Sanction of CIT instead of JCIT renders reopening u/s. 147 of Income Tax Act invalid

CIT Vs. SPL’s Siddhartha Ltd (Delhi High Court)- The argument of the assessee before the Tribunal was that the approval was not granted by the Joint Commissioner for reopening U/s. 147. Instead, it was taken from the CIT, Delhi-III, New Delhi, who was not competent to approve even when he was a higher Authority inasmuch as Section 151 of the Act specifically mentions Joint Commissioner as the Competent Authority. This contention of the respondent-assessee has been accepted by the Tribunal thereby quashing the assessment proceedings. The contention of the Revenue that it was merely an irregularity committed by the AO and was rectifiable under Section 292B of the Act, has not been found convincing by the Tribunal. Where the Assessing Officer does not himself exercise his jurisdiction under Section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non-satisfaction of the condition precedent.

The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja Vs. State of Gujarat, (1995) 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether.

HIGH COURT OF DELHI 

ITA No. 836 of 2011

Decision Delivered On: 14^th September, 2011

COMMISSIONER OF INCOME TAX

VERSUS

SPL^‟S SIDDHARTHA LTD.

ORDER

A.K. SIKRI, J.  (ORAL)

1. The notice issued by the AO under Section 147 read with Section 148 of the Income Tax Act (hereinafter referred to as ^„the Act^‟)  for reopening the assessment for the Assessment Year 2002-03 has been set aside by the Income Tax Appellate Tribunal (^„the Tribunal^‟ for brevity) on the ground that the requisite approval of Additional Commissioner of Income Tax, which is mandatorily required, was not taken. Income tax return in this case was filed on 26.9.2002 at the loss of Rs. 27.63 lacs. The same was processed under Section 143(1) on 26.2.2003. Thereafter, notice under Section 147 read with Section 148 of the Act for reassessment was issued on 12.3.2009. This was much after the expiry of four years from the end of the relevant assessment year. The basis for issuance of the notice was that the inquiries conducted by Investment Wing of the Department had revealed that Mr. Dipak Gupta was indulging in providing the accommodation entries and he had admitted that he had taken cash from various parties and given them Demand Drafts/Cheques by charging commission. DDs/Cheques then were introduced as share capital or loan in their books of accounts. On that basis, it was alleged that insofar as the assessee is concerned, three bogus parties had given accommodation entries for a total sum of Rs. 5 lacs. Since four years had elapsed, the AO was required to take approval of the Competent Authority under Section 151 (1) of the Act. This provision reads as under: