HC Quashes section 148 notice issued beyond 4 years as same was approved by JCIT instead of CIT

Ambika Iron and Steel Pvt. Ltd. Vs PCIT (Orissa High Court)

For the purpose of Section 151(1) of the Income Tax Act, 1961 since the reopening of the assessment was beyond 4 years, it had to have the prior approval of the Commissioner of Income Tax, and there was no such approval in the present case.

Indeed, in the notice issued under Section 148 of the IT Act on 31^st March, 2021 which has been challenged in W.P.(C) No.41826 of 2021 it has been stated that the notices had been issued after obtaining ‘necessary satisfaction of the Jt. CIT Range-I, Cuttack’ whereas the Officer authorized to record the necessary satisfaction had to be the Chief Commissioner of Income Tax / Commissioner of Income Tax.

In view of the baove, the impugned notice under Section 148 of the IT Act is hereby quashed.

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

1. These matters are taken by video conferencing mode.

2. In each of these cases, the challenges to a notice issued by the Income Tax Department (hereinafter ‘Department’) under Section 148 of the Income Tax Act, 1961 (IT Act) as it stood prior to the amendment by the Finance Act of 2021 with effect from 1^st April, 2021. In other words, in each of these cases, the notice under Section 148 of the IT Act has been issued prior to 1^st April, 2021. In many of them, in fact, the date of the notice is 31^st March, 2021.

3. In each of these cases, the relevant assessment year (AY) in relation to which such notice has been issued is more than four years prior to the date of the reopening i.e. it is beyond four years from the expiry of the AY in question and is clearly therefore, time barred in terms of the first proviso to Section 147 of the IT Act.

4. The stand of the Revenue that in view of the notifications issued by the Central Government in terms of the provisions of the Taxation and other laws (Relaxation and Amendment of Certain Provisions) Act, 2020, the said time limits stood extended is clearly untenable as those notifications were issued to deal with the situation arising from the amendment to the IT Act by the Finance Act, 2021 with effect from 1^st April, 2021 whereas in these cases the notices were issued prior to 1^st April, 2021.

5. This Court had an occasion in similar circumstances to quash an identical notice under Section 148 of the IT Act by its order dated 20^th November, 2019 in W.P.(C) No.7618 of 2009 and which order stood confirmed by this Court by the dismissal of the Department’s review petition i.e. RVWPET No.188 of 2020 by the order dated 3^rd December, 2021 which reads as under:

“1. Although the point made by the Revenue in this review petition is that this Court in its order dated 20th November, 2019 erred in drawing a distinction between an Additional Commissioner and Commissioner in terms of their authority, the point involved was that for the purpose of Section 151(1) of the Income Tax Act, 1961 since the reopening of the assessment was beyond 4 years, it had to have the prior approval of the Commissioner of Income Tax, and there was no such approval in the present case.

2. Consequently, no ground is made out for reviewing the order dated 20^th November, 2019 in W.P.(C) No.7618 of 2009.

3. The review petition is dismissed.”

6. Indeed in the notice issued under Section 148 of the IT Act on 31^st March, 2021 which has been challenged in W.P.(C) No.41826 of 2021 it has been stated that the notices had been issued after obtaining “necessary satisfaction of the Jt. CIT Range-I, Cuttack” whereas the Officer authorized to record the necessary satisfaction had to be the Chief Commissioner of Income Tax / Commissioner of Income Tax.

7. For all the aforesaid reasons, in each of the above cases, the impugned notice under Section 148 of the IT Act is hereby quashed. The writ petitions are allowed, but in the circumstances, with no order as to costs.

8. As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court’s Notice No.4587, dated 25^th March 2020, modified by Notice No.4798, dated 15^th April, 2021 and Court’s Office order circulated vide Memo Nos.514 and 515 dated 7^th January, 2022.