As per section 151, 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. And in any other case 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.

For Further Clarity, Section 151 is re-produced below:

151 (1) No notice shall be issued under section 148by 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 himself.

Requirements to be satisfied by Assessing Officer considering section 151:

1.Satisfaction has to be received by assessing officer before issue of notice:

The AO issued a notice for reopening on 30 March 2011 when as a matter of fact approval was received with reference to the provisions of Section151 from the Commissioner of Income Tax on 31 March 2011. As on the date on which the notice of reopening was issued, the Assessing Officer was not in receipt of the approval which is required under Section 151, the reopening was quashed in  WRIT PETITION NO.1246 OF 2012 (BOMBAY HC), Shri. Ghanshyam K. Khabrani Vs. ACIT.

2. Satisfaction required and not merely approval:

Merely sign and stamp of approving authority will not amount to satisfaction.

In the case of The Central India Electric Supply Co. Ltd V/s ITO, reported vide 333 ITR 237 (2011), Honourable Delhi HC has held that,

Where a mere stamp is affixed and signed by a Under Secretary underneath a stamped “Yes‟ against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this Court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Thus, we find force in the contention of learned counsel for the appellant that there has not been proper application of mind by the Board.

3. Approval should be of the authority, as required in the section and not of the higher authority:

In the reassessment within 4 years, act requires that 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.

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.

Honourable Bombay High Court in the case of DSJ Communication Ltd V/s. DCIT, Circle-2(1) & Anr. Held that, there is merit in the contention raised on behalf of the Assessee that the requirement of Section 151(2) 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. Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner. That expression has a distinct meaning by virtue of the definition in Section 2(28C). The Commissioner of Income Tax is not a Joint Commissioner within the meaning of Section 2(28C). In the present case, the Additional Commissioner of Income Tax forwarded the proposal submitted by the Assessing Officer to the Commissioner of Income Tax. The approval which has been granted is not by the Additional Commissioner of Income Tax but by the Commissioner of Income Tax. There is no statutory provision here under which a power to be exercised by an officer can be exercised by a superior officer. 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.

Also Read:

Re-assessment Procedure under Section 147 of Income Tax Act, 1961

Assessment or Reassessment Notice U/s 148

(Republished With Amendments)

CA hardik voraHardik Vora,  

B Com, LLB, CA,

ca.hardikvora@yahoo.com

More Under Income Tax

3 Comments

  1. Chaitz says:

    whose approval is needed to be taken before issuing the notice u/s 148 after 8 years, It would be approval of officer at the time of assessment or that of officer at the time of issuing the notice?

  2. RINKESH BHAVSAR says:

    IF ANCESTLOR PROPERTY WHOSE DOCUMENTS WARE NOT EXECUTED, BOUGHT BY FATHER BEFORE 1981 N SOLD BY SON IN 2012….THAN WHAT SHOULD BE COST OF ASSETS AS ON 1981 FOR INDEXATION PURPOSE ????
    ACTUAL COST WAS NOT AVAILABLE……….

    1. DELNAZ BHATHENA says:

      If the holding period of plot was 3 years or more then same would be treated as long term capital gain. In such case you will be eligible for indexation benefit and will be liable to pay tax @ 20% after deducting index cost of acquisition from sales proceeds. There are two ways to save tax on this transaction either you can invest the amount of capital gain in capital gain tax saving bonds under section 54 EC or you can invest the entire sale proceed in the residential house under section 54F.

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