return of income for the assessment year under consideration on 31.10.2007 declaring total income of Rs.25,27,660/-. The assessment was completed u/s. 143(3) (of Income Tax Act, 1961) on 22.12.2009 at a total amounting to Rs.26,27,660/-. Thereafter, the Assessing Officer has reopened the assessment by issuing notice u/s. 148 (of Income Tax Act, 1961) on 29.03.2014 and completed the reassessment u/s. 147 (of Income Tax Act, 1961) r.w.s. 143(3) (of Income Tax Rules, 1962) of the Act on 31.03.2015 whereby the total income of the assessee was assessed at Rs.40,84,900/-. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and also challenged the validity of reopening of the assessment for want of necessary sanction/satisfaction of Pr. CCIT/CCIT/PCIT/CIT. The ld. CIT(A) upheld the validity of reopening.

3. Before the Tribunal, the ld. AR of the assessee has submitted that the original assessment was completed u/s. 143(3) (of Income Tax Act, 1961) and the reopening is after the expiry of four years from the end of the assessment year, therefore, the proviso to sub Section (1) of Section 151 (of Income Tax Act, 1961) is applicable in this case and thereby the Assessing Officer cannot issue a notice u/s. 148 (of Income Tax Act, 1961) without prior sanction of Pr. CCIT/CCIT/PCIT /CIT as case may be. Thus, ld. AR of the assessee contended that the reopening is not validit when the Assessing Officer issued notice u/s. 148 (of Income Tax Act, 1961) only after taking sanction of JCIT. In support of his contention he has relied upon the following decisions:

1. CIT (Central-1) vs. Aquatic Remedies (P.) Ltd. [2020] 113 taxmann.com 451 (SC)

2. Reliable Finhold Ltd. v. Union of India [2015] 54 taxman.com 318 (Alld).

3. Dr. Shashi Kant Garg, vs. CIT (2006) 203 CTR 75/2006/ 285 ITR 158 / [2006] 152 Taxman 308(All).

4. Sardar Balbir Singh vs. Income Tax Officer [2015] 61 taxmann.com 320 (Lko-Trib)

4. Thus, ld. AR of the assessee has contended that the issue of validity of reopening of the assessment is covered by the decision of the Hon'ble jurisdictional High Court in the case of Reliable Finhold Ltd. (Supra) as well as in the case of Dr. Shashi Kant Garg, vs. CIT (Supra). The Hon'ble Supreme Court has also upheld the decision of the Hon'ble Bombay High Court in the case of CIT vs. Aquatic Remedies (P.) Ltd. (Supra). Hence, the AR has contended that the reopening is not validity and the same is liable to be quashed.

5. On the other hand, ld. D.R. has submitted that the provision of Section 151(1) (of Income Tax Act, 1961) are attracted only when the reopening is done by the Assessing Officer who is below the rank of ACIT/DCIT whereas in the case in hand, reopening of the assessment is by the DCIT who is not below the rank of ACIT/DCIT and consequently sub section (2) of Section 151 (of Income Tax Act, 1961) is applicable in this case, which requires sanction of JCIT and not Pr. CCIT/CCIT/PCIT/CIT. He has relied upon the order of the ld. CIT(A) and submitted that the ld. CIT(A) has considered the relevant provisions of Section 151(1) (of Income Tax Act, 1961) and held that when reopening has been done by the DCIT then Section 151(2) (of Income Tax Act, 1961) comes in operation which requires the satisfaction and approval from JCIT only.

6. I have considered the rival submissions as well as material placed on record. There is no dispute that the original assessment was completed u/s. 143(3) (of Income Tax Act, 1961) on 22.12.2009 and thereafter the notice u/s. 148 (of Income Tax Act, 1961) was issued on 29.03.2014. Thus, the reopening in the case in hand is after four years from the end of the assessment year. It is also not in dispute that the Assessing Officer has issued notice u/s. 148 (of Income Tax Act, 1961) after recording the reasons and obtaining the satisfaction of JCIT. Section 151 (of Income Tax Act, 1961) contemplates the mandatory condition for taking the prior sanction/satisfaction of the higher authorities before issuing the notice u/s. 148 (of Income Tax Act, 1961) in different class of matter. For ready reference Section 151 (of Income Tax Act, 1961) as existed at the relevant time is reproduced as under:-

“Sanction for issue of notice.

151. (1) In a case where an assessment under sub-section (3) of section 143 (of Income Tax Act, 1961) or section 147 (of Income Tax Act, 1961) has been made for the relevant assessment year, no notice shall be issued under section 148 (of Income Tax Act, 1961) by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless tne Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] :

Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer 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 (of Income Tax Act, 1961) 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.

Explanation.—For the removal of doubts, it is hereby declared that the Joint Commissioner, the Principal Commissioner or Commissioner or the Principal Chief Commissioner or Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148 (of Income Tax Act, 1961), need not issue such notice himself.”

7. Thus, Section 151 (of Income Tax Act, 1961) provides the condition of satisfaction of the higher authorities before issuing the notice u/s. 148 (of Income Tax Act, 1961) and also divides the cases in broad to two categories viz (i). The reopening of the cases where the original assessment is completed u/s. 143(3) (of Income Tax Act, 1961) as covered under sub Section (1) of Section 151 (of Income Tax Act, 1961) and (ii) the case where the original assessment was not completed u/s. 143(3) (of Income Tax Act, 1961) as covered under sub section (2) of Section 151 (of Income Tax Act, 1961).

The proviso to sub Section (1) further sub categories the cases where the original assessment is completed u/s. 143(3) (of Income Tax Act, 1961) and the notice is issued after expiry of four years from the end of the relevant assessment year. Since in the case in hand, the original assessment was completed u/s. 143(3) (of Income Tax Act, 1961) therefore, sub Section 2 (of Income Tax Act, 1961) of sub Section 151 (of Income Tax Act, 1961) shall not be applicable in this case as it falls in the category of the cases which are provided under sub Section (1) of said provision. Further the reopening was after expiry of four years from the end of the assessment year therefore, the proviso to sub section (1) is attracted in this case.

The proviso to sub section (1) specifically requires the satisfaction/sanction of Pr. CCIT/CCIT/PCIT/CIT before issuing the notice u/s. 148 (of Income Tax Act, 1961). The Hon'ble jurisdictional High Court in the case of Reliable Finhold Ltd. (Supra) while considering an identical issue has held in para 9 and 10 as under:

“In the present case, admittedly the original assessment was under Section 143(3) (of Income Tax Act, 1961). The notice under Section 148 (of Income Tax Act, 1961) was sought to be issued more than four years after the end of the relevant assessment year. The assessment year is A.Y. 1998-99. Notice under Section 148 (of Income Tax Act, 1961) was issued on 29 March 2005. In the circumstance, clearly the proviso to sub-section (1) of Section 151 (of Income Tax Act, 1961) was attracted. Admittedly, as the counter affidavit which has been filed 5 by the Revenue indicates, no sanction or permission of the Commissioner was obtained”

8. Thus once the reopening is after expiry of four years from the end of assessment year and the original assessment was completed u/s. 143(3) (of Income Tax Act, 1961) then irrespective of the rank of the Assessing Officer who has reopened the assessment it is mandatory condition that satisfaction of Pr. CCIT/CCIT/PCIT/CIT is required. The ld. CIT(A) has decided this issue against the assessee by holding as under:

“Appellant is taking shelter of the Proviso to S. 151 which say that in a case where an assessment under sub-section (3) of section 143 (of Income Tax Act, 1961) or section 147 (of Income Tax Act, 1961) has been made for the relevant assessment year, no notice shall be issued under section 148 (of Income Tax Act, 1961) by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, 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. As per the Proviso after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.

It is therefore apparent that S. 151(1) and its proviso will come Into operation for the Assessing Officers who are below the rank of Assistant Commissioner or Deputy Commissioner but in this case the reopening has been done by Deputy Commissioner, Cir - II, Allahabad, for which the S. 151(2) comes into operation as per which the satisfaction and approval from Joint Commissioner is required. Section 151(2) (of Income Tax Act, 1961) 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 (of Income Tax Act, 1961).When the statute mandates the satisfaction of a particular functionary for the exercise 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. It is therefore held that AO was legally correct in taking the necessary statutory approval from the prescribed authority. Case laws relied upon by appellant are not applicable on the given set of facts in the instant case.”

9. The above finding and in view of the ld. CIT(A) is contrary to the provisions of Section 151 (of Income Tax Act, 1961) as considered and interpreted by the Hon'ble Jurisdictional High Court in the case of Reliable Finhold Ltd. (Supra). It is pertinent to note that subsequently decided provision is amended by Finance Act, 2015 w.e.f. 1.6.2015 and language of the amended provision is made more clear and an ambiguous as well as simpler than the earlier provision. In the new substituted provision of Section 151(1) (of Income Tax Act, 1961) it is mandatory requirement for issuing notice u/s 148 (of Income Tax Act, 1961) after expiry of four years from the end of the relevant assessment year that unless the Pr. CCIT/CCIT/PCIT/CIT is satisfied on the reasons recorded by the AO that it is fit case for issue such notice. Therefore, there is no difference in the higher authority whose satisfaction is required prior to issuing notice u/s. 148 (of Income Tax Act, 1961) in all the cases where the notice u/s. 148 (of Income Tax Act, 1961) is issued after the expiry of four years from the end of the relevant assessment year. Hence, in the facts and circumstances of the case and following the binding precedent of the Hon'ble jurisdictional High Court, the reopening in the case in hand is not valid as the Assessing Officer has not satisfied the mandatory condition as provided u/s. 151(1) (of Income Tax Act, 1961) read with proviso being the satisfaction of Pr. CCIT/CCIT/PCIT/CIT.

Accordingly, the reopening of the assessment is quashed being void and consequently the reassessment order is also liable to be quashed as void ab initio. Since the reopening and reassessment is quashed on the legal issue, therefore, the Ground No.3 becomes infructuous.

10. In the result, appeal filed by the assessee is allowed.

(Order pronounced in the open Court on 17/02/2021.)

Sd/-

[VIJAY PAL RAO]

JUDICIAL MEMBER