Approval to issue Section 148 notice has to be given by JCIT & not by PCIT

Miranda Tools Pvt. Ltd. Vs ITO (Bombay High Court)

The Petitioner is a company registered under the Companies Act engaged in the business of manufacture and marketing of fabrics. The Petitioner filed its return of income for the assessment year 2014-15 on 22 September 2014 declaring nil income. The Petitioner’s case was selected for scrutiny assessment vide notice dated 18 September 2015. On 7 April 2016, the Assessing Officer issued notice under section 142(1) of the Income Tax Act, 1961 calling upon the Petitioner to submit certain details regarding share application money received by the Petitioner. The Assessing Officer thereafter passed an assessment order on 1 September 2016 under section 143(3) of the Act accepting the income offered by the Petitioner. The Assessing Officer issued a notice on 26 February 2019 under section 148 of the Act on the ground that he has reason to believe that the income chargeable to tax in respect of share application money for the relevant assessment year has escaped assessment.

As per the provisions of section 151(2) of the Act, a sanction to issue notice for reopening under section 148 of the Act has to be given by the Joint Commissioner of Income Tax in case the reassessment is sought to be done before four years. Under section 2(28C) of the Act, a Joint Commissioner also means Additional Commissioner of Income Tax. In the present case, the Assessing Officer submitted a proposal to the Principal Chief Commissioner of Income Tax for reopening the assessment under section 148 on 6 February 2019.

The question arises is whether the sanction granted by the Chief Commissioner of Income Tax would fulfill the requirement of section 151. It is long been settled that when the statute mandates the satisfaction of a particular authority for the exercise of power then it has to be done in that manner only. Adopting this principle, the Division Benches of this Court in the case of Ghanshyam K. Khabrani v. Asst. CIT¹ and CIT v. Aquatic Remedies P.Ltd.² have held that sanction for issuance of reopening notice has to be obtained from the Authority mentioned in Section 151 and not from any other officer including a superior officer. In the present case the Chief Commissioner of Income tax is not the officer specified in section 151 of the Act. There is thus a breach of requirement of section 151(2) of the Act regarding sanction for issuance of notice under section 148 of the Act. Consequently, the impugned notice and the impugned order cannot be sustained in law. The Petitioner, therefore, is entitled to succeed.

Accordingly, the impugned notice dated 26 February 2019 and the impugned order dated 15 July 2019 are quashed and set aside. The petition is disposed of accordingly.

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