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Assessment U/s. 147 not become invalid for satisfaction of Reasons recorded by both CIT & JCIT

Merely because an even higher authority has expressed similar satisfaction does not obliterate the satisfaction of appropriate authorities.

Mayurbhai Mangaldas Patel Vs. Income Tax Officer (ITAT Ahemdabad)

that in the present case the Joint/Additional Commissioner of Income-tax has categorically expressed his satisfaction about the fact that on the reasons recorded by the Assessing Officer, it is fit case for issuance of notice under section 148. The requirements of approval under section 151 are thus clearly Satisfied. Merely because an even higher authority has expressed similar satisfaction does not obliterate the satisfaction of appropriate authorities.

What we have seen in this particular case appears to be a part of the standard operating procedure in the income tax department, and, if that be so, there can hardly be a case in which the Commissioner has granted the approval for reopening of assessment and the Joint/ Additional Commissioner of the range concerned has not recorded his satisfaction to the effect that on the reasons recorded by the Assessing Officer, it is a fit case for reopening the assessment. Even if there is any defect in the proceedings, as long as it is in substance and effect of the same is in conformity with the scheme of the Act, section 292B prevents it’s being rendered invalid on that count.

Section 292B, inter alia, categorically provides that “no  proceeding taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such proceeding if such proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act”.

Quite clearly, therefore, it is indeed an inherent part of the approval being granted by the Commissioner that the Joint/Additional Commissioner of Income-tax expresses his satisfaction about the reason of reopening of assessment being sufficient to issue notice under section 148 and thus initiate the reassessment process, and, in the case before us, this aspect of the matter has come to the light. Ironically, however, this aspect of the matter is not adequately highlighted and properly demonstrated, in most of the cases before the judicial forums, and that obviously is the reason that there are several judicial precedents quashing the reassessment proceedings on the ground that the approval is of the Commissioner concerned, and not of the Joint/ Additional Commissioner. All the judicial precedents filed before us fall in the category in which there is nothing on the record to demonstrate, or even suggest, that the Joint/ Additional Commissioner concerned has recorded his satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for initiating the reassessment proceedings. We have carefully perused these precedents but we do not find any reference to the finding that in those cases satisfaction of the Joint/ Addl. Commissioner of Income-tax, to the effect that, on the reasons recorded by the Assessing Officer, it was a fit case for initiating the reassessment proceedings, was also on record. A decision rendered without taking note of this fact cannot be an authority for the proposition that even when such a satisfaction by the appropriate authority is on record, just because similar satisfaction is expressed by the higher authority is also on record, requirements of section 151 cannot be taken as having been complied with. The binding nature of judicial precedents is only for what they actually decide and not what can be inferred from these judicial precedents. Nothing, therefore, turns on these precedents in the present case. On the contrary, being satisfied that sanction envisaged by the scheme of section 151, i.e. by recording satisfaction on the reasons recorded by the Assessing Officer that it is a fit case for initiating reassessment proceedings, is given by the prescribed authority on the facts of this case, these judicial precedents are not clearly relevant in the present context.

 

O R D E R

Per Pramod Kumar, AM:

1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 1st October 2014 passed by the CIT(A), Gandhinagar, Ahmedabad in the matter of assessment under section 143(3) r.w.s. 147 of the Income-tax Act, 1961, for the assessment year 2005-06. Grievances raised in ground nos. 1, 2 & 3, which are the only grounds pressed before us, are as follows:

“1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of Assessing Officer in reopening the assessment u/s 147 of the Act.

2. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of Assessing Officer in reopening the assessment u/s 147 of the Act even when conditions required to be fulfilled u/s 151 was not been complied by assessing officer.

3. The appellant says and submits that the AO forwarded the proposal for reopening of the assessment to CIT Gandhinagar for his approval through JCIT. The JCIT expressed satisfaction about the recording of reasons and forwarded to CIT. The CIT approved the proposal on 30-03-2011 and received by the AO on 04-04-2011. The Notice under Section 148 was issued on 30-03-2011. Since the notice issued is prior to the approval of the CIT, it is bad in law. Under Section 151(2) the AO is required to take approval of JCIT but he has not taken JCIT approval and has taken approval of CIT. None obtaining of permission of the authority as prescribed in the Act is bad in law [Ghanshyam K. Khabrani V/s. ACIT 346 ITR 443 [Mum] and CIT V/s. SPL ‘s Siddhartha Ltd. 345 ITR 223 (Del)].

2. When this appeal was called out for hearing, learned counsel for the assessee mentioned it as a covered matter – covered by a series of orders of the co-ordinate benches in the cases of Arvindbhai R. Patel vs. ITO (ITA 228/Ahd/2015; order dated 24.07.2017), Bharat Ramjibhai Patel vs. ITO (ITA No.229/Ahd/2015; order dated 04.09.2017), and Arvindbhai Ramjibhai Patel HUF vs. ITO (ITA No.3448/Ahd/2015; order dated 12.06.2017), and by Hon’ble Bombay High Court’s judgment in the case of DSJ Communications Pvt Ltd Vs DCIT [(2014) 41 taxmann.com151] It is submitted that in all these cases reopening of assessment is quashed on the short ground that the Assessing Officer has obtained prior approval, for reopening the assessment, from Commissioner of Income-tax, whereas authority prescribed for such approval, under section 151, is the Joint/ Additional Commissioner of Income-tax. Learned counsel then invites our attention to the fact that it is an undisputed position that the approval in this case has been obtained from the Commissioner. He submits that since that the approval is granted by an authority higher, and other, than Joint/ Additional Commissioner, the same is vitiated in law. We are thus urged to quash the reassessment proceedings. Learned Departmental representative vehemently relies upon the orders of the authorities below, and submits that even when approval is granted by the commissioner, it is inherent part of process of approval that the Joint Commissioner grants the approval and expresses his satisfaction about the reasons. We are thus urged to confirm the reopening of assessment. In response to a specific question put to the learned counsel for the assessee on whether the Joint/Additional Commissioner had also granted the approval and recorded his satisfaction, he submits that, in the formal note initiated by the ITO, the Joint/ Additional Commissioner of Income-tax has expressed his satisfaction with the reasons, but then notwithstanding this position and on the same set of facts co-ordinate benches have quashed the reassessment proceedings on the ground that the approval was granted by the Commissioner, even though statutorily approval of the Joint/ Additional Commissioner was required. He submits that it cannot be open to us to deviate from the views so taken by the coordinate benches. He further submits that whatever be the internal processing, eventually the approval is granted by the Commissioner, and it is such an approval which is relevant for the purpose of compliance with the provisions of Section 151.

3. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

3. We had an occasion to take a look at the internal processing sheet used by the income tax authorities for granting approval for reopening the assessment at the request of the Assessing Officer, and we understand that this internal processing sheet is a part of the standard operating procedure in the income tax department generally, and at least in the charge of the Commissioner concerned. This internal processing sheet has 13 columns and, so as to demonstrate the actual working of the processing of granting such an approval, we are reproducing below scanned copy of the processing sheet in this case:

image

5. It is an important to bear in mind the fact that in the processing sheet for reopening the assessment, in column 12, the Additional Commissioner of Income-tax, Mehsana Range has, in response to the question “whether the Additional Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice under section 148”, observed that “Yes, Satisfied with the reasons- Sd/- 28.03.2011” Of course, even after recording of the above satisfaction, the file was processed further, and the same question was put again to the Commission in column 1. I reply to the question “whether the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice under section 148” observed that “I am satisfied. Issue 148. Sd/- 30.3.2011”

5. Let us, in the light of this factual position, revert to the provisions of section 151, which reads as follows:

“151 – Sanction for issue of notice

(1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, 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 by an Assessing Officer, who is below the rank of Joint 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.

(3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint 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, need not issue such notice ]”

6. As evident from the plain reading of the above statutory provision, all that is necessary for the prescribed authority to satisfy himself that “on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice”; that is all that, for the purpose of section 151, expression “sanction” or “approval” refers to. The sanction consists of recording the satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for issue of such notice for reopening the assessment. What is material is that such a satisfaction is recorded by the prescribed authority, and it is this satisfaction, we may clarify at the cost of repetition, which is statutorily treated as “sanction” in the heading of section 151. The words “approved” or “sanctioned” are not even required to be used by the prescribed authority, because, under the scheme of section 151, it is satisfaction of the authority, on the reasons recorded by the Assessing Officer, that this is a fit case for reopening the assessment. The use of words that the reassessment is being done with the “approval” of the Commissioner is meaningless unless the actual satisfaction of the Commissioner is actually seen, and we see that actual processing sheet for so called approval of the Commissioner, it is plain on facts that the satisfaction “on the reasons recorded by the Assessing Officer that it is a fit case for issuance of notice under section 148” is not only of the Commissioner but also of the Joint/ Additional Commissioner concerned.

7. There is no doubt that in the present case the Joint/Additional Commissioner of Income-tax has categorically expressed his satisfaction about the fact that on the reasons recorded by the Assessing Officer, it is fit case for issuance of notice under section 148. The requirements of approval under section 151 are thus clearly Satisfied. Merely because an even higher authority has expressed similar satisfaction does not obliterate the satisfaction of appropriate authorities. What we have seen in this particular case appears to be a part of the standard operating procedure in the income tax department, and, if that be so, there can hardly be a case in which the Commissioner has granted the approval for reopening of assessment and the Joint/ Additional Commissioner of the range concerned has not recorded his satisfaction to the effect that on the reasons recorded by the Assessing Officer, it is a fit case for reopening the assessment. Even if there is any defect in the proceedings, as long as it is in substance and effect of the same is in conformity with the scheme of the Act, section 292B prevents it’s being rendered invalid on that count. Section 292B, inter alia, categorically provides that “no  proceeding taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such proceeding if such proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act”. Quite clearly, therefore, it is indeed an inherent part of the approval being granted by the Commissioner that the Joint/Additional Commissioner of Income-tax expresses his satisfaction about the reason of reopening of assessment being sufficient to issue notice under section 148 and thus initiate the reassessment process, and, in the case before us, this aspect of the matter has come to the light. Ironically, however, this aspect of the matter is not adequately highlighted and properly demonstrated, in most of the cases before the judicial forums, and that obviously is the reason that there are several judicial precedents quashing the reassessment proceedings on the ground that the approval is of the Commissioner concerned, and not of the Joint/ Additional Commissioner. All the judicial precedents filed before us fall in the category in which there is nothing on the record to demonstrate, or even suggest, that the Joint/ Additional Commissioner concerned has recorded his satisfaction that, on the reasons recorded by the Assessing Officer, it is a fit case for initiating the reassessment proceedings. We have carefully perused these precedents but we do not find any reference to the finding that in those cases satisfaction of the Joint/ Addl. Commissioner of Income-tax, to the effect that, on the reasons recorded by the Assessing Officer, it was a fit case for initiating the reassessment proceedings, was also on record. A decision rendered without taking note of this fact cannot be an authority for the proposition that even when such a satisfaction by the appropriate authority is on record, just because similar satisfaction is expressed by the higher authority is also on record, requirements of section 151 cannot be taken as having been complied with. The binding nature of judicial precedents is only for what they actually decide and not what can be inferred from these judicial precedents. Nothing, therefore, turns on these precedents in the present case. On the contrary, being satisfied that sanction envisaged by the scheme of section 151, i.e. by recording satisfaction on the reasons recorded by the Assessing Officer that it is a fit case for initiating reassessment proceedings, is given by the prescribed authority on the facts of this case, these judicial precedents are not clearly relevant in the present context.

8. In view of the detailed reasons set out above, we are of the considered view that the hyper technical grievances raised before us are devoid of legally sustainable merits. We accordingly reject the same.

9. As we part with the matter, we must that we have taken note of the fact that as reassessments after reassessments are being quashed by the judicial authorities, on the ground as raised before us in this case, the income tax authorities have not taken pains either to follows the standard operating procedure or to demonstrate to us that this standard operating procedure was followed, and there cannot, thus, be a case in which approval of the Commissioner was obtained without the satisfaction of the Range Head (i.e. concerned Joint! Additional Commissioner of Income Tax) qua the reasons recorded by the Assessing Officer for reopening the assessment, Commissioner could have granted the approval for reopening. It is for the income tax authorities to present to the judicial forums the actual facts, with supporting evidences, to the judicial forums and thus properly assist these forums in dispensing justice to the parties. It is extremely painful to us to depart from the views that the coordinate benches have taken in the earlier cases, or to distinguish the judgments of Hon’ble Courts above, but then, as complete facts having come to light, and duly evidenced, before us, we cannot knowingly perpetuate the errors in the name of reverence to binding judicial precedents. In the case of Mumbai Kamgar Sabha vs. Abdulbahi Faizullbhai AIR 1976 SC 1455 Their Lordships have, in their inimitable and felicitous words observed thus, “It is trite, going by anglophonic principles that a ruling of a superior Court is binding law. It is not of scriptural sanctity but of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decisions, exalting the precedents into a prison house of bigotry, regardless of the varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting the matters which may lurk in the dark”. Lest we may be blamed for departing from, in the name of reverence to the judicial precedents, a judicial forum’s unflinching commitment for the cause of justice, once the factual matrix has admittedly shown a different shade of truth, we must not remain constrained by the judicial precedents which were given oblivious of the facts now glaring at us.

10. Ground nos. 1,2 and 3 are thus dismissed, and, as we have stated earlier as well, no other ground of appeal was pressed before us.

11. In the result, the appeal is dismissed. Pronounced in the open Court today on this 30thday of November, 2017.

Categories: Income Tax
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